Paper Outlook — Declaring War on Dumping
BY ALL indications, the paper manufacturing sector is doing everything within its means to ensure that capacity walks hand-in-hand with demand. Whether these measures will have an impact on what is largely perceived as a weak North American paper market through the front half of 2007 remains to be seen.
Some big names were on the move in the back half of 2006 on the coated freesheet side. International Paper sold its coated and super- calendered (SC) papers business to CMP Holdings, a subsidiary of Verso Paper Holdings, for roughly $1.4 billion. But perhaps the biggest news came from Weyerhaeuser, which combined its fine papers business with Domtar in a $3.3 billion megadeal. The deal created a “new Domtar,” which will likely have an impact on the supply side.
Out of Service
Capacity is being taken out of the equation, as well. NewPage recently announced that subsidiary Luke Paper, of Luke, MD, was permanently shutting down its No. 7 paper machine, leaving 130 jobless. Also, NewPage is idling its No. 11 machine in Rumford, ME, for three months in the first quarter of 2007, taking 25,000 tons of coated paper out of circulation.
One paper buyer for a magazine publisher, speaking on the condition that he not be identified, is not surprised with recent actions of paper manufacturers, given the stagnation in pricing. There has also been a domino effect with some neighboring grades.
“Mills have made a concerted effort to keep capacity in line with demand,” he says. “Another wild card is that newsprint consumption is declining rapidly. Publishers are also changing trim size to lower consumption. This usually has a ripple effect on all grades and causes downward pricing pressure, especially on coated and SC.”
With mill closures and the consolidation that has taken place in recent years, the buyer doesn’t anticipate much movement at all on the pricing end. “I don’t see any increases in the first half of 2007, and it’s too soon to tell about the second half,” he notes.