Tuesday, June 26, 2007

Tembec shuts Louisiana paper mill, 540 jobs cut

Tembec shuts Louisiana paper mill, 540 jobs cut


CALGARY, Alberta, June 1 (Reuters) - Tembec Inc. (TBC.TO: Quote, Profile, Research) said on Friday it will shut its coated-paper mill in St. Francisville, Louisiana, at the end of July, cutting 540 jobs.

The Canadian paper maker said high costs and inconsistent production at the mill, and what it called "challenging market conditions in terms of both price and demand," provoked the closure.

The shutdown is the latest of a series of facility closures by Tembec over the past year. The company has been cutting capacity and looking to boost margins at its operations.

In a statement, Tembec chief executive James Lopez said the company had unsuccessfully attempted to boost the profitability of its only coated-paper mill last year by lowering costs and changing its product mix.

"Despite these changes this facility continues to be hampered by high energy costs, low machine productivity and difficult market conditions," the statement said.

Tembec said it is reviewing alternatives for the St. Francisville operation but offered no other details.

The mill has a capacity of 325,000 tons of coated and specialty papers used in catalogues, magazines and for cover stock.

Tembec shares were unchanged at C$1.18 on Friday on the Toronto Stock Exchange. The stock has dropped 22 percent over the past 12 months.

($1=$1.06 Canadian)

((Reporting by Scott Haggett, editing by Peter Galloway; scott.haggett@reuters.com; Reuters Messaging: scott.haggett.reuters.com@reuters.net; +1 403 531-1622)) Keywords: TEMBEC/CLOSURE

(C) Reuters 2007. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nN01364932

Thursday, June 21, 2007

Domtar paper machine to halt again

Domtar paper machine to halt again
By Diana Graettinger
Wednesday, June 20, 2007 - Bangor Daily News


BAILEYVILLE — For the third time this year, the Domtar Inc. pulp and paper mill, Washington County’s largest employer, announced Tuesday that it is shutting down its paper machine.

The move will idle about 90 employees indefinitely. The mill, which dates to 1906, has about 500 workers.

The company blamed the latest shutdown on poor market conditions.

"We will run through the 24th [of June], and we will conclude on the 25th," Domtar spokesman Scott Beal said Tuesday.

The cut-size operation, which cuts large rolls of paper into 8½-by-11-inch sheets, went down around June 4.

So far there is no announced restart date for the paper machine, but Beal cautioned that the company wasn’t saying there would be no return to production.

In previous shutdowns, some workers have been kept on board to do maintenance. But not this time.

"We will be working hard to minimize our expenses during this period when we have one of our production machines down," Beal said.

The company will be asking employees to take vacation time if possible.

In May, the same 90 employees returned to work after being out of work for about a month. The cut-size machine was switched back on the day after Memorial Day after having been turned off April 5.

The first time the paper machine was shut down was in March. And just last November the company announced it was cutting back on production for two months because of the same market-related conditions. Production resumed in January.

The shutdown is not restricted to Domtar.

"I have read some headlines that some of our competitors are taking downtime," Beal said. "We also are seeing some of our own sister mills within Domtar. It isn’t just a localized problem in Down East Maine. I know that doesn’t do a lot to put food on the table — we understand that — but this issue is bigger than just Domtar."

Town Manager Scott Harriman said Tuesday he was sorry to hear about the latest shutdown.

"We’re disappointed to hear the news that Domtar is going down for an indefinite period, and we hope that they will be able to get back up and running in a very short time frame," he said.

Harriman said shutdowns were difficult. "The up-and-down nature of these shutdowns [is] very tough on local people," he added.

Although the paper machine is down, the production of pulp — the raw material that Domtar ships worldwide and that is used in the papermaking process — will continue.

George "Bud" Finch, chairman of the Eastport Port Authority, said Tuesday it has been a good year for shipping pulp out of the port at Estes Head. As of the end of May, the port had shipped out more than 145,000 metric tons of pulp. The port expects to ship upward of 360,000 metric tons by the end of the year — a record amount, he said.

"While we recognize that the downturn in the paper industry is certainly a significant blow to the economy of Washington County, we have great hope that the global market for Domtar pulp will remain strong," Finch said.

Domtar, based in Montreal, is the third-largest producer of uncoated, free-sheet paper in North America. It is also a leading manufacturer of business papers, commercial printing and publication papers, and technical and specialty papers.

Saturday, June 16, 2007

Publisher of Men’s Magazines Is Sold to Private Equity Fund

Publisher of Men’s Magazines Is Sold to Private Equity Fund

By RICHARD PÉREZ-PEÑA
Published: June 16, 2007
http://www.nytimes.com/2007/06/16/business/media/16mag.html?_r=1&oref=slogin

Dennis Publishing, the magazine company behind three of the most successful publications aimed at young men in the United States — Maxim, Stuff and Blender — was acquired for an undisclosed price by the private equity fund, Quadrangle Capital Partners II, Quadrangle said yesterday.

Kent Brownridge, an industry veteran, is a junior partner in the purchase and will be chief executive of the magazine group. Mr. Brownridge, 66, spent 31 years at Wenner Media — publisher of Rolling Stone, US Weekly and Men’s Journal — most recently as senior vice president and general manager, before leaving Wenner in 2005.

Dennis Publishing is the American arm of Dennis Publishing Ltd., a British company owned by Felix Dennis. It will retain one of its American magazines, The Week.

A spokesman for Quadrangle said the group would be renamed when the sale is completed, which is expected to be in the third quarter. Quadrangle was represented in the deal by Davis Polk & Wardwell. Dennis was advised by Allen & Company and Jones Day.

