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Japanese Earthquake and Tsunami Could be Opportunity for North American Mills

March 14, 2011

The devastating earth quake and tsunami in Japan impacted four of Nippon Paper's mills, Mitsubishi's Hachinohe mill, Oji Paper's Nikko mill and Hokuetsu Kishi Paper's Hitachinaka mill. The overall result is idling of annual capacity of 2.8 million tonnes coated and uncoated printing and writing paper, 552 K tonnes newsprint, 400 K tonnes kraft linerboard, 390K tonnes carton board, 94 K tonnes packaging paper and 59 K tonnes of SBS. This may be an opportunity for North American mills.

Metso entry into machine clothing business could impact Xerium and Albany Intl.

May 10, 2010

Analysis of:Metso Corporation has gained title to all the shares in Tamfelt Corp. | pulp-paperworld.com

Metso and Voith are the two largest paper machinery manufacturers in the world. Voith supplies not only machines but also roll covers and machine clothing. Metso entered into the roll covering business with the acquisition of Beloit Manhattan a decade ago but has not been a supplier of machine clothing. Metso's acquisition of Tamfelt marks entry into the machine clothing business and could make it more difficult for Xerium and Albany International to get new machine start up clothing business.

Acquisition of SCA Asia Packaging Assets Great for IP

April 26, 2010

Analysis of:International Paper Agrees to Purchase SCA's Asia Packaging Business | phx.corporate-ir.net

IP signed an agreement to purchase SCA’s Asia packaging business (2009 revenues of $250 million) for $200 million in cash. The price is attractive at 80% of revenues. Typically, for assets of this quality, the multiple is as high as 1.2x revenues. This acquisition, in combination with bullish containerboard and pulp and uncoated free sheet paper markets. is very positive for International Paper. IP also announced that it is increasing its quarterly dividend from $0.025/share to $0.125/share.

Chilean earthquake could cause pulp supply crisis and escalating prices

March 2, 2010

Analysis of:Earthquake in Chile shuts pulp capacity, likely to extend global pricing run | www.risiinfo.com

The horrific earthquake in Chile has resulted in temporary shutdown of about 4.5 million metric tonnes/year of market pulp capacity. Information is scarce due to the loss of infrastructure and power. Arauco and CMPC have issued "force majeure" letters to their customers saying that they will not fulfill their commitments. Detailed structural analysis of the mill facilities will be needed to determine needed repairs and when production can be resumed.

Recycling facilities acquisition should benefit Cascades

September 22, 2009

Analysis of:Canada's Cascades buying two recycling businesses | finance.yahoo.com

Cascades is acquiring the Canadian assets of Sonoco Recycling and the recovery assets of upstate New York based Yorkshire Paper Corporation. This will not only increase the annual recycling capacity of Cascades subsidiary Metro Waste Paper Recovery but also reduce costs for Norampac recycled board mills and Cascades tissue mills. The improvement in EBITDA should offset the cost of the acquisition.

Weyerhaeuser dividend cuts appear necessary, but there are hurdles to conversion to REIT

July 7, 2009

Analysis of:Timber company Weyerhaeuser slashes dividend | finance.yahoo.com

Weyerhaeuser announced that its quarterly dividend is being reduced from $0.25 to $0.05 per share. The firm also said it was making progress toward reorganizing as a REIT. Conversion to a REIT may have some downsides.

Lumber Quota Tax Could Lead to Eastern Canadian Pulp Mill Shutdowns

March 2, 2009

Analysis of:Canada breached softwood lumber agreement: ruling | ca.news.yahoo.com

Sawmills in four provinces have been ordered to pay an additional 10 per cent export charge in a softwood lumber ruling made by an international arbitration tribunal. The London Court of International Arbitrations ruled on Thursday, February 26, that Canada breached the softwood lumber agreement by failing to calculate quotas properly during the first six months of 2007. Mills in Ontario, Quebec, Manitoba and Saskatchewan must now pay an additional 10 per cent export charge on softwood lumber shipments until $68.26 million has been collected, under the ruling. The decision cannot be appealed.

