Paper

Economic news hasn’t gotten much better as the first quarter of 2009 progresses, and neither has there been much improvement in the recovered paper market.

Prices experienced a modest uptick in January, but domestic demand is weak for all grades, especially low grades like news (ONP), OCC (old corrugated containers) and mixed paper. "It appears the mills are really packed," says one Midwestern packer.

The industry is awaiting the fallout from the announcement that Smurfit-Stone Container Corp. filed for bankruptcy protection for its U.S. and Canadian subsidiaries. The announcement was made at the end of January. "It’s going to hurt us," the packer says, adding that the full impact of the filing has yet to be determined.

The early months of 2009 brought more news of shrinking domestic capacity. Domtar Corp. has announced that it will permanently reduce fine paper manufacturing at its Plymouth, N.C., mill by shutting down one of the two paper machines comprising the mill’s fine paper production unit. This was expected to result in the curtailment, at the end of February 2009, of 293,000 tons of the mill’s uncoated freesheet production capacity, according to Domtar. Domtar also reports that it plans to reduce staff across various parts of the mill by approximately 185 employees.

"Continued adverse economic conditions and the decline of fine paper orders require that we reduce our uncoated freesheet manufacturing capacity," says John D. Williams, president and CEO of Domtar. "Plymouth employees have made commendable efforts over the years to keep their facility operating efficiently, and I want to thank all affected employees for their hard work and dedication."

The Plymouth mill will continue to operate two pulp lines, one pulp dryer and one paper machine.

However, the domestic market’s weak appetite has been offset some by a slight uptick in export activity. "Material is moving to China—that market is loosening up some," reports the packer.

Generation overall is flat because of the weak economy, says a recycler based in the Northeast, though the incoming volume seems to vary by region. The Midwestern packer reports solid generation, considering the tough times. "We’re still seeing relatively good tonnage," she says.

In these challenging economic times, some sources say companies are turning their attention inward. While they are concerned with the market, the Midwestern packer says many companies are more concerned with keeping their businesses up and running. "Everyone is always concerned about revenues," she says. "But we’re just focused on trying to get our operations running cost efficiently. You just keep focusing on costs."

One silver lining to the current situation is lower fuel prices and freight rates, sources say.

In mid-February, President Obama signed the final stimulus bill into law. Some sources say it will be difficult to say what kind of immediate or even near-term benefit the package might bring to the paper industry. "I think it’ll get things moving in the right direction," the Midwestern packer says of the stimulus bill. "There’s no question that there are some policies on there that will help—or at least that won’t hurt."