Maxim was a pioneer among the “lad magazines,” the upscale-but-raunchy publications, including Stuff and FHM, for young men. Blender, a music magazine, also appeals mostly to men under 35, a favorite target of advertisers.

Blender, Stuff and Maxim, all monthlies, have a combined paid circulation of 4.5 million in the United States, and together they average more than 400 ad pages each issue.

The deal includes the magazines’ Web sites, which attracted more than four million unique visitors during April, and other related ventures including the Maxim satellite radio channel on Sirius and Maxim-themed resorts and restaurants.

Quadrangle is a major investor in a number of media companies, including Cablevision Systems and Metro-Goldwyn-Mayer Studios. The company is led by Steven Rattner, the former deputy chairman of Lazard.

By RICHARD PÉREZ-PEÑA
Published: June 16, 2007\


Dennis Publishing, the magazine company behind three of the most successful publications aimed at young men in the United States — Maxim, Stuff and Blender — was acquired for an undisclosed price by the private equity fund, Quadrangle Capital Partners II, Quadrangle said yesterday.

Kent Brownridge, an industry veteran, is a junior partner in the purchase and will be chief executive of the magazine group. Mr. Brownridge, 66, spent 31 years at Wenner Media — publisher of Rolling Stone, US Weekly and Men’s Journal — most recently as senior vice president and general manager, before leaving Wenner in 2005.

Dennis Publishing is the American arm of Dennis Publishing Ltd., a British company owned by Felix Dennis. It will retain one of its American magazines, The Week.

A spokesman for Quadrangle said the group would be renamed when the sale is completed, which is expected to be in the third quarter. Quadrangle was represented in the deal by Davis Polk & Wardwell. Dennis was advised by Allen & Company and Jones Day.

Maxim was a pioneer among the “lad magazines,” the upscale-but-raunchy publications, including Stuff and FHM, for young men. Blender, a music magazine, also appeals mostly to men under 35, a favorite target of advertisers.

Blender, Stuff and Maxim, all monthlies, have a combined paid circulation of 4.5 million in the United States, and together they average more than 400 ad pages each issue.

The deal includes the magazines’ Web sites, which attracted more than four million unique visitors during April, and other related ventures including the Maxim satellite radio channel on Sirius and Maxim-themed resorts and restaurants.

Quadrangle is a major investor in a number of media companies, including Cablevision Systems and Metro-Goldwyn-Mayer Studios. The company is led by Steven Rattner, the former deputy chairman of Lazard.

Friday, June 15, 2007

N.Skog in talks to restructure magazine paper

N.Skog in talks to restructure magazine paper
By Aasa Christine Stoltz
REUTERS

7:07 a.m. June 15, 2007

OSLO – Norwegian papermaker Norske Skog is in talks with competitors that may lead to a merger in the European magazine paper industry, the company's chief executive told Reuters in an interview on Friday.
Norske Skog, the world's biggest producer of newsprint, may see its smaller magazine paper operations grow or shrink as a result, Chief Executive Christian Rynning-Toennesen said.

“Yes, we are in talks with some companies,” he said, though declining to reveal which firms or any further details.

Rynning-Toennesen said prices of magazine paper in Europe would stay low in the second quarter but that some signs of improvement were in view.

“Some capacity is being closed down, leading to a slightly tighter market in the second half of this year than the first.”

Also the currently weak Chinese market for newsprint may get a demand boost from the 2008 Beijing Olympics, Rynning-Toennesen said. The company has two paper mills in China.

“I think it will improve in a couple of years – minimum one year, maximum two years,” he said. He added that the Chinese market looked marginally better now than it did six months ago.

The Asian market is where Norske Skog sees the strongest growth in demand, but overcapacity has kept prices low. New Chinese capacity will enter the market this year and next, but there have been no new mills scheduled to open after that.

Rynning-Toennesen said efforts to overcome the excess of capacity were helping improve China's market balance. “The government is pushing for shutdowns of old plants that are highly polluting.”

CHOPPING COSTS

Norske Skog's aim to knock 3 billion Norwegian crowns ($492.8 million) off its cost base in 2006-2008 is going as planned, and the effort may be expanded further, Rynning-Toennesen said.

“We're working to see if there are other projects and measures we could launch on top of what we've already decided on,” he said.

The Norske Skog CEO added that current savings efforts are more than offsetting the general rise in raw material costs. “We think all our cost increases will be more than counteracted by our improvement programme.”

But he was uncertain how the market would develop and declined to make any specific results forecasts.

Rynning-Toennesen repeated earlier statements that Norske Skog aimed to achieve about half of its remaining cost-cutting plans of 2.6 billion crowns in 2007 after reaching 400 million in annual improvements in 2006.

But he acknowledged that cost improvements could possibly be swallowed by a demanding market.

“If prices should continue to decline in the United States, our improvement could possibly be eaten up by falling prices. If on the other hand, the American market stabilises and increases, that will not happen,” he said.

“This is going in the right direction, though I would prefer it were moving faster,” Rynning-Toennesen said.

Thursday, June 14, 2007

UPM's CFO says no plans to close any more paper mills

UPM's CFO says no plans to close any more paper mills
Wed Jun 13, 2007 3:54PM EDT

NEW YORK, June 13 (Reuters) - UPM-Kymmene Oyj (UPM1V.HE: Quote, Profile, Research) (UPM.N: Quote, Profile, Research), the world's largest maker of magazine paper, has no plans to close or reduce production at any of its remaining paper mills, Jyrki Salo, the company's chief financial officer, said Wednesday.

