COVID-19 has affected virtually every industry around the world, and paper is certainly no exception. North American demand for commercial paper fell year‑over‑year in April due to COVID-19 as well as other economic factors which impacted the industry as a whole. Specifically, coated paper saw a 35% decline in demand and uncoated paper saw a 33% decline. The biggest drop, of 55%, was in copy paper due to school and corporation closures. However, as America’s economy begins to reopen for business, there are positive signs of which SPC believes our clients should be aware.
Most Paper Mills Remain Open
While downtime has been a given due to decreased demand, the majority of mills have kept parts of their operations running in spite of COVID-19 pressures. Those which have idled could restart quickly if and when demand increases. Mills have both slashed capacities and furloughed employees in a collective effort to cut their operating costs, but most common stocks are available in standard turn times—or quicker. As for speciality stocks, those may be harder to source. In the past, mills have been shut down to keep supply down to match demand and keep prices at a higher level. We have our ear to the ground to keep you informed on this everchanging market.
“SPC’s strong and long relationships with our mill partners, gives us purchasing power many of our competitors lack. We’ve used that power to negotiate a price decrease on a number of commonly used stocks, which we look forward to sharing with you.”
– Ryan LeFebvre
Verso Idling Mills and Consolidating Operations
Verso Corporation recently announced that they will indefinitely idle their paper mills in Duluth, Minnesota and Wisconsin Rapids, Wisconsin. The mill in Duluth was known for producing uncoated groundwood stocks used for catalogs and books. As for the Wisconsin Rapids Mill, we toured this facility last fall with some clients to see the production of paper stocks commonly used in printing direct mail at SPC. This mill is now converting rolls to sheets through the end of the year and may be restarted if market conditions improve. Until we see what supply and demand looks like over the next few months, it might not be economically viable to do so. In the meantime, Verso is exploring sustainable alternatives including, marketing it for sale, restarting it if market conditions improve, or closing it permanently. While they consider all their options, they are moving sheeting operations to two other mills in both Escanaba and Quinnesec, Michigan. Wisconsin Rapids is considered a low-cost sheetfed sheet provider for North America, so closing it would be concerning for our market if supply comes back more than anticipated. Of course, this depends on how well the economy rebounds from the impacts of COVID-19.
Since the economic conditions are rapidly changing at different rates across the country, mills have been aggressively adjusting their production by managing downtime and inventories to respond to market demands. We believe marketers should take advantage of the conditions since it is unpredictable how the industry will react to supply and demand over the coming months.
Mills in the News
Domtar Reaching End Of Temporary Shutdowns
In response to the current state of the market, Domtar had idled its freesheet uncoated paper production capacity at its Ashdown, Kingsport and Hawesville mills in April. Hawesville’s H1 machine is scheduled to reopen production this month; Hawesville’s H2 machine, Ashdown’s A62 machine and the Kingsport mill are scheduled to resume operations in July. Domtar’s other facilities have remained fully operational and have been shipping products without interruption.
Sappi Resuming Alfeld Mill Production
A May fire in Sappi Europe’s Alfeld mill site in Germany sidelined paper machine 3, which produces one-side coated specialty papers. An inspection found limited damage to the machine itself, and production is scheduled to restart in July with deliveries expected to begin in August. Backup supplies are being provided by Sappi’s Italian mill sites to ensure demands are met.
Willamette Falls Earns Certification
Oregon’s Willamette Falls Paper Company has added Sustainable Forestry Initiative® chain of custody certification to its full line of paper products. This includes their innovative reHARVEST™ paper grades made with varying percentages of straw fiber.
Nine Dragons Increases Overseas Output
In mid-May, the People’s Republic of China issued new scrap import quotas that have created upward pressure on Old Corrugated Containers prices. Nine Dragons Paper is reportedly shipping as much pulp as it can to China to make up for their current domestic shortfall of natural resouces needed for their market needs. We are following the situation to see how this impacts U.S. needs for recycled pulp.
Kruger Shutdown Continues
Kruger Specialty Papers, which produces coated ground woods often used in magazines and catalogs, temporarily shut down its Brompton (Québec) facility in April due to the COVID‑19 outbreak. The mill has not yet announced a reopening date. No other Kruger facilities have been affected.
Cascades Closing Brown Containerboard Facility
In an effort to align present production capacities and reduce costs, Cascades is permanently closing its packaging facility in Burlington, Ontario. Production is being redeployed to Cascades’ other units in Ontario, and their employees are being offered transfers to other facilities.
We encourage our clients with upcoming mailing campaigns to take advantage of this buyers’ market. SPC is here to help you make your mark by connecting with your customers in the ways they prefer: with captivating direct mail that drives response.