Reports from Chile after the earthquake and tsunami hit the country is
that paper companies are making progress on restarting their operations,
however, pulp mills are still idle, as their damage is more extensive.
Chile’s only two newsprint suppliers, CMPC’s Inforsa mill and Norske
Skog’s Bio Bio mill, are still closed. They have combined capacity of
340,000TPA of newsprint. This will artificially assist the USA newsprint
producers.
Kruger will extend the downtime of PM 3 at its Wayagamack Mill in
Trois-Rivieres, Quebec, Canada for a period of one month starting March
31.
Kruger said the decision to extend downtime is the result of low
demand for directory paper from the ongoing weak market conditions.
Recall the Coy Paper news releases
outlined this paper machine was shut down on December 31, 2009 with a
planned restart set for March 31.
Production is now planned to
resume on May 1.
PM 3 has the capacity to produce about 74,000 metric
tons per year of directory paper.
NewPage announced they reached an agreement with Domtar to purchase
Domtar's coated groundwood paper product lines and all the respective
accounts and book of business. The purchase will include the coated
groundwood paper book of business, Choctaw, Saturn, and Jupiter brands.
We have received some
reports from our industry contacts that recent legislative moves may
allow the industry to claim a Cellulosic Fuel credit (IRC 40(b)(6)) for
Black Liquor produced and fired between 1/1/10 and the enactment date of
the new bill (likely to be in next several days). This could produce a
substantial 1Q10 windfall for kraft-based producers. The size of the
cellulosic fuel credit is $1.01/gallon, rather than $0.50/gallon with
Black Liquor. The cellulosic credit appears taxable, while the tax
status of the black liquor credits is still an open question. It also
appears that companies may have the ability to re-file for 2009
(depending on their tax situation) and claim the larger cellulosic
credit, rather than the black liquor credit. Our contacts suggest that
all the big four accounting firms as well as several law firms are
currently working on this issue.
Thus, it is safe to assume most
paper companies are digging into the
issue.
Containerboard and box shipments for February were up 6.0% ! Also,
inventories fell at mill and at box plants by 96.800 Tons - roughly
4.5%. More good news included the industry ran at 95% of capacity in
February and USA containerboard exports totaled
319,000 tons, up
49.1% from 2009. This is all good news for the producers ....
converters, look for price increases.
Many of the major paper producers in North America recently announced
price increases on coated, uncoated and supercalendered paper of about
$30/ton effective with shipments on or after April 1st. Companies to
announce so far include NewPage, Kruger, Verso, AbitibiBowater,
Catalyst, Evergreen Packaging, Myllykoski, FutureMark, West Linn Paper
and Irving Paper. Supply as a result of shuttered equipment is reduced,
demand appears up, and the mills are grabbing this opportunity to
announce new price levels. Look for the producers to attempt to raise
prices throughout the year.
The stronger shipments were reported for most of the paper and pulp
grades in February, as well as December and January, this will support
our position that the business is now recovering and the paper industry,
accordingly, is reviewing pricing increases. Uncoated Papers
The Uncoated
Freesheet shipments were up 5.7% from February 2009. This was the
largest increase in over 3 years (Note, February 2009 vs 2008 was down
20.8%).
Mills such as International Paper and Domtar continue to
take significant capacity reductions. Coated Papers
Coated paper shipments also witnessed
increased shipments.
Lightweight (publication) coated paper (LWC)
shipments increased 21.0% versus February 2009 and coated free sheet
increased 9.7%. (Note, last January, those two
categories posted
declines of 37.4% and 24.6%, respectively).
Producers of coated free
sheet will continue to benefit from duties recently announced for some
Chinese and Indonesian imports and I suspect shipments will continue to
advance.
Market Pulp
Domtar
announced a $50/mton price increase in North America and Europe for
both the NBSK and NBHK grades, effective April 1. If successful, the
hike would be the 10th price increase in the last 12 months. The market
has absolutely tightened as a result of both the Chile earthquake and
strike at the Finnish ports. Additional market pulp producers that
reported an increase include, Sodra's $40/ton April price hike on NBSK
for Europe. Fibria announced a $50/mton global increase on (hardwood)
BEK.
Reports suggest that the $30-50/mton price increase for March
on softwood and hardwood grades in North America, Europe and Asia have
gone through without much push back.
If the April price announcement
is successful, NBSK pulp prices would
be up 50% from this time in
2009. NBSK (benchmark grade) pulp list price will be at $960/mton, up
30%.
Domtar just announced it will permanently close its coated groundwood
publication paper mill in Columbus, Mississippi. The Domtar coated
groundwood paper mill has an annual production capacity of 238,000 tons
of coated groundwood and 70,000 metric tons of thermo-mechanical pulp.
Chile
produces nearly 5Million MTA of market pulp or 8% of the world's
supply. Nearly 80% of the pulp capacity is located within 150 miles of
Concepción.
Reports from the region suggest that mills will be
down for 30-60 days. Aftershocks could easily push the restarts back
even further. If the entire Chilean industry is out for just 2 months,
this could result in a loss of 800,000/MT.
Some analysts are
predicting modest price gains of only $30-40/MT (3-5% increase). On the
other extreme, some contacts in the pulp brokerage community are
pointing to April list price increases of as much as $80-100/MT (9-11%
increase). Deutsche Bank forecast is for April hikes in the $60/MT
range.
Notes from a Forrester Research Report-
Online
retail sales, in the US, excluding auto, travel and drugs, grew 11% in
2009 to $155.2 billion or 6% of total. Forrester predicts 11% growth in
2010, reaching $172.9 billion or 7% of sales and similar growth
annually through 2014, bringing online sales up to $248.7 billion by
2014.
The overall web-shopping audience is growing, up 4% in 2009
to represent 67% of the US online population. Forrester predicts
consumer electronics to continue seeing double digit growth online,
with apparel, accessories, footwear seeing a 17% growth online in 2009
and expecting over 10% growth for the next few years.
The trend for online sales is mirroring online/ Digital advertising.
St. Marys Paper will close PM 5 at its Sault Ste Marie, Ontario mill.
The machine has a capacity to produce 130,000MTA of SC-A paper. The
mill’s other machines, PM3 and PM4, have been closed since December.
Catalyst has proposed a plan to
the union that could restart 2 specialty paper machines at the Elk
Falls paper mill. The Elk Falls mill is located in Richmond, BC with
annual capacity of 153,000 tons of uncoated mechanical specialty paper
and 373,000 tons of newsprint.
The Outsell research firm released
an optimistic report on a forecast growth for both digital and printed
advertising. The report also outlined digital advertising
($119.6Billion) may exceed print ($111.5Billion) for the first time.
Magazine advertising spending is expected to increase 1.9% or
$9.4Billion, including a 4.2% increase for consumer titles and 1% for
B-to-B titles. One additional trend noted in the report was business to
business advertisers see cross-media marketing as most effective.
Following up on the Coy Paper
earlier releases, the stevedores that work the ports in Finland remain
on strike. The Finnish Transport Workers Union has forced several of
the Finnish paper makers to cease operations. The mills are not able to
receive raw materials, they are unable to warehouse finished paper, and
most importantly, the paper mills can not ship paper.
Of notable mention, the following mills are shut down
-UPM shut down Rauma mill, capacity 720,000MT/YR, of coated mechanical
and 540,000 mtpy of supercalendered paper
-Sappi closed its Kirkniemi mill, 740,000MT/YR of coated mechanical.
-UPM
closing of Kaukas (Lappeenranta), 570,000MT/YR of coated mechanical and
Kaipola, with 700,000MT/YR of coated mechanical, directory and
newsprint papers
-UPM at Kymi, 850,000MT/YR of coated and uncoated woodfree capacity.
-Stora Enso will begin closing mills.
Negotiations with the stevedores continue. ?Finland has 25 major ports,
10 of which handle 75% of their exports.
Consistent with our Coy Paper
earlier releases, initial reports outline shipments for commercial
printers declined 7.2% in January (versus January 2009) to $6.7Billion.
Many believe this might be a trend, with the advent of EReaders and
other electronic devices cannibalizing traditional print.
The official American Forest and
Paper Association (AF&PA) released final figures for January and
confirmed Printing and Writing paper shipments were up 8.9% (vs.
January 2009).
Highlights of January (versus JAN 2009 report include-
-Coated Papers up 14.6%
-Uncoated Mechanical up 28.3%
-Uncoated Freesheet up 1.9%
-USA Purchases (shipments and imports less exports) up 4%
Inventories of Printing and Writing rose 1%, up 9800 tons from December
2009.
When Fraser Paper completes its sale (sometime in April), the new
specialty papers business will consist of the integrated pulp, energy,
and paper operation in Edmundston, New Brunswick and Madawaska, Maine,
as well as two lumber mills located in Plaster Rock and Juniper, New
Brunswick. The company will be called Twin Rivers Paper Company. This
new company name is reflective of the location of the pulp and paper
operations at the Madawaska and Saint John Rivers.
The worldwide producers of pulp
and paper have substantially increased the use of renewal wood for
biomass for their massive energy demands. The result is less
(nonrenewable) fossil fuels consumed. A recent release from the Wood
Resource Quarterly confirmed that since 2006, energy generated from
biomass has gone up over 50%, last year accounting for 18% of the total
energy consumption by this industry sector.
Apple delayed the introduction of
its new IPAD EReader to retail stores until April 3, although orders
will be accepted on the web as early as March 12. The IPAD will come
with the iBookstore application and 11 other free download
applications. Many are watching this device with interest to determine
if Apple will change the way we read, much like this company changed
the way we listen to music and use our phones.
The Coy Paper Company has always focused on the specialty paper market
and now has included chemicals to its product offerings. The company
has technical support and blending facilities and will market and
distribute the Hartindo Anti Fire chemicals to include AF 21, AF 11E
and AF 31.
Many
paper mills and coaters are evaluating Coy's product to include in
their product lines. Imagine, a fire proof paper and a flame proof
paper!!
The chemical offers permanent protection from fire once
applied, Hartindo AF21 will protect your home and family, hotels, night
clubs, schools, Hospitals libraries and museums, etc. from the ever
present danger of fire, giving you peace of mind 24 hours a day.
Contact Coy Paper at info@coypaper.com for more information.
Even with a slightly improved
demand at the end of 2009, coated publishing paper prices are almost
$150 below their mid-2009 peak. Despite the combined rising costs of
raw materials and the loss of black liquor credits, pressure continues
on margins for the producers of coated groundwood publication papers.
The forecast is for coated paper prices to continue to trend upward and
producers to look for more improvement throughout the second half of
2010, assuming the economy does not enter another dip.
While
it was true that during 2009, coated paper prices declined, but, in the
first half, so did production costs. Unfortunately, the price slide
continued despite the return of increased costs toward the end of the
year. Pulp costs increased such as softwood pulp, up $200 per ton since
their 2009 low, while coated publication prices fell
$130 over the same time frame. Producers are also facing further
pressure from the rising costs of energy, chemicals, transportation,
and other cost components.
The challenge remains for mills due
to rising fiber costs and the elimination of the black liquor credits
(which will not be renewed). These credits reached as much as $100 per
ton of paper. Combined with the other cost concerns noted above,
producers will face tremendous margin pressure in 2010 if prices remain
at their current levels. Accordingly, look for producers to introduce
increased pricing thorough 2010.
The index known as the Pulp &
Paper Week composite (includes 23 USA companies) reported forth quarter
2009 earnings up 60% (vs. 4Q08) with sales down 7.5%. For all of 2009,
the group’s earnings were down 34.2% with sales down 11.4% when
compared to 2008 results. It was noted that 15 of these companies
benefited by the alternative fuel black liquor tax credits which offset
losses, improved balance sheets, and substantially boosted earnings.
Worldcolor will close its plant in
Carroll, IA which will be the fourth closure in the last 12 months.
Other shutdowns previously reported on Current News on the Pulp and
Paper Industry were located in Oberlin OH, Bromont QB, and Richmond ON.
So many of our readers mail
publications or print direct mail marketing pieces; accordingly, a
summary of the newest USPS plan. Mail volume is forecast to drop 15%
from 177Billion pieces to less than 150Billion by 2020. If no action is
taken, this will result is a deficit of -$240Billion by 2020.
Proposed plan is to
-Restructure retiree health benefits
-Fewer delivery days; more locations, more self service kiosks, more
user friendly website
-Establish more flexible workforce
-Review pricing on each program, to include a price increase in 2011
-Introduce more products
Notes on report from Business Wire
The
Institute for Supply Management (ISM) reported that US economic
activity in manufacturing expanded in February for the 7th consecutive
month, with the overall economy growing for the 10th consecutive month.
New orders and production showed significant month-over-month growth,
with the Employment index increasing for the 3rd consecutive month. The
paper and printing sector indicators are summarized below.
The Finnish Transport Workers’
Union went on strike this week. If the strike effects the Finnish
ports, mills such as UPM Kymmene will lack raw materials, paper
storage, and a means to export paper. The mills will have no choice but
to shut down. Note, almost half of UPM’s paper production capacity is
in Finland, but they plan to deliver orders from mills in other
countries.
USA Department of Commerce
reported on their preliminary results in its countervailing duty
investigation of coated paper from China and Indonesia. They announced
a preliminary duty of 12.83% on products from China, and 17.48% on
products from Indonesia. Asia Pulp & Paper (APP), a major exporter
of coated paper from China and Indonesia to the USA, expressed
disappointment with the initial findings.
Department
of Commerce’s final ruling is expected to be released in September
along with the final ruling on anti-dumping. The last phase of this
investigation will occur in October or early November, when the USA
International Trade Commission will determine if the domestic paper
industry has been harmed.
USA Printers share in the foreign
producers disappointment on this ruling. Their coated paper costs will
surely increase in a challenging market.
?International Paper, the world's
largest producer of paper, will permanently shut down the two remaining
paper machines at its Franklin Virginia plant.
To date, electronic books only
make up less than 2% of all books sold. Trade books, both hard and
paperback, are 35% and mass market printed books are 21%. As far as
distribution is concerned, Book chains sell nearly 30% of all the books
sold, followed by e-commerce sites at 20%, and the independent shops
account for 5%. I would image the digital distribution will be a new
channel and experience robust growth once the EReaders start hitting
the market in a bigger way.
Condé Nast, Hearst, Meredith, Time
Inc. and Wenner Media with the support of Magazine Publishers of
America and Bonnier Corp.; National Geographic; ESPN; and New York
Media, have reported they will place front-of-book advertisement
placements to answer tough questions about their relevancy. In all,
close to 100 titles are planning to give up prominent space in their
issues for an industry ad campaign that aims to promote magazines as
vital.
The
community is ferociously determined to correct the misconceptions that
have been swirling around the advertising industry. The primary
objective is to confirm that printed magazines are still exciting,
Mobile, and will still be a strong presence for all to read 'the
printed word'. The publications will also educate the public on how,
long term, electronic media will devalue its product by offering its
content for free online.
Just reading another report
confirming producers of Paper and Board in Europe were down nearly 11%
to 90Million tons, from 2008. This is the lowest level of shipments
since 2001. Similar to the USA, the European manufacturers experienced
weak demand and several capacity closures.
Domtar and SAPPI recently
announced yet another increase for their market hardwood pulp of
$50/ton for shipments. It was also reported that most of the producers
of BEK will increase pricing $30/ton. This move follows all the North
American producers of softwood pulp with the earlier announcement for
an increase of $30/ton. Once all prices are into the market, the NBSK
price for North America will be $910/MT and Europe will be $890/MT.
Most
pulp buyers will not have a choice, but to pay the increase. Pulp
supply has been tight due to continued strong demand in China. Also,
the earthquake in Chile will impact several producers.
Pulp prices have staged a remarkable rally in the last 10-11 months,
with most grades rising more than $200/MT.
The last decade yielded only limited new domestic capacity for the
paper industry and an unprecedented number of plant and equipment shut
downs. The industry is entering 2010 with a slight breeze to our backs
with many markets witnessing small increases in order books from end
users that most likely had to restock. Unfortunately, the economy is
still not improving to a point that housing starts, bank credit, nor
consumer buying has returned with any sustainability. Many of the raw
materials consumed in paper making have increased and the black liquor
alternative fuel credit is gone. NBSK pulp may raise to almost $880/MT
– a 16 month high - and come close to matching the August 2008 peak. Newsprint
continues its challenge into 2010, with both advertisers and readers
down, although pricing has improved for the producers. The price has
steadily risen from a recent low of $450 to nearly $530/MT. The
forecast is for still more shuttering of equipment to balance, the
declining demand, with supply. Uncoated Freesheet
producers have announced an increase of $40/ton on business papers and
demand appears to be stabilized (although current base is low). The
major producers reduced capacity in 2009 and this will balance the
market.
The manufactures of Coated Freesheet
and Groundwood
are still experiencing challenges from the a reduction in both
advertising pages and over all circulation. The manufactures have
announced price increases, but printers continue to push back citing
fear of alienating their customers with advanced pricing.
Virtually all products for Containerboard
have increased prices, and converters are paying the new levels.
Current order backlogs are OK at best, with export shipments doing
well. Real challenge is if the economy does not improve, no one will
consume goods that go into boxes.
Our forecast is for a gradual
recovery for the paper industry, and trending up from a poor 2009.
As of today, all the major producers of ContainerBoard including
International Paper, Georgia Pacific, and Temple Inland have increased
pricing. These three leading producers are digging their heels in on
the $60/ton announcement for April 1. More than likely, this second
increase of the year will happen, despite persistently weak demand. Key
issues include tight supply/demand balance, lean inventories, and
surging fiber costs.
As we assumed, White Birch joined AbitibiBowater in announcing they
will file for bankruptcy protection. White Birch is the second-largest
newsprint manufacturer in North America with newsprint mills in Quebec
City, Riviere-du-Loup and Gatineau. The company expects operations to
continue producing paper for end users.
From recent report by American Forest and Paper Association
The
AF&PA reported that USA printing and writing paper shipments went
up 9% in January vs. 2009. This is the third consecutive monthly
increase when compared to the year before. All paper classifications
grew, with coated fee and groundwood - publication having double-digit
growth. US purchases (shipments + imports - exports) also went up by
+4%, and inventory levels increased 1%, by 9,800 tons from December.
RR Donnelley will acquire Bowne
& Co.for $481Million and is expected to close in the second half of
2010. Bowne had revenues of $675Million in 2009 and offers digital
print services for healthcare, financial services and others.
Most CEOs running pulp and paper
companies believe the ‘worst is over’ and now look for a slow recovery
over the next 2+ years. Most admit the industry cycle is mature or even
declining and much of the lost demand may not return. The paper, pulp,
and packaging industries all need to review their models for long term
survival. The last two decades illustrated a trend of mergers,
acquisitions, consolidation, and plant and equipment closures. This
assisted with the over supply challenge, but if demand continues to be
decreasing, a transformation must occur.
The
paper companies will need to review other segments and models to be
viable as a long term entity. Areas of focus perhaps should include,
Chemicals, water treatment, energy, logistics, forest management, and
recycling. The paper companies all currently have expertise in these
areas as a normal course of business. Now, maybe they should evaluate
if these areas could generate new streams of revenue and recreate a
‘new’ entity.
The USA printing industry
continues to lobby against the coated paper manufactures that have
asked the US International Trade Commission to levy a tariff on Chinese
and Indonesian producers. Overall demand for printing is down and the
continued competition from electronic communication is fierce. Reports
confirm over 73,000 workers in the printing industry lost their jobs in
the past 2 years. The printers feel that the imported paper maintains a
competitive market, and without China and Indonesian paper, the cost of
the largest component for printing costs, would increase. Increased raw
material costs will further drive clients away from the printed media
and potentially close down printers.
The printing community is fighting to keep the imported coated paper
coming into the USA without a penalty tariff.