What Chinese Pulp Expansion?

September 12, 2008

Analysis of:Pulpwatch.org Rates Mills on Social, Environmental Performance | www.greenbiz.com

The author of the article may be confusing of the new paper and paperboard mills in China that will utilize recycled waste paper with mills making virgin pulp from trees rather than secondary fiber waste paper. It is highly doubtful that China has the forest resources to support supply of 19+ million metric tonnes of green wood per year. it is likely that China will continue to build paper and paperboard mills based on recycled waste paper with much of it coming from the USA.

GP Acquisition of SSCC Brewton Mill Could Benefit Both Companies and the Bleached Board Segment

August 13, 2007

Analysis of:Smurfit-Stone Agrees to Sell Brewton, AL, Mill to Georgia-Pacific for $355 Million | biz.yahoo.com

Smurfit-Stone’s sale of the Brewton, AL mill is a logical step after last year’s sale of the consumer packaging division and recycled boxboard mills to TPG Capital/Altivity. SSCC improves concentration on core business. The acquisition of this mill by Georgia-Pacific makes GP a bigger player in SBS (Solid Unbleached Sulfate) paperboard. This move concentrates about 80% of the SBS segment in three producers – International Paper (IP), MeadWestvaco (MWV) and Georgia-Pacific (private-Koch Industries). Consolidation should aid in maintaining rational pricing in the SBS segment. It also shows that the new owners of GP (Koch) have departed from the former strategy of trying to mold GP into a tissue and consumer products company and are focusing on opportunities in various segments of the pulp and paper industry.

Pope & Talbot Capacity Reduction - Harbinger of More Bad Effects of the BC Logging Strike?

August 6, 2007

Analysis of:Pope & Talbot Announces Temporary Capacity Reduction | phx.corporate-ir.net

Pope & Talbot's announcement of a temporary capacity reduction at the Nanaimo, British Columbia mill is not likely to have a significant impact on the global northern bleached softwood kraft pulp market, but it might  be the "canary in the mineshaft." If the BC logging strike continues, it is likely that other mills in BC will also face problems with availability of chips and increased costs.

New Pratt Industries Recycled Containerboard Mill Is Not Likely to Upset the Supply/Demand Balance But Could Be Beneficial to Integrated Containerboard Producers

July 25, 2007

Analysis of:Pratt Industries USA to Build Louisiana Recycling Mill | www.visy.com.au

Will the new Pratt mill make the entire containerboard segment less attractive? What will be the impact on supply/demand, OCC costs and pricing- especially in view of the new Asian capacity that will come on in the next year? Will the affect all of the containerboard producers equally?

B.C. forestry is bad news for pulp and paper producers including Catalyst Papers, Pope & Talbot and Howe Sound Pulp

July 24, 2007

Analysis of:No quick end in sight for B.C. forestry strike | www.theglobeandmail.com

The strike by British Columbia logging and sawmill workers could have significant negative impact on pulp and paper producers due to chip shortages and increased chip prices. The companies most likely to be negatively impacted include Catalyst Papers, Pope & Talbot, and Howe Sound Pulp.

Graphic Packaging - Altivity merger should be beneficial to recycled paperboard packaging producers

July 13, 2007

Analysis of:Graphic Packaging Corporation and Altivity Packaging, LLC Announce Merger | phx.corporate-ir.net

Merger of Graphic Packaging and Altivity will result in the new GPK having 40% market share in recycled multi-ply paperboard. The top three North American recycled paperboard producers will have combined share of about 80%. This should improve prospects for balanced supply and demand and rational pricing.