Earlier this month, the Helsinki, Finland-based paper manufacturer decided to shut its paper mill at Miramichi, Canada, for up to 12 months, due to a global overcapacity in magazine paper and weak prices.

"If you look at the assets that we have, we have very modern, very high capacity assets ... so now we will be able to generate margins that are well above the industry average," Salo said in an interview.

In March of last year, UPM-Kymmene announced that it planned to close and restructure operations at a number of its facilities in a move aimed at cutting costs, reducing supply and improving profitability.

The company's European and North American rivals like Stora Enso Oyj (STERV.HE: Quote, Profile, Research), M-Real (MRLBV.HE: Quote, Profile, Research) and Neenah Paper Inc. (NP.N: Quote, Profile, Research) have all been undergoing similar restructurings due to market oversupply and weak selling prices.

((Reporting by Euan Rocha; euan.rocha@reuters.com@reuters.net; 1 646 223 6026, editing by J.S. Benkoe)) Keywords: UPMKYMMENE CLOSURES/

Loggers, sawmill workers on strike alert

Loggers, sawmill workers on strike alert
Coast's $2-billion industry could be behind picket lines by next week
Gordon Hamilton, Vancouver Sun

Published: Wednesday, June 13, 2007
Eight thousand coastal loggers and sawmill workers were told Tuesday to get ready for a strike, after talks broke down Monday between the coast's largest employer group and the United Steelworkers.

"Crews in the coastal forest industry should prepare for potential strike action," the United Steelworkers said in a bargaining bulletin sent out Tuesday morning after Forest Industrial Relations, which represents 31 companies, walked away from the negotiating table.

The union is also negotiating with three major companies -- Interfor, Island Timberlands and Timberwest Forest -- separately. Those results are mixed.

The coast master agreement, which affects 8,000 workers, expires at midnight Thursday. If all sets of talks break down, 72-hour strike notice could be delivered Friday starting the count-down to a strike next week, putting the $2-billion sawmilling and logging industry behind picket lines.

A strike would also begin a 30-day countdown for the coast's pulp and paper industry, which has built up a one-month supply of wood chips in anticipation of logging and sawmilling operations going down.

"I would characterize the probability of a strike as being very high," Rick Jeffery, president of the Coast Forest Products Association, said Tuesday. "There are significant portions of the Steelworkers demands that will take us back to the 1980s."

Kevin Mason, analyst with Equity Research Associates, said the logging and sawmilling sector has been preparing for a strike but that the coast's seven pulp and paper producers are vulnerable, even though theirs is a totally separate industry whose workers are represented by a different union.

"For the the pulp and paper industry, which is relying on wood chips, this is a huge thing," Mason said.

Mason said if the union calls a strike, it could be a long, bitter one.

"Both sides seem quite entrenched and quite far apart."

The industry and labour have gone through significant transformations since 2003, when a three-week-long strike was only resolved after both sides agreed to an arbitrated settlement. That settlement, imposed in 2004 by mediator Don Monroe, sowed the seeds for further conflict as it was viewed by workers as being pro-industry.

Since then, industry has used the 2004 agreement to contract-out logging operations and make changes in worker shifts that have not sat well with employees. Further, in 2005, the old IWA was merged into the United Steelworkers, a larger, more powerful union that observers say is ready to flex its muscles on the coast.

Steve Hunt, western regional director for the Steelworkers, said the union is not looking for a strike but that employers are seeking even further concessions than contained in the Monroe agreement.

"The last thing we want to do is strike. That's the easiest thing to do," Hunt said. "We are trying to do some repair work from the last collective agreement that was imposed and that's a tough thing for workers to see their way through.

"Many benefits that these guys have enjoyed for a long time were taken away. The issue here is: How do we restore some of those benefits. We know we can't get them all back, but that's where we are trying to land."


Hunt said FIR walked out of negotiations Monday night. One other set of negotiations -- Island Timberlands -- is going well, he said.

The union is still negotiating with Interfor as well but no talks are taking place at TimberWest, where the union and company are involved in a labour relations board dispute over the number of workers actually employed by TimberWest.

Hunt said a significant change since the 2004 arbitrated contract is that the Steelworkers is a stronger union than the old IWA, with deeper pockets to sustain workers through a long strike.

Forest Industrial Relations spokesman Ron Shewchuk characterized the break-down in talks as a time-out, saying the employer bargaining arm is prepared to return to the table if the union is prepared to move on company demands.

"I don't think by any means that all hope is lost," he said.

The main issues separating the two sides are:

- Changes in shifting that give employers the right to set 10-hour, four-day work weeks, run operations on weekends and change shifts with little notice.

- Contracting out, always a contentious issue, which has yet to even be tabled at the FIR talks.

- A two-year agreement sought by the Steelworkers to align the expiry of the coastal contract with the contracts covering Interior workers, which expire in 2009. The industry opposes that.

Shewchuk said companies are prepared to make some changes in the shifting provisions but not give up what was gained in the Monroe agreement as it makes companies more cost-effective.

"The Monroe arbitrated settlement was directly responding to the realities of an industry that needs to improve its competitiveness. We were not in good shape. And those conditions have only worsened since then. The Canadian dollar has risen further and the housing market in the U.S. has declined. Now we have a surcharge on lumber going out of the country.

"We have made some proposals but we really don't see any movement on the union's part. We'd be willing to talk further if there was an opportunity for the union to move."

Hunt responded: "FIR should go and dream somewhere else. They are the ones who walked away from the table."

