Prices dropping for all grades of paper

Prices dropping for all grades of paper
Posted by D. Eadward Tree
http://deadtreeedition.blogspot.com/2008/12/prices-dropping-for-all-grades-of-paper.html

Deflation has now officially hit the market for publication papers: Prices for everything from newsprint to coated freesheet have declined this month, several sources indicated in the past week.

December prices were down even in the formerly rock-steady market for high-grade supercalendered paper (SCA) paper, according to both Pulp & Paper Week and Deutsche Bank. Mark Wilde of Deutsche Bank put the December drop at $10 to $20 per ton and said SCA prices could continue declining if demand for lightweight coated (LWC) remains weak. Until recently, analysts were predicting that SCA prices would remain steady or even rise during 2009.

"Newsprint prices are slipping," Wilde wrote, with declining costs and the Canadian dollar making mills more willing to accept lower prices rather than shutting down. The Deutsche Bank analyst agreed with Pulp & Paper Week that newsprint dropped about $10 to $15 per metric ton in December, breaking a string of consecutive monthly price increases that had pushed newsprint prices up more than $200, or about 35%, since the summer of 2007.

FOEX reported a slight drop in U.S. newsprint prices last week, while Forestweb reported that newsprint prices are flat. But Forestweb's North American Publishing Papers Index decreased in December because of declining prices for coated papers.

Prices for LWC and other coated-groundwood products dropped $35 to $70 per ton in December and are "coming under increased pressure, wrote Wilde. "With consumption likely to remain weak and the US$ rising (increasing threat from imports), producers will remain at battle stations through 2009," he added. High customer inventories, decreasing catalog circulation, and a weak advertising market for magazines are all dragging down coated groundwood.

The CEO of Abitibi Bowater (aka AbitibiUnderwater) admitted to the Globe and Mail this week that his biggest fear was a collapse of demand in the first half of next year. Despite the bearish news on pricing, shares of the newsprint giant doubled in price during the week (to 52 cents, down from $20.47 at the beginning of the year). AbitibiBowater stock was boosted by news of an apparent sale of some hydroelectric assets, production cuts by competitors, and the company's statement that the current quarter will be more profitable than the previous quarter. All of that boosted hopes that the company will remain solvent despite having $1 billion in debt payments due during the coming year.

Stocks of such other publicly traded paper companies as Verso, Domtar, and Catalyst were generally flat for the week. Wall Street had already accepted that demand and prices will decline. The big question is whether producers will idle enough capacity to prevent paper markets from collapsing.

The New Hampshire working forest is in crisis

The New Hampshire working forest is in crisis
By TOM THOMSON
http://www.unionleader.com


I HAVE OWNED forestland since 1956. When I was 11, my father encouraged me and my two older brothers to purchase a woodlot in our home town of Orford. We did, and we still own it and manage it as a sustainable forest today. Since then, my wife, Sheila, and I have purchased 2,800 acres of forestland. We have a couple of logging operations going on nearly every year.

As one who has been active within the forest community, I believe there is a crisis in New Hampshire's working forest. When I talk about the working forest community, I am thinking about the forest landowners, tree farmers, maple producers, loggers, truckers, foresters, chip and saw mills, wood-to-energy plants and all the employees, as well as all those businesses that support our forest industry, such as the equipment manufacturers, sales and part suppliers, banks and fuel suppliers.

The state Department of Resources and Economic Development (DRED) shows annual revenue of $1.2 billion just in the forest products industry. This number more than doubles when you factor in the dollar impact our forests have on recreation, hunting and fishing, tourism and other positive benefits to our state. This is one of the many reasons New Hampshire was just ranked as the most livable state in America.

Let's review some facts: In 2006-07 the Fraser pulp mill in Berlin closed forever. Three months ago, the Wausau paper mill in Groveton closed, and a few weeks ago cutbacks were announced at the Fraser paper mill in Gorham. Hundreds of mill workers lost their jobs. But that was only the tip of the iceberg. The men and women working in the forest, supplying the nearly 1.3 million tons of wood fiber to these mills, have also taken a hit. Some try to hang on; others are gone. With fewer loggers working, there are fewer logs available, which has put an additional strain on our saw mills, and if that isn't enough, the so-called environmental groups are suing the U.S. Forest Service and have all but stopped logging in the White Mountain National Forest, which many of our mills count on.

We have lost important low-grade markets and now we are losing our infrastructure. What's happening is not unlike what happened to the New Hampshire shoe industry decades ago, except the collapse of our forest industry and its connection to the many forest benefits would have a much greater impact on our state's economy.