We often report on the financial conditions for the paper and pulp
producers as well as printers, but the entire supply chain has been
negatively effected. Poor demand from the printing community negatively
effected the latest set of financials from global paper distributor
giant PaperlinX. The merchant's sales for the six months to December
2009 fell across the board, with Australian, New Zealand, European and
North American operations showing double digit declines; meanwhile,
Asia did illustrate some positive results.
We
reported earlier in the year, that PaperlinX was successful in the sale
of their Tasmanian paper manufacturing operations to Nippon Paper;
however, the company is still looking to sell its Burnie paper
manufacturing plant, and, if no buyer is found it will close in June
2010.
For the first half of the 2009-10 financial year
PaperlinX reported a loss of $175Million, the bulk of this coming from
costs associated with its exit from paper manufacturing. The company
recorded a 28% drop in group revenues to $2.7Billion, as well as a 24%
drop in paper volumes, which the company attributed to its exit from
paper manufacturing operations in Australia and the impact of weak
markets.
International Paper just announced
a $60/ton price increase on containerboard for shipments starting in
April. We assume fellow producers will follow such as Temple-Inland,
Packaging Corp, Rock-Tenn, Greif, and Sonoco. Also, Boise and Kapstone.
Although
inventories for containerboard are down from historical highs for the
month of January, they DID increase from January 2008. Prices have
increased, but demand for boxes appears stagnate, at best. In fact,
Deutsche Bank reported shipments were down over 4% and inventory rose
67,000 tons. The past price increase went through, will the April pop
also be successful?
The Reader’s Digest Association
has officially emerged from Chapter 11 protection. As part of its
restructuring, the publisher reduced its debt by 75% (from $2.2 billion
to $525 million). Holders of senior secured debt transferred ownership
of Reader's Digest to the lender group and will effectively receive
equity.
Most of the major paper sectors
have announced price increases, and end users are paying the new price.
It appears many of the raw materials including chemicals, pulp, energy,
and transportation have all increased, and the infamous black liquor
credit is gone. As we outlined in past releases, the forecast will be a
slow one for paper producers to recover. Demand continues to be soft
and the industry continues to have too much capacity.
The current challenging magazine
industry on publication's revenues has resulted in many reviewing their
membership to the Audit Bureau of Circulation (ABC). For decades, ABC
was considered the bible of auditing over 750 consumer magazines for
circulation. However, over the past few years, about 100 of the smaller
(or shuttered) have dropped ABC. The most common reason relates to the
$10,000 fee ABC charges each year for the audit.
Advertising
pages have dropped some 23% from 2008 to 2009, and significant revenue
along with it. Many of the smaller publishers are cutting cuts to
merely survive.
Appleton, SAPPI, and NewPage
continue their efforts with the USA International Trade Commission to
review coated paper imports from China and Indonesia. The USA paper
producers would like the government to impose a 100% tariff because
they feel the Asian governments are unfairly subsidizing the coated
paper producers. Most believe the final ruling will not be awarded
until the Fall of 2010; however, the USA Dept. of Commerce is to make a
ruling by March 1.
Many
of the domestic printers are fighting this hearing for fear that if the
results support the USA producers, coated paper will cost more. During
the past 18 months, although the paper markets have been poor, there
were no significant increases in imports. Printers also cite domestic
coated manufactures have not witnessed their market share to decrease.
Printers
already are experiencing a challenge just with poor demand, the fear of
coated paper increases will only produce a more depressed industry.
Comments?
The world’s largest paper producer of magazine papers, Kymmene, just
announced it will temporarily reduce its work force at both the Kaukas
and the Kymi mills in Finland. Management cited poor demand for the
companies paper products and an objective to improve costs. UPM Kymmene
has 64 plants in 15 countries.
The NewPage mill in Rumford Maine
recently started up a paper machine that was shut down in September.
This machine manufactures coated paper for magazines. The mill is now
operating all equipment at the Rumford location
Lately, pulp and transportation
cost increases have forced many mills to evaluate paper prices. Sappi
will increase prices on coated woodfree paper sheets and rolls by 10%
starting with March shipments. Also citing increased costs and
unsustainable margins, Lecta, the second largest European coated
woodfree paper producer, announced a 9-12% price increase on coated
woodfree paper, effective with deliveries as of March 15th.
The publisher, Penton Media, will
reorganization under Chapter 11. Penton Press is the parent company of
such trade magazines as American Printer and Paper, Film & Foil
Converter magazines. The publisher had more than $1 billion in
liabilities and the assets reported were between $500 million and $1
billion, according to court documents.
Posted by
P. Scott Vallely
Please,
also, visit PAPER NEWS for
all the news on paper
The workers at the Fraser Paper Madawaska paper mill in Maine agreed to
have their paychecks cut by 8.5% as part of a new contract mill
management says is needed to keep the facility from closing. This
initiative will save the company $4Million in annual savings.
Reader’s Digest had historically
controlled the top spot for the biggest selling consumer magazine. The
Audit Bureau of Circulation’s latest figures reveal that
this is no longer the case.
Meredith's
Better Homes and Gardens now holds that distinction, with a total
circulation of 7.6Million, according to the ABC covering the
June-December 2009 period. It should be noted, Reader’s Digest, now No.
2 at 7.1 million, deliberately cut its circulation in recent years to
improve its profitability.
15 companies recently obtained
Forest Stewardship Council certification for their management practices
covering a total area of over 1.5Million hectares. Applicants,
including AbitibiBowater, Domtar, and Kruger among others. The
Rainforest Alliance’s Smartwood Program conducted the assessment.
Sustainability and environmentally friendly initiatives continue to be
important programs for the Pulp and Paper industry.
The major marketers are learning
that traditional (mailed) direct mail becomes a more successful
campaign when combined with digital marketing. The final figures for
2009 are not yet in, but, in 3Q 2009, US consumers received 5.2 billion
pieces of direct mail, a drop of 27% from 2008. Marketers are finding
that with reduced spending budgets they are sending fewer pieces, but
more targeted. The companies are complimenting these efforts with
emails and witnessing increased responses.
From a Pulp and Paper Week Report
Barclay's
Capital analyst, Peter Ruschmeier, estimated US uncoated mechanical
paper (groundwood containing paper used in inserts, paperback books,
and certain magazines) is to increase 22.6% in 2010; coated freesheet
to rise 14.4%; coated mechanical (publication papers) to be up 13.2%;
market pulp up 2.0%; and uncoated freesheet up 1.1%; with newsprint
down 7.2%. Many industry observers feel that demand will increase in
2010 and rising costs will squeeze margins. Most pulp, paper, and board
producers will focus on raising selling prices to offset margin
pressure.
Coy Paper might
take some exception with the aggressive growth figures on both uncoated
and coated groundwood papers as well as coated free sheet. Unless
advertising dramatically improves, I would be hard pressed to forecast
a growth of even half these figures. We DO agree that mills will
attempt to increase pricing (for all grades) throughout the year in an
effort to stay ahead of the cost curve.
After a punishing first half of
2009 for magazine sales at the newsstand, many of the industry’s
biggest newsstand sellers witnessed sales declines begin to at least
level out in the second half of the year.
Single
copy sales declined 12.4% in the first six months of the year. It
should be noted that results were partly affected by a disruption in
the wholesaler delivery chain which led to delays in getting issues to
stores. The challenging economy is also at blamed for a decline in
single-copy sales.
In the second half, though, single-copy sales
declines narrowed for big newsstand sellers like People, In Style,
Glamour, Family Circle and Cosmopolitan.
Not all shared in the
improvement. Good Housekeeping’s newsstand sales fell nearly 30% on top
of a 17.7% decline in the first half. Vogue was down 15% and Men’s
Health, 14%.
Dr. Joe Webb, director of
Economics and Research Center, said “2009 was a tough year for
printers, and the trend of displacing print with new media by retailers
and others continues. The longer the slow economic times last, the more
entrenched these new media budget allocations will be.” Dr. Webb
emphasized that print businesses will continue to be under pressure to
merge and consolidate because of these shifts. “The most successful
print businesses had specialized equipment and processes that were
targeted to the exact needs of those markets, such as magazines,
catalogs, and newspaper inserts. The higher profits those organizations
enjoyed for many years were the rewards they had for concentrating on
those niches. It wasn't until those niches started to contract that the
printers realized that specialization had risks, which were often
underestimated, that quickly eliminated those rewards.”
Total Shipments for printers for 2009 for Year are $88 Billion
The USA Government Printing Office (GPO) awarded bids to more than 1800
printers in 2009 for $425Million (down from $421Million in 2008). Top
five include
NPC (News Printing) $29.3Million
RRDonnelly $27.0Million
Monarch $19.5Million
Gateway Press $17.5Million
SourceLink $16Million
Time Warner reported that its publishing unit, Time Inc., generated
$3.7 million in revenue in 2009, down 19% from 2008. Those losses were
fueled largely by a 22% or $541 million decline in advertising revenue.
Meanwhile, subscription revenues declined 13% for the year and other
revenues fell 24%.
?S&P recently generated a
report that outlined a slow recovery for companies involved with USA
forest products. ?The document reviews a slight improvement in outlooks
for 60% of forest sector companies. This report is titled “The US
Forest Products Sector is Entering a Slow Recovery” and says that the
positive trend reflects significant debt reduction that these companies
achieved, despite poor economic conditions. They believe that the
economy and housing markets have hit bottom and that the sector’s
credit profile will improve over the next few quarters.
I,
on the other hand, am not as bullish, especially if one is focused on
the pulp and paper segment of the forest products industry. There will
be some improvement, assuming the economy picks up, but debt reduction
will be a challenge.
The International Paper Company,
the world's largest pulp and paper producer, reported a loss for the
forth quarter of $101million due to a decline in sales. The Industrial
Packaging unit dragged down the balance of the corporation, posting a
loss of $391Million.
Meanwhile,
Domtar experienced strong pulp sales and benefited from recent pulp
price increases. The company announced a profit of $124Million for the
forth quarter (compare to a loss of $676Million 4Q2008).
As announced by AF&PA Report
In
December, paper output in the USA was 2.9Million tons, up 3.3%, yet for
the year, paper output was down 13%. Coated paper improved 12.8% for
the month, but was down 18.7% for the year. Uncoated mechanical grades
increased 1.4% in December, but dropped 20.5% for the year. Uncoated
freesheet was up 1.9% for the month and down 11.1% for the year. This
is the second consecutive month of increased output vs. 2008.
R.H. Donnelley changed their name
to Dex One and also announced it will emerge from Chapter 11. The
124-year-old local business directory publisher and marketing company
also provides business search engines and pay-per-click networks. The
new name will tie into their search website dexknows.com. The company
is attempting to rebrand itself as a search engine company.
The paper industry continues to produce fewer tons each year. Not a
healthy trend!
The
last decade has not been friendly for the North American packaging
paper producers, considering the demand peaked in 1999 at nearly
56Million tons. Several believe the market will have fallen below
46Million tons in 2009, when the final numbers come out. Meanwhile, the
producers for graphic papers last witnessed very good growth in 1970
and the 80s and than 90s- but the market topped out at 50Million tons
in 2000. In 2001, the demand fell to about 46Million tons – and managed
to stay at this level until 2007. Between 2007 and 2008, demand fell
15% to 39Million tons and most forecast 2009 will end up at slightly
under 32Millions tons (19% down).
The biggest element in this
decline was lack of advertising (especially for Auto, Financial, and
Real Estate). It is predicted that the next few years will generate a
flat demand, and than decline, beyond 2011. One study indicated that
this segment might be down to 25Million tons by 2024. Newsprint could
well be the largest component of this decline.
RockTenn, Graphic Packaging
International, and Sonoco have all announced an increase for corrugated
box prices by 10 percent and corrugated sheets by 12 percent, effective
with shipments on or after February 22. The industry had previously
increased the price for uncoated recycled paperboard by $50/ton and
bleached board products by $40/ton.
The converters have all absorbed a 40% increase in the cost of recovered
paper.
Another cost pressure is the price announcements for Old Corrugated
Containers (OCC)increasing in January from $80 to $110/ton.
Consistent with our previous releases, as of today, Domtar and NewPage
announced $40/ton price hike on its offset grades, effective Feb 22.
Others,
including International Paper, Glatfelter, Finch, Flambeau, and Grays
Harbor have already announced similar price hikes on offset grades.
Georgia Pacific, Boise, Suzano, Soporcel have limited their efforts to
cut-size office grades. The continued rally in pulp prices is
pressuring margins at nonintegrated mills.
Verso Digital recently presented
their findings on a survey based on millions of Internet users and
found that avid readers forecast they will split purchases between
print and electronic. Most of the 'avid' reader group is over 45 years
of age (66%). Only 28% of those in the 18+-age bracket are avid
readers. 27% of avid readers are not willing to pay more than $10 and
37% not sure how much they would pay.
Apple
just announced the IPAD device. I note Apple has revolutionised
computers, cel phones, MP3 players - and could now create lure to grow
the audience for EReaders.
In any event - more EReaders mean less paper consumed, in an already
depressed market for demand.
These are difficult and challenging environments in the paper and
printing markets, it is important to review your printing platform to
assure you are still as cost competitive as possible
-Does the printer’s equipment still fit your publication?
-Do you still invite competitive printers to quote your publication?
-Is your printer still financially stable?
-Where has the printer downsized? Has this area effected your
publication?
-Slower response from CSR, no new ideas on distribution, the paper buyer
has not recommended any alternative papers, etc.
-Is your printer taking the correct steps to be environmentally
friendly?
-Has your printer invested in new technologies?
ALSO,
-Have you considered more cost effective alternative papers?
-Lower brightness; Uncoated Supercalender instead of coated, lighter
basis weight, self-cover, Groundwood containing /LWC in stead of a
'free; sheet.
-Have you reviewed reducing the size of your publication or fewer pages?
-Are you still distributing to nonrevenue producing subscribers?
It's
January, start the year by reviewing all your vendors to confirm they
are still competitive and partner up with your vendors to mutually
create ways to save money.
Posted by
P. Scott Vallely
Please,
Click on PAPER NEWS for
all the news on paper
Total Uncoated Free shipments were down -11% for 2009 to 9.7Million
tons. USA imported 855,600 tons for 11 months - 16% lower than last
year and exports declined 6% at 779,300.
Graphic Packaging International
announced a price increase of $50 per ton on all grades of
PaceSetter(R) uncoated recycled board (URB), effective with shipments
after Feb. 18.
The
company is one of the largest producers of folding cartons and holds a
leading market position in coated-recycled boxboard and specialty bag
packaging.
The recession of 2009 saw
consumers begin to use more coupons than in recent years, in fact, it
was the first increase in 17 years. Shoppers turned to both the
newspaper as well as online and cell phone applications to find
coupons. Of particular note was online coupon access increased 92% and
redemption shot up 360%, although the Internet still accounts for only
1.5% of coupons redeemed, according to a report from Inmar. Despite the
rapid rise of online coupons, newspaper inserts still account for 89%
of coupons distributed to consumers and more than half of coupon
redemption. Web sites accounted for 0.3% of coupons distributed to
consumers and 1.5% of redemption. 19.6% of online coupons are redeemed
and it is estimated that consumers redeemed a total of 3.3 billion
coupons in 2009, a 27% increase from 2.6 billion in 2008.
From Company release.
Quad/Graphics
Inc., the largest privately held printer in the US, will acquire
Montreal based, World Color Press Inc. for an estimated $1.4 billion.
The deal will close in the summer when the expanded Quad/Graphics will
become the 2nd largest commercial printer in the US behind RR Donnelley
& Sons Co. Worldcolor shareholders will own 40% and Quad/Graphics
shareholders 60%. Quad/Graphics CEO Joel Quadracci, age 41, will lead
the combined entity as chairman, president and CEO. Worldcolor’s CEO,
Mark Angelson will be named to the board and oversee the integration.
Worldcolor prints magazines like Sports Illustrated, Rolling Stone, The
Crate & Barrel catalog and Yellow Book Directories. Quad/Graphics’
clients include Newsweek, GQ and the LL Bean Catalog. In the 12 months
through Sept, their combined revenue was $5.1 billion.
The
official report from AF&PA outlined USA shipments of Printing and
Writing Paper increased 6% in December versus December 2008, the 2nd
consecutive increase, with all 4 grades reporting an increase for the
month. YTD shipments were down 15%. USA purchases (shipments + imports
less exports) also increased in December, up 3% vs. 2008, but still
down 17% YTD. Printing and writing inventory levels decreased 2% or
41,000 in Dec09 vs. Nov09.
In 2009, China imported a record
high 13.7Million tons of market pulp, increasing 44% over the 2008
deliveries. The extra demand was consumed by the new machines starting
up without domestic fiber. Most exerts in the industry believe the
Chinese will continue to grow their purchases of market pulp, despite
less worldwide supply and increased prices. There has also been an
increase in pulp consumption in India with solid demand in Bangladesh,
Pakistan and Vietnam. Suppliers in Brazil and Indonesia had pulp
availability decrease due to flooding, while Russian suppliers had
unusually frigid temperatures, slowing production.
Three new pulp & paper
investments in China announced by Guangxi Yongkai Sugar and one by
Guangxhi Huacheng Paper adding almost 1Million TPA of uncoated paper.
China, now the largest producer of uncoated papers, also continues to
witness increases in consumption.
Last week we announced Domtar
increased their price and, as assumed, most of the uncoated white paper
mills joined Domtar in reporting a price increase for late February or
early March. Most increases were $40/ton, the exception is Wausau which
we reported as $60 for text and cover grades. Domtar and Boise told
customers they would only increase cut-size business papers; however,
International Paper, Glatfelter and Finch extended the increase to
offset rolls, tag/index/file folder stock and other converting grades.
The year 2009 was not kind to many
paper markets, and Newsprint was hit especially hard. After a reduction
of 14% in 2008, demand continued to erode another 24% in 2009.
Electronic communication has truly hurt this industry. Capacity
continues to outstrip demand, despite reduced pricing and plant
closings. AbitibiBowater continues to operate under chapter 11 -
commanding 43% of the market, White Birch is #2 at 22% - failed to pay
an interest debt due last Fall, and Port Huron - filed for bankruptcy
protection. Even if the economy improves, will end users go back to
newspapers for news, classified advertisements, and coupons?
The NAPL reported that US
commercial printing sales were down -16% in 2009 to $72Billion. The
rate of decline slowed significantly since last summer, with a forecast
for 2010 of rising +2 to 3% to $73-74 billion. NAPL forecasts a slow
recovery, not hitting its stride until later in the year.
The New York Times announced they
will soon charge non subscribers for heavy use for attaining news on
their website. The company will continue to provide free content for a
limiting number of articles and print subscribers will continue to have
free access to the site. Under the new metered model, a viewer can read
a certain number of articles per month free before being charged a flat
fee. This is a similar model to The Financial Times. The exact cost was
not confirmed. Note, the NYTimes is one of the most popular newspaper
site in the country (over 17 million readers) . The Times will begin
charging in January 2011.
The Catalyst Paper Company
reported that the 1PM at its Crofton mill in British Columbia will be
curtailed indefinitely due to weak newsprint and directory paper demand.
The
machine has a capacity of 140,000TPA of commodity grades and was
temporarily idled on December 23, 2009 for the holiday period.
The
mill has an annual production capacity of 200,00TPA of newsprint and
210,000TPA of directory paper, along with the capacity to produce
343,000TPA of NBSK pulp.
Throughout the last several years, Coy
Paper
has reported on shuttered newsprint equipment. Today, we confirm
AbitibiBowater’s Fort Frances mill in Ontario will now be shut down
indefinitely due to an effluent problem. They will remain down until
they are in compliance with all laws and regulations. ?
Stora Enso
will restart the #2 paper machine at Varkaus Plant in Finland after
having been down for 6 weeks. The stop was due to market related down
time. The Varkaus, facility has a capacity of 290,000TPA of directory
paper and newsprint, while PM #3, which has remained running, has
310,000TPA capacity.
