When MeadWestvaco sold its coated papers business to NewPage in May 2005, it retained the Tango coated cover line and packaging business.

 

　　Conditions for buyers of premium coated paper products are relatively good. Terrific overcapacity has widely broadened opportunities to purchase high-quality products at low prices.

 

　　This market should continue through 2007 and beyond, with possible upward blips during holiday buying, sports events and political elections. After that, the winds of change may blow behind new owners—oligarchs and private equity management that govern operations and restrain production and capacity expansion. One needs only to look at newsprint and lightweight coated (LWC) for a roadmap.

 

　　In less than a decade, newsprint, supercalendared (SC) and LWC paper consolidated into a few hands. Two in North America (Bowater, Abitibi) and NSI of Norway now control over 60% of production. After a period in which a quarter of newsprint production was eliminated and prices touched new historic lows, the industry is now weathering very poor newspaper publishing markets with firm pricing and balanced inventories.

 

　　LWC production is not quite as concentrated— but it's close. Pricing for most products is firm, although more volatile. The fate of older, less efficient lightweight coated machines in North America is closure or conversion, while newer machines in Asia and Europe will dominate worldwide. It won't be long before the LWC market starts acting like newsprint.

 

　　This trend is trickling upward to economy- and premium-coated freesheet markets. Prices have been firm in a market that has not been terribly robust. Production and inventories remain controlled yet segmented, though certain bad boys in Europe (i.e., Finland) and Asia (i.e., Korea, China) over-produce, forcing a glut on the U.S. markets. Over 30% of coated freesheet consumption demand will be satisfied by imports in 2006, after a brief respite in 2005 when imports actually fell over 20%.

 

　　Coated freesheet capacity stands around 4½ million tons, matching domestic needs nearly perfectly. A virtual 100% operating rate firmed prices this year, further supported by energy price spikes, rising pulp markets and chemical cost increases—all neatly passed along to the customers. Only time will tell if the new industry structure will uphold this trend.

 

　　Old mills, new names

 

　　The old expression "you can't tell the players without a scorecard" may be relevant in today's coated freesheet markets. Luckily for the buyers, mills are loathe to change brands, so changes may be held to the salesman's business card and the letterhead on your invoices.

 

　　Ahead of the curve on restructuring was Appleton Papers. For years, the company operated without a true direction in the premium business, but after some years of focus, Appleton has emerged as a leading producer of technologically advanced coated paper. Starting almost from scratch, the Utopia brand is now widely accepted in a variety of premium applications, namely fashion and other high-end boutique markets. Its recent release of Utopia One X demonstrates its new boldness in working the fashion segment to the hilt. Appleton also is seriously burrowing into RFID markets and other technical papers in labels and security, and away from face stock (now a commodity). This re-invention of the premium coated paper mill is about to replicated.

 

　　Three very large deals currently closed—two with private equity and the other a merger. Unfortunately, as GAM went to press, all are under a "quiet period," so no official comments were available.

 

　　Weyerhaeuser and Domtar will form a new company to house the assets of their combined fine paper segment. Though mostly uncoated and new strength in digital, it does include a LWC mill and premium coated in Canada. "New" Domtar has new options in coated—either by filling out the product line or introducing new premium products to the mix.

 

　　The divestiture of International Paper is underway. Bits and pieces are being sold off monthly, leaving the world's former leader in forest products production a packaging materials company (like Weyerhaeuser, without the real estate business). It is retaining Accent Opaque (premium uncoated) and Carolina (coated cover).

 

　　IP is re-branding the LWC line, calling it TruSpec in the newly formed Pine Bluff Papers division, which might have been tough to sell since it makes paper and board under one roof.

 

　　Spin-offs included Thilmany and the publications segment to equity groups. Verso Paper is biggest of the bunch. It includes the coated paper and SC paper from four mills, totaling 1.4 million tons of paper and $1.7 billion in sales. Not much is known about the direction of the product mix going forward.

 

　　NewPage Corp. is the new name for the former MeadWestvaco coated paper mills. NewPage, a private equity concern, promptly sold its carbonless unit to Glatfelter Paper, allowing it to focus on the commercial printing business with its 2.2 million-ton capacity of coated paper.

 

　　The big guys, notably Sappi and Stora Enso, are still running the global show on pricing and product mix.

 

　　Sappi announced price increases in Europe for coated freesheet grades. This is an effort to stabilize a sinking market by forging a bottom braced by severe cost increases in energy, chemicals and fiber. In North America, the closure of a machine in Maine seems to have been beneficial to profit goals.

 

　　Stora Enso nipped off a bit of IP to capture dominance in the Latin American market. It bought IP's coated groundwood mill and now controls production on that continent.

 

 

[时间：2006-10-20  作者：Mike Ducey  来源：信息中心]