© The Vancouver Sun 2007

Thursday, June 07, 2007

BoSacks Speaks Out: The Price of Paper is on the Rise

BoSacks Speaks Out: With all the talk and emphasis on the digital future of information distribution, it's a sobering thought to remember that most of our information distribution business models still revolve around dead trees. I say sobering because the price is on the rise yet again. Did you put these increases in your budget?



I have received the following information from several sources and felt it prudent to send it out to my entire list rather then just my Paper and Pulp list. I believe that editors, marketers, publishers and all my other readers should be equally aware of the dynamics of our industry. Paper is just one of the many factors that constitute the entire puzzle of publishing, but ask your production people how much of the manufacturing budget paper takes up? I believe that you will find that it takes up more of your budget than you thought possible.




"The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it."

Adam Smith (Scottish philosopher and economist, 1723-1790)



SAN FRANCISCO, June 7, 2007 (RISI) - At least three more North American coated paper suppliers have told customers to expect price increases on coated freesheet (CFS) shipments next month, contacts said. Sources said Sappi, Stora Enso and West Linn were among companies hiking prices to remain competitive with NewPage, which told customers earlier this week that it would increase prices $60/ton ($3/cwt) on CFS sheets and rolls effective June 7. Additionally, sources said Stora Enso told customers the price increase would apply to orders of coated mechanical paper as well as to CFS shipments.





From Sappi:

Effective for new orders with a confirmed delivery date on or after June 7, 2007,

Sappi Fine Paper North America is increasing prices US $4.00 (CAN $4.25) per

cwt on the following sheet products:



1. HannoArt sheets (all basis weights and finishes)

2. Magno sheets (all basis weights and finishes)

3. Private label sheet and sheeter roll programs





Effective for new orders entered on or after June 7, 2007, with a confirmed

delivery date of July 8, 2007, or later, Sappi Fine Paper North America is

increasing prices US$3.00 (CAN $3.25) per cwt on the following web products:



1. Aero web (all basis weights and finishes)

2. Opus web (all basis weights and finishes)

3. Somerset web (all basis weights and finishes)

4. Flo web (all basis weights and finishes)



From NewPage

SAN FRANCISCO, June 6, 2007 (RISI) - US coated paper supplier NewPage told its customers today that it would hike the price of various grades of coated freesheet sheets and rolls by $60/ton next month.



The increase is effective June 7 on orders with a confirmed delivery date of July 2, or July 16 depending on the product. In a letter to customers Newpage cited rapidly increasing chemical, energy and transportation costs and the need to achieve sustainable earnings levels.



From StoraEnso:

Please be advised that Stora Enso will increase transaction price 7% on the following

coated and uncoated web products.Effective with orders placed June 15 and all shipments July 1, this increase applies to:



PolarisPress (all versions)

SolarisPress

StellaPress

TerraPress

CapriPress (all versions)

ConsoPress (all versions)

MagniPress (all versions)

SuperiorPress

ExoPress

Lux Cream

Lux

Classic

Effective with orders placed June 15 and all shipments July 13, this increase applies to:



Arbor Web Plus

Arbor Web

Productolith

LumiArt

Orion

Excellence

MediaSet

NovaPress

All Private Label products

The 7% increase applies to all gloss finish products. For all other finishes, recycle fiber

content and covers, apply the appropriate differentials from the new gloss price.


From West Linn:

This letter is to advise you that West Linn Paper Company will be increasing prices on all Sonoma®, Capistrano®, Nature Web®, Nature Plus® and any other related private label products by $3.00 per cwt (US). The price increase will be effective on orders placed as of June 7, 2007, and on any existing orders shipping on or after July 2, 2007, regardless of order date.

Metso Reveals Order For Coated Paper Machine Worth EUR 100

Metso Reveals Order For Coated Paper Machine Worth EUR 100 Mln From Henan Puyang Longfeng Paper In China [MX]

6/6/2007 5:49:31 AM Helsinki, Finland - based diversified machinery company Metso Corp. (MX) announced on Wednesday that the company received an order valued EUR 100 million for supply of lightweight-coated papermaking line to Henan Puyang Longfeng Paper Co. Ltd. in Puyang in China.

The company said that the paper machine would have a capacity close to 1,000 tons of printing and writing paper grades daily. The machine will have a wire width of 7.9 meter and a design speed of 1,800 m/min. Metso expects to deliver from headbox to reel with related stock preparation and air systems. In addition, it would provide wet end chemicals and coating color preparation systems.

Puyang expects to produce 300,000 tons of poplar based chemi-mechanical pulp and 500,000 tons of high quality printing paper.

In a separate announcement, Metso said it would supply an extensive production line rebuild for JSC Segezha Pulp and Paper mill in Russia and a wet-end rebuild in Gruvon mill in Sweden. The total value of the order for JSC Segezha is around EUR 11 million. The company expects to start rebuilt production line in early summer in 2008. The supply for Billeurd will start in spring 2008. The value of the order is not disclosed on request from the client.

MX finished Tuesday's regular trading session at $56.77,down $0.64 on a volume of 19K shares.

Dollar hammers forestry industry

Dollar hammers forestry industry
Each cent increase is a $150M hit

The Gazette


Wednesday, June 06, 2007


The rising value of the Canadian dollar is cutting deeply into the lifeline of Quebec forestry companies, according to the industry's council, which estimates that every penny increase takes out at least $150 million a year in industry revenue.

The currency crunch comes amid dismal market conditions and growing concerns that another round of mill closings are coming, Guy Chevrette, president of the Quebec Forest Industry Council, said yesterday.