Monday, March 1, 2010 Wausau Paper will increase the base price of the
following grades by $2.00/cwt:
Exact Index; Exact Vellum Bristol; Exact Tag; Exact Opaque Colors; Exact
Multipurpose
Domtar just announced a $40/ton price increase on their business paper
cut size grades, effective February 15. So far, this is the only grade
line to be increased. We can only assume that all Domtar’s competitors
will follow; especially in that demand is improving including December
2009 vs 08 shows shipments +1.2% ( this is the first positive
comparable since April of 2007).
Certainly
raw material costs including pulp prices and energy continue to surge.
Also,inventories at both the mills and the merchants are down 20% down
from this time last year. Lastly, recall International Paper and Domtar
will close 800,000TPA of capacity by mid-2010, representing 7% of North
America’s Uncoated Free Sheet capacity; furthermore, the artificial
support from the black liquor credits are gone (that was $8Billion in
2009!!). All indicators that the price increase will most likely stick.
A price increase for both the East and the West Coast was announced in
December for January shipments. We
think these price increases might actually happen, or at least
$25-30/ton of the announced increase; the balance will most likely be
absorbed in the February / March time period. Although demand has not
appreciably picked up, raw material costs certainly have increased,
thus, creating this 'forced' increase.
Reader’s Digest just reported that
their restructuring plan was approved and the company could exit
bankruptcy by January 31. The company’s debt would be reduced from
$2.2Billion to $550Million and the retirement for past employees would
be modified. They will reduce headcount and move headquarters to a more
efficient faculty.
From NewPage News Release
NewPage
Corporatio announced that Richard D. Willett, Jr., President and Chief
Executive Officer, has resigned from NewPage effective immediately.
Mark A. Suwyn, former Chief Executive Officer and currently Executive
Chairman, has been elected to serve as Chief Executive Officer until a
new Chief Executive Officer is named.
NewPage is headquartered
in Miamisburg , Ohio ,and is the largest coated paper manufacturer in
North America , based on production capacity, with sales of $4.4
billion. The company's product portfolio is the broadest in North
America and includes coated freesheet, coated groundwood,
supercalendered, newsprint and specialty papers.
NewPage owns paper
mills in Kentucky , Maine , Maryland , Michigan , Minnesota , Wisconsin
and Nova Scotia , Canada . These mills have a total annual production
capacity of approximately 4.4 million tons of paper, including
approximately 3.2 million tons of coated paper, approximately 1.0
million tons of uncoated paper and approximately 200,000 tons of
specialty paper.
Printing and writing paper
shipments improved in the USA for the month of December. Total
shipments yielded 1.478Million tons, up 2.8% vs. November and 5% higher
than last year. Full year shipments decreased 15.6% to 17,000 tons.
Coated mechanical rose 15.5% to 306,300 tons and coated freesheet rose
12.1% to 256,500 tons vs. 2008, with both increasing vs. November YTD,
both were down almost 20% with coated mechanical at 3.2Million tons and
coated freesheet down to 3.25Million tons. Uncoated freesheet rose 1.2%
vs. December 2008 to 752,399 tons, with YTD volumes down 11.6% to
9Million tons. Uncoated mechanical remained stable vs. December last
year, at 131,800 tons, but dropped 21.8% YTD to 1.6Million tons.
Canon, the Japanese maker of cameras, copy machines and other
electronics and
Oce,
which sells printers and copiers and has relied heavily on sales to
banks and architecture firms are on target for Canon’s $1.1Billion
purchase. The over riding objective is to be the #1 presence in the
printing industry. The combination will yield a huge sales network in
Asia, Europe and the USA.
The combined Canon-Océ will be up
against competition from Fuji and Ricoh to dominate the European, USA
and Asian markets. Canon’s acquisition comes just a year after Ricoh
bought Ikon Office Solutions, based in Pennsylvania, for $1.62 billion.
In addition to Cenveo closing its
Charlottesville, VA printing plant, which they obtained through the
purchase of Cadmus Communications they will also close the Baltimore
commercial printing plant in February.
You can now have these timely releases come directly to you.
All
new – you can now subscribe to Coy Paper’s Pulp and Paper Industry News
releases and have them come directly to your computer – for free go to http://psvallely.blogspot.com/ on
the
lower right side click on FOLLOW and you will automatically receive
this blog. The Current News on the Pulp and Paper market and Industry
is a daily read by hundreds of professionals in the industry as well as
research analysis’s and investors.
The Magazine Publishers of
America’s Publishers Information Bureau (PIB) reported on advertising
pages for 2009. Pages were down 25.6% and revenues closed at
$20Billion, which means a decline of 18.1%. The New York Times reported
total magazine advertising pages were down over 58,500 pages when they
compared 2008 page count to ad pages in magazines that were still
published in 2009. Only 18 magazines enjoyed an increase of advertising
pages.
The
biggest decliners were financial, insurance and real estate ( down
41.4%) and automotive (down 40.5%). Estimated revenues were down in all
categories except for food and food products, which posted a slight
1.4% gain.
PIB also noted that the advertising page reduction
experienced in 2009 was so severe that many of the surviving publishers
lost focus on their dependence for advertising revenues and, instead,
began to concentrate on digital editions.
Fewer advertising pages
translate into a decline in overall page count and thus less paper is
consumed. If advertising in publications do not improve, difficult to
forecast much advancement for publication paper demands.
The year, 2009, certainly created several challenges for the paper
industry. Paper producers did a remarkable job of limiting price
erosion despite sharply lower shipment volumes and variable (usually
up) raw material costs. The industry responded with massive amounts of
market downtime, as well as a significant amount of closures, in many
cases even driving down inventories despite weak demand.
Although
the last few months of 2009 illustrated some improvement; sustained
improvement will only arrive once the economy improves. Keep in mind,
2009 paper demand continued to be lower than 2007 and the beginning of
2008.
The paper manufacturers continue to operate along a
slippery rope – recently most grades experienced an announced price
increase; meanwhile, demand continues to be below expectations, supply
was controlled by down time (this is not sustainable ), input costs
such as chemical, energy, and transportation are forecast to increase,
and the infamous black liquor credit (worth billions of dollars) is
gone.
I think we all agree that for the industry to be healthy,
long term, a price increase is needed; however, most buyers are
aggressively pushing back due to the inability to pass it on to their
customers.
Of particular note is the containerboard price
increase – without consumers buying 'stuff' – nothing to go into the
box – therefore demand is forecast to be depressed. The other two
markets sharing concern are the price increase for publication and
newspaper papers. Both are hurting from lack of subscribers and
depressed advertising.
Anyone of our Coy Paper Company News on the
Pulp and Paper readers care to comment on forecasting 2010 prices,
demand, and supply; also, venture an opinion on next mills to close?
Two of America's largest magazine publishers, Time Inc. and Meredith,
have reportedly joined forces to buy paper. The two companies issued
joint requests for proposals to potential paper suppliers late last
year, according to several sources.
Together, the two consume several hundred thousand tons of paper,
annually.
Time
is a major buyer of lightweight coated (LWC - 29lbs to 32lbs ) for
offset printing. Meredith's is more geared to rotogravure papers and
higher basis weights. This will introduce added pressure for pricing on
an already depressed market.
Department of Commerce announced
it will delay the decision on the countervailing duties against Chinese
and Indonesian paper producers until February 22nd. The Department must
determine if the imports from the two countries caused injury to USA
paper producers and originally reported the decision would be made by
mid December.
-Penton Media has ceased publication of the print editions of American
Machinist and Welding Design & Fabrication
-Consumer
business and finance magazines had a rough go in 2009. Collectively,
the titles tracked by PIB saw advertising pages fall nearly 30 percent.
-Reed
Business Information has ceased publication of three trade titles:
Video Business, Manufacturing Business Technology, and Industrial
Distribution.
Following up on the Coy Paper
earlier releases, in August, Yueyang started up #10PM and in October #9
PM started up. Both continue to run trials and reports outline the
paper looks fine. Both have a capacity of 200,000TPA each of uncoated
paper. #10PM will focus on recycled business and offset papers while #9
will supply the same papers from virgin fiber. The plan is for #10PM to
eventually produce papers from 100% deinked pulp (most of the raw stock
coming from USA).
In 2008 China produced 79.8Million tons of paper
and paperboard – an increase of nearly 13% annually since 2000. Of this
production, China consumed 13.85Million uncoated printing and writing
tons in 2008 and produced 14Million tons.
At 400,000TPA of new capacity, the Chinese must have America in their
scope for exporting paper.
Forrester Research has just revised up its May 2009 forecast of this
year’s U.S. eReader sales to 3 million units from 2 million, due to
strong sales in November and December. Moreover, it now expects sales
of another 6 million units in 2010.
2009 Top 10 plants in USA by revenue include
US Government
Allstate Insurance
State of California
State of Washington
CVS/Caremark
Ohio State University
Spartan Stores
University of Oklahoma
Louisiana State University
University of Washington
Glatfelter agreed to acquire the
nonwoven producer Concert Industries Corporation from Brookfield Asset
Management Inc. for $235Million, expanding the specialty paper
company's markets, especially in developing markets beyond the USA.
Concert is one of the world's leading producers of highly absorbent and
customized airlaid. The airlaid line is one of the best options in the
marketplace in terms of high absorbency. The company's unique
production process allows products to absorb more moisture than common
cellulose, yet it is lighter, more durable and cost competitive,
especially when compared to similar weight non-wovens.
Concert Industries has operations in Canada and Germany with a total
capacity of 84K tons.
Dr Webb recently published a report on the printing industry. A few
highlights-
"The
third quarter of 2009 continued a positive turnaround from a disastrous
Q1,” said Dr. Webb. “The industry has had significant declines in
volume for the last year, and has cut back staffing levels at a
slightly faster rate than those sales declines. It may now be finding
the right balance of productive capabilities, declining shipments, and
price pressures of electronic media.”
In the report, Dr. Webb
reviews the latest trends in shipments, profits, and capacity measures
for the industry. He also discusses how it is likely that in the next
six months the recession will probably be declared as over. “It is
likely that the fourth quarter of 2009 will be identified as the
recession's end."
Coy Paper has reported on all
the challenges last year for the paper markets. 2009 certainly proved
to be a challenge for anyone associated with the publishing world. The
year outlined economic fallout, bankruptcies, dwindling advertising
dollars, shuttered magazines, layoffs, pay cuts to name a few. Folio
reports on the industry as 2009 unwinded 2009 profile on the
magazine industry world link Click on link
Excepts from recent RISI research paper.
Prime
View International (PVI) is the leader (66% market share) in supplying
displays used in e-readers such as Amazon.com’s Kindle, Sony’s Reader
and Barnes & Noble’s Nook. PVI is owned by Taiwan’s largest paper
manufacturer, Yuen Foong Yu, which launched this technology division 17
years ago, as they became worried about digital replacing print. After
facing tough competition in the LCD market, they’ve spent over a
$1Billion on e-screen development and acquisitions, purchasing screen
technology from Philips Electronics in 2005 and E Ink Corp. of MA last
June. Worldwide sales of e-readers are expected to soar to 12 million
units in 2010, up from 5 million in 2009. Many of these will be made by
competitors, able to show video with full color screens such as Apple’s
Tablet and Qualcomm’s new screen technology called Mirasol.
The American Forest & Paper
Association (AF&PA) and the NPTA are joining forces to host a
combined conference March 21-23, 2010 in New York City, called
PAPER2010.
Also know as 'paper week'.
The
AF&PA is the national trade association of the forest products
industry, representing pulp, paper, and wood products manufacturers,
and forest landowners. The NPTA Alliance (formerly the National Paper
Trade Association, Inc.) is the association for the $60Billion paper,
packaging and supplies distribution industry.
Reader’s Digest plans to launch
three new magazines called Reverse Diabetes, Walk it Off, and No Fail
Weight Loss All three will be sold as part of a single-sponsored
package in the health sector. The magazines will be published 4 times a
year.
As Coy Paper
recently announced, International Paper just closed its uncoated
freesheet (business papers) paper machine #1 in Franklin, VA. This past
Fall, the company announced that they would close the mill to reduce
production capacity. In November, company stopped production on its # 6
paper machine.
Finally, some good news for the
ailing magazine industry. Recall, we reported on Conde Nast having to
close six consumer magazines, including Gourmet; reduced costs 25%; and
making several reductions in their workforce – have announced they are
working on a trade magazine for the men's' fashion market. This new
title may be marketed as a trade publication and not a consumer
magazine.
Reed Business Information has been
marketing the sale of the USA magazine group and has yet to confirm a
buyer for the complete division. The current decisions are to close
several publications, or sell them individually – or begin to lay staff
off.
Coy Paper Company offers a wide selection of paper grades as well as industry expert, P. Scott Vallely, also keeps you up to date on what is happening in the paper industry.
Please visit our section of recent news, industry links, and trends by clicking PAPER NEWS. This is a popular gathering of updated news on all paper markets and visited by major mills, analysts, and end users. Please visit entire section for PAPER NEWS by clicking on links.
We offer a sample as follows -
Please, also, visit PAPER NEWS for all the news on paper
Shipments for containerboard and boxes continue to improve with box
shipments up 4.8% from 2009. Inventory levels are also showing modestly
reduced levels at both the mill and the box plants. This marks the
third straight month of improved demand, shipments, and operating rates.
Suffice it to say, the price announcement in April for $60/ton is
firmly implemented.
The Chief Marketing Officer Council conducted a survey and confirmed
that 90% of adults that currently subscribe to magazines prefer the
print format. It was noted that 24% of the respondents would review
EReaders in the future. All 90% reported that they do use the Internet,
mainly for research.
The American Forest and Paper Association issued its report for April
shipments for Printing and Writing papers. The numbers are up; paper
shipments rose nearly 11% to 1.5Million tons in April (vs. 2009).
Coated
Papers increase was 28% to 584,000 tons
Uncoatd Paper increase 2% to
899,900
Coated Free increased to 33% to 312,400
Coated
Publication increased 22% to 272,000 tons
Uncoated Freesheet
decreased slightly -0.6% to 745,800 tons
Uncoated groundwood
increased 16.5% to 154,000 tons
Total year to date paper shipments
increased 10.7% to almost 6Million tons
The coated paper markets continue to witness strength and the current
$40/ton price initiative is being implemented. Coated Free producer's
backlogs are strong, primarily due to the anti dumping fees imposed by
the USA against the Chinese and Indonesian mills. Both the Publication
groundwood and coated free markets are seasonally strong.
Market pulp continues to enjoy a snug market. The producers are taking
advantage of the reduced supply and increased demand with the May 1
price increase of $40 to 50/ton. Although reports from China outline
falling prices and given the downward trend of the Euro, pulp might have
reached its peak offshore.
The North America NBSK market price is
now $1000/MT. We await June .....
Fraser Papers completed the sales of its specialty papers business to
Twin Rivers Paper Company and of its pulp mill in Thurso, Quebec to
Fortress Specialty Cellulose Inc. Fraser Papers remains under creditor
protection pursuant to CCAA, with its stay of proceedings extended to
July 9th, 2010.
AbitibiBowater filed a plan to reorganize in an effort to emerge from
bankruptcy. The plan will be filed in both USA and Canadian courts.
The company’s common stock will be canceled and holders will not receive
any recovery. The unsecured creditors would receive a pro rata share of
equity in the reorganized company. The plan is subject to approval.
Folio Magazine, a large consumer of paper, recently published a
spreadsheet that outlined grades that increased in price from all the
major mills. I attach for your reference.
http://www.foliomag.com/files/images/folio_table2.gif
UPM, Catalyst, and FutureMark all have announced price increases on
their pubication grades for shipments after June 1; NewPage, will delay
their increase until 7/1.
Bullet points on article by Lucia Moses on Advertising -
After a
disappointing first quarter and brutal recession, magazine ad pages
finally seem to be heading into positive territory.
Industry
advertising pages fell 9.4 percent in the first quarter, per Publishers
Information Bureau, in contrast to many publishers’ statements that the
ad climate was improving.
Moving into the second quarter- pages
are trending up, according to a survey of major publishing houses.
After
a flat first quarter, Hearst expected to report an 8.2 percent increase
in magazine ad pages (excluding Food Network Magazine) for the first
half of the year.
Condé Nast expects to post a 3.7 percent
increase for its monthlies in the first half, with nine of 16 titles
recording gains.
Time Inc. said it would be up about 6 percent
in ad pages in the same period. Meredith estimated in a conference call
that magazine ad revenue would be flat to up slightly in the second
quarter.
“I’m encouraged,” said Lou Cona, evp, Condé Nast Media
Group. “We’re seeing an increase in ad budgets. Companies that were
completely focused on driving sales are now reintroducing brand-building
measures into their media mix.”
Publishing execs said the gains
were coming from a range of ad categories.
“We’re seeing it in
beauty, packaged goods, primarily, but we’re also seeing some rebound in
automotive,” said Michael Clinton, Hearst’s evp, chief marketing
officer and publishing director. “A bit of the luxury market’s beginning
to come back.”
Bright spots among titles include Condé Nast’s
Wired, up 19.7 percent; and Teen Vogue, up 14.6 percent. Time Inc.’s
Real Simple and Cooking Light, which redesigned last year, will be up an
estimated 32 percent and 21 percent, respectively. InStyle will be up
18 percent driven by a 20 percent uptick in luxury ads.
And while
how much the Apple iPad and other tablets will help magazines over the
long haul remains anyone’s guess, some titles are starting to see a
related paging bump.
Condé Nast’s Vanity Fair said ad programs
tied to its launch on the iPad helped drive an 11.6 percent paging
increase for the first half. Wired also cited its iPad edition as a
factor in its first-half increase.
Not all are sharing in the
gains. Many shelter and luxury ad-dependent books remain soft, as do
travel and men’s lifestyle titles. Condé Nast’s W declined 13.8 percent
for the first half and Details, 9.3 percent. Time Inc. said its News
Group would be down due to a decrease in issues at Fortune.
Indeed,
publishing execs still sounded a cautious note. “The economy seems to
be tentative,” Condé Nast’s Cona said. “A lot of our business ties in to
how the economy continues to do.”
The redemption of coupons increased 27% in 2009 and newspapers remain
the primary source of distribution. Perhaps the last frontier for
newspapers' success. Newspapers accounted for nearly 90% of all the
coupons redeemed with free standing inserts generating 53%. Although
Internet coupons increased 263%, they still remain a small percentage of
over all redemption. The increase in coupons is most likely a direct
result of the challenging economy and lack of disposable dollars. Let's
hope, for the survival of newspapers, that this trend continues - for
more coupons - not a poor economy......
Any day now, we expect the producers of pulp to announce yet another
price increase of approximately $40/ton. The global markets continue to
witness extended backlogs and good demand creating lower inventories.
Chilean pulp mills are slowly coming back on stream, but many domestic
mills are taking required Spring Maintenance down time - so look for
pulp to remain tight for several months.
Most producers are reporting on continued demand improvement for both
publication groundwood coated and free sheet coated papers. Printers
and publishers paid approximately $5-10/cwt more for coated papers in
April and manufacturers are surely reviewing a formal July price
increase. The recent announcement on anti dumping will also assist
domestic producers. Last week, the US imposed Anti-Dumping duties on
Chinese and Indonesian imports. For Chinese mills, this adds 31-90% to
the 4-
13% duties already in place, and Indonesian mill face an
additional
11%.
Asia Pulp & Paper (APP), the leading exporter of coated paper from
China and Indonesia (capacity of 15Million tons), fully expects the
preliminary ruling to be overturned for the Anti Dumping case. They
maintain the mills that export from China and Indonesia have never sold
their products in the United States at less than fair value.
The
preliminary ruling outlined the company illegally dumped paper in the
United States. The USA Producers maintain the domestic market was
being flooded with imported coated paper. The offshore produces state
domestic shipments of coated paper are down because overall demand is
down in this bad economy, not because of any alleged unfair practices of
Chinese and Indonesian producers and importers.
In the current
case, the preliminary anti-dumping and countervailing duty applied to
Asia Pulp and Paper products are 43.65% on products from China, and
28.1% on products from Indonesia, as reported in our past releases.
