Paper Market Update

Industry News

• Coated Freesheet Mill West Linn Complete Closure

- October 16th announcement and immediate closure related to loss of pulp supply and exposure to higher market pulp prices

- 3 PM’s total 270,000 tons/year;7% of North American supply

- http://westlinnpaper.com/announcement.html

• UPM Announces Shut of PM5 at Blandin Mill in Q1 2018

- Produces 128,000 tpy of coated groundwood, 5% of North American supply

- Affected business to be transitioned other PM’s in UPM system

- https://www.upmpaper.com/whats-new/

•  Verso Announces Formation of Strategic Alternatives Committee

- Committee will identify and evaluate strategic transactions including the possible sale of some Verso mills

- http://investor.versoco.com/2017-09-21-Verso-Corporation-Board-of-Directors-Forms-Strategic-Alternatives-Committee

•  NORPAC Trade Case Against Canadian Producers of Uncoated Groundwood Publication Grades Proceeds

- US ITC found merit to dumping (ADD) and government support (CVD) claims against Canadian producers (Resolute, Kruger, Catalyst, White Birch) and referred case to Department of Commerce for further review

- After request for delay, CVD determination now scheduled for 1/8/18, ADD determination now scheduled for 1/16/18

•  Georgia Pacific Closing Uncoated Freesheet PM in WA

- Cut-size and offset PM at Camas, WA to close in Q2 2018

- http://www.camaspostrecord.com/news/2017/nov/14/georgia-pacific-restructuring-camas-mill-eliminating-280-to-300-jobs/

•  UPM Signs Deal for Potential New Pulp Mill in Uruguay

- Two-billion-euro project could scale up to produce two million tons annually of eucalyptus pulp

- http://www.upm.com/About-us/Newsroom/Releases/Pages/UPM-and-the-Government-of-Uruguay-sign-an-investment-agreement-to-establish-a-co-001-Wed-08-Nov-2017-00-18.aspx

Publication Paper Pricing – Historical View 2010 – 2017

  Mill Operating Rates (shipments to capacity - not seasonally adjusted)  

Product Segment Commentary

• Coated Freesheet

-Q4 operating rates in high 90’s due to seasonal demand and loss of West Linn, Appleton Coated (14% of N.A. supply)

- Lead times as much as 8 – 10 weeks

- Near to mid-term forecast is for mills to operate at or close to full capacity

- SAPPI conversion project at Skowhegan mill will remove 30 days of production from 1 of 3 paper machines in Q1 2018

- Mill inventories are low with little time near term to restock

- Demand decline moderating at less than 5%/year loss

- $2.00/cwt price increases announced for November 1

• Coated Groundwood

-Q4 operating rates in high 90’s to over 100 due to seasonal demand and July capacity loss (Resolute’s PM2 at Catawba)

- Lead times 4 – 8 weeks

- Demand decline continues close to double digits/year

- UPM PM5 closure will keep remaining capacity busier in H1 2018 than historical averages

• Uncoated Freesheet

-After one-month blip in August to 99% operating rates fell back to yearly average of 89-90%

- Capacity loss in process due to closure or repurposing coated freesheet capacity back to coated grades

- PCA converting 1PM in Q2 2018; GP closing 1PM in Q2 2018; IP converting 1PM in 2019

- Decreased supply to West Coast coming in 2018 could require longer lead times and/or freight considerations

- Suppliers continue to balance supply and demand to help manage prices

• Uncoated Groundwood

-High bright ground grades lead times 4 – 8 weeks in part due to loss of capacity in Q3 2017

- SC grades continue to suffer due to loss of retail advertising

- Newsprint capacity closures resulting in high operating rates and higher prices for near to mid-term

- Cloud of unfair trade case hanging over Canadian producers of newsprint/high brights which could result in price increases or mill closures if duties are imposed