The average Quebec sawmill has lost an estimated $1.5 million since the beginning of the year, Chevrette said in a statement. "For a pulp and paper plant of 300,000 tonnes, that (loss) is close to $20 million."

Late Friday, Tembec Inc. announced that it would shutter its coated-paper mill in St. Francisville, La., for an indefinite period

The shutdown, due July 31, will affect about 540 employees.

The company, which cited "challenging market conditions in terms of both price and demand," noted that attempts had been made to improve the overall financial performance of the mill.

Yesterday, the president of Canada's largest forestry union took a swipe at forestry companies at a labour convention in New Brunswick.

"Employers, especially in the forestry sector, have deliberately taken the money they have earned from our publicly owned natural resources and invested them elsewhere in the world," Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada, told convention delegates.

He was responding to news that the UPM Kymmene paper and ground wood mills in Miramichi, N.B., will shut down for nine to 12 months, and that four more mills in Quebec are facing temporary shutdown.

"These communities are a microcosm of what is going on in more than four dozen communities from coast to coast to coast," he said, noting that in the past three years, more than 12,000 pulp, paper and sawmill workers have been put on the street across Canada.

"Forest companies are investing those good Canadian dollars in places where workers can most easily be exploited. And then they have the nerve to say Canadian workers can't compete."

lmoore@thegazette.canwest.com

UPM to Shut Miramichi Paper Mill for One Year

UPM to Shut Miramichi Paper Mill for One Year

June 5, 2007 - UPM said that it will close its Miramichi mill operations in August for up to one year. The paper mill is scheduled to close late in August for 9 to 12 months. The nearby groundwood mill will also shut down.

About 600 employees will be impacted by the closure, UPM said.

The Miramichi mill, located in New Brunswick, Canada, has two machines, producing lightweight coated paper, with an annual capacity of 450,000 tonnes.

Despite best efforts, Miramichi has not been able to turn its exports to the U.S. profitable. The mill is suffering from unprecedented strength of the Canadian dollar. Also, market prices for the coated magazine paper have been decreasing in North America. Demand for magazine grades in North America has been stable, but globally, there continues to be overcapacity in magazine paper, suppressing the sales price, UPM explained.

In Europe, UPM has permanently ceased production of 530,000 tonnes of coated magazine paper during 2006-2007 to reduce the structural overcapacity and improve profitability of the business. The Voikkaa mill in Finland was permanently closed and a production line in Jämsänkoski, Finland, was converted to another business area. UPM also closed 150,000 tonnes of coated fine paper capacity at its Kymi mill, Finland last year.

"UPM's target is to improve the long-term profitability of the coated paper business. With today's decision, UPM leaves all options open for Miramichi. We will continue to explore solutions for Miramichi during the shutdown but realize that there needs to be material changes in the business environment for the mill to start up again,” said Jyrki Ovaska, president of UPM's Magazine Paper Division.

"The Miramichi management and employees have succeeded in steadily improving the efficiency of the mill," Ovaska said. "Unfortunately, their efforts could not overcome the challenges in the business environment."

Ovaska said UPM's North American magazine paper customers will continue to be served by the company's other coated groundwood paper mills in North America and Europe during the Miramichi shutdown.

A decision on restarting Miramichi will be made in 2008, based on market conditions, the company added.

SOURCE: UPM

Monday, June 04, 2007

John Faraci has whacked billions from International Paper's U.S. operations

Paper Cuts
Evan Hessel 06.18.07


John Faraci has whacked billions from International Paper's U.S. operations. Can he succeed abroad?

International Paper chief executive John V. Faraci kicked off the board meeting in early May by loading his nine directors into the company's corporate jet. After three flights and 11 hours in the air, the weary group set foot in Svetogorsk, Russia (pop: 16,000), a gritty industrial burg of cement apartment towers on the Karelian Isthmus, near the border with Finland, surrounded by thick pine forest.

The next day Faraci took his companions on tour of IP's 1,600-acre pulp-and- paper mill. He showed off the massive new machine that bleaches wood pulp in a slurry of caustic chemicals. He boasted about slashing energy consumption at its natural gas and biomass power plant. And he walked the group along a recently renovated football-field-length paper machine that pumps out 40 tons of white paper an hour. Thanks to cheaper labor and abundant pulp supplies, paper costs on average 13% less to produce here than in the U.S.

Why drag these folks halfway across the world, instead of subjecting them to a snappy PowerPoint presentation? Faraci has a lot to prove--to the board, to long-suffering investors, to skeptics who see a dying industry ground up in the jaws of overcapacity and shrinking demand. Svetogorsk, he believes, represents one of a handful of new investments abroad--a $2 billion bet in Russia, China and Brazil on basically two commodities: white printing paper and heavy-paper packaging. That gamble could help the 109-year-old Memphis, Tenn. company become the most cost-efficient producer--or break it. The board of directors, Faraci figured, have to like Svetogorsk in order to sign off on the $1 billion or so he wants to spend in a 50-50 joint venture with Ilim Holding, Russia's largest pulp producer.

Paper is a lousy business. Any brief spurt of profitability is inevitably followed by a mad frenzy of plant additions, and then by another round of overcapacity and depressed prices. During the current depression, which stretches back over four years, the industry's return on capital has averaged 5% a year. Companies have faced stark choices: Abitibi-Consolidated and Bowater merged; Weyerhaeuser decided to chuck paper and focus on real estate and building materials; Temple-Inland, squeezed by Carl Icahn, carved itself into three companies.