The Department of Commerce’s final rulings are expected to be
released in September. The last phase of the cases takes place in
October or early November, when the U.S. International Trade Commission
will determine if the U.S. paper industry has been harmed.
The year 2009 was a struggle for anyone selling advertising space, but
it might have been a little easier for those selling space on the
internet. For the first time, the percentage of dollars (12.6%) favored
the global spending on internet advertisements versus the segments such
as magazines (10.3%). Newspapers, also, continue to loose market
share for advertising dollars to the web. The overall reduction in ad
spending for 2009 was 12.3% ($22.7Billion), and I note online spending
was also down, declined 3.4%.
The Freedonia Group recently made a study available
Study
Highlights:
-Revenue for the USA commercial printing industry,
which includes prepress and printing services on a job order basis, is
expected to increase 2.1 percent per year to $77.7 billion in 2014.
-Gains
will be aided by a cyclical rebound in advertising expenditures and
increased outsourcing by newspaper publishers. Although the volume of
printed pages in periodicals such as newspapers will fall, commercial
printers will benefit as many publishers outsource their printing
operations.
-Digital printing is expected to achieve the fastest
gains based on its lower cost, quick turnaround and ease of
customization for shorter print runs. Digital technology is a
game-changer in many printing applications -- such as direct mail and
book publishing -- as it accommodates both variable-data printing, which
allows for the creation of individualized products, and
print-on-demand, which allows customers to shrink inventories.
Notes from a recent RISI report-
Pulp & Paper Product's Council
reported that printing and writing paper shipments up 10% in March to
1.9Million tons, the fifth month of gains. Coated paper shipments grew
to 665,000 tons, with coated freesheet up 27% and coated mechanical up
24%. Uncoated mechanical paper grew 6% to 431,000 tons while uncoated
freesheet was up 2% to 829,000 tons. Total exports increased 37.2% in 1Q
to 279,000 tons and mill inventories shrunk 22% to 1.55Million tons by
the end of March.
These findings are consistent with our past
releases.
Smurfit-Stone Container, one of the industry's largest containerboard
and corrugated packaging producers, announced plans to exit chapter 11.
The company will reorganize and become a much leaner organization.
The world's largest magazine paper maker,UPM-Kymmene, posted a first
quarter profit of $93Million (euro70Million), compared with a 2009 loss.
The company reported that sales rose 10%.
•Uncoated free sheet (UFS) shipments up versus year-ago for fourth
consecutive month.
•Coated free sheet (CFS) shipment surges; this is
fourth double-digit growth versus year-ago.
•Year-ago shipments of
coated mechanical (CM) robust enjoying better gains than Coated Free and
fifth consecutive double-digit year-ago increase.
•Increase of
uncoated mechanical (UM) shipments passes 20% for second time in past
three months.
This is fifth consecutive month of increase. Maybe
the improved economy and new paper demand is for real and sustainable!
Recent reports for the USA Newspapers confirms the deep circulation
declining trend is continuing. The average publisher reported weekday
sales were down nearly 9% from 2008. Sunday sales have decreased 6.5%.
This trend is universal, with almost all chains, and most of the
smaller newspapers, sighting decreases. The nation's top 10 newspapers
reported over 10% declines and added that it is a direct result of the
electronic media cannibalizing market share.
The Department of Commerce’s second preliminary decision, anti-dumping
charges, in the trade case regarding certain imported coated paper from
China and Indonesia was delayed to Friday, April 30. The first
preliminary decision, March 2, covered countervailing duties. The final
ruling will be in September for both issues
The last phase of the
cases takes place in November, when the U.S. International Trade
Commission will determine if the U.S. paper industry has been harmed.
Only an affirmative ruling at that time would lead to the imposition of
duty order on the coated paper in question from China and Indonesia.
International Paper will buy SCA's packaging business in Asia for
$200Million. This acquisition includes 13 box plants and $250Million in
sales. This purchase will compliment International Paper's current non
integrated container business in Asia and enforce the objective of
growing its global footprint.
China's Sun Paper reported that #3 machine, with a capacity of
350,000TPA, is now in commercial production. The company plans to also
install a new uncoated mechanical paper machine, PM #24, at the same
facility.
A second Chinese company, Fujian Nanping, rebuilt two
newsprint machines at its mill and converting them in March to uncoated
printing and writing paper. Both PM #3 and PM #4 have capacity of
50,000TPA. We suspect most of this capacity will remain in Asia.
The PPI edition for Asia reported on the following-
In Japan, last
year, a total of 32-paper machine closures were announced, with combined
capacity taken out of 1.463Million TPA, representing 5% of total paper
and board. In 2010 there have been additional closings, including Oji’s
shutting down the 130,000 TPA coated paper machine, PM #10, at its
Kasugai plant, Aichi prefecture. They also plan to close a kraft paper
machine, PM #4, at the Kure mill, Hiroshima prefecture, and convert the
180,000TPA PM #5 from printing/writing paper to kraft paper, taking that
capacity out of the market. Despite curtailments, prices remain
stagnant.
The global pulp market remains extremely tight. Recall, we have
announced numerous pulp mills that were shut down due to poor economics,
now the lack of supply has hurt availability for most fibers.
Catalyst Paper announced the reopening early May of the second pulp line
in British Columbia, with a capacity of 165,000 tons of NBSK, this
should help.
Major producers have all announced $30-50/MT price
increases for May. Price levels for Domtar, Canfor and Mercer
International for NBSK will transact at $1,000/MT for May (up $40/MT).
NBSK in North America prices will be up 13% from the July 2008; note,
this is 57% from May 2009 (the lowest price point of this current
cycle). Pulp producers in Europe have also increased pulp prices for May
$30/MT and $50/MT for hardwood - BEK.
The disruption of supply from
the Chilean earthquakes, the strikes in Sweden, and now, spring
maintenance have all resulted in even less availability.
Coupons that are now sent to an Internet address or a mobile devise are
gaining in popularity. These are the fastest growing segment on
redemption of coupons. On line product coupons increased 263% or
50Million from 2008. Perhaps, like newspapers, books and maybe
magazines, printed coupons might start to decline with the cannibalism
from electronic communication.
You can catch all the headlines from the Coy Paper Company LLC current news on
the pulp and paper industry on Twitter. Or set up this blog on our RSS
feed, located on the lower right side of this page.
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site can be found on http://twitter.com/CoyPaper There is no
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Overall book sales fell almost 2% in 2009 (vs 2008) to approximately
$24Billion. One segment hard hit was the 5.2% decline in sales for adult
paperback books.
Although the EReader only accounted for 1.3% of
book sales for 2009, most industry experts feel this will grow
dramatically. This could, ironically, assist printed book sales .....
short term; however, if electronic reading devises catch on, printed
books could experience a dramatic decline.
The March figures for Containerboard are beginning to be reported and it
appears inventories are down (down 40,000 tons vs. February) and box
shipments are up nearly 7% (vs. March 2009). All positive signs for the
success for the recent April price increase.
Reed Business Information (RBI), a division of Reed-Elsevier, has been
unsuccessful in confirming a buyer for many of its business-to-business
publications, announced that it is closing 23 book publications.
Posted by
P. Scott Vallely
Please, also,
visit PAPER NEWS for all
the news on paper
Much has been written about the black liquor credit many of the USA pulp
and paper producers enjoyed. This tax credit allowed many of the
manufacturers to report a profit in 2009, despite both depressed demand
and pricing.
The top 5 that enjoyed their share of the $8Billion
total paid include
International Paper $2Billion
Georgia Pacific
$1.02Billion
Smurfit Stone $560Million
Domtar $495Million
MeadWestvaco
$$320Million
From a recent MRI report-
In the Mediamark Research &
Intelligence Survey of the American Consumer, findings show that 91% of
e-reader owners read magazines, reading on average 13 magazines each
month. This is higher than the US adult population in general, of which
84% read magazines reading an average of 11 magazines/month. E-reader
owners also appreciate and value the benefits of magazines more, i.e.
they are 26% more likely than an avg adult to say magazines relax them,
20% more likely to report that magazines make them think and 11% more
likely to feel that magazines give them good ideas. This is a good
indication of the potential of these devices to become strong magazine
platforms in the future. MRI ‘s Survey of the American Consumer
interviews 26,000 US adults, aged 18+, in their homes each year, with
results being projectable to the entire US adult population. Data is
released twice yearly, in the spring and fall.
We have released several pieces on the recent uncoated paper price
increases and many of you have commented. The most recent announcement
of $60/ton for May, follows a $40/ton price increase in April. This will
bring cut-size office paper list prices to $1,050 to $1,100/ton or an
average $1,075.
Buyers polled by Purchasing.com say March delivered
prices averaged $1,090. Forms bond dipped under $1,000 last April and
for the past year have averaged $978/ton, delivered. PPI Pulp &
Paper Week says forms bond list has averaged $985for the past year, as
compared with $1,115 a year-ago-March.
Yesterday, we issued a release from
UBS on the industry, today, the American Forest and Paper Association
reported preliminary printing and writing paper increased 10.7% (4.435
million tons)in the first quarter of 2010.
Total coated paper
shipments through 1Q rose 20% to 1.743 million tons with coated
freesheet volume up 17.1% to 881,700 tons and coated mechanical
shipments up 23%, to 860,000 tons. Total uncoated paper shipments rose
5.4% to 2.692 million tons in 1Q with uncoated mechanical shipments up
27.3% vs. last year, and uncoated freesheet up 2.2% to 2.275 million
tons.
Note, these statistics are still preliminary (and slightly
different than UBS). Of particular note - both reports illustrate
increased demand.
Although the vast majority of USA paper producers are integrated
(produce pulp on site), the smaller mills must purchase fiber at market
pricing. In contrast, nearly all of the European and Asian paper
producers are non integrated and must buy pulp. This model, over the
past several years, with depressed pulp prices, has been advantageous.
However, with the current aggressive price increases, the non integrated
mills are experiencing dynamic cost increases. Also, the foreign mills
must also contend with the stronger US Dollar.
Two large USA mills
to watch that buy fiber include Wausau and NewPage. Clearly, without
the support of the black liquor credit and, now, fiber increases, their
margins will be under pressure.
Based on recent UBS report-
UBS reported that coated freesheet
shipments in the USA in March increased 27.1% vs. last year, the 5th
consecutive month of growth reaching the highest level since Oct 2008.
Coated groundwood shipments rose 33.9% vs. last year, also the 5th
consecutive month of growth. Both grades were compared against easy
baselines last March. Uncoated groundwood shipments increased 26.5% vs.
last year, but uncoated freesheet paper was a bit weak, almost flat with
last year. Note, these are preliminary figures.
The all important index of advertising pages for magazines fell 9.4% in
the first quarter of 2010 to 34,800 pages (compare to 1Q2009). This was
a disappointment for most publishers, hoping the improved economy would
turn the trend around. It was especially frustrating in that 2009 ad
pages for the first quarter were down nearly 26% from 2008 to 37,200.
Comparing
1Q2010 to 2009, financial, insurance, and real estate actually saw an
increase of 11.3% and cosmetics were up 7.6%; however, apparel and
accessories were down 15.7%, pharmaceuticals down 15.6%, transportation
and hotels down 13%, and media was down 13%. Fewer advertising pages
generally translates into less editorial pages, as well, which means
less paper consumed.
Demand and prices continue their upward trend for both pulp and paper.
In almost every paper and pulp grade, tight markets and elevated costs
are pushing prices higher. Supply is down and demand (versus a
depressed 2009) appear up. Perhaps the most notable advanced pricing
initiative is in containerboard, where producers announced $60/ton
increase
for April 1, immediately after a $50/ton increase in January.
Producers sight improving demand, lean inventories, limited capacity,
and higher costs all create a good environment for price increases.
As
reported recently in the Coy Paper releases,
all uncoated paper producers for literally all free sheet uncoated
markets have announced a $60/ton price hike for early May.
USA commercial printing shipments dropped 7.2% in February, reaching
$6.57 billion. Shipments were down 6.4%, for the first two months of
2010 indicating a yearly forecast of approximately $82-84 million.
Increased
paper prices and the recent advancement of EReaders will not help this
trend.
International Paper launched its new environmental website, Down2earthonline.com. The site
reviews issues to assist consumers to better understand some of the
myths and misconceptions of recycled paper. By educating those inside
our industries, customers and end users can better understand these
complex environmental issues and the steps that the forest products and
printing industries are taking to become more sustainable and make
positive contributions to our world.
As we
have written in our past releases, the paper industry continues to be a
good environmental stewart, yet, have not done a good job promoting
this fact.
International Paper and Domtar announced a $60/ton uncoated free sheet
price increase for May shipments. The initiative applies to desk top /
copier paper, offset, and converting grades such as envelope. This is
the second price increase for 2010.
Current pricing for cutsize
business paper is $1050-1100/ton; rolls are $885-900/ton
We assume
the remaining producers, such as Boise, Wausau Paper, & Glatfelter
will also increase.
Report from CEPIFINE
CEPIFINE reported that fine paper shipments in
Europe increased in Feb, both domestically and exports. Coated woodfree
shipments rose 10.9% to 633,000 tonnes, with domestic deliveries up 7%
to 501,000 tonnes and exports up 2% to 104,000 tonnes. Uncoated woodfree
shipments rose 12.1% to 647,000 tonnes, with domestic up 4.8% to
543,000 tonnes and exports up 120% to 132,000.
The digital media already has built in efficiencies – no warehouse
costs, no make ready, cost effective small runs, no need to repulp the
unsold books, and zero inventory, to name a few. Other advantages
include quick turnarounds as well as provide the ability for unknown
authors to publish and distribute a book.
The forecast is for growth
of digital publications to increase to 15-20% of the print volume over
the next 5 years. This would yield a market share of 10% by 2013 and
15% by 2015. Printed books reached their peak with sales of 3.13Million
units in 2007.
I would assume if EReaders, like the recently
introduced IPAD, continues to grow, it may come at the cost of printed
material. That said, it may also bring more people to books and
magazines and assist Digital publishing and printed books and magazines,
at least short term.
Avery Dennison reported sales revenue of $6Billion for 2009, a decline
of 11 percent from $6.7 billion in 2008. Net sales in the company’s
pressure sensitive materials segment, which comprises 56% of its
business, decreased 9% last year after a 4% gain in 2008. The company
also reported a loss in net income of $746.7Million.
Avery
Dennison's CEO reported “Sales volumes dropped during the first half of
the year as customers substantially reduced inventories and recovered
only modestly later in the year”.
As reported in these releases in past, the USA commercial printers
witnessed declines in volume; however, with respective cost reductions,
the industry recorded a $700Million profit in 2009.
There are still
challenges ahead. Shipments for January and February dropped 6.4% vs.
2009 and it is difficult to remain profitable with declining volume.
As I am sure all our readers are more than aware, Apple introduced the
IPAD and sold
over 300,000 IPADs. By comparison, they sold 270,000
iPhones when first available in 2007.
Initial reports reveal, many
magazine customers are embracing the new format for print but appear
upset at the 'excessive' prices for single issues.
Magazines are
pinning their hopes on the EReaders and hope that, like the cel phone,
MP3, and lap top, that Apple and IPAD will greatly assist the current
decline in publication circulation and advertising revenue. But, these
companies need to be careful on pricing so they do not alienate readers.
from Wood Resource Quarterly-
The global pulp and paper industry has
substantially increased its use of woody biomass for energy the past
few years, which has consequently reduced dependence on fossil fuels,
reports the Wood Resource Quarterly. Since 2006, energy generated from
biomass has gone up over 50%, last year accounting for 18% of the total
energy consumption by this industry sector. Pulp and paper
manufacturers worldwide consumed 75 million tons of woody biomass for
energy in 2009.
Shipments for both January and February (and early reports for March) on
box shipments
appear strong and, therefore, all the major producers
have announced a 10% box price increase for April shipments. Note, Coy Paper confirmed a $60/ton April
containerboard price increase announcement. This new announcement will
be the second increase of 2010. Not only is demand stronger than 2009,
but inventories are declining and operating rates are hoovering in the
mid 90's.
Consistent with the Coy Paper recent
releases, the global pulp market remains tight and the major producers
have announced $50/MT increase for April. The real story is spot prices
in the USA have increased sharply, with spot NBSK up $20/MT to almost
$850/MT. Manufacturers in Chile are bringing to restart capacity, this
will provide some relief to supply (and pricing) pressure.
World
inventories are low, demand appears increased, and spring is generally
the time most mills conduct maintenance; accordingly, do not look for
much relief, short term.
Pricing recap
$50/MT for April;
NBSK to $960/MT for North America
The IPAD will be introduced this weekend, and we thought it a good time
to review the economics of Digital versus print.
The New York
Times recently documented an article describing the economics of
producing a traditional printed hard cover book and a digital book.
They state the typical hardcover retails for $26.00, and the publisher
generally is compensated 50% or $13.00 of this price. The publisher
than must pay approximately $3.25/book for printing, warehousing, and
shipping the book to the store. The publisher also pays a 15% royalty
($$3.90) to the author, $1.00/book for marketing, and about 3% or
0.80/book for design and editing. Accordingly, the publisher is left
with about $4.00/book before paying staff and overhead expenses.
The
current agreement with Digital distributors is to compensate the
publisher 30%, or $9.00/book on a book retailing for $12.99 (or $7.00
for a book retailing for $9.99 – the level most are now looking at).
Costs are lower than a printed book, outlined as 0.50 to convert the
text to a digital file and .0.78 to market the book. The royalty is
still being worked out, but currently most authors are settling in at
25% of the digital price or about $3 for the $12.99 retail or $2.50 for
the $9.99 price. Given the math, the author makes slightly less, but
hopefully sells more books, meanwhile the publisher makes slightly more.
Currently digital books make up a very small percentage of the
market, but the growth potential is large.
Will you be making the
switch from hard bound to tablet?
AF&PA recently published a report on capacity, included is executive
summary-
The annual survey of the American Forest & Paper
Association reported declines in the U.S. capacity for all of the
Printing & Writing Paper grades, excepting uncoated mechanical.
Coated mechanical capacity fell -10.4% in 2009 and is forecast to
decline by -6.8% in 2010 and -1.9% in 2011, remaining flat in 2012.
Coated woodfree capacity in the U.S. decreased by -11.8% in 2009 and is
projected to fall?-4.3% in 2010 and remain unchanged in 2011 and 2012.
Uncoated woodfree declined -5.4% for last year, but it has decreased
-25% since 2000. Further decreases are forecast for 2010, -6.3% and
2011, -0.7%. There is no change forecast for 2012. Of the four P&W
paper grades, the only increase in 2009 was in uncoated mechanical
capacity, 6.2%. Projected numbers indicate continued expansion: 4.8% in
2010, 1.6% in 2011 and 0.6% in 2012.
U.S. papermaker SMART Papers introduced Knightkote® 50 brand,
FSC-certified, premium matte coated line which will have the highest
amount of post-consumer waste (PCW) and recycled fiber.
Knightkote
50—available in a 92-bright, cool-blue White and Creme—is a
comprehensive selection of 70,80 and 100lb. text papers, 65,80,and
100-lb. cover papers, a 7 and 9pt. business reply card and a 130lb.
double-thick cover.
Knightkote 50 can be used in all offset, digital
printing and converting applications including advertising and
marketing materials, direct mail, brochures, books, free standing
inserts, premium packaging, greeting cards and more.
Mohawk Papers
will distribute this sheet.
Notes from ABC report-
Print subscriptions remain the core of
consumer magazines. As reported by the Audit Bureau of Circulations, 278
million print subscriptions were active in the second half of 2009. As
AdAge reported, even if 5 million people buy the iPad and every one of
them buys the digital version of their magazine, print is still by far
the dominant format. The Internet is increasingly useful to magazines in
other ways, though; not only does it provide a centralized database of
names and information, but it also is a platform for selling
subscriptions on-line. Hearst reported that 45% of its subscriptions
were generated on the Internet, up from 5% in 2005. Rodale said web
subscriptions for its titles were up 15-25%. Condé Nast said 25% of its
total new subscriptions were added on-line. The five publishers in the
coalition to create a new digital storefront will be selling on-line
editions of their magazine, yes, but the new venue will also be selling
print subscriptions.
