<B>Newsprint Markets Improving</B>

The newsprint industry appears to be one of the few segments of the paper industry that is showing some clear-cut signs of strength. As the industry continues to strengthen there is a greater sense that the finished newsprint price increase, scheduled for Sept. 1, will take hold.

This sector of the paper industry has been able to better control its production schedule. With two major players in the North American newsprint industry, Bowater and Abitibi Consolidated, the supply /demand balance has been steadier. Both of these companies have been involved in significant merger activities over the past several years, with Abitibi recently acquiring Donohue, a mid-sized newsprint producer.

Meanwhile, Bowater acquired Newsprint South, a Mississippi-based newsprint operation. The mill is capable of producing 250,000 metric tons of newsprint a year. The acquisition brings to nine the number of newsprint mills Bowater owns and operates in North America and overseas.

While both of these companies have been growing their market share in the newsprint sector, they have been idling capacity to ensure better market conditions for newsprint. This past week Abitibi Consolidated announced plans to close its Steilacoom, Wash., newsprint mill. That facility has the capability of producing 130,000 metric tons of newsprint a year.

The company also announced plans to close one of its paper machines in Trois Rivieres, Que., early next year, unless the mill is sold.

The improved environment for newsprint directly translates into better market conditions for old newspaper. While the grade has dipped, it hasn't fallen as sharply as OCC. The ability of the grade to weather the sliding price of other paper stock grades has been attributed partly to the better market conditions for the newsprint industry.

Meanwhile, the OCC market continues to suffer from a steep oversupply of finished product on hand. While merger activity is taking place in the paperboard industry, there still are a fair number of larger producers. These operations, while still taking downtime, are presently still producing too much finished product for an economy that appears to be cooling off.