Faraci has spent the last couple of years wielding a massive ax. He has shuttered four mills in North America, canning 25,000 employees, 22% of the total. That move and some cost-cutting are supposed to add $1.2 billion to the bottom line through 2008. Last year he engineered the largest U.S. land sale since the Louisiana Purchase, selling 6 million acres of forest in the South, Midwest and Northeast, raising $6.6 billion. IP is a smaller but more profitable operation since he took over: In 2006 it netted $635 million on $22 billion in sales, versus $382 million on revenue of $25.2 billion in 2003. Long-term debt is down from $13.5 billion to $6.5 billion. But the $39 stock has barely budged, despite ip's spending $3 billion over 2006 and 2007 to repurchase shares.

An IP lifer, Faraci joined the company as a financial analyst in 1974 after earning an M.B.A. from the University of Michigan. What he loved about the company was its vast acreage, which reminded him of his boyhood summers, spent going to camp, hiking and fishing in New Hampshire's White Mountains. For 15 years he cycled through jobs managing forests in Oregon, operating sawmills and running the company's construction materials subsidiary. He moved to New Zealand in 1995 to run papermaker Carter Holt Harvey, in which IP held a 51% stake. Four years later Faraci was recalled to headquarters as chief financial officer.

IP was at a critical point. In 1999 and 2000 Faraci helped John Dillon, then chief executive, buy Union Camp, Shorewood Packaging and Champion International for a total of $19 billion. The expansion couldn't have come at a worse time. Just as paper demand was lagging, IP was adding production capacity. The acquisitions piled on $5 billion in debt. "In hindsight," Faraci concedes, "we overpaid."

That became clear soon after Dillon stepped down. Faraci began exploring what new shape IP might take. One option: unloading its prized asset--its forests. Timberland appreciates 4% a year simply from tree growth: Relying on sustainable methods, IP could cut 4% of its standing timber each year to sell to its own paper and sawmills or to those of its competitors. "The forests had been our security blanket," Faraci says, adding with a dash of emotion, "The trees were the whole reason I got into this business."

In 2005 IP's forest resources division carved up the forest into 66,000 plots and conducted title searches for each one. Faraci signed deals in April 2006 selling 4.2 million acres of forest to Resource Management Services for $5 billion in cash and notes and another 900,000 acres in Louisiana, Texas and Arkansas for $1.1 billion to TimberStar, a unit of the REIT Istar Financial. Small timber outfits, individuals and environmentalists bought the remaining 562,000 acres for $520 million. (IP still owns 500,000 acres in the U.S.)

Faraci also sold his wood products division for $562 million. While a cyclical business, lumber can be hugely profitable during housing booms. Sales of 13 lumber mills to West Frasier Timber of Canada generated another $325 million; five plywood-and-lumber processors brought in another $240 million from Georgia-Pacific.

All told, IP swept up $11 billion. Faraci used $6.2 billion to pay down debt and $1 billion to fund pension obligations. Those two moves have freed up $500 million a year.

What's left? Paper packaging, the stuff of corrugated cardboard and cereal boxes, and so-called uncoated freesheet paper, used for office and business forms, envelopes, printing and so forth. These are not especially profitable businesses, with Ebit margins of, respectively, 9.7% and 7%. (By contrast forest products, most of them sold off, had margins as high as 36%.) So Faraci has to be hyperefficient. In the U.S. he's counting on various moves--layoffs, flexible labor contracts, heat-recovery devices to lower energy bills, new software for ordering and logistics--to lower costs. But he must also be in markets where people are clamoring for paper. That's why Faraci is betting on plants overseas.

In Latin America demand is growing at 3.6% a year, capacity at only 1%. Since 1960 IP has been in Brazil, where access to eucalyptus trees--which grow in 7-year cycles, compared with 26 years for southern U.S. pine--provide a cheap source of pulp. But in February Faraci shifted gears, swapping a pulp mill in the state of Mato Grosso do Sul for an integrated white paper mill in Luis San Antonio in the state of São Paolo. IP is already increasing capacity there, 130% by 2009, to 1 million tons of white paper a year, convinced that Brazil can soak up the additional output and thereby push up prices. Operations there now generate 3% of revenue, but 10% of net profits.

Faraci's biggest wager to date: Russia. If he persuades his board and the Russian Federal Antimonopoly Service to approve a pending deal, IP would spend $400 million to buy a 50% stake in two mills in Siberia and two in the west that together produce 2.5 million tons of pulp, as well as white paper and containerboard. In addition, over three years IP and its partner would invest $1.2 billion in new capital equipment, with the idea of increasing production by 40% and introducing new products. Faraci sees Siberia as a gateway to Asia, where the mills now export 45% of their pulp and where the market is expanding 7% a year.

Still, there's risk. Despite IP's goodwill efforts in Svetogorsk, where it has created jobs for unemployed paper workers and built an orphanage, the Kremlin could insist on tough terms--as it has for Western energy giants. As Credit Suisse analyst Mark W. Connelly says, it could be years before an investment in Ilim pays off.

China poses even greater potential obstacles. In March 2006 IP put up $140 million in a joint venture with Shandong Sun Paper, that nation's fifth-largest paper-and-packaging company. The deal includes two coated-paperboard machines producing packaging for toiletries and cigarettes; a third comes onstream later this year. This comes on top of investments in nine corrugated-box plants in China.