Comments on print vs. digital for getting and
reading your favorite publications?
Burgo joins the major European coated paper producers in their
announcement of a 6-8% increase in coated mechanical paper prices,
effective in May and an increase for coated woodfree in June. The price
of uncoated woodfree will also jump in May. This Coy Paper news release
reported earlier that Norske Skog, Myllykoski, Arctic Paper and Lecta
cited their plans to raise prices to combat raw material cost increases
particularly of pulp.
Catalyst will raise its 30 lb. newsprint prices to match the recent
AbitibiBowater $25/MT on May 1 and $25/MTon June 1. Looks like all
systems GO for this increase.
Due to increased costs, particularly for pulp, Norske Skog, Myllykoski,
Arctic Paper and Lecta have announced coated paper increases. Effective
with orders placed on or after April 1; Norske Skog will increase coated
mechanical and supercalendered paper prices by Euro 35/MT and
Myllykoski will raise the price of its publication papers by Euro 40/MT.
Arctic and Lecta have announced increases of 10-12% for woodfree
papers.
Surely, these increases will also effect USA purchases.
AbitibiBowater is the first to announce more price increases for
Newsprint. The company has scheduled two newsprint price increases, for
$25/MT each, for May 1 and June 1. The company had previously hiked
prices twice this year, bringing the total scheduled for the first half
of 2010 to an increase of $100/MT.
This additional cost is bad for
the struggling newspapers, but the paper producers need it for survival!
RISI reported the following on the Graphic Paper Outlook
John Maine,
RISI’s VP of World Graphic Papers, said that although the USA leading
economic indicators are the strongest in 5 years, “in paper, it doesn’t
feel that way”. In 2009, world demand for printing/writing paper dropped
10% overall, with the biggest decline seen in coated papers, which fell
13-15%. He predicted that Printing and Writing paper would be flat in
2010, with uncoated freesheet stable and coated paper the strongest to
come back, noting that Jan-Feb 2010 saw coated paper shipments up 6%.
Both magazine advertising spending and catalog circulation are expected
to drop 3% in 2010, a great improvement over the double-digit declines
of 2009, but still a reduction. Through 2011, he sees the world market
facing overcapacity, especially in coated freesheet, due to the more
than 4Million tons of new Coated Free capacity coming online in China.
Coy Paper's current News on the
pulp and paper Industry continues to report on the tightening of
the world pulp supply and that global prices have soared. We firmly
predict that North American pulp prices are heading toward 15-year
highs. Accordingly, paper and packaging materials will also increase.
Our
past releases have included supply disruptions in Chile and Finland,
two large producing countries supplying almost 12% of the world's annual
pulp demands, coincided with a recovery in demand in China. Pulp is the
raw material used to manufacture newsprint, fine paper, magazine paper
and cardboard.
The two week strike at the Finnish ports resulted in
plant shut downs in Finland and much of Chile's 4Million tons of annual
market pulp is out of production due to the earthquake and tsunamis.
The
March transaction price for Northern bleached softwood kraft of $890/MT
is just under list of $910, past the 2008 cyclical high of $880 and
heading toward the $925 transaction peak in the fourth quarter of 1995.
Northern bleached hardwood kraft, at $785/MT spot this month, compares
with $820 list and still has a way to go to reach the $865 peak in late
1995.
The American Forest & Paper Association is currently conducting
their annual meeting in NYC and reported that USA paper and paperboard
capacity dropped 2.5% in 2009 to 93.9 million tons, with 2010 capacity
expected to decline 3.4% followed by stability in 2011 and 2012. In
2009, 14 US mills were permanently closed, shutting down 16 paper and
paperboard machines, with an additional 11 machines permanently closed
at other mills. Other machines and mills have been indefinitely idled
and may be restarted in the future. AF&PA represents 90% of USA
industry capacity.
According to market research firm Freedonia Group in a study titled
“Corrugated & Paperboard Boxes,” demand for corrugated and
paperboard boxes is projected to increase 2.4% annually through 2014 to
$36.4 billion. Gains will be driven by an expansion in manufacturing
output after the real declines registered during the 2004-2009 period.
In particular, an acceleration in shipments of nondurable goods, such as
food and beverages, will support demand for related boxes.
The study
reported that sales of corrugated and solid fiber boxes accounted for
more than 70% of demand in 2009, and advances will be aided by their
well-entrenched position as the shipping container of choice in nearly
all manufacturing sectors. Demand will also benefit from the favorable
environmental profile of corrugated boxes, which will become
increasingly important as producers continue to seek ways to adopt
sustainable packaging practices. Moreover, the study claims, value gains
will be bolstered by heightened demand for more costly linerboard
grades that can support high-quality printing and graphics.
Further,
demand for folding paperboard boxes will rise 1.8% per annum through
2014, slower than the corrugated box pace, as folding cartons face stiff
competition from alternative packaging (e.g., pouches, blister packs
and clamshells) in many markets. Source reduction efforts will also
restrain demand. However, the study indicates, gains will be supported
by advances in printing and graphics capabilities and a more favorable
environmental profile than plastic packaging. Set-up box demand will be
supported by their widespread use in high-end confectionery, silverware,
and jewelry applications.
Food and beverages will remain the largest
box market, accounting for 45% of demand in 2014, the report reveals.
Good prospects for boxes are expected in markets such as frozen foods,
dairy products, and meat, poultry and seafood products. Other nondurable
goods markets offering favorable opportunities for boxes include
cosmetics and toiletries, and rubber and plastic products. In the
durable goods sector, box demand will post healthy gains in the
machinery and equipment, motor vehicle parts, and instruments markets as
both industrial machinery and automotive industries recover from sharp
declines in the 2004-2009 period. In nonmanufacturing markets such as
retail shipping and carry-out foodservice, box demand will be supported
by consumer preferences for online shopping and food prepared or eaten
away from home.
Consistent with Coy Paper's past
reports, the containerboard market is witnessing an increase in
shipments (up 6% February 10 vs 09) and lower inventories (down 97,000
tons). Exports remain strong and operating rates are hoovering at 95%.
Most USA producers have announced a $60/ton price increase and the
European manufacturers are beginning to also report increases.
Neenah Paper reported that John P. O'Donnell will be the Chief Operating
Officer, reporting to Sean Erwin, Chairman and Chief Executive Officer,
effective June 1. Mr. O'Donnell has been President of Neenah's Fine
Paper segment.
Worldcolor reported it will close another facility, Dyersburg, TN, in
early 2011. This location joins four others Coy Paper had announced earlier,
Carroll IA, Oberlin OH, Bromont QB, and Richmond ON. The Tennessee plant
has rotogravure and web offset capabilities and printed magazines,
catalogs and freestanding inserts.
Apple just confirmed an agreement with five of the six biggest
publishers for books to be included on the IBookstore application.
Although Random House is still considering working with Apple,
Macmillian, Simon & Schuster, Hachette, HarperCollins, and Penguin
have all signed up. Apple will market these publisher’s books on the
IPAD and collect a 30% commission on the selling price.
Union officials confirmed an agreement and this will end the Finnish
stevedore strike. The Transport Workers’ Union and the employers’
representatives accepted a compromise. The strike began on March 4th,
and has temporarily shut down 50% of paper production in Finland. Mills
will restart gradually over a few days, to ensure paper quality reaches
target level.
Caraustar announced they will increase prices by $60 per ton on all
uncoated recycled paperboard grades and $45 per ton on coated recycled
paperboard grades produced by its mills. The increases are effective
with shipments after April 5, 2010. Coy
Paper notes that inventories are becoming tighter and demand up
slightly; therefore, this increase should have limited challenges.
M-Real has reported that they have experienced a significant increase in
raw material costs, particularly pulp and logistic costs.
Accordingly,M-real Zanders will increase prices for carbonless papers
for deliveries after 19 April 2010 by 10%.
Reports from Chile after the earthquake and tsunami hit the country is
that paper companies are making progress on restarting their operations,
however, pulp mills are still idle, as their damage is more extensive.
Chile’s only two newsprint suppliers, CMPC’s Inforsa mill and Norske
Skog’s Bio Bio mill, are still closed. They have combined capacity of
340,000TPA of newsprint. This will artificially assist the USA newsprint
producers.
Kruger will extend the downtime of PM 3 at its Wayagamack Mill in
Trois-Rivieres, Quebec, Canada for a period of one month starting March
31.
Kruger said the decision to extend downtime is the result of low
demand for directory paper from the ongoing weak market conditions.
Recall the Coy Paper news releases
outlined this paper machine was shut down on December 31, 2009 with a
planned restart set for March 31.
Production is now planned to
resume on May 1.
PM 3 has the capacity to produce about 74,000 metric
tons per year of directory paper.
NewPage announced they reached an agreement with Domtar to purchase
Domtar's coated groundwood paper product lines and all the respective
accounts and book of business. The purchase will include the coated
groundwood paper book of business, Choctaw, Saturn, and Jupiter brands.
We have received some
reports from our industry contacts that recent legislative moves may
allow the industry to claim a Cellulosic Fuel credit (IRC 40(b)(6)) for
Black Liquor produced and fired between 1/1/10 and the enactment date of
the new bill (likely to be in next several days). This could produce a
substantial 1Q10 windfall for kraft-based producers. The size of the
cellulosic fuel credit is $1.01/gallon, rather than $0.50/gallon with
Black Liquor. The cellulosic credit appears taxable, while the tax
status of the black liquor credits is still an open question. It also
appears that companies may have the ability to re-file for 2009
(depending on their tax situation) and claim the larger cellulosic
credit, rather than the black liquor credit. Our contacts suggest that
all the big four accounting firms as well as several law firms are
currently working on this issue.
Thus, it is safe to assume most
paper companies are digging into the
issue.
Containerboard and box shipments for February were up 6.0% ! Also,
inventories fell at mill and at box plants by 96.800 Tons - roughly
4.5%. More good news included the industry ran at 95% of capacity in
February and USA containerboard exports totaled
319,000 tons, up
49.1% from 2009. This is all good news for the producers ....
converters, look for price increases.
Many of the major paper producers in North America recently announced
price increases on coated, uncoated and supercalendered paper of about
$30/ton effective with shipments on or after April 1st. Companies to
announce so far include NewPage, Kruger, Verso, AbitibiBowater,
Catalyst, Evergreen Packaging, Myllykoski, FutureMark, West Linn Paper
and Irving Paper. Supply as a result of shuttered equipment is reduced,
demand appears up, and the mills are grabbing this opportunity to
announce new price levels. Look for the producers to attempt to raise
prices throughout the year.
The stronger shipments were reported for most of the paper and pulp
grades in February, as well as December and January, this will support
our position that the business is now recovering and the paper industry,
accordingly, is reviewing pricing increases. Uncoated Papers
The Uncoated
Freesheet shipments were up 5.7% from February 2009. This was the
largest increase in over 3 years (Note, February 2009 vs 2008 was down
20.8%).
Mills such as International Paper and Domtar continue to
take significant capacity reductions. Coated Papers
Coated paper shipments also witnessed
increased shipments.
Lightweight (publication) coated paper (LWC)
shipments increased 21.0% versus February 2009 and coated free sheet
increased 9.7%. (Note, last January, those two
categories posted
declines of 37.4% and 24.6%, respectively).
Producers of coated free
sheet will continue to benefit from duties recently announced for some
Chinese and Indonesian imports and I suspect shipments will continue to
advance.
Market Pulp
Domtar
announced a $50/mton price increase in North America and Europe for
both the NBSK and NBHK grades, effective April 1. If successful, the
hike would be the 10th price increase in the last 12 months. The market
has absolutely tightened as a result of both the Chile earthquake and
strike at the Finnish ports. Additional market pulp producers that
reported an increase include, Sodra's $40/ton April price hike on NBSK
for Europe. Fibria announced a $50/mton global increase on (hardwood)
BEK.
Reports suggest that the $30-50/mton price increase for March
on softwood and hardwood grades in North America, Europe and Asia have
gone through without much push back.
If the April price announcement
is successful, NBSK pulp prices would
be up 50% from this time in
2009. NBSK (benchmark grade) pulp list price will be at $960/mton, up
30%.
Domtar just announced it will permanently close its coated groundwood
publication paper mill in Columbus, Mississippi. The Domtar coated
groundwood paper mill has an annual production capacity of 238,000 tons
of coated groundwood and 70,000 metric tons of thermo-mechanical pulp.
Chile produces
nearly 5Million MTA of market pulp or 8% of the world's supply. Nearly
80% of the pulp capacity is located within 150 miles of Concepción.
Reports
from the region suggest that mills will be down for 30-60 days.
Aftershocks could easily push the restarts back even further. If the
entire Chilean industry is out for just 2 months, this could result in a
loss of 800,000/MT.
Some analysts are predicting modest price
gains of only $30-40/MT (3-5% increase). On the other extreme, some
contacts in the pulp brokerage community are pointing to April list
price increases of as much as $80-100/MT (9-11% increase). Deutsche Bank
forecast is for April hikes in the $60/MT range.
Notes from a Forrester Research Report-
Online retail sales, in the
US, excluding auto, travel and drugs, grew 11% in 2009 to $155.2 billion
or 6% of total. Forrester predicts 11% growth in 2010, reaching $172.9
billion or 7% of sales and similar growth annually through 2014,
bringing online sales up to $248.7 billion by 2014.
The overall
web-shopping audience is growing, up 4% in 2009 to represent 67% of the
US online population. Forrester predicts consumer electronics to
continue seeing double digit growth online, with apparel, accessories,
footwear seeing a 17% growth online in 2009 and expecting over 10%
growth for the next few years.
The trend for online sales is
mirroring online/ Digital advertising.
St. Marys Paper will close PM 5 at its Sault Ste Marie, Ontario mill.
The machine has a capacity to produce 130,000MTA of SC-A paper. The
mill’s other machines, PM3 and PM4, have been closed since December.
Catalyst has proposed a plan to the union that could restart 2 specialty
paper machines at the Elk Falls paper mill. The Elk Falls mill is
located in Richmond, BC with annual capacity of 153,000 tons of uncoated
mechanical specialty paper and 373,000 tons of newsprint.
The Outsell research firm released an optimistic report on a forecast
growth for both digital and printed advertising. The report also
outlined digital advertising ($119.6Billion) may exceed print
($111.5Billion) for the first time. Magazine advertising spending is
expected to increase 1.9% or $9.4Billion, including a 4.2% increase for
consumer titles and 1% for B-to-B titles. One additional trend noted in
the report was business to business advertisers see cross-media
marketing as most effective.
Following up on the Coy Paper
earlier releases, the stevedores that work the ports in Finland remain
on strike. The Finnish Transport Workers Union has forced several of
the Finnish paper makers to cease operations. The mills are not able to
receive raw materials, they are unable to warehouse finished paper, and
most importantly, the paper mills can not ship paper.
Of notable
mention, the following mills are shut down
-UPM shut down Rauma mill,
capacity 720,000MT/YR, of coated mechanical and 540,000 mtpy of
supercalendered paper
-Sappi closed its Kirkniemi mill, 740,000MT/YR
of coated mechanical.
-UPM closing of Kaukas (Lappeenranta),
570,000MT/YR of coated mechanical and Kaipola, with 700,000MT/YR of
coated mechanical, directory and newsprint papers
-UPM at Kymi,
850,000MT/YR of coated and uncoated woodfree capacity.
-Stora Enso
will begin closing mills.
Negotiations with the stevedores continue.
Finland has 25 major ports, 10 of which handle 75% of their exports.
Consistent with our Coy Paper earlier
releases, initial reports outline shipments for commercial printers
declined 7.2% in January (versus January 2009) to $6.7Billion. Many
believe this might be a trend, with the advent of EReaders and other
electronic devices cannibalizing traditional print.
The official American Forest and Paper Association (AF&PA) released
final figures for January and confirmed Printing and Writing paper
shipments were up 8.9% (vs. January 2009).
Highlights of January
(versus JAN 2009 report include-
-Coated Papers up 14.6%
-Uncoated
Mechanical up 28.3%
-Uncoated Freesheet up 1.9%
-USA Purchases
(shipments and imports less exports) up 4%
Inventories of Printing
and Writing rose 1%, up 9800 tons from December 2009.
When Fraser Paper completes its sale (sometime in April), the new
specialty papers business will consist of the integrated pulp, energy,
and paper operation in Edmundston, New Brunswick and Madawaska, Maine,
as well as two lumber mills located in Plaster Rock and Juniper, New
Brunswick. The company will be called Twin Rivers Paper Company. This
new company name is reflective of the location of the pulp and paper
operations at the Madawaska and Saint John Rivers.
The worldwide producers of pulp and paper have substantially increased
the use of renewal wood for biomass for their massive energy demands.
The result is less (nonrenewable) fossil fuels consumed. A recent
release from the Wood Resource Quarterly confirmed that since 2006,
energy generated from biomass has gone up over 50%, last year accounting
for 18% of the total energy consumption by this industry sector.
Apple delayed the introduction of its new IPAD EReader to retail stores
until April 3, although orders will be accepted on the web as early as
March 12. The IPAD will come with the iBookstore application and 11
other free download applications. Many are watching this device with
interest to determine if Apple will change the way we read, much like
this company changed the way we listen to music and use our phones.
The Coy Paper Company has always focused on the specialty paper market
and now has included chemicals to its product offerings. The company has
technical support and blending facilities and will market and
distribute the Hartindo Anti Fire chemicals to include AF 21, AF 11E and
AF 31.
Many paper mills and coaters are evaluating Coy's product to
include in their product lines. Imagine, a fire proof paper and a flame
proof paper!!
The chemical offers permanent protection from fire
once applied, Hartindo AF21 will protect your home and family, hotels,
night clubs, schools, Hospitals libraries and museums, etc. from the
ever present danger of fire, giving you peace of mind 24 hours a day.
Contact Coy Paper at info@coypaper.com for more information.
Even with a slightly improved demand at the end of 2009, coated
publishing paper prices are almost $150 below their mid-2009 peak.
Despite the combined rising costs of raw materials and the loss of black
liquor credits, pressure continues on margins for the producers of
coated groundwood publication papers. The forecast is for coated paper
prices to continue to trend upward and producers to look for more
improvement throughout the second half of 2010, assuming the economy
does not enter another dip.
While it was true that during 2009,
coated paper prices declined, but, in the first half, so did production
costs. Unfortunately, the price slide continued despite the return of
increased costs toward the end of the year. Pulp costs increased such as
softwood pulp, up $200 per ton since their 2009 low, while coated
publication prices fell $130
over the same time frame. Producers are also facing further pressure
from the rising costs of energy, chemicals, transportation, and other
cost components.
The challenge remains for mills due to rising
fiber costs and the elimination of the black liquor credits (which will
not be renewed). These credits reached as much as $100 per ton of paper.
Combined with the other cost concerns noted above, producers will face
tremendous margin pressure in 2010 if prices remain at their current
levels. Accordingly, look for producers to introduce increased pricing
thorough 2010.
The index known as the Pulp & Paper Week composite (includes 23 USA
companies) reported forth quarter 2009 earnings up 60% (vs. 4Q08) with
sales down 7.5%. For all of 2009, the group’s earnings were down 34.2%
with sales down 11.4% when compared to 2008 results. It was noted that
15 of these companies benefited by the alternative fuel black liquor tax
credits which offset losses, improved balance sheets, and substantially
boosted earnings.
Worldcolor will close its plant in Carroll, IA which will be the fourth
closure in the last 12 months. Other shutdowns previously reported on
Current News on the Pulp and Paper Industry were located in Oberlin OH,
Bromont QB, and Richmond ON.
So many of our readers mail publications or print direct mail marketing
pieces; accordingly, a summary of the newest USPS plan. Mail volume is
forecast to drop 15% from 177Billion pieces to less than 150Billion by
2020. If no action is taken, this will result is a deficit of
-$240Billion by 2020.
