Arandell Corporation

Blake Hutchison, Director of Purchasing

Wow, what a difference a few price increase announcements make on demand!  I think the mills got the desired effect they were looking for.

Lead times are increasing and increasing rapidly.  Coated groundwood grades seem to be accelerating the quickest, with lead times already out 5 - 7 weeks.  Coated freesheet, while not as bad, is still out 3 - 5 weeks.

The greatest factor in how quickly you can get paper is the basis weight.  If you print on a heavier weight (70#, 80#, 100#) your lead times won’t be as long.  38# through 60# basis weights, both coated groundwood and coated freesheet, are in high demand and their lead times are accelerating faster than the heavier weights.  32# - 38# is a little better, but not by much.

My advice would be to get your paper situation figured out quickly and at least get an LDC date to work off of so that you can properly estimate how much time you are going to need. 

If you have any questions, please don’t hesitate to email me  or call me at 800-558-8724

Thank you.

Blake Hutchison, Director of Purchasing

We have been bombarded the past few days with price increase announcements from our North American mill partners. 

Below is a listing of which mills have announced, how much they are initially going to increase their prices, and when they will take effect:

 Sappi:

• Coated freesheet (CFS) web products (all finishes)
  • 55# and up - $1.00/cwt
  • 50# and below - $3.00/cwt
• Effective immediately on new and unconfirmed orders

 West Linn:

• CFS products (all finishes)
  • $2.00/cwt
• Effective with all orders placed on or after May 21^st and on any existing orders shipping on or after June 1^st

 Appleton Coated:

• CFS products (all finishes)
  1. $2.00/cwt
• Effective with orders shipping on or after June 1^st

 Verso Paper:

• CFS products (all finishes)
  • $2.00/cwt
• Coated Groundwood (CGW) products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st

 NewPage:

• CFS products (all finishes)
  • $2.00/cwt
• CGW products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st

 Evergreen:

• CGW products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st

 AbitibiBowater:

• CGW products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st

 Kruger:

• CGW products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st

 UPM:

• CGW products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st

 FutureMark:

• CGW products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st

 Catalyst

• CGW products (all finishes)
  • $3.00/cwt
• Effective with new orders entered and all existing orders shipping on or after June 1^st 

In discussing these increases with our mill partners, one theme has been constant: they are raising prices to curb the continued pricing depression as well as alleviate pressures from rising input costs.  Pulp prices have been rising, and there is no more money coming in from the Black Liquor tax credit.  We will continue to be diligent and do everything we can to mitigate these increases as much as possible.

Lead times for both CFS and CGW grades are creeping out. CFS is out anywhere from three to five weeks, and some CGW grades are already out six weeks. I would encourage each and every one of our clients to get your paper orders in as quickly as possible to ensure availability. 

If you have any questions, please don’t hesitate to email me or call me at 800-558-8724

Thank you.

Blake Hutchison, Director of Purchasing

Over the past three business days, we have seen the North American paper mills announce price increases.  The following is a list of mills, the affected grades, and when the increase takes effect:

 Appleton Coated:

• $1.50/CWT
• Effected grades:
  • Utopia 3
  • Utopia Book Family Grades
  • Utopia Film Coat
  • All private label grades
• All basis weights and finishes
• Effective with shipments April 1^st, 2010 or later.

 West Linn:

• $1.50/CWT
• Effected Grades:
  • Sonoma
  • Capistrano
  • Natureweb
  • Natureweb Plus
• All basis weights and finishes
• Effective with all new or existing orders shipped on or after April 1^st 2010.

 Verso:

• $1.50/CWT
• Effected Grades:
  • Influence
  • Velocity
  • Liberty
  • Advocate
  • Clarity
• All basis weights and finishes
• Effective with all orders entered immediately (3/15) and all order shipping on or after April 1^st 2010.

 Evergreen:

• $1.50/CWT
• Effected Grades:
  • TruSpec 4
  • TruSpec 4.5
  • TruSpec 5
• All basis weights and finishes
• Effective with orders entered immediately (3/16) and all orders shipping on or after April 1^st, 2010.

 AbitibiBowater:

• $1.50/CWT
• Effected Grades:
  • AbiBowGloss
  • AbiBowBright 76
  • AbiBowBright 80
  • AbiBowMax 84
  • AbiBow SCA
  • AbiBow SCB
  • AbiBow SNC
• All basis weights and finishes
• Effective for all new orders placed immediately and for all shipments effective May 1^st, 2010.

 NewPage

• $1.50/cwt
• Effected grades:
  • Arborweb
  • Orion
  • Vision
  • Escanaba
  • Dependoweb
  • Capri
  • Consoweb
• All basis weights and finishes
• Effective with new orders entered on or after March 15^th, 2010.

Why the increase?