Faraci vows to lift IP Asian sales from an expected $250 million this year to $1.6 billion in 2009. But that assumes he will consummate an as yet uncompleted deal for a white paper plant (IP declines to name where it is). And that China's paper industry, backed by $24 billion from the State Development & Planning Commission, doesn't overbuild and overproduce. New Chinese mills already make and ship paper for less than any U.S. manufacturer, and they wouldn't hesitate to dump supplies within their own borders to keep the business chugging. "The Chinese care more about jobs than profits," concedes Michael Bruner, IP's manager at the Courtland, Ala. plant, who has toured Chinese paper mills.

Faraci acknowledges the coming fight. "I know we don't have this market staked out," he says. "We have very strong competitors pulling all the levers they can. You gotta run fast just to stay even."

By the Numbers
Paper Tiger
China is a fast-growing competitor.

$54 billion Asia's paper and forestry sales last year, vs. $127 billion for U.S.

42 Number of new Chinese mills to be built by 2010; the U.S. has closed 35 since 2005.

$547China's cost per ton of white paper produced, compared with $481 in the U.S.

Sources: RISI; PricewaterhouseCoopers; Center for Paper Business & Industry Studies at Georgia Tech.

Tembec to idle its coated paper mill located in St. Francisville, Louisiana

Tembec to idle its coated paper mill located in St. Francisville, Louisiana


Temiscaming, Quebec, June 1, 2007 – Tembec today announced that its coated paper mill located in St. Francisville, Louisiana will be indefinitely idled, with a target date for idling of July 31, 2007. It will affect approximately 540 employees.

The St. Francisville mill has a capacity of 325,000 short tons of coated and specialty papers, primarily used in catalogues, magazines and cover stock. Tembec acquired the facility in June 2001 by way of a Chapter 11 bankruptcy proceeding involving the mill’s former owner, Crown Paper Co.

A number of factors have combined to make this decision necessary, according to Dan Alexander, Executive Vice President and President, Paper Group. “The effect of challenging market conditions in terms of both price and demand, the inconsistent performance of the mill in terms of production, the increased cost of purchased energy, and the high manufacturing costs at this site have resulted in a situation that could not be sustained. While there has been progress during the past year, the overall financial performance of this site has been and continues to be unacceptable,” said Mr. Alexander.

The decision to idle St. Francisville is consistent with the recovery plan that was announced last year by Tembec President and CEO, James Lopez. Margin improvement at all manufacturing locations is central to this plan and the Company had indicated that, where no long-term solutions could be identified and implemented to achieve this goal, necessary action would be taken.

“Significant steps were taken in 2006 to lower the operating costs of this facility and upgrade the product mix. Despite these changes, this facility continues to be hampered by high energy costs, low machine productivity and difficult market conditions. The Company will continue to evaluate options to improve the profitability of this site and will take all available steps to ensure its customers will not experience supply interruptions,” said Mr. Lopez.

Tembec indicated that it is reviewing the full range of alternatives for this site. The Company would not speculate on the outcome of this review process.

“Decisions of this nature are never easy to make, and Tembec regrets the impact of today’s announcement on employees, their families and the St. Francisville community,” concluded Mr. Alexander.

Tembec is a large, diversified and integrated forest products company. With operations principally located in North America and in France, the Company employs approximately 9,000 people. Tembec’s common shares are listed on the Toronto Stock Exchange under the symbol TBC. Additional information on Tembec is available on its website at www.tembec.com

Catalyst Paper laying off 185 at Port Alberni operation

Catalyst Paper laying off 185 at Port Alberni operation
The company will eliminate another 130 jobs from head office staff
by Gordon Hamilton
Vancouver Sun
Published: Thursday, May 31, 2007

Catalyst Paper said Wednesday it is shutting down one of two paper machines at Port Alberni, laying off 185 people in the Vancouver Island community and eliminating another 130 jobs across the company.

Declining newsprint consumption in North America and the sky-high Canadian dollar forced the money-losing papermaker to make the sweeping restructuring moves, corporate relations vice-president Lyn Brown said Wednesday.

At the same time, Catalyst said it will be moving out of its downtown Vancouver headquarters for cheaper office space in Richmond. Many of the 130 support jobs will be lost in the head office move.


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Font: ****That's on top of 350 jobs phased out in a cost-cutting move announced only 10 weeks ago.

"These are not easy decisions to make and we recognize they affect people in a very personal way. But at the same time, these are tough times," Brown said, noting that every one cent change in the dollar has a $9 million impact on the company's bottom line.

Catalyst's operating costs are in Canadian dollars but the majority of Catalyst's business is conducted in export markets which pay in U.S. dollars.

Brown said over the last four years the company has achieved $400 million in performance improvements "only to see those gains erased" by higher energy costs and a higher Canadian dollar.

The loss of the Port Alberni paper machine is being viewed by many in the community as a betrayal by the company. Catalyst has lobbied for and received tax breaks from the city.

"We did our thing for them," Port Alberni Mayor Ken McRae said of the tax breaks. "We can't rely on them any more."

An official at the local Communications, Energy and Paperworkers Union blamed New York financial investor Third Avenue Management for the lay-offs. Third Avenue increased its stake in the company to 38 per cent last year and immediately launched a remake of the board of directors and senior management. Rick Hebert, second vice-president of CEP Local 686, said the layoffs will throw people's lives into turmoil and hurt the town's economy.

"But these private equity investors only care about shareholder profit," Hebert said.

When Hebert began working at the mill in 1977, it employed 1,500 people, he said. Once the paper machine shuts down -- Catalyst announced it is an indefinite curtailment starting Aug. 31 -- the remaining operation, a lightweight coated paper machine, will only employ 230 people.

Brown said the restructuring is more a matter of survival for the company.