Proposed plan is to
-Restructure retiree
health benefits
-Fewer delivery days; more locations, more self
service kiosks, more user friendly website
-Establish more flexible
workforce
-Review pricing on each program, to include a price
increase in 2011
-Introduce more products
Notes on report from Business Wire
The Institute for Supply
Management (ISM) reported that US economic activity in manufacturing
expanded in February for the 7th consecutive month, with the overall
economy growing for the 10th consecutive month. New orders and
production showed significant month-over-month growth, with the
Employment index increasing for the 3rd consecutive month. The paper and
printing sector indicators are summarized below.
The Finnish Transport Workers’ Union went on strike this week. If the
strike effects the Finnish ports, mills such as UPM Kymmene will lack
raw materials, paper storage, and a means to export paper. The mills
will have no choice but to shut down. Note, almost half of UPM’s paper
production capacity is in Finland, but they plan to deliver orders from
mills in other countries.
USA Department of Commerce reported on their preliminary results in its
countervailing duty investigation of coated paper from China and
Indonesia. They announced a preliminary duty of 12.83% on products from
China, and 17.48% on products from Indonesia. Asia Pulp & Paper
(APP), a major exporter of coated paper from China and Indonesia to the
USA, expressed disappointment with the initial findings.
Department
of Commerce’s final ruling is expected to be released in September
along with the final ruling on anti-dumping. The last phase of this
investigation will occur in October or early November, when the USA
International Trade Commission will determine if the domestic paper
industry has been harmed.
USA Printers share in the foreign
producers disappointment on this ruling. Their coated paper costs will
surely increase in a challenging market.
International Paper, the world's largest producer of paper, will
permanently shut down the two remaining paper machines at its Franklin
Virginia plant.
To date, electronic books only make up less than 2% of all books sold.
Trade books, both hard and paperback, are 35% and mass market printed
books are 21%. As far as distribution is concerned, Book chains sell
nearly 30% of all the books sold, followed by e-commerce sites at 20%,
and the independent shops account for 5%. I would image the digital
distribution will be a new channel and experience robust growth once the
EReaders start hitting the market in a bigger way.
Condé Nast, Hearst, Meredith, Time Inc. and Wenner Media with the
support of Magazine Publishers of America and Bonnier Corp.; National
Geographic; ESPN; and New York Media, have reported they will place
front-of-book advertisement placements to answer tough questions about
their relevancy. In all, close to 100 titles are planning to give up
prominent space in their issues for an industry ad campaign that aims to
promote magazines as vital.
The community is ferociously determined
to correct the misconceptions that have been swirling around the
advertising industry. The primary objective is to confirm that printed
magazines are still exciting, Mobile, and will still be a strong
presence for all to read 'the printed word'. The publications will also
educate the public on how, long term, electronic media will devalue its
product by offering its content for free online.
Just reading another report confirming producers of Paper and Board in
Europe were down nearly 11% to 90Million tons, from 2008. This is the
lowest level of shipments since 2001. Similar to the USA, the European
manufacturers experienced weak demand and several capacity closures.
Domtar and SAPPI recently announced yet another increase for their
market hardwood pulp of $50/ton for shipments. It was also reported
that most of the producers of BEK will increase pricing $30/ton. This
move follows all the North American producers of softwood pulp with the
earlier announcement for an increase of $30/ton. Once all prices are
into the market, the NBSK price for North America will be $910/MT and
Europe will be $890/MT.
Most pulp buyers will not have a choice,
but to pay the increase. Pulp supply has been tight due to continued
strong demand in China. Also, the earthquake in Chile will impact
several producers.
Pulp prices have staged a remarkable rally in the
last 10-11 months, with most grades rising more than $200/MT.
The last decade yielded only limited new domestic capacity for the paper
industry and an unprecedented number of plant and equipment shut downs.
The industry is entering 2010 with a slight breeze to our backs with
many markets witnessing small increases in order books from end users
that most likely had to restock. Unfortunately, the economy is still
not improving to a point that housing starts, bank credit, nor consumer
buying has returned with any sustainability. Many of the raw materials
consumed in paper making have increased and the black liquor alternative
fuel credit is gone. NBSK pulp may raise to almost $880/MT – a 16
month high - and come close to matching the August 2008 peak. Newsprint continues its challenge
into 2010, with both advertisers and readers down, although pricing has
improved for the producers. The price has steadily risen from a recent
low of $450 to nearly $530/MT. The forecast is for still more
shuttering of equipment to balance, the declining demand, with supply. Uncoated Freesheet producers have
announced an increase of $40/ton on business papers and demand appears
to be stabilized (although current base is low). The major producers
reduced capacity in 2009 and this will balance the market.
The
manufactures of Coated Freesheet and
Groundwood are still experiencing challenges from the a reduction
in both advertising pages and over all circulation. The manufactures
have announced price increases, but printers continue to push back
citing fear of alienating their customers with advanced pricing.
Virtually
all products for Containerboard
have increased prices, and converters are paying the new levels.
Current order backlogs are OK at best, with export shipments doing well.
Real challenge is if the economy does not improve, no one will consume
goods that go into boxes.
Our forecast
is for a gradual recovery for the paper industry, and trending up from a
poor 2009.
As of today, all the major producers of ContainerBoard including
International Paper, Georgia Pacific, and Temple Inland have increased
pricing. These three leading producers are digging their heels in on
the $60/ton announcement for April 1. More than likely, this second
increase of the year will happen, despite persistently weak demand. Key
issues include tight supply/demand balance, lean inventories, and
surging fiber costs.
As we assumed, White Birch joined AbitibiBowater in announcing they
will file for bankruptcy protection. White Birch is the second-largest
newsprint manufacturer in North America with newsprint mills in Quebec
City, Riviere-du-Loup and Gatineau. The company expects operations to
continue producing paper for end users.
From recent report by American Forest and Paper Association
The
AF&PA reported that USA printing and writing paper shipments went
up 9% in January vs. 2009. This is the third consecutive monthly
increase when compared to the year before. All paper classifications
grew, with coated fee and groundwood - publication having double-digit
growth. US purchases (shipments + imports - exports) also went up by
+4%, and inventory levels increased 1%, by 9,800 tons from December.
RR Donnelley will acquire Bowne
& Co.for $481Million and is expected to close in the second half of
2010. Bowne had revenues of $675Million in 2009 and offers digital
print services for healthcare, financial services and others.
Most CEOs running pulp and paper
companies believe the ‘worst is over’ and now look for a slow recovery
over the next 2+ years. Most admit the industry cycle is mature or even
declining and much of the lost demand may not return. The paper, pulp,
and packaging industries all need to review their models for long term
survival. The last two decades illustrated a trend of mergers,
acquisitions, consolidation, and plant and equipment closures. This
assisted with the over supply challenge, but if demand continues to be
decreasing, a transformation must occur.
The
paper companies will need to review other segments and models to be
viable as a long term entity. Areas of focus perhaps should include,
Chemicals, water treatment, energy, logistics, forest management, and
recycling. The paper companies all currently have expertise in these
areas as a normal course of business. Now, maybe they should evaluate
if these areas could generate new streams of revenue and recreate a
‘new’ entity.
The USA printing industry
continues to lobby against the coated paper manufactures that have
asked the US International Trade Commission to levy a tariff on Chinese
and Indonesian producers. Overall demand for printing is down and the
continued competition from electronic communication is fierce. Reports
confirm over 73,000 workers in the printing industry lost their jobs in
the past 2 years. The printers feel that the imported paper maintains a
competitive market, and without China and Indonesian paper, the cost of
the largest component for printing costs, would increase. Increased raw
material costs will further drive clients away from the printed media
and potentially close down printers.
The printing community is fighting to keep the imported coated paper
coming into the USA without a penalty tariff.
We often report on the financial conditions for the paper and pulp
producers as well as printers, but the entire supply chain has been
negatively effected. Poor demand from the printing community negatively
effected the latest set of financials from global paper distributor
giant PaperlinX. The merchant's sales for the six months to December
2009 fell across the board, with Australian, New Zealand, European and
North American operations showing double digit declines; meanwhile,
Asia did illustrate some positive results.
We
reported earlier in the year, that PaperlinX was successful in the sale
of their Tasmanian paper manufacturing operations to Nippon Paper;
however, the company is still looking to sell its Burnie paper
manufacturing plant, and, if no buyer is found it will close in June
2010.
For the first half of the 2009-10 financial year
PaperlinX reported a loss of $175Million, the bulk of this coming from
costs associated with its exit from paper manufacturing. The company
recorded a 28% drop in group revenues to $2.7Billion, as well as a 24%
drop in paper volumes, which the company attributed to its exit from
paper manufacturing operations in Australia and the impact of weak
markets.
International Paper just announced
a $60/ton price increase on containerboard for shipments starting in
April. We assume fellow producers will follow such as Temple-Inland,
Packaging Corp, Rock-Tenn, Greif, and Sonoco. Also, Boise and Kapstone.
Although
inventories for containerboard are down from historical highs for the
month of January, they DID increase from January 2008. Prices have
increased, but demand for boxes appears stagnate, at best. In fact,
Deutsche Bank reported shipments were down over 4% and inventory rose
67,000 tons. The past price increase went through, will the April pop
also be successful?
The Reader’s Digest Association
has officially emerged from Chapter 11 protection. As part of its
restructuring, the publisher reduced its debt by 75% (from $2.2 billion
to $525 million). Holders of senior secured debt transferred ownership
of Reader's Digest to the lender group and will effectively receive
equity.
Most of the major paper sectors
have announced price increases, and end users are paying the new price.
It appears many of the raw materials including chemicals, pulp, energy,
and transportation have all increased, and the infamous black liquor
credit is gone. As we outlined in past releases, the forecast will be a
slow one for paper producers to recover. Demand continues to be soft
and the industry continues to have too much capacity.
The current challenging magazine
industry on publication's revenues has resulted in many reviewing their
membership to the Audit Bureau of Circulation (ABC). For decades, ABC
was considered the bible of auditing over 750 consumer magazines for
circulation. However, over the past few years, about 100 of the smaller
(or shuttered) have dropped ABC. The most common reason relates to the
$10,000 fee ABC charges each year for the audit.
Advertising
pages have dropped some 23% from 2008 to 2009, and significant revenue
along with it. Many of the smaller publishers are cutting cuts to
merely survive.
Appleton, SAPPI, and NewPage
continue their efforts with the USA International Trade Commission to
review coated paper imports from China and Indonesia. The USA paper
producers would like the government to impose a 100% tariff because
they feel the Asian governments are unfairly subsidizing the coated
paper producers. Most believe the final ruling will not be awarded
until the Fall of 2010; however, the USA Dept. of Commerce is to make a
ruling by March 1.
Many
of the domestic printers are fighting this hearing for fear that if the
results support the USA producers, coated paper will cost more. During
the past 18 months, although the paper markets have been poor, there
were no significant increases in imports. Printers also cite domestic
coated manufactures have not witnessed their market share to decrease.
Printers
already are experiencing a challenge just with poor demand, the fear of
coated paper increases will only produce a more depressed industry.
Comments?
The world’s largest paper producer of magazine papers, Kymmene, just
announced it will temporarily reduce its work force at both the Kaukas
and the Kymi mills in Finland. Management cited poor demand for the
companies paper products and an objective to improve costs. UPM Kymmene
has 64 plants in 15 countries.
The NewPage mill in Rumford Maine
recently started up a paper machine that was shut down in September.
This machine manufactures coated paper for magazines. The mill is now
operating all equipment at the Rumford location
Lately, pulp and transportation
cost increases have forced many mills to evaluate paper prices. Sappi
will increase prices on coated woodfree paper sheets and rolls by 10%
starting with March shipments. Also citing increased costs and
unsustainable margins, Lecta, the second largest European coated
woodfree paper producer, announced a 9-12% price increase on coated
woodfree paper, effective with deliveries as of March 15th.
The publisher, Penton Media, will
reorganization under Chapter 11. Penton Press is the parent company of
such trade magazines as American Printer and Paper, Film & Foil
Converter magazines. The publisher had more than $1 billion in
liabilities and the assets reported were between $500 million and $1
billion, according to court documents.
Posted by
P. Scott Vallely
Please,
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The workers at the Fraser Paper Madawaska paper mill in Maine agreed to
have their paychecks cut by 8.5% as part of a new contract mill
management says is needed to keep the facility from closing. This
initiative will save the company $4Million in annual savings.
Reader’s Digest had historically
controlled the top spot for the biggest selling consumer magazine. The
Audit Bureau of Circulation’s latest figures reveal that
this is no longer the case.
Meredith's
Better Homes and Gardens now holds that distinction, with a total
circulation of 7.6Million, according to the ABC covering the
June-December 2009 period. It should be noted, Reader’s Digest, now No.
2 at 7.1 million, deliberately cut its circulation in recent years to
improve its profitability.
15 companies recently obtained
Forest Stewardship Council certification for their management practices
covering a total area of over 1.5Million hectares. Applicants,
including AbitibiBowater, Domtar, and Kruger among others. The
Rainforest Alliance’s Smartwood Program conducted the assessment.
Sustainability and environmentally friendly initiatives continue to be
important programs for the Pulp and Paper industry.
The major marketers are learning
that traditional (mailed) direct mail becomes a more successful
campaign when combined with digital marketing. The final figures for
2009 are not yet in, but, in 3Q 2009, US consumers received 5.2 billion
pieces of direct mail, a drop of 27% from 2008. Marketers are finding
that with reduced spending budgets they are sending fewer pieces, but
more targeted. The companies are complimenting these efforts with
emails and witnessing increased responses.
From a Pulp and Paper Week Report
Barclay's
Capital analyst, Peter Ruschmeier, estimated US uncoated mechanical
paper (groundwood containing paper used in inserts, paperback books,
and certain magazines) is to increase 22.6% in 2010; coated freesheet
to rise 14.4%; coated mechanical (publication papers) to be up 13.2%;
market pulp up 2.0%; and uncoated freesheet up 1.1%; with newsprint
down 7.2%. Many industry observers feel that demand will increase in
2010 and rising costs will squeeze margins. Most pulp, paper, and board
producers will focus on raising selling prices to offset margin
pressure.
Coy Paper might
take some exception with the aggressive growth figures on both uncoated
and coated groundwood papers as well as coated free sheet. Unless
advertising dramatically improves, I would be hard pressed to forecast
a growth of even half these figures. We DO agree that mills will
attempt to increase pricing (for all grades) throughout the year in an
effort to stay ahead of the cost curve.
After a punishing first half of
2009 for magazine sales at the newsstand, many of the industry’s
biggest newsstand sellers witnessed sales declines begin to at least
level out in the second half of the year.
Single
copy sales declined 12.4% in the first six months of the year. It
should be noted that results were partly affected by a disruption in
the wholesaler delivery chain which led to delays in getting issues to
stores. The challenging economy is also at blamed for a decline in
single-copy sales.
In the second half, though, single-copy sales
declines narrowed for big newsstand sellers like People, In Style,
Glamour, Family Circle and Cosmopolitan.
Not all shared in the
improvement. Good Housekeeping’s newsstand sales fell nearly 30% on top
of a 17.7% decline in the first half. Vogue was down 15% and Men’s
Health, 14%.
Dr. Joe Webb, director of
Economics and Research Center, said “2009 was a tough year for
printers, and the trend of displacing print with new media by retailers
and others continues. The longer the slow economic times last, the more
entrenched these new media budget allocations will be.” Dr. Webb
emphasized that print businesses will continue to be under pressure to
merge and consolidate because of these shifts. “The most successful
print businesses had specialized equipment and processes that were
targeted to the exact needs of those markets, such as magazines,
catalogs, and newspaper inserts. The higher profits those organizations
enjoyed for many years were the rewards they had for concentrating on
those niches. It wasn't until those niches started to contract that the
printers realized that specialization had risks, which were often
underestimated, that quickly eliminated those rewards.”
Total Shipments for printers for 2009 for Year are $88 Billion
The USA Government Printing Office (GPO) awarded bids to more than 1800
printers in 2009 for $425Million (down from $421Million in 2008). Top
five include
NPC (News Printing) $29.3Million
RRDonnelly $27.0Million
Monarch $19.5Million
Gateway Press $17.5Million
SourceLink $16Million
Time Warner reported that its publishing unit, Time Inc., generated
$3.7 million in revenue in 2009, down 19% from 2008. Those losses were
fueled largely by a 22% or $541 million decline in advertising revenue.
Meanwhile, subscription revenues declined 13% for the year and other
revenues fell 24%.
?S&P recently generated a
report that outlined a slow recovery for companies involved with USA
forest products. ?The document reviews a slight improvement in outlooks
for 60% of forest sector companies. This report is titled “The US
Forest Products Sector is Entering a Slow Recovery” and says that the
positive trend reflects significant debt reduction that these companies
achieved, despite poor economic conditions. They believe that the
economy and housing markets have hit bottom and that the sector’s
credit profile will improve over the next few quarters.
I,
on the other hand, am not as bullish, especially if one is focused on
the pulp and paper segment of the forest products industry. There will
be some improvement, assuming the economy picks up, but debt reduction
will be a challenge.
The International Paper Company,
the world's largest pulp and paper producer, reported a loss for the
forth quarter of $101million due to a decline in sales. The Industrial
Packaging unit dragged down the balance of the corporation, posting a
loss of $391Million.
Meanwhile,
Domtar experienced strong pulp sales and benefited from recent pulp
price increases. The company announced a profit of $124Million for the
forth quarter (compare to a loss of $676Million 4Q2008).
As announced by AF&PA Report
In
December, paper output in the USA was 2.9Million tons, up 3.3%, yet for
the year, paper output was down 13%. Coated paper improved 12.8% for
the month, but was down 18.7% for the year. Uncoated mechanical grades
increased 1.4% in December, but dropped 20.5% for the year. Uncoated
freesheet was up 1.9% for the month and down 11.1% for the year. This
is the second consecutive month of increased output vs. 2008.
R.H. Donnelley changed their name
to Dex One and also announced it will emerge from Chapter 11. The
124-year-old local business directory publisher and marketing company
also provides business search engines and pay-per-click networks. The
new name will tie into their search website dexknows.com. The company
is attempting to rebrand itself as a search engine company.
The paper industry continues to produce fewer tons each year. Not a
healthy trend!
The
last decade has not been friendly for the North American packaging
paper producers, considering the demand peaked in 1999 at nearly
56Million tons. Several believe the market will have fallen below
46Million tons in 2009, when the final numbers come out. Meanwhile, the
producers for graphic papers last witnessed very good growth in 1970
and the 80s and than 90s- but the market topped out at 50Million tons
in 2000. In 2001, the demand fell to about 46Million tons – and managed
to stay at this level until 2007. Between 2007 and 2008, demand fell
15% to 39Million tons and most forecast 2009 will end up at slightly
under 32Millions tons (19% down).
The biggest element in this
decline was lack of advertising (especially for Auto, Financial, and
Real Estate). It is predicted that the next few years will generate a
flat demand, and than decline, beyond 2011. One study indicated that
this segment might be down to 25Million tons by 2024. Newsprint could
well be the largest component of this decline.
RockTenn, Graphic Packaging
International, and Sonoco have all announced an increase for corrugated
box prices by 10 percent and corrugated sheets by 12 percent, effective
with shipments on or after February 22. The industry had previously
increased the price for uncoated recycled paperboard by $50/ton and
bleached board products by $40/ton.
The converters have all absorbed a 40% increase in the cost of recovered
paper.
Another cost pressure is the price announcements for Old Corrugated
Containers (OCC)increasing in January from $80 to $110/ton.
Consistent with our previous releases, as of today, Domtar and NewPage
announced $40/ton price hike on its offset grades, effective Feb 22.
Others,
including International Paper, Glatfelter, Finch, Flambeau, and Grays
Harbor have already announced similar price hikes on offset grades.
