Arandell Corporation

Blake Hutchison, Director of Purchasing

As the United States House of Representatives sends the newly passed “cap & trade” legislation over to the Senate for debate, I thought now might be a good time to discuss electronic versus paper communication.

While it is true that both can (and should) be used in concert with each other, is one better than the other from a sustainability standpoint? The answer is a resounding “YES.”

Consider the issue of inputs/raw materials being renewable. Printed communication uses paper as its primary material. Paper comes from trees, which are a renewable resource, and have been for longer than humans have been on the planet. Since this is the case, and since forest products companies rely on trees for their products, they take great care to “renew” their main resource. The forest product industry plants 1.7 million trees per day, more than three times what they harvest. The primary materials used to make a computer require the mining and refining of many different metals and minerals (including gold, silver and palladium). These are non-renewable resources from the standpoint that an individual cannot just “plant” a metal or mineral. 

In addition, paper and printed pieces have a leg up on the electronic medium when it comes to energy consumption. 60% of the energy required to manufacture paper in the U.S. comes from carbon neutral sources and is produced onsite at the paper mills. Compare that to the electronics industry, which obtains over 90% of its power from the national power grid, a large part of which is greenhouse gas-emitting, coal-powered power plants.

As well, paper products stand a much better chance of being recycled properly.  Nearly 60% of all paper in the U.S. is recycled annually, while only 18% of electronic devices are; and of those that are, almost none are being reused for other products. E-waste is the nation’s single largest toxic waste export.

Some interesting facts, courtesy of International Paper:

• 20% Less CO₂ is used per year by a person reading a daily printed newspaper versus a person reading web-based news for 30 minutes a day.
• On average it takes 500 kilowatt-hours of electricity to produce 440 pounds of paper, the typical amount of paper each individual uses in a year. That’s the equivalent of powering one computer continuously for five months.
• It costs an estimated $2.8 billion of energy to leave computers sitting idly overnight in the U.S. On a CO₂ basis, that’s an amount equivalent to four million cars on the road.

The paper industry has had much more time to figure out how to be sustainable and responsible. In time, the electronics industry will do the same. But, until then, paper and printed communications have the upper hand when it comes to being sustainable. And while a balance is required between the two for effective communication, it is important to keep the above facts in mind when finding that balance.

Blake Hutchison, Director of Purchasing

Fraser Papers Files for Bankruptcy Protection.

Fraser Papers, which operates two paper mills and two pulp mills, produces mostly uncoated publishing grades, although they do manufacture some coated groundwood products.  Annually, they produce 410,000 tons of paper and 615,000 tons of pulp.  The company claims that, at least initially, their operating plans remain unchanged, and that they will continue to manufacture specialty paper products for existing clients.  How long that continues to be the case depends on how much cash they can generate to continue operations and how many orders they continue to receive.

This is the second North American mill to file for protection this year, click here to see the first.  A continuing trend?  Doubtful.  But, if Fraser fails to generate enough cash to keep paper operations going, it will force many of their clients to seek paper elsewhere, and that could tighten the market up.

Blake Hutchison, Director of Purchasing

Could it be true?  Could the paper market be correcting and things starting to look up?

In discussing current market affairs with many of our paper suppliers, the answer seems to be a guarded “yes.”  While the first and second quarters have seen a tremendous amount of downtime taken (both temporary and permanent), the mills feel that the moves they have made have been adequate enough to balance their supply with market demand.  We shall see.  But one thing is for sure: any more months of +/- 20% paper ship rates, and the paper mills could be in more trouble than they are now.  No one wants to see that.

What does this guarded optimism mean for prices?  Well one thing is for sure: the drastic reduction in paper prices we have seen the last two quarters cannot be sustained.  The mills have given back most, if not more than what they gained over the last 18-24 months.  And while the mills’ costs have decreased as well, they have not decreased in tandem with price decreases. 

Does this mean that increases are on the way?  I highly doubt it.  Are we going to continue to see the vast differences in pricing levels that we have seen over the past six months?  I doubt that as well.  Whatever your paper price is today, feel confident that you are not going to see any increases through the end of the year. Also feel confident that you are not “missing out” on some paper price deals by continuing to shop around. 

One thing to watch:  black liquor credits.  What is that?  Black liquor is a by-product of the paper making process that is created and then re-used elsewhere down the process chain.  Some mills have been able to apply for, and receive large amounts of government money under a loophole in a budget bill passed in 2005.  That loophole is set to expire soon, and some members of Congress are looking to close it sooner.  Those mills that are relying on this additional loophole funding now might be caught in a bind sooner rather than later if this loophole closes before it is supposed to.  If you would like more information about this, please just let me know.

Blake Hutchison, Director of Purchasing

In looking back at what I was predicting to happen in the first part of 2009, I have found that I was right about decreased demand, decreased pricing and increased downtime and capacity reductions. But I was not envisioning these types of numbers:

Decreased Demand
Through a variety of different end-user actions, such as reductions in page counts, changes in trim sizes, pared-down mailing lists and cancelled print projects, consumption of coated paper in North America has fallen over 25% since the third quarter of 2008. So far in 2009, shipments of paper have fallen by over 20% on a monthly basis as compared to shipments in 2008. This trend is expected to continue until at least the second half of 2009.

Because of these actions, the paper mills have attempted to match this drop in demand with supply. The easiest way to do this for them is to simply shut down their machines.

Paper Prices
After a year and a half of almost constant, quarterly price increases, paper prices are retreating and retreating quickly. No more is this evident than in the coated groundwood stocks. Coated freesheet prices have fallen to levels last seen in June and July of 2008, and they continue to fall. Coated groundwood prices, however, continue to fall and they are a moving target on a daily basis. Part of the reason for this is the greater number of groundwood manufacturers than freesheet producers.

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