"The reality is: A 93-cent Canadian dollar makes more acute some of the costs the Port Alberni mill faces," she said.

The Port Alberni machine makes directory paper, which is slightly high in value than newsprint. However, the Port Alberni machine has higher costs than Catalyst's other machines. It's production is to be shifted to the company's Crofton mill north of Victoria, replacing 134,000 tonnes of newsprint production at that plant.

Catalyst operates four pulp and paper mills in resource towns on Vancouver Island and at Powell River on the mainland. It also operates a recycled paper plant on the Lower Mainland.

ghamilton@png.canwest.com




© The Vancouver Sun 2007

Sunday, June 03, 2007

Shutdown feared at Catalyst Paper

Shutdown feared at Catalyst Paper
by Gordon Hamilton
Vancouver Sun
Published: Wednesday, May 30, 2007

Catalyst Paper has called a meeting today with union leaders from its four pulp and paper operations in what is widely believed to be an announcement that it intends to shut down capacity.

"I would say things are not looking too bright at Catalyst," said investment analyst Paul Quinn of Salman Partners. "It's really difficult right now for Canadian producers with the Canadian dollar where it is and fibre costs going up.

"I wouldn't rule out temporarily shutting down some capacity."


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Font: ****Catalyst has mills at Port Alberni, Powell River, Crofton and Campbell River. It could close one entire mill or several machines at a number of mills. The company lost $25 million in the first quarter of 2007.

Catalyst is the coastal region's prinicipal pulp and paper company, with 3,800 employees. Besides the four paper mills, it runs the province's only plant producing recycled paper.

The meeting with union leaders comes after Catalyst's board of directors met Tuesday in Vancouver. Representatives of the company's largest shareholder, Third Avenue Management of New York, were on hand for the meeting.

Catalyst is being squeezed by poor paper markets and because its operating costs are all in Canadian dollars. But the majority of Catalyst's business is conducted in export markets, so its transactions are for the most part completed in US dollars. As the Canadian dollar climbs versus the greenback, the company's revenue stream is less able to cover its operating costs.

The Canadian dollar closed above 93 cents US on Tuesday.

The last time Catalyst temporarily shut down capacity was in early 2005 when one paper line was closed at Port Alberni. That shutdown lasted for almost two years before the company declared it permanent.

Port Alberni Mayor Ken McRae was prepared for the worst Tuesday, saying he expects the company will announce it is closing further capacity there. Catalyst's Port Alberni mill produces lightweight coated paper and directory paper. Lightweight coated prices are weak and the directory machine has high operating costs.

"We have been hearing so many stories -- that the mill has been sold to someone else, that they are going to shut down another machine. You never know. The machines are old, eh?" said McRae.

"Whatever they do, they will do. And we will just move on."

ghamilton@png.canwest.com

© The Vancouver Sun 2007

Friday, June 01, 2007

Pulp mill builders want better guarantees of timber supply

Timber tariffs decrease investors' interest in Russian forest industry
Pulp mill builders want better guarantees of timber supply


Export tariffs imposed by Russia on raw timber are likely to make Finnish forest companies less willing to invest in Russia's forest industry.
The tariffs will cause practical problems for Russia if the "wrong" types of wood harvested during felling cannot be exported.

The export tariffs are to take effect from the beginning of July. Initially the fee will be EUR 10 per cubic metre, and it is to increase by degrees to EUR 50.
The idea behind the tariffs is to force Western companies who want to use Russian raw material to invest in production in Russia.
Finnish experts see the tactic as strange. Most countries who want to attract foreign investment use positive incentives, but Russia is resorting to the threat of punitive measures.

So far, Finns have invested fairly little in the Russian forest sector. A few sawmills, a plywood plant and a cardboard mill have been put up, but pulp and paper projects are still in the planning stages.
The most serious project is a pulp mill planned by Metsä-Botnia in the Vologda region.
Metsä-Botnia CEO Erkki Varis says that sudden administrative moves, such as the export tariffs imposed by Russia, are "always poison" for investors, as they create uncertainty.
The tariffs also pose concrete difficulties for pulp mills operating in Russia.
"No factory exists that would be able to use all of the tree species in a certain area. If a factory produces pulp from coniferous trees, the forest might yield three times as much leafy trees and unusable wood", Varis says.
"There is no use for them in Russia. If tariffs are imposed on them, what are we supposed to do. Burn them?"
Varis says that the Vologda pulp mill is a long-term project that might be implemented in the next decade. He notes that nobody knows what will be happening in Russia at that time.

The greatest risks in the pulp mill project involve the availability of raw material, Varis admits. A promise from the local governor that there will be enough wood is not good enough for an investor.
"We have to be certain that the mill will get 300 truckloads of raw material every day. We need to have enough long-term and permanent felling contracts in our back pockets."

Timo Uronen, head of the forest industry section of the Ernst & Young auditing service, says that the equipment in Russia's forest sector is old and in poor condition. "There is a need for EUR 10 billion in investments", he states.
In Uronen's opinion, Russia has many opportunities, but the risks are considerable. "They apply to wood acquisition and logistics."
"The timber tariffs and the behaviour linked with them will certainly not increase confidence. Hopefully the whole thing will go away, but it does have an impact on the willingness of companies to invest", Uronen says.

Russia has vast forest resources, but they are used inefficiently. Plans are for annual felling of 576 million cubic metres, but currently only 130 million cubic metres are harvested from Russia's forests.
Russia's production of pulp, paper, and cardboard is 10 million tonnes a year, whereas Finland produces 14 million tonnes.