Georgia Pacific, Boise, Suzano, Soporcel have limited their efforts to
cut-size office grades. The continued rally in pulp prices is
pressuring margins at nonintegrated mills.
Verso Digital recently presented
their findings on a survey based on millions of Internet users and
found that avid readers forecast they will split purchases between
print and electronic. Most of the 'avid' reader group is over 45 years
of age (66%). Only 28% of those in the 18+-age bracket are avid
readers. 27% of avid readers are not willing to pay more than $10 and
37% not sure how much they would pay.
Apple
just announced the IPAD device. I note Apple has revolutionised
computers, cel phones, MP3 players - and could now create lure to grow
the audience for EReaders.
In any event - more EReaders mean less paper consumed, in an already
depressed market for demand.
These are difficult and challenging environments in the paper and
printing markets, it is important to review your printing platform to
assure you are still as cost competitive as possible
-Does the printer’s equipment still fit your publication?
-Do you still invite competitive printers to quote your publication?
-Is your printer still financially stable?
-Where has the printer downsized? Has this area effected your
publication?
-Slower response from CSR, no new ideas on distribution, the paper buyer
has not recommended any alternative papers, etc.
-Is your printer taking the correct steps to be environmentally
friendly?
-Has your printer invested in new technologies?
ALSO,
-Have you considered more cost effective alternative papers?
-Lower brightness; Uncoated Supercalender instead of coated, lighter
basis weight, self-cover, Groundwood containing /LWC in stead of a
'free; sheet.
-Have you reviewed reducing the size of your publication or fewer pages?
-Are you still distributing to nonrevenue producing subscribers?
It's
January, start the year by reviewing all your vendors to confirm they
are still competitive and partner up with your vendors to mutually
create ways to save money.
Posted by
P. Scott Vallely
Please,
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on PAPER NEWS for
all the news on paper
Total Uncoated Free shipments were down -11% for 2009 to 9.7Million
tons. USA imported 855,600 tons for 11 months - 16% lower than last
year and exports declined 6% at 779,300.
Graphic Packaging International
announced a price increase of $50 per ton on all grades of
PaceSetter(R) uncoated recycled board (URB), effective with shipments
after Feb. 18.
The
company is one of the largest producers of folding cartons and holds a
leading market position in coated-recycled boxboard and specialty bag
packaging.
The recession of 2009 saw
consumers begin to use more coupons than in recent years, in fact, it
was the first increase in 17 years. Shoppers turned to both the
newspaper as well as online and cell phone applications to find
coupons. Of particular note was online coupon access increased 92% and
redemption shot up 360%, although the Internet still accounts for only
1.5% of coupons redeemed, according to a report from Inmar. Despite the
rapid rise of online coupons, newspaper inserts still account for 89%
of coupons distributed to consumers and more than half of coupon
redemption. Web sites accounted for 0.3% of coupons distributed to
consumers and 1.5% of redemption. 19.6% of online coupons are redeemed
and it is estimated that consumers redeemed a total of 3.3 billion
coupons in 2009, a 27% increase from 2.6 billion in 2008.
From Company release.
Quad/Graphics
Inc., the largest privately held printer in the US, will acquire
Montreal based, World Color Press Inc. for an estimated $1.4 billion.
The deal will close in the summer when the expanded Quad/Graphics will
become the 2nd largest commercial printer in the US behind RR Donnelley
& Sons Co. Worldcolor shareholders will own 40% and Quad/Graphics
shareholders 60%. Quad/Graphics CEO Joel Quadracci, age 41, will lead
the combined entity as chairman, president and CEO. Worldcolor’s CEO,
Mark Angelson will be named to the board and oversee the integration.
Worldcolor prints magazines like Sports Illustrated, Rolling Stone, The
Crate & Barrel catalog and Yellow Book Directories. Quad/Graphics’
clients include Newsweek, GQ and the LL Bean Catalog. In the 12 months
through Sept, their combined revenue was $5.1 billion.
The
official report from AF&PA outlined USA shipments of Printing and
Writing Paper increased 6% in December versus December 2008, the 2nd
consecutive increase, with all 4 grades reporting an increase for the
month. YTD shipments were down 15%. USA purchases (shipments + imports
less exports) also increased in December, up 3% vs. 2008, but still
down 17% YTD. Printing and writing inventory levels decreased 2% or
41,000 in Dec09 vs. Nov09.
In 2009, China imported a record
high 13.7Million tons of market pulp, increasing 44% over the 2008
deliveries. The extra demand was consumed by the new machines starting
up without domestic fiber. Most exerts in the industry believe the
Chinese will continue to grow their purchases of market pulp, despite
less worldwide supply and increased prices. There has also been an
increase in pulp consumption in India with solid demand in Bangladesh,
Pakistan and Vietnam. Suppliers in Brazil and Indonesia had pulp
availability decrease due to flooding, while Russian suppliers had
unusually frigid temperatures, slowing production.
Three new pulp & paper
investments in China announced by Guangxi Yongkai Sugar and one by
Guangxhi Huacheng Paper adding almost 1Million TPA of uncoated paper.
China, now the largest producer of uncoated papers, also continues to
witness increases in consumption.
Last week we announced Domtar
increased their price and, as assumed, most of the uncoated white paper
mills joined Domtar in reporting a price increase for late February or
early March. Most increases were $40/ton, the exception is Wausau which
we reported as $60 for text and cover grades. Domtar and Boise told
customers they would only increase cut-size business papers; however,
International Paper, Glatfelter and Finch extended the increase to
offset rolls, tag/index/file folder stock and other converting grades.
The year 2009 was not kind to many
paper markets, and Newsprint was hit especially hard. After a reduction
of 14% in 2008, demand continued to erode another 24% in 2009.
Electronic communication has truly hurt this industry. Capacity
continues to outstrip demand, despite reduced pricing and plant
closings. AbitibiBowater continues to operate under chapter 11 -
commanding 43% of the market, White Birch is #2 at 22% - failed to pay
an interest debt due last Fall, and Port Huron - filed for bankruptcy
protection. Even if the economy improves, will end users go back to
newspapers for news, classified advertisements, and coupons?
The NAPL reported that US
commercial printing sales were down -16% in 2009 to $72Billion. The
rate of decline slowed significantly since last summer, with a forecast
for 2010 of rising +2 to 3% to $73-74 billion. NAPL forecasts a slow
recovery, not hitting its stride until later in the year.
The New York Times announced they
will soon charge non subscribers for heavy use for attaining news on
their website. The company will continue to provide free content for a
limiting number of articles and print subscribers will continue to have
free access to the site. Under the new metered model, a viewer can read
a certain number of articles per month free before being charged a flat
fee. This is a similar model to The Financial Times. The exact cost was
not confirmed. Note, the NYTimes is one of the most popular newspaper
site in the country (over 17 million readers) . The Times will begin
charging in January 2011.
The Catalyst Paper Company
reported that the 1PM at its Crofton mill in British Columbia will be
curtailed indefinitely due to weak newsprint and directory paper demand.
The
machine has a capacity of 140,000TPA of commodity grades and was
temporarily idled on December 23, 2009 for the holiday period.
The
mill has an annual production capacity of 200,00TPA of newsprint and
210,000TPA of directory paper, along with the capacity to produce
343,000TPA of NBSK pulp.
Throughout the last several years, Coy
Paper
has reported on shuttered newsprint equipment. Today, we confirm
AbitibiBowater’s Fort Frances mill in Ontario will now be shut down
indefinitely due to an effluent problem. They will remain down until
they are in compliance with all laws and regulations. ?
Stora Enso
will restart the #2 paper machine at Varkaus Plant in Finland after
having been down for 6 weeks. The stop was due to market related down
time. The Varkaus, facility has a capacity of 290,000TPA of directory
paper and newsprint, while PM #3, which has remained running, has
310,000TPA capacity.
Monday, March 1, 2010 Wausau Paper will increase the base price of the
following grades by $2.00/cwt:
Exact Index; Exact Vellum Bristol; Exact Tag; Exact Opaque Colors; Exact
Multipurpose
Domtar just announced a $40/ton price increase on their business paper
cut size grades, effective February 15. So far, this is the only grade
line to be increased. We can only assume that all Domtar’s competitors
will follow; especially in that demand is improving including December
2009 vs 08 shows shipments +1.2% ( this is the first positive
comparable since April of 2007).
Certainly
raw material costs including pulp prices and energy continue to surge.
Also,inventories at both the mills and the merchants are down 20% down
from this time last year. Lastly, recall International Paper and Domtar
will close 800,000TPA of capacity by mid-2010, representing 7% of North
America’s Uncoated Free Sheet capacity; furthermore, the artificial
support from the black liquor credits are gone (that was $8Billion in
2009!!). All indicators that the price increase will most likely stick.
A price increase for both the East and the West Coast was announced in
December for January shipments. We
think these price increases might actually happen, or at least
$25-30/ton of the announced increase; the balance will most likely be
absorbed in the February / March time period. Although demand has not
appreciably picked up, raw material costs certainly have increased,
thus, creating this 'forced' increase.
Reader’s Digest just reported that
their restructuring plan was approved and the company could exit
bankruptcy by January 31. The company’s debt would be reduced from
$2.2Billion to $550Million and the retirement for past employees would
be modified. They will reduce headcount and move headquarters to a more
efficient faculty.
From NewPage News Release
NewPage
Corporatio announced that Richard D. Willett, Jr., President and Chief
Executive Officer, has resigned from NewPage effective immediately.
Mark A. Suwyn, former Chief Executive Officer and currently Executive
Chairman, has been elected to serve as Chief Executive Officer until a
new Chief Executive Officer is named.
NewPage is headquartered
in Miamisburg , Ohio ,and is the largest coated paper manufacturer in
North America , based on production capacity, with sales of $4.4
billion. The company's product portfolio is the broadest in North
America and includes coated freesheet, coated groundwood,
supercalendered, newsprint and specialty papers.
NewPage owns paper
mills in Kentucky , Maine , Maryland , Michigan , Minnesota , Wisconsin
and Nova Scotia , Canada . These mills have a total annual production
capacity of approximately 4.4 million tons of paper, including
approximately 3.2 million tons of coated paper, approximately 1.0
million tons of uncoated paper and approximately 200,000 tons of
specialty paper.
Printing and writing paper
shipments improved in the USA for the month of December. Total
shipments yielded 1.478Million tons, up 2.8% vs. November and 5% higher
than last year. Full year shipments decreased 15.6% to 17,000 tons.
Coated mechanical rose 15.5% to 306,300 tons and coated freesheet rose
12.1% to 256,500 tons vs. 2008, with both increasing vs. November YTD,
both were down almost 20% with coated mechanical at 3.2Million tons and
coated freesheet down to 3.25Million tons. Uncoated freesheet rose 1.2%
vs. December 2008 to 752,399 tons, with YTD volumes down 11.6% to
9Million tons. Uncoated mechanical remained stable vs. December last
year, at 131,800 tons, but dropped 21.8% YTD to 1.6Million tons.
Canon, the Japanese maker of cameras, copy machines and other
electronics and
Oce,
which sells printers and copiers and has relied heavily on sales to
banks and architecture firms are on target for Canon’s $1.1Billion
purchase. The over riding objective is to be the #1 presence in the
printing industry. The combination will yield a huge sales network in
Asia, Europe and the USA.
The combined Canon-Océ will be up
against competition from Fuji and Ricoh to dominate the European, USA
and Asian markets. Canon’s acquisition comes just a year after Ricoh
bought Ikon Office Solutions, based in Pennsylvania, for $1.62 billion.
In addition to Cenveo closing its
Charlottesville, VA printing plant, which they obtained through the
purchase of Cadmus Communications they will also close the Baltimore
commercial printing plant in February.
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The Magazine Publishers of
America’s Publishers Information Bureau (PIB) reported on advertising
pages for 2009. Pages were down 25.6% and revenues closed at
$20Billion, which means a decline of 18.1%. The New York Times reported
total magazine advertising pages were down over 58,500 pages when they
compared 2008 page count to ad pages in magazines that were still
published in 2009. Only 18 magazines enjoyed an increase of advertising
pages.
The
biggest decliners were financial, insurance and real estate ( down
41.4%) and automotive (down 40.5%). Estimated revenues were down in all
categories except for food and food products, which posted a slight
1.4% gain.
PIB also noted that the advertising page reduction
experienced in 2009 was so severe that many of the surviving publishers
lost focus on their dependence for advertising revenues and, instead,
began to concentrate on digital editions.
Fewer advertising pages
translate into a decline in overall page count and thus less paper is
consumed. If advertising in publications do not improve, difficult to
forecast much advancement for publication paper demands.
The year, 2009, certainly created several challenges for the paper
industry. Paper producers did a remarkable job of limiting price
erosion despite sharply lower shipment volumes and variable (usually
up) raw material costs. The industry responded with massive amounts of
market downtime, as well as a significant amount of closures, in many
cases even driving down inventories despite weak demand.
Although
the last few months of 2009 illustrated some improvement; sustained
improvement will only arrive once the economy improves. Keep in mind,
2009 paper demand continued to be lower than 2007 and the beginning of
2008.
The paper manufacturers continue to operate along a
slippery rope – recently most grades experienced an announced price
increase; meanwhile, demand continues to be below expectations, supply
was controlled by down time (this is not sustainable ), input costs
such as chemical, energy, and transportation are forecast to increase,
and the infamous black liquor credit (worth billions of dollars) is
gone.
I think we all agree that for the industry to be healthy,
long term, a price increase is needed; however, most buyers are
aggressively pushing back due to the inability to pass it on to their
customers.
Of particular note is the containerboard price
increase – without consumers buying 'stuff' – nothing to go into the
box – therefore demand is forecast to be depressed. The other two
markets sharing concern are the price increase for publication and
newspaper papers. Both are hurting from lack of subscribers and
depressed advertising.
Anyone of our Coy Paper Company News on the
Pulp and Paper readers care to comment on forecasting 2010 prices,
demand, and supply; also, venture an opinion on next mills to close?
Two of America's largest magazine publishers, Time Inc. and Meredith,
have reportedly joined forces to buy paper. The two companies issued
joint requests for proposals to potential paper suppliers late last
year, according to several sources.
Together, the two consume several hundred thousand tons of paper,
annually.
Time
is a major buyer of lightweight coated (LWC - 29lbs to 32lbs ) for
offset printing. Meredith's is more geared to rotogravure papers and
higher basis weights. This will introduce added pressure for pricing on
an already depressed market.
Department of Commerce announced
it will delay the decision on the countervailing duties against Chinese
and Indonesian paper producers until February 22nd. The Department must
determine if the imports from the two countries caused injury to USA
paper producers and originally reported the decision would be made by
mid December.
-Penton Media has ceased publication of the print editions of American
Machinist and Welding Design & Fabrication
-Consumer
business and finance magazines had a rough go in 2009. Collectively,
the titles tracked by PIB saw advertising pages fall nearly 30 percent.
-Reed
Business Information has ceased publication of three trade titles:
Video Business, Manufacturing Business Technology, and Industrial
Distribution.
Following up on the Coy Paper
earlier releases, in August, Yueyang started up #10PM and in October #9
PM started up. Both continue to run trials and reports outline the
paper looks fine. Both have a capacity of 200,000TPA each of uncoated
paper. #10PM will focus on recycled business and offset papers while #9
will supply the same papers from virgin fiber. The plan is for #10PM to
eventually produce papers from 100% deinked pulp (most of the raw stock
coming from USA).
In 2008 China produced 79.8Million tons of paper
and paperboard – an increase of nearly 13% annually since 2000. Of this
production, China consumed 13.85Million uncoated printing and writing
tons in 2008 and produced 14Million tons.
At 400,000TPA of new capacity, the Chinese must have America in their
scope for exporting paper.
Forrester Research has just revised up its May 2009 forecast of this
year’s U.S. eReader sales to 3 million units from 2 million, due to
strong sales in November and December. Moreover, it now expects sales
of another 6 million units in 2010.
2009 Top 10 plants in USA by revenue include
US Government
Allstate Insurance
State of California
State of Washington
CVS/Caremark
Ohio State University
Spartan Stores
University of Oklahoma
Louisiana State University
University of Washington
Glatfelter agreed to acquire the
nonwoven producer Concert Industries Corporation from Brookfield Asset
Management Inc. for $235Million, expanding the specialty paper
company's markets, especially in developing markets beyond the USA.
Concert is one of the world's leading producers of highly absorbent and
customized airlaid. The airlaid line is one of the best options in the
marketplace in terms of high absorbency. The company's unique
production process allows products to absorb more moisture than common
cellulose, yet it is lighter, more durable and cost competitive,
especially when compared to similar weight non-wovens.
Concert Industries has operations in Canada and Germany with a total
capacity of 84K tons.
Dr Webb recently published a report on the printing industry. A few
highlights-
"The
third quarter of 2009 continued a positive turnaround from a disastrous
Q1,” said Dr. Webb. “The industry has had significant declines in
volume for the last year, and has cut back staffing levels at a
slightly faster rate than those sales declines. It may now be finding
the right balance of productive capabilities, declining shipments, and
price pressures of electronic media.”
In the report, Dr. Webb
reviews the latest trends in shipments, profits, and capacity measures
for the industry. He also discusses how it is likely that in the next
six months the recession will probably be declared as over. “It is
likely that the fourth quarter of 2009 will be identified as the
recession's end."
Coy Paper has reported on all
the challenges last year for the paper markets. 2009 certainly proved
to be a challenge for anyone associated with the publishing world. The
year outlined economic fallout, bankruptcies, dwindling advertising
dollars, shuttered magazines, layoffs, pay cuts to name a few. Folio
reports on the industry as 2009 unwinded 2009 profile on the
magazine industry world link Click on link
Excepts from recent RISI research paper.
Prime
View International (PVI) is the leader (66% market share) in supplying
displays used in e-readers such as Amazon.com’s Kindle, Sony’s Reader
and Barnes & Noble’s Nook. PVI is owned by Taiwan’s largest paper
manufacturer, Yuen Foong Yu, which launched this technology division 17
years ago, as they became worried about digital replacing print. After
facing tough competition in the LCD market, they’ve spent over a
$1Billion on e-screen development and acquisitions, purchasing screen
technology from Philips Electronics in 2005 and E Ink Corp. of MA last
June. Worldwide sales of e-readers are expected to soar to 12 million
units in 2010, up from 5 million in 2009. Many of these will be made by
competitors, able to show video with full color screens such as Apple’s
Tablet and Qualcomm’s new screen technology called Mirasol.
The American Forest & Paper
Association (AF&PA) and the NPTA are joining forces to host a
combined conference March 21-23, 2010 in New York City, called
PAPER2010.
Also know as 'paper week'.
The
AF&PA is the national trade association of the forest products
industry, representing pulp, paper, and wood products manufacturers,
and forest landowners. The NPTA Alliance (formerly the National Paper
Trade Association, Inc.) is the association for the $60Billion paper,
packaging and supplies distribution industry.
Reader’s Digest plans to launch
three new magazines called Reverse Diabetes, Walk it Off, and No Fail
Weight Loss All three will be sold as part of a single-sponsored
package in the health sector. The magazines will be published 4 times a
year.
As Coy Paper
recently announced, International Paper just closed its uncoated
freesheet (business papers) paper machine #1 in Franklin, VA. This past
Fall, the company announced that they would close the mill to reduce
production capacity. In November, company stopped production on its # 6
paper machine.
Finally, some good news for the
ailing magazine industry. Recall, we reported on Conde Nast having to
close six consumer magazines, including Gourmet; reduced costs 25%; and
making several reductions in their workforce – have announced they are
working on a trade magazine for the men's' fashion market. This new
title may be marketed as a trade publication and not a consumer
magazine.
Reed Business Information has been
marketing the sale of the USA magazine group and has yet to confirm a
buyer for the complete division. The current decisions are to close
several publications, or sell them individually – or begin to lay staff
off.
