Paper Department

Building on Strength

Paper stock markets continue their strong performance over the past several months. Demand for most grades is looking promising, with signals that this trend may continue into next year. The price for many of the white grades, which have been soaring through most of the summer and into the fall, are starting to stabilize, although there still are indications prices may move up slightly in December and even into next year.

Strengthening pulp prices continue to pull up demand for their usual substitutes such as pulp substitutes and deinking grades. The office paper market also has seen positive moves help the overall market condition for the grade.

On the domestic side, continued strong buying by paperboard mills is helping keep the supply of white grades flowing. Demand for sorted white ledger (SWL) and office pack is benefiting from increased interest in making white top linerboard.

The old corrugated (OCC) market continues to hold its own. Prices have rebounded from earlier in the summer, and could be strengthening into next year. Prices are moving at between $70 to $100 in most regions, although there is a growing sense that prices could increase by $5 to $10 in January. Although several board mills are running with plenty of inventory on hand, other mills in the same geographic region are in greater need for additional OCC, which is keeping the price of the material from slumping.

The one paper segment that hasn’t been enjoying the strong upswing is the North American newsprint market. With many newsprint mills still sitting with an oversupply of finished product, downtime has been prevalent. Several of the larger newsprint mills have been taking significant downtime to remove excess capacity. Further, Abitibi-Consolidated, Montreal, announced plans to permanently close its Chandler, Quebec, newsprint mill. One point constantly being reiterated by many North American newsprint producers is the need to raise the price of finished products. Despite significant downtime taken throughout North America, finished product prices have not been able to respond with any signs of firming.

Although the newsprint industry is languishing, end markets for old newspapers (ONP) have been seeing some steadiness. The strength in the building products industry is helping keep the flow of material to end sources. At the same time, a number of board mills also are consuming a significant amount of the grade, which is keeping prices buoyant.

Strong buying by both Asian and Latin American markets has helped drive demand and prices for most paper stock grades. The strong buying over the last several months from Mexico and Asia has helped propel many paper stock grades to higher prices. With higher pulp prices still slated to be implemented early next year, there could be further strengthening of many of the higher end paper stock grades such as hard white cuttings and shavings, as well as SWL.

ROCK-TENN TO CLOSE LYNCHBURG PLANT

Rock-Tenn Co. intends to close its Lynchburg, Va., laminated paperboard products converting plant and consolidate the business into its other laminated products plants. The Lynchburg converting plant primarily manufactures components for the furniture and automotive industries and a variety of industrial products.

Customers of the plant will be served by other division operations. The closing of the Lynchburg converting operation will not affect the operation of Rock-Tenn’s Lynchburg recycled paperboard mill.

CHESAPEAKE BIDS FOR SHOREWOOD

Chesapeake Corp., Richmond, Va., has made a proposal to acquire Shorewood Packaging Corp., New York, for about $480 million in equity plus about $260 million in debt.

According to Chesapeake, the transaction can take place with assets on hand and is not subject to any financing approvals.

Chesapeake notes that “the company is prepared to commence immediate good faith negotiations on an exclusive basis with the objective of entering into a definitive merger agreement consistent with its proposal.”

EDWARDS PAPER SOLD

Eduardo and Jacqueline Flores announced the sale of Edwards Paper Co. to LaCour International, the privately held Red Springs, N.C. converter and marketer of post-consumer waste sanitary paper products.

Edwards is a fully-integrated milling-converting producer of tissues, towels, wipes and dispensing systems with sales, manufacturing and distribution facilities in Miami and Tucson, Ariz.