NEWS

4Q newsprint price hike proposed

The fifteen largest newsprint producers in North America have proposed or committed to price increases for the 1997 fourth quarter on standard 30 lb newsprint. The top 15 producers, from the world's largest Abitibi-Consolidated Inc. to No. 15 Alberta Newsprint Co., control an estimated 86.3% of the 16.2 million mtpy North American newsprint capacity.

If successful, the increases would raise the average transaction price for 30 lb newsprint to $610/metric ton on the West Coast and $600/metric ton on the East Coast. It would be the second price increase in 1997, but, if successful, would still put the average price for 1997 at about 13.7% below the 1996 average ($645/metric ton on the East Coast). The first increase this year was for $75/metric ton on Mar. 1.

A key issue to be worked out on the increase is when it becomes effective. On both coasts, producers have differed on the starting dates for the increase: Oct. 1 or Nov. 1.

Newsprint was one of the first grades in the North American paper industry where a price increase was successful, following dismally low prices across the industry in most of 1996 and after 10 months of declining prices for newsprint.

Driving the demand for newsprint has been a robust U.S. economy that spurred more advertising revenue for and lineage in U.S. daily newspapers, the principal newsprint consumers in North America. Two of the four largest U.S. dailies, the Wall Street Journal and the Los Angeles Times, recently announced plans to add more pages to their editions. The second largest U.S. daily, USA TODAY, reported it was consuming about 6% more newsprint through June this year, compared with last year. USA TODAY also started a new once-a-month section on the Olympics in August.

A fourth-quarter increase could succeed if a strike that shut two Fletcher Challenge Canada Ltd. newsprint mills in British Columbia continues and if the U.S. dailies' newsprint consumption continues at about 4% above year-to-year levels (bringing it by year-end up to the average annual consumption over the past four years), and if U.S. and Canadian mills reduce their swollen inventories that totaled 531,000 metric tons at the end of July.

SALES & EARNINGS

Canadian companies post small profits

Canada's paper and forest products sector posted a small profit in the second quarter, reversing big losses recorded in the first quarter of the year. The pulp and paper segment of the industry is beginning to pull out of a long decline as market demand and prices are improving. Newsprint, the industry's largest commodity, has turned around and producers pushed through a $75/metric ton price increase during the second quarter. Pulp prices are also climbing. For lumber and other wood products, the outlook remains positive, but lumber prices have declined since last winter due to overproduction.

Industry profits were also affected by production curbs to balance inventories, labor unrest in British Columbia, and several large corporate restructurings. The largest was the merger of Abitibi-Price Inc. and Stone-Consolidated Corp. The new entity, Abitibi-Consolidated Inc., is the world's largest newsprint producer and now controls 20% of the North American market.

Further consolidation is expected in the Canadian industry over the next year, say analysts. Sam Magid, forest analyst at Salman Partners Inc. in Vancouver, B.C., predicts two more major consolidations as well as "strengthening balance sheets, special dividends, share buybacks, mergers and acquisitions, and just a lot of wealth creation in the sector." He told the Globe & Mail, "It's going to be a big cash flow sector."

For 20 surveyed companies, total second-quarter earnings from operations were C$55 million. This compares with net income of C$174 million in the same period a year ago. The second quarter results were a big improvement over the first quarter, when Canadian companies had net losses of $130 million. Total sales for the group were C$8.4 billion in the second quarter, a 10% increase from a year ago.

TISSUE

G-P, Metsä-Serla
in joint venture

In a shake-up of its European commercial tissue distribution, Georgia-Pacific Corp. in late August announced formation of a joint venture company with Metsä-Serla Tissue to distribute its Ultimatic and Cormatic washroom systems throughout Europe. The new venture, Ultimatic Systems GmbH, will expand an existing Nordic distribution agreement between the two companies. It will be based in Zug, Switzerland, and 54% owned by G-P.

Under the agreement, Metsä-Serla Tissue will manufacture Ultimatic and Cormatic towel products under license, and will take responsibility for sales and distribution in Europe. G-P says that its two brands will complement Metsä-Serla's own Katrin brand of towels. In addition, Metsä-Serla will acquire the hygiene products division of U.K.-based Inversek plc, which holds G-P license in the U.K. and other European countries. Terms of this acquisition were not revealed.

Leading U.S. private-label diaper maker Paragon Trade Brands Inc. in August announced that a joint venture company formed with an affiliate of Mexican Grupo P.I. Mabe SA de CV (Mabesa) acquired a controlling stake in Serenity SA, the third-largest diaper manufacturer in Argentina. The joint venture, which is 49% owned by Paragon, paid $11.6 million for 70% of the Serenity shares. In addition, earn-out payments will be made over the next three years, based on the performance of Serenity.

Svenska Cellulosa AB (SCA) recently bid DM550 million ($300 million) to acquire the 20% of German paper company Papierwerke Waldhof-Aschaffenburg AG that it does not already own.

TISSUE

Venture gets Celulosa Argentina assets

Argentine paper and pulp maker Celulosa Argentina SA said it will sell its tissue and board manufacturing assets to Kimberly-Clark Corp. (K-C) and Brazil's Industrias Klabin de Papel e Celulose SA for $19.9 million, according to AP-Dow Jones. Celulosa said in a filing with the Buenos Aires Stock Exchange that it will also receive capital injections worth $65.8 million from its main shareholders. Celulosa was scheduled to have transferred the assets to KCK Tissue SA-K-C's and Klabin's recently formed joint venture in Argentina-on Sept. 15, the statement said.

Kimberly-Clark Corp. (K-C) in August said it had won a national dual source contract to supply its Kleenex, Scott, Surpass, and Tradition paper products and dispensers to U.S. hospital and healthcare provider Premier. According to K-C, Premier owns, or is affiliated with, 1,800 hospitals with a group purchasing volume of $8 billion.

SANITARY PRODUCTS

Producers adding lotions to diapers

Procter & Gamble Co. (P&G) in July unveiled changes to its premium diapers that are seen as a prelude to more significant changes predicted for next year. The company started shipping a new skin-care range of Pampers Premium containing aloe extract at the end of June