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Grade Profile
Uncoated groundwood: Market demand rises, producers brace for new capacity
GRADE STRUCTURE. A higher grade than newsprint but lower than fine papers, uncoated groundwood papers carry the distinction of being a group of higher-value grades. Several of the grades are closely related to newsprint and track it on pricing. By definition, the uncoated groundwood grades contain more than a 10% mechanical pulp content, and contain varying proportions of chemical pulp and fillers. These uncoated groundwood papers are used for a variety of end uses, such as telephone books, magazines, catalogs, advertising inserts, Sunday newspaper magazines, direct mail flyers, business forms, and paperback books.
Typically, most uncoated groundwood papers are a step up from newsprint in both quality and price, with higher brightness levels and smoother surfaces. Several of the grades, such as machine-finished (MF) offset and rotonews, are marketed as cost-effective, slightly higher-quality substitutes for newsprint. In the case of supercalendered papers, they are a lower cost alternative to lightweight coated (LWC) groundwood paper. Supercalendering and soft calendering add a glossy surface to make a paper (grades SC-A, SC-B, SC-C, and soft-nip) that competes with LWC for some business. Brightness levels range from 62 to 72 Elrepho, compared to 56 to 62 for standard newsprint and 68 to 84 for LWC. Basis weights range from 20 to 45 lbs.
Mills with newsprint machines often make some uncoated groundwood paper, and some newsprint machines have been converted to sole production of the grade. Uncoated groundwood papers also include rotogravure, white directory and forms (mostly blended with chemi-thermomechanical pulp).
PRODUCTION/CAPACITY. Uncoated groundwood paper prices peaked in the last quarter of 1995 and first-quarter 1996-on the heels of tight supply for LWC and uncoated free-sheet papers. Printers and publishers responded by building inventory that vastly reduced demand for the papers and sent prices plunging. The prices dropped 20% to 25% by the end of 1996 on the key grades MF offset, white directory paper, and SC-A.
Demand picked up in early 1997 as inventories pared down and the economy remained robust, but producers still expected a continued period of slow recovery in the market. By mid year, U.S. production of uncoated groundwood grades was up 1.5% (compared with first-half 1996). U.S. exports were up about 40,000 tons through the first quarter. North American shipments of SC papers rose 17% in the first half of 1997. Large publishers who buy white directory paper expected consumption to rise 2% in 1997, compared with 1996.
Even with the improvement, several producers worried about how new capacity projects will impact the North American market. From 1996 to 1998, Canada's capacity to produce uncoated groundwood papers will increase 11.8% with the addition of the 385,000 stpy Stora Forest Industries Ltd. SC-A+ machine at the Port Hawkesbury, N.S. mill, and the Alliance Forest Products Inc. machine conversion to produce an added 115,000 stpy of SC-A and B papers at the Dolbeau, Que. mill, according to the Canadian Pulp and Paper Assn. In the U.S. from 1996 to 1998, capacity was expected to increase by 82,000 tons from conversions and speedups, according to the American Forest & Paper Assn. Irving Paper Ltd. will add a Valmet OptiLoad onto a newsprint machine at the Saint John, N.B., mill, to start producing SC papers by fall 1998 with an annual capacity of 175,000 tpy.
OUTLOOK. None of the uncoated groundwood grades increased in price across the board in the first half 1997, reflecting the cautious approach taken by producers as demand showed signs of improvement. Some SC and MF offset producers were considering increases for the late third or fourth quarters if orders remained steady, and if LWC and newsprint prices kept rising.
BY GREG RUDDER,
News Editor
SUPPLY/DEMAND (million tons)
FORECAST (000 tons)
| UNITED STATES1 |
1997e |
1996p |
1995r |
Production
(shipments) |
1,994 |
2,028 |
2,129 |
| Capacity |
2,359 |
2,334 |
2,198 |
| Utilization rate, % |
84.5 |
86.9 |
96.8 |
| Imports |
1,961 |
1,972 |
2,221 |
| Exports |
264 |
224 |
203 |
Apparent U.S.
consumption |
3,691 |
3,776 |
4,147 |
| lb/capita |
27.5 |
28.4 |
31.50 |
000 tons/billion $
real GDP (1992) |
0.515 |
0.546 |
0.61 |
| CANADA2 |
Production
(shipments) |
2,661 |
2,551 |
2,889 |
| Capacity |
3,080 |
3,078 |
3,122 |
| Exports |
2,384 |
2,303 |
2,588 |
| Utilization rate, % |
86.4 |
82.9 |
92.5 |
| 1. AF&PA. 2. CPPA. e=Pulp & Paper estimate; p=preliminary; r=revised. |
TOP N. AMERICAN PRODUCERS
| Company |
Annual
capacity*
(000 tons) |
Market
share
(%) |
| 1. Abitibi-Consolidated1 |
1,653 |
30.3 |
| 2. Champion International |
523 |
9.6 |
| 3. Bowater |
374 |
6.9 |
| 4. Alliance 2 |
369 |
6.8 |
| 5. MacMillan Bloedel |
363 |
6.7 |
| 6. Fletcher Challenge |
255 |
4.7 |
| 7. Tripap |
248 |
4.5 |
| 8. Consolidated Papers |
240 |
4.4 |
| 9. Madison Paper |
225 |
4.1 |
| 10. Daishowa (N. America) |
195 |
3.6 |
Market share of top five companies: 53%
Market share of top 10 companies: 74%
North American capacity: 5,440,000 tons.
U.S.: 2,358,000 tons; Canada: 3,081,000 tons.
* All tons are short tons; capacity based on 1997 estimates. 1. Abitibi-Consolidated Inc. was formed by the merging of Abitibi-Price Inc. and Stone-Consolidated Corp. The new company began operating in June 1997. 2. Alliance figures include the Coosa Pines, Ala., acquisition and conversion of a newsprint machine at Dolbeau, Que. Machine conversion completed in July 1997. Source: Pulp & Paper Week, Company Profiles, company data.
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