NewPage in the News
Category : Black Liquor, China, Coated, Paper, Subsidies
NewPage announced results of operations for the fourth quarter and full year today. It is clear that the company has very serious financial issues, but this does not make NewPage unique in our industry. We won’t speak directly to the financials; that is not our area of expertise.
Downtime Reported: Other than the financials, there were a few other items of interest. The company reported that it took 515,000 tons of market related downtime in 2009. See below.
During 2009, we took approximately 515,000 tons of market-related downtime that included the indefinite shutdown of two paper machines one in Rumford, Maine and one in Whiting, Wisconsin,” said Suwyn. “We believe inventories have now essentially bottomed out through the mill and printer system, and we have seen some rebound in orders over the past couple of months that have allowed us to restart production on these machines. While a couple of months do not make a trend, our customers indicate print advertising appears to be in the early stages of recovery.
It sounds as if the two indefinitely idled machines have re-started, but I don’t believe this has been in the news, so perhaps the press release simply refers to the elimination of other market related downtime.
Still on the same subject, we assume that the uncoated free sheet being produced on coated free sheet machines does not count in this 515,000 tons of downtime. We estimate that more than 200,000 tons of this substitute grade was shipped in 2009. Therefore, the actual shortfall in coated demand for NewPage last year might be over 715,000 tons.
Black Liquor: The final black liquor benefit for NewPage was $304 million. According to NewPage the greatest benefactors of this obscene subsidy were the coated paper buyers.
As previously reported, the U.S. Internal Revenue Code allowed a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. This credit expired on December 31, 2009. Income recognized for the credit is included in net income (loss) attributable to the company and totaled $90 million for the fourth quarter of 2009 and $304 million for the full year 2009. We believe that generally the industry passed on most of the benefits of the alternative fuel mixture credit to customers in the form of lower sales prices.
There is no factual basis for this NewPage claim. It creates additional credibility problems for the company.
As we have previously discussed, coated producers that did not benefit from the subsidy continued to operate in 2009. If some of these mills had closed due to prices falling below variable costs, at the same time the subsidized producers continued operating, this would have been evidence that at least some of the subsidy was passed on to buyers. Then if prices increased in 2010 after the subsidy expired, this too would have been evidence that buyers benefited from the subsidy. Neither of these events occurred. The NewPage claim is simply not true.
New NewPage President : Tom Curley was announced as the President and CEO of the company earlier this month. NewPage provided Mr. Curley’s background in the press release.
Curley holds an associate degree in Aeronautical Engineering from Daniel Webster College in Nashua, New Hampshire, and a Bachelor of Science degree in Industrial Technology from the University of Massachusetts at Lowell. Beginning his career with General Electric Company, he later joined Caterpillar Inc., Cooper Cameron Corporation, and Rolls-Royce plc. During his career, he has progressed through increasingly responsible roles and, prior to joining NewPage, Curley served as president of the Rolls-Royce Energy business.
Anti-Dumping Duties : The trade action (sponsored by NewPage and several partners) against U.S. imports of Chinese and Indonesian coated free sheet “sheets” has generated some activity lately. The Dead Tree Edition reported here that a group of environmental organizations are warning printers away from the Chinese imports. At the same time, a group called Save Printer Jobs is lobbying against the trade action.
The effort to halt Chinese imports did not stop at our border. An announcement was made today that an organization of fine paper producers in Europe has launched a probe against the Chinese for dumping coated paper in Europe. This is going to add to international tensions.
The U.S. coated trade issue was the subject of a detailed report in our December Reel Time. It is a very complicated problem. The Chinese probably are dumping paper unfairly and illegally. On the other hand, the black liquor subsidy, and numerous other business subsidies, take away our right to complain.
Most importantly, the stage is being set for possible trade wars that would be highly destructive. That is the primary concern. We plan to cover this issue in more detail later.
NewPage and most of the coated and uncoated guys are in some real trouble. The consumption of printing and writing paper continues to decline. I believe the two main drivers of our decline are: alternative ways of communicating (mainly electronic); a misinformed/uniformed public concerning the environment. Our industry has not done well in responding to either of these challenges.
There are many areas where paper is not the best means to deliver information. The printed encyclopedia is a good example of that. Our industry needs to get real data on where paper is the best way to get measurable results and then present it.
We have done virtually nothing to inform the public on how we interact with the natural world. We have little or no voice in the public commons when it comes to discussions on the environment. The public is not seen as a “customer”. However, I believe the public is the “ultimate end user”. My fear is that there will be a do not mail initiative in a large state, probably California. It will not be initiated in the State House but rather will be a ballot initiative. The intent of most of those who sign a do not mail petition will not be to hurt the paper industry but that will be a likely outcome. (The printing industry, direct mail business and USPS will also be “victims”.) Once there are enough signatures collected to get on the ballot our industry will respond. We will find the money we claim not to have now and will go and work to defeat the measure.
I have been in the paper and printing industry for almost forty-six years so I will probably be OK. However, I am concerned about the folks who have many years to work and contribute.
It is about time for our industry to get off its rear end and get in in front of the public to tell our story. The story of the North American forests is the greatest story never told. The public also needs to know that we are and have been a sustainable industry; long before others co-opted that word.
Memo to industry executives: the company website is not the way to get to the public! In fact, some of the industry’s promotional pieces and website information, in my opinion, cause us harm rather than help us.
What do you think?
Paper Geek,
Thanks very much for your comment. Let’s see if anyone else wants to respond before I join in.
verle
Paper Geek,
I think we all agree that pressure from electronic communication will continue to damage our industry. If we promote “paper” better and keep costs low then we can reduce the damage, but we can’t stop the electronic revolution.
I do agree completely with you, however, in regard to what often seem to you and me to be soft, even apologetic, defenses of the paper and print industries.
We have great stories to tell, and great comparisons to make, but we have not always presented the stories well.
We choose not to to confront the extreme environmental organizations, and just let them spew lies and half-truths. Confrontation will make us seem defensive to the public perhaps, but personally, I would rather go down fighting.
verle
The “group” behind the Save Printer Jobs website is Asia Pulp and Paper