New Saudi Tissue Machine Is Just an Incremental Step

July 9, 2007

Analysis of:Metso to supply tissue machine to Saudi Paper Manufacturing in Saudi Arabia | www.metso.com

The addition of a new Metso tissue machine at Saudi Paper Manufacturing Company will make Saudi Arabia the largest producer of tissue in the Middle East. This new machine is an incremental step to meet growing demand, rather than a spur to provide a significant jump in tissue consumption. Saudi Paper Manufacturing started making tissue in 1992 and added tissue machines in 1995 and 2000. Gulf Paper Industries in Riyadh - the other Saudi tissue producer - installed a new Overmeccanica tissue machines in 2004 and 2007. All of the Saudi tissue mills use combinations of recycled fiber and purchased pulp - making grades equivalent to North American and European AFH (Away From Home) tissue. High grade consumer tissue is and will continue to be imported to Saudi Arabia to meet the needs of the upper classes. We can expect continued growth of tissue manufacturing in various Middle East countries. I provide detail on the current status in my commentary.

Timing of Introduction of New Coating PCC Could Be Good for MTX

June 29, 2007

Analysis of:Minerals Technologies Launches Opacarb(R) 3000 PCC, a New Coating Product for Paper | biz.yahoo.com

The new PCC coating pigment should be especially attractive to papermakers in view of the discontinuance of European coating clay manufacture and the recent increases in latex prices. The new product could significantly increase utilization of the MTX merchant PCC plant at Walsum, Germany - providing a significant upside for MTX.

Coated Paper Shutdowns Could Bode Well for Some Paper Companies

June 5, 2007

Analysis of:UPM Announces 9 to 12 Months Shutdown at its Miramichi Mill | biz.yahoo.com

Coated paper capacity shutdowns, in combination with the recently imposed duties on Chinese coated paper imports to USA, could help obtain price increases in coated papers and and positively impact the earnings of some North American paper companies in both the coated and uncoated sectors.

Softwood Lumber Agreement Could Cause Big Problems for Canadian Newsprint and Pulp Producers

September 15, 2006

Analysis of:UPDATE 2-Canada, US sign formal deal to end lumber dispute - Reuters | today.reuters.com

The agreement will provide the U.S.A. with higher than normal lumber prices in periods of lower than peak housing construction. This will be achieved by raising the costs of Canadian lumber producers as U.S. lumber prices fall – causing shutdowns and/or bankruptcies of Canadian producers. This, in turn, will reduce the supply of chips to pulp and newsprint mills, especially in Northern Ontario and Northern Quebec. This could adversely affect ABY, BOW, DTC, SSCC, CAS-TSX and TBC-TSX.

Weyerhaeuser-Domtar Deal Is Not a Harbinger of the Paperless Office - Can Benefit Both

September 11, 2006

Analysis of:Weyerhaeuser to Separate Unit | online.wsj.com

The statement in the Wall Street Journal that this deal is an example of trying to cope with the effect of electronic documents and e-commerce is off base.

The uncoated free sheet market is stable and the pricing outlook good. Weyerhaeuser - a relatively small player - was seeking to divest its printing and writing paper business units to focus on core businesses in timber, lumber, building products, market pulp, containerboard and corrugated. Domtar was seeking to focus on uncoated free sheet papers as a core business. Domtar will have over 30% share in uncoated free sheet with relatively low cost mills.

The top four producers will have 75% combined share, which should facilitate pricing discipline. Domtar still needs to make some other moves to realize the full positive potentials of this deal. This article should be of interest to investors in WY, DTC, IP, WPP and other printing and writing paper producers.

Bowater Idling of Thunder Bay Could Help Newsprint Producers

September 8, 2006

Analysis of:Bowater Incorporated Announces Paper Curtailment at Thunder Bay, Ontario; Pulp Production to Continue at Facility | biz.yahoo.com

- BOW Thunder Bay is a large high cost facility.

- Idling Thunder Bay should help implementation of the newsprint price increase.

- This action could be positive for both Bowater (BOW) and Abitibi-Consolidated (ABY).

Are Biorefineries Going to Denude the Earth?

April 6, 2006

Analysis of:The Forest Killers | www.forbes.com

In the 10 April 2006 issue of “Forbes” magazine, p. 100, Peter Huber has written a column titled: "The Forest Killers." In this article, Huber postulates that if we perfect “chemical refineries that do the cow-gut [he had been referring to the efficiency of cows earlier] thing much better… Plant’s won’t celebrate..”

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