From International Paper Release
International
Paper announced plans to close its paper mill operations in Franklin,
VA, and its containerboard mills in Pineville, LA, and Albany, OR. The
company also announced it would permanently shut down the previously
idled No. 3 machine at its Valliant, OK, containerboard mill. The
Valliant Mill's other two machines will continue to operate. These
permanent shutdowns will reduce the company's North American paper and
board capacity by 2.1 million tons.
The company concluded that we
have excess capacity in our North American paper and packaging
businesses, and these decisions will better match our supply with our
expected customer demand.
Since the onset of the global recession,
the decline in demand for International Paper's uncoated freesheet in
North America has accelerated, and consequently the company has decided
to further reduce its uncoated freesheet capacity.
In its
containerboard and coated paperboard businesses, International Paper
expects demand to resume growth as the economy rebounds. However, the
company's demand is not expected to return to 2008 levels in the near
future. Therefore, permanent International Paper capacity closures are
necessary.
The closures will impact about 1,600 employees and will result in
permanent North American capacity reductions.
Following
these permanent shutdowns, International Paper will have approximately
10 million tons of North American containerboard capacity, 2.6 million
tons of North American uncoated freesheet production capacity, and 1.7
million tons of North American coated paperboard capacity. These
capacity shutdowns will not impact the company's ability to serve its
customers.
MeadWestvaco reported they will
restructure fourteen facilities in their global packaging markets
group. ??These actions include further reducing corporate and business
unit overhead expenses and closing or restructuring 12 to 14
manufacturing locations. This will result in the elimination of
approximately 2,000 positions, or 10 percent of MeadWestvaco’s global
workforce in 2010.
The
company also announced they will not provide 2009 pay increases for
salaried employees. The manufacturing-related reductions will include
savings from facility restructurings and closures. The company feels
that rationalizing assets as outlined will accommodate reduced demand
and corporate financial objectives.
This week's big announcement was
Caraustar Industries, Inc. has emerged from Chapter 11 as a newly
reorganized private company eliminating approximately $135 million in
debt.
The
company’s Plan of Reorganization had minimal business disruption and
was completed in record time. Caraustar also reported to have closed on
a new $75 million revolving credit facility to provide adequate
liquidity to meet all of its working capital needs, including any
future capital investments.
The year 2009 was certainly a
challenge for the pulp and paper industry – slow demand and constant
pricing pressure. Paper prices experienced a steady fall for most of
the year and now appear to be leveling off. Several producers, and Coy Paper Company,
are forecasting a gradual price increase for most grades for 2010.
Demand might only slightly rebound, but raw material costs such as
pulp, chemicals, transportation and energy will increase. Inventory
levels, both at the mill and the end user, are down and manufacturers
continue to curtail supply and imports are down. Lastly, support such
as the ‘black liquor’ credit is gone. Therefore, even if demand does
not increase, there are plenty of other reasons for paper prices to
rise.
The AF&PA recently reported
that recycled fiber consumption in the USA was 2.5Million tons in
November, an increase of 0.9% vs. last month and an increase of 0.8%
vs. 2008. This trend is expected to continue.
Release liner is the material that
many labels (pressure sensitive) include as a backer sheet. This is the
component of the label, which is used as a carrier and discarded once
the label is consumed.
-World consumption – all release liners – 31Billion sq. meters
-Growth is less than 1%/year
-Super Calendar Kraft #1 material (44% of the market)
-Films increased to 20% of the liner market
-Clay coated now 13% of the market
-Linerless labels have failed to be successful
-Total label growth 2.1%
-Glue applied + 2%
-Pressure Sensitive +1.8%
In our past releases we reported the USPS lost $3.8Billion for
2009Fiscal, which was $1Billion more than 2008. Total mail volume was
177.1Billion pieces – down 25Billion (12.7%) from the 202.7Billion
pieces in 2008. Concern for 2010 is people learned to order product on
line, accept digital communication as well as business invoices,
correspond on email, and think greener – no longer accepting catalogues
and direct mail promotions. The USPS needs to revise its model for
fewer pieces mailed and accept this as a trend.
Posted by
P. Scott Vallely
Please,
also, click PAPER NEWS for
all the news on paper
North
American
Rail freight volume of pulp and paper decreased and YTD
carloads were down 20% through November. Last
week, the Senate Commerce Committee passed comprehensive freight
railroad reform legislation designed to increase competition and
improve federal regulation of railroads. It is estimated that 30% of US
paper, packaging and wood product manufacturing sites have access to
only a single rail carrier. This monopoly status has led to high costs
with poor customer service.
Pressure
continues to mount for producers of container board after all the major
North American manufactures announced the $50/ton price hike
in the East and most producers are pushing for $70/ton in the West.
Demand continues to be weak – slow economy means less goods
purchased and therefore, box volumes fell
12% year to date through November. Most buyers are trying to
push back on price increases.
However, given the large supply reductions (recall our earlier
blog that International Paper, Smurfit, and West Fraser will
shut off 2.7Million tons) perhaps the price increase has a chance.
Recently, Deutsche Bank hosted a conference on the pulp marketand declared that after pricing had held flat for the month of
December, the major softwood and hardwood producers once again announced
price
hikes of $20-30/mton in the US, Europe, and Asia, effective
January 1.
Producers set NBSK price at $850/mton (+$20/mton) in
the US, $830/mton (+$30/mton) in Europe, and +$20-30/mton in Asia,
with
China at $720-730/mton.
China had been heading up the robust demand for pulp because of low
inventories and tight supplies, but suddenly there are reports of
slowing demand in China – perhaps the pipe line is finally full.
Also, China started up 6
new pulp machines during the 2H2009 and 3 more will come on line
1H2010. China's new production will increase to 2.6Million tons of pulp
by the end of 2010.Most North American buyers report
that pulp remains fairly tight in supply due to equipment curtailments,
especially Hard Wood.These same buyers predict this
tightness will not last and a price correction will occur 2Q10.
Joe Connelly of the Wall Street
Journal interviewed Mr. Vallely about the Paper.com site, one of the
largest web marketing sites that focuses exclusively on selling paper.
He commented on the success of the site to date and the recent initative
to now market Paper.com for sale. Any interested buyers should email
the management team at admin@paper.com . The interview was aired on
WCBS radio 880.
Sun Paper will build a $228 million, 300,000 TPA, uncoated mechanical
(groundwood) paper machine at the Yanzhou City mill. This machine
(PM24) will make publication papers in a basis weight range of 60-150
g/m2, in 2011. This will follow the installation of PM23, a 350,000TPA
uncoated fine paper machine being installed in April 2010.
Sun
currently produces 450,000 TPA of uncoated woodfree and mechanical
paper, 100,000TPA of coated woodfree paper, and 300,000 TPA of
cartonboard from this facility.
AbitibiBowater reconfirmed that
they plan to restart paper machine #5 in Thunder Bay, ON in early
February. The 250,000 TPA newsprint machine was shut down indefinitely
in August, along with PM #4, 160,000 TPA.
It’s no secret, like the USA paper
producers, Canada has also struggling with overcapacity and decreasing
demand. The forecast is for the Canadian industry will lose an
aggregate C$1.2 billion this year and the industry will not return to
profitability until 2011. American Forest & Paper Association data
show that the volume of shipments to the U.S. from Canada fell from 18%
to 75% in various key paper categories during the first three quarters
of 2009, versus the same period of 2008.
Canada
has always been a world leader in Newsprint production with a capacity
of over 10Million tons; however, newsprint makers estimate they will
have only shipped closer to 7.2 million tons by year end. The future is
not predicted to be much better with consumption at between 6.8 million
and 6.9 million metric tons next year, and somewhat lower still in
2011.
The Fitch Rating Organization recently forecast a modest recovery for
paper in 2010. The rating service reported that short term demand for
uncoated freesheet (UFS) and coated mechanical paper (LWC – Publication
paper) are stabilizing and expected to rise later in year.
Unfortunately, coated freesheet and uncoated mechanical (groundwood) is
projected to experience slow demand Paper margins will continue to be
squeezed by the rising cost of pulp, possible transportation and
chemical price increases, and lack of black liquor credits.
MediaFinder.com reports fewer
magazine closures in 2009, 428 vs. 613 in 2008 and 643 in 2007. The
number of launches also decreased to 275 in 2009 from 335 in 2008.
Regional magazines had both the highest number of start ups, 21, and
shutdowns at 34. Business-to-business magazines saw 120 closings in
2009, less than 147 in 2008 and 158 in 2007. There were 85 b-to-b
launches in 2009.
To compliment our report earlier this week on our Coy Paper news
releases,
we
offer 'heard on the streets' comments that US
Printing/Writing Paper demand and shipments were up 2.5% in November
primarily driven by strong coated paper shipments.
November
shipments of 1.435Million tons was the first monthly 2009 vs 2008
increase since February 2008 (vs. 2007). Total shipments YTD were
15.612 million tons, down 17% vs. 2008.
-Coated freesheet was up 10.4% to 293,600 tons in November
-Coated mechanical (LWC - publication paper) up 14.7% to 285,100 tons.
-Uncoated
freesheet was stable at 714,800 tons, down 0.5% vs. last year. November
shipments were down vs. October, due to seasonality.
Smurfit-Stone has announced 900,000 tons of permanent linerboard
capacity closures at two locations.
-Ontonogan, MI corrugating medium mill (280,000 tons)
-Missoula, MT mill (620,000 tons)
Smurfit
news follows the recent announcement that International Paper will
shutter 1,400,000TPA of containerboard capacity and West Fraser's
announcement of 450,000 tons
of capacity.
The producers will most likely continue to adjust supply to demand which
will assist the recent price increase.
Revenue generated from advertising pages is forecast to continue to be
depressed. Accordingly, several publications look to survive by
increasing the cover price for the magazine.
A few examples include-
-Condé Nast - The New Yorker, Golf Digest and Teen Vogue in 2010,
-Hearst - Good Housekeeping, Esquire and Veranda and is considering the
same for Country Living
-Wenner - Men’s Journal and Rolling Stone
-Meredith - Better Homes and Gardens and Ladies’ Home Journal, Family
Circle and Traditional Home
-Rodale is looking at doing the same at its health/fitness titles
Publishers are also reviewing decreasing the frequency they print
magazines in an effort to save money.
The producers of Solid Bleached Sulfate (SBS) board grades are
beginning to tell end users about increasing the price by $40/ton.
Although these grades have not had an increase since October 2008
(transaction price $1000-1050/ton), they also have not had to discount
pricing like so many other paper grades during 2009. So far Georgia
Pacific and MeadWestvaco have formally announced.
Recall
MeadWestvaco shuttered a 200,000TPA paper machine in Texas and
International Paper will close a 140,000TPA machine in Virgina.
The
printing and writing paper shipments for November look dramatically
improved versus at this time last year. The American Forest & Paper
Association released market data. Deutsche Bank cautions that a good
portion of the improvement owes to a "lapping" of weak numbers
from
4Q2008. Nonetheless, the numbers are striking and could signal the
beginning of an inflection point in white paper markets. The best year
over year comparables were in light-weight coated paper (LWC), where
preliminary data suggests shipments were up 14.7% (-22.4% YTD). Spot
discount pricing for LWC are slowly increasing.
Heavier-weight
coated free sheet shipments were up 10.4% (-20.7% YTD). Uncoated free
sheet shipments were down -0.5% (-12.6% YTD). The smallest category,
uncoated groundwood, had the weakest performance with shipments down
15.0% (-23.4% YTD). Sequentially,
shipments in all markets were down
from October levels. Much of that month to month easing would appear to
be seasonal as the holiday printing season begins to ebb.
As
noted industry shipments are now lapping 2008 shipments. Thus,
enthusiasm should be tempered. Moreover, we think coated and uncoated
free sheet markets remain vulnerable to
ripple effects from pending
capacity start-ups of some 4.5MM tons in China as well as capacity
overhangs in other markets. Quick note on pulp, looks like price
increases have slowed, and demand has stabilized – China buying less
and global inventories in balance.
In the next two years, China plans to add 4.6Million TPA of paper
capacity,
-2,600TPA being coated woodfree
-2,000TPA uncoated.
The 4 manufacturers of coated paper
- Jinhai Pulp & Paper (APP China) 900,000 tons
- -Shandong Chenming 800,000TPA
- -Shandong Huatai 500,000TPA
- -Oji Paper 400,000TPA
Uncoated
paper will be in balance with demand, because many smaller
manufacturers are being consolidated into the larger ones, and there is
growth enough in China to absorb the rest.
The coated market,
however, is all new capacity. The high growth Chinese market will
eventually absorb the excess by the end of 2014. In the meantime, they
will be forced to find external markets for excess capacity and/or
suffer low operating rates.
In 2009, Japan was the fastest
growing market for Chinese exports, increasing 400% or 145,000 tons vs.
last year. Japan’s paper producers have had difficulty competing on
price, however; recently they have become competitive, resulting in
October Chinese imports to Japan dropping 21% vs. Sept. The extent to
which Chinese coated exports will be affected by the US anti-dumping
investigation or fears over Dubai, will determine where the excess
tonnage is sold in the next 2 years.
Paper.com LLC operations, arguably the largest web based paper
marketing company, recently commissioned Moniker to secure buyers for
the site. Paper.com has over 40,000 paper items and thousands of
visitors each day; the site has nearly 2000 affiliate marketers and a
category 'killer' URL address is now for sale. Contact admin@paper.com
Nielsen Business Media has agreed
to sell eight of its media brands, including a number of its trade
magazines, to e5 Global Media, a new company formed by Pluribus Capital
Management and Guggenheim Partners.
The
sale agreement includes The Hollywood Reporter, Billboard, Adweek,
Brandweek, Mediaweek and Back Stage magazines, as well as Nielsen’s
Clio Awards and Film Journal International. Also being sold is the Film
Expo Business, which includes the ShoWest, ShowEast, Cinema Expo
International and CineAsia trade shows.
Financial terms of the deal were not disclosed, although it was rumored
to be priced at approximately $70 million
This week, beyond the Paperlinx machine shut downs just reported, two
more companies officially announced downtime. Note, most paper
producers are constantly curtailing manufacturing due to poor backlogs
- just not formally announcing it.
-Sappi Fine Paper to close Kangas Mill in Finland by 1Q 2010,.
-Nippon Paper Mill Down for 2 Weeks in Port Angeles, WA, this is the
third shutdown this year.
St.
Mary’s Paper in Sault Ste. Marie, Ontario will idle paper machines #3
and #4 during the 1Q2010. PM #5 will remain operational. Management
sited poor demand as the reason for this market related downtime.
The
mill produces 240,000TPA of SCA premium, SCA and SCB paper grades under
the trade names Sequence, Sequel and Synpress
Australia's PaperlinX has decided to close its Wesley Vale pulp and
paper mill and one of the two paper machines at its Burnie mill and
therefore reduce production at Tasmanian paper manufacturing
operations, The closures mark Paperlinx's exit from paper
manufacturing. Upon completion of this exit, PaperlinX said that it
will be solely a distribution company, distributing paper, signs,
display and graphics materials, and industrial packaging.
The
Wesley Vale Mill produces 40,000 TPA of pulp and 145,000TPA of coated
and uncoated papers for publishing, business forms and printing
The Burnie Mill has a capacity of 140,000TPA of uncoated business
papers.
Although transportation companies, many of which ship paper products,
experienced a challenging 2009, the forecast appears to favor the
truckers; allowing them to charge more for full loads. Unfortunately,
for the truckers, the less-than-truckload market looks like it will
remain a buyers' market for the short term. Most clients have limited
inventory and are requesting trucks to replenish stock to their floor.
Transportation, both inbound and outbound, are important cost
components when quoting a delivered price for paper.
As Coy Paper reported
in past, Time, Conde Nast, Hearst, Meredith and News Corp. will create
an industry standard platform for magazines, newspapers, etc… for full
color, touch-screen digital format that is attractive and interactive
for the the Internet, smart phones and e-readers.
These publishers
collectively represent nearly 145Million consumers. This will be a
subscription fee based initiative for full access and the objective is
to establish a revenue stream from advertisers.
The USA largest pulp, forest, and
paper companies posted earnings of $1.2Billion in the third quarter of
2009, versus $733Million in, 2008 for increase of $500Million. All but
two companies posted positive or improved earnings. Note, this
improvement was primarily a result of an estimated $1.1Billion of tax
credits for the use of black liquor as a bio fuel to generate energy.
As of today, the newsprint producers AbitibiBowater, White Birch,
Kruger, and Tembec have all announced price increases for the coming
months.
These
major producers have announced a $25/mton price for both January and
for February. Meanwhile Norpac announced a single $50/mton for January
and Catalyst Paper also announced a $50/mton price hike for February.
Although demand remains low, with USA Dailies suffering a decline of
over 23.5% in October, the paper supply has been reduced. Given the
equipment closures for the last few years, most buyers are forecasting
that these increases will be paid. Coy
Paper forecasts that additional newsprint price increases will be
announced during 2010.
As Coy Paper has previously reported,
all the major containerboard
producers have announced a $50/ton price hike in the East and $70/ton
in the West. This is a difficult increase for most converters to
absorb, given the poor economy and lack of orders for packaging. This
recent price movement is a result of large supply reductions. Coy Paper has reported on closures such
as International Paper and West Fraser shuttering 1.8Million
tons, a better demand for exports, and the expiration of black liquor
credits - all placing pressure on mills for this increase.
A recent report outlined the black liquor credit could have assisted
mills
cost by as much as $180/ton.
Eleven publicly traded Canadian companies reported combined third
quarter loss of negative C$487 million. This was slightly better than
second quarter of 2009 at negative $535.8 million and the first quarter
of negative C$642.6 million. AbitibiBowater’s loss of –C$411.4 million
contributed the most to the Canadian industry’s lack of profit. Only
three companies were profitable in 3Q; Domtar C$62.5 million; Cascades
C$35 million; and, Canfor Pulp C$11.4 million. All companies declined
in sales, generating combined C$6.2 billion, down over 20% versus 2008
but up 1% vs. 2Q. AbitibiBowater (-34%), Catalyst Paper (-48%), Tembec
(-28%) and Fraser Papers (-24%) had the worst sales declines in 3Q vs.
2008.
Sometime in early 2010, Hearst
plans to start a digital e-reading service called Skiff, formerly known
as FirstPaper. Skiff will sell digital versions of newspapers and
magazines on electronic readers and other devices that have better
graphics and look more like the print magazine, than Amazon’s Kindle.
Hearst would be the first publisher with its own end-to-end digital
publishing system including reading hardware.
Fraser Papers is reviewing the
option of buying its core specialty paper business and renaming the new
entity to Newco This will allow the company to exit creditor
protection. The plan is to sell the assets of the core business in
Edmundston, NB, Madawaska, ME and two New Brunswick lumber mills to the
new entity, Newco. Than, the new company would dispose of remaining
assets, owned by Fraser, including Gorham Paper Mill in NH, two lumber
mills in Maine, and Thurso pulp mill in Quebec.
Recycled fiber costs continue to increase and prices for old corrugated
containers (OCC) have recently risen over $10/ton.
The continuous higher fiber costs could put pressure on many mills with a
concentration of recycled grades.
Smurfit-Stone announced a price
increase which mirrors the new price levels made by International
Paper, Georgia-Pacific and Temple-Inland which Coy Paper reported on earlier. These
four producers represent nearly 75% of the domestic containerboard
market.
Time Magazine’s Sports Illustrated publication is talking about
transitioning the print magazine to a digital magazine-friendly
e-reader.
Time
Inc. has been working with Web site design firm Wonderfactory for
Sports Illustrated and several of their other publications.
Time is
also working on an application that would translate all of Time Inc.’s
magazines to the iPhone. A pay model for the tablet versions have not
been determined.
The American Forest & Paper
Association (AF&PA) announced that ArborGen, Grays Harbor Paper,
Marcal Paper Products, and Thilmany Papers are the newest members of
the Association. The forest products industry employs approximately 1
million workers and generates 6 percent of the total U.S. manufacturing
GDP.