Paper

Rising costs continue to put pressure on many businesses all over the country, and companies dealing with recovered fiber are not immune.

Transportation problems—from the soaring cost of fuel to the shortage of shipping containers—are contributing to less favorable market conditions, according to a California recycler. "The cost of transportation is a big issue, be it domestic or export," he says, adding that steamship lines lately have been able to dictate prices with unprecedented control. Companies are seeing freight rates at double and triple what they were in the past, he adds, which are considerable costs to try to absorb.

The current situation is tied directly to the weak dollar, the recycler says. He explains that paper enjoyed low freight rates for years because there weren’t that many other products being exported. However, a weak dollar makes U.S.-made products more attractive on the export market. "Now there’s competition," he says. Commodities like grain and ferrous scrap that used to go in break-bulk vessels are now going into containers, he adds. "I don’t see it changing any time soon," he continues. "It was a long time coming—we enjoyed cheap freight for a long time."

The general economic downturn could also spell trouble for some tissue manufacturers. "A lot of tissue manufacturers make away-from-home products, tissue-products used by airlines and hotels," says a Texas-based recycler. "If you have fewer people traveling, fewer planes flying, instead of their 1,000 cases of napkins, they only need 750."

Domestic capacity continues to shrink as well. In an SEC filing in early July, The Newark Group Inc. announced that it is permanently closing its Haverhill Paperboard mill in Haverhill, Mass., by the end of August.

The company also announced that it also would permanently shut down its Bennington Paperboard mill in North Hoosick, N.Y., effective Aug. 30, 2008.

In announcing the closures, the company noted that the decision was made based on the need for further reduced capacity within the company’s paperboard mill division.

The company also recently announced that it was hiking the price for all its recycled paperboard by $50 per ton. The increase was effective with shipments starting July 28, 2008.

In addition, Sonoco also announced a mill closure in early July. The company will permanently close its Montreal uncoated recycled paperboard mill, effective Aug. 27, 2008, according to James Harrell, division vice president and general manager, paper, North America.

The mill has annual capacity of 48,000 tons of primarily heavy-weight coreboard that has been principally used for the company’s internal converting operations.

On the export front, as of press time, the Beijing Olympics were only about a month away. Sources report some uncertainty over the demand the industry can expect from China once the games are over.