Everyone in the forest food chain is being squeezed to the point of no return. As a forest landowner, I checked my stumpage values of more than 25 years ago and found that I received almost twice as much for hardwood pulp at that time than I do today. Loggers and truckers, mills and anyone else using diesel fuel at $4.25 per gallon (and climbing almost daily) are being crushed by these huge fuel bills, along with higher insurance, labor and equipment costs, with likely no chance of passing on these costs. This, along with ever-increasing state rules and regulations and added or higher fees, is having a crushing impact on our business and owning forestland.

Many who have been in this business all their lives say they have never seen things this bad. Others say in the past you could just work longer hours and seven days a week to make ends meet; but that won't work this time around.

We know the wood fiber is there. Forest landowners are unwilling to give their wood away; all we need is to have markets that pay everyone in the forest food chain their fair share, and you will see plenty of wood available.

We all have been hit hard by the energy crisis, but this crisis brings great opportunities for our state and the forest community by using low-grade forest products (our natural renewable resource) in a sustainable manner to produce a significant percentage of our energy needs here in New Hampshire, provide thousands of jobs and keep our energy dollars here at home. I call on Gov. John Lynch and all other elected or appointed state officials to become fully engaged in this important issue. We have reached a crisis in New Hampshire's working forest. We need to act now or our timber industry -- New Hampshire's oldest, largest continuous industry -- will be gone.

Tom Thomson operates the Thomson Family Tree Farm in Orford.

Mergers changing face of forest industry

Mergers changing face of forest industry
A survey shows B.C. is at the forefront of a process that is creating regionalized businesses

Gordon Hamilton
Vancouver Sun
http://www.canada.com/vancouversun/news/business/story.html?id=aefd1255-7539-4247-bcce-106e3a43945b

Thursday, April 26, 2007


Mergers and acquisitions -- some of the largest of which involve Canadian companies -- are tearing down the vertically integrated global forest industry and rebuilding it as regionalized, specialty businesses, according to a new PricewaterhouseCoopers survey.

And British Columbia is at the forefront of this industry-wide transformation, where financial players -- such as New York's Third Avenue Management and B.C. billionaire Jim Pattison -- are influencing the new direction, said PwC partner Craig Campbell, who contributed to the report.

"Ownership has very much changed. It's not only visible in the name changes on the front gate, but also back in the share registers," Campbell said in an interview Wednesday.

The PwC survey, titled Branching Out, identifies Montreal-based Domtar Inc.'s $3.3-billion US consolidation with American giant Weyerhaeuser's fine paper business as the second-largest deal in the world last year, and suggests that Weyerhaeuser is not finished hiving off assets.

Weyerhaeuser operates three sawmills in the B.C. Interior. Its Kamloops pulp mill became part of the new Domtar. The report says Weyerhaeuser is North America's largest remaining vertically integrated player and is coming under mounting pressure to restructure its remaining assets.

"They will be looking at all their assets. Canada and B.C. would be front and centre in terms of what they are evaluating," Campbell said.

West Fraser Timber Co.'s $325-million US purchase of International Paper's southern U.S. sawmills, and Cascade's $476-million acquisition from Domtar of a 50-per-cent stake in Norampac, are in the top 10 North American deals of 2006.

The largest deal was International Paper's $5-billion US sale last December of 1.6 million hectares of southern U.S. forestlands to institutional timberland investors. International Paper has led the transformation away from large, vertically integrated companies, and today is a product specialist, focused on packaging and uncoated fine papers. It has a global reach, branching out into China, Brazil and Russia.

The new emerging business model has separated forestlands from manufacturing, selling them to timber investment management organizations. Pulp and paper companies are being uncoupled from sawmills and other wood products businesses.

In B.C., Weyerhaeuser's former coastal assets have been uncoupled; the private timberlands going into privately-owned Island Timberlands. The sawmills and Crown tenures were merged with Western Forest Products. The driving force behind the restructuring on the Coast was Brookfield Asset Management and its Tricap Restructuring Fund.

In the Interior, Canfor Corp. uncoupled its pulp assets from the sawmills last July, creating Canfor Pulp Income fund, which trades separately.

"The root cause of this is under-performance across the industry and when you have an under-performing industry, you get these financial players having a look, scratching their heads and asking 'why is this industry chronically under-performing?'"

The trend for the financial players is to sell off non-core assets and focus on core assets, he said. The next step after uncoupling assets, is horizontal consolidation across the different stages of the value chain, a model International Paper has already adopted.