In discussing these increases with the various mills, the most common answer has been their production COSTS. Indeed, those have been on a slow, but steady rise over the past six months, especially with the price of their primary input, pulp. The mills were able to absorb these rising costs as long as they were still making money from the Black Liquor tax credit, but now that it is gone (as of 12/31/09) they are hurting.

Another reason being given is the strength they are seeing in their order logs. Since November 2009, there has been an uptick in orders, and year over year paper shipment numbers have seen double digit increases since December 2009. The mills have curtailed so much production in the past 24 months that they believe they have been able to bring their supply level in line with demand. 

Will there be more?

My estimate is that the $1.50/cwt increase is only half of what the mills really want. I believe they initially wanted $3.00/cwt, but have since realized that perhaps two $1.50/cwt quarterly increases would be a more effective way to incrementally get what they desire. I very much expect to see another $1.50/cwt increase, effective July 1, 2010.

Blake Hutchison, Director of Purchasing

My Paper Prognostications for 2010

Gazing into the crystal ball, here are some things that I see coming in the New Year:

Supply:
Throughout 2009, seldom has a week gone by where we have not read about a sawmill closing, a paper machine being idled or a mill closing their doors. Supply is what paper mills can control the most, and to try to keep pricing in line with demand, they have taken a large chunk of capacity out of the system. The mills have also looked at their platforms and tweaked schedules to fit demand. In some cases, grades and basis weights that were run two to three times per month are now only run once, and some are only run once every six weeks. This has resulted in us seeing lead times and LDC dates push out to four to six weeks on some grades, where they had been only two to three weeks earlier in the year.

Inventories have been worked down to lower-than-normal levels, and I believe that paper mills are going to engage in rush inventory building or order pre-making due to their desire to have cash readily available and not tied up in inventory.

So, with reduced schedules and inventories and fewer machines making paper these days, I would watch for some LDC extensions for the next couple of months. I expect more mill downtime in the first and second quarters as demand decreases over the first half of 2010. If the second half of 2010 is busier than 2009, which I certainly hope it is, I expect longer lead times and potentially some tight markets, especially for SC grades. A key thing to remember is that it is not going to be as easy to get paper during the second and third quarters of 2010 as it was in 2009. Plan ahead.

Demand:
Demand estimates for coated paper in 2010 range from a 2% to 8% INCREASE over 2009 from what I can see. In speaking with the paper mills, a general consensus is that 2009 was horrible, but 2010 should see a small improvement; somewhere in the 3% to 6% range and this is what they are budgeting for. I believe they are hoping that the holiday season goes well and that companies will start to print again. I believe (and hope) they are right in their predictions.

Price:
The increase announcements that were to have taken effect in October never really materialized.  I believe that was more of an effort by the coated and uncoated producers to try to stop the pricing reductions of the second and third quarters more than trying to get more for their grades.

But, rest assured that there will be more increases coming in 2010. Several factors will lead to this, but the big factor is the elimination of the black liquor tax credit at the end of 2009. During the third quarter, U.S. paper mills that had pulping capacity took in almost $1 billion in tax credits from this program. In many cases, this helped the mills to go from red to black on the balance sheets. Well, that is going away. Input costs for the mills have been rising and this credit has been helping them weather the storm. Watch for an announcement sometime in January. That probably will not hold for long (if at all), but there will be at least $3.00/cwt worth of paper increases in 2010. Plan on it for the second half of the year.

If you have any questions, please just let me know!  Thank you again for your business!

Blake Hutchison, Director of Purchasing

I recently read an article in Multichannel Merchant that detailed some ideas about how a cataloger can gain control of their paper spend for 2010 and how these ideas will always result in lower costs.  In reviewing these ideas, I found some of them to contain the truth, but not “the whole truth” as they say in court.  So I thought I would provide some perspective from a printer who supplies paper for many of our clients.

Idea #1:  Establish long term pricing now

Pricing levels have decreased some 20% YTD.  And while the buyers of paper have had the upper hand throughout the year, that will change in 2010.  The producers will be able to pass along some increases.

Printers have the upper hand when it comes to negotiating pricing caps.  When an end user is negotiating their prices with a mill (through a merchant), their only negotiating tool is their annual tonnage.  A printer has the ability to take the annual tonnage of all of their paper clients, combine them and use the whole as leverage with their mill partners, thereby increasing the paper buying power of their clients.  By being part of the whole, you can significantly limit your exposure to these increases.

Ideas #2 & #3:  Challenge your printer to reduce waste and use paper calculators

Paper waste is a natural part of the printing process. A printer is not only challenged on their waste factors by end users, but also by the industry as a whole.  The more they can reduce their waste factors, the better position they are in to reduce paper consumption costs.  A “paper calculator” is a very generic tool that some merchants have put together to try to challenge the printer on their waste and create an “in” with an end user. 

The printer knows their presses. They know the most efficient way produce a job on press.  They know what grades, basis weights, finishes and specific brands of paper perform the best on their presses.  They work everyday on ways to reduce paper waste factors.  Yes, it is important to consider waste.  But to use a very generic calculator to come up with tonnage numbers that really have no basis in reality is a good way to create contention. Trust me; the printer is doing their very best on your behalf.

Ideas #4 & #5:  Reduce your cover and text weights

Always a good thing to consider when looking for ways to reduce paper costs.  But BE CAREFUL.  It might not always be the best idea.  The USPS has just announced new “droop test” regulations that have a lot of end users scrambling to HIGHER basis weights in order for their pieces to pass the test.   

You also might want to consider how your printed piece will look.  As you decrease your basis weight, you are sacrificing opacity and creating “show through”.  Your printer should have plenty of printed samples of what downgrading in basis weight will look like.

Idea #6:  Ship rail

Remember the idea of combining purchases to leverage paper prices?  The same can be done with shipping costs.  The more paper you are ordering as a whole will dictate whether or not you are able to ship rail.  An end-user who prints three or four times annually only gets to combine those tons in a shipment.  But a printer who may have three or four other paper clients printing right around the same time can combine those tons and get them to ship rail.  A printer has the ability to forecast, well in advance, and is in a much better position to work with mills to achieve maximum transit cost savings.

Some other ideas not mentioned in the article:

• For those end users who purchase their own paper: pay close attention to your consumption reports. The leftover inventory that is listed on your report is REAL MONEY and should be utilized as quickly as possible. Make sure you work with your printer to find a home for it as quickly as possible.
• If an opportunity to use it isn’t readily available, work with your printer to get rid of the paper. They might have an opportunity to use it on another printing for another client and might buy it from you.
• Do you know what the storage and handling charges are at your printer? If not, you should. The storage and handling of paper is a real cost to a printer. If they aren’t supplying the paper, they are going to need to charge for those services.
• In many cases, if the printer is able to supply the paper, they will waive those charges.

Questions? Please feel free to contact me any time at 800-558-8724, ext. 165 or BJHutchison@arandell.com.

Blake Hutchison, Director of Purchasing

I just received the following letter from Verso executive Michael Weinhold.

Click here to read the letter.

I find this letter to be extremely interesting.  I was expecting mills that were garnering large sums of money from the black liquor tax credit to announce increases by the end of the year (as per my earlier post), but Verso has just jumped the gun on everyone.  We aren’t sure at this point if it will stick.  I think a lot of it depends on what the other coated freesheet producers (NewPage, Sappi, Appleton Coated, West Linn, etc.) do in response to this.  Some of them have been taking money from the tax credits, but others haven’t. 

We will keep you posted.  Any questions, please feel free to contact your sales rep or myself directly.

***SEPTEMBER 2, 2009 UPDATE***

I also recieved the following letter from NewPage proclaiming their price increase. It appears this will be an industry trend….

NewPage increases prices for coated freesheet grades.

Blake Hutchison, Director of Purchasing

It’s that time of year again …

For the average American the holiday season begins with a kick in November…and maybe October for the early planners. But for us in the printing and catalog/retail industries, the holiday season is well under way. At Arandell, we are deep in the midst of receiving files packed full of fur-lined boots, scarves and mittens, and delicious holiday hams and turkeys.

With the start of the “busy” holiday season, there are a few things that every cataloger must remember to ensure their books are produced to spec and delivered on time. One key factor of importance is meeting your LDC, or Last Date to Change.

LDC’s are creeping out.

According to Pulp & Paper Products Council, June shipments of printing and writing papers showed a 5.1% INCREASE over May shipments. Amazing!  This affects catalogers because we are also seeing LDC dates creeping out. In the past we have seen three- to four-week LDC dates; now they are moving out to four- to six-weeks in some cases. Why the movement? A couple reasons:

   • We are entering the typical “busy season” for paper mills, where their backlogs of orders and runs are filling up. This happens every year.

   • The mills have taken a lot of downtime throughout the slow spring season. Many of the machines are still down. Because of this, specific combinations of basis weight and grade (i.e. 80#, #3 COVER) that might have been manufactured twice per month in the past, are now only manufactured once, and thereby increasing lead times and LDC’s.

In the past six- to eight months paper has been readily available; last-second spot orders have been able to be filled. Given the above two factors, however, things will continue getting tighter, and much more quickly than anticipated. 

With paper prices falling to levels last seen over a year ago, there have been cases where LDC orders have INCREASED because end users have more money to spend than the last time. Multiply situations like this all over the country, and ready dates and LDC’s could continue to move out further and further.

How to ensure you have your paper when you need it.

It is important to keep in close communication with your printer and watch your LDC dates. Make sure you and your team are ready when it comes time to finalize everything. Missing your LDC could drastically affect your holiday selling season.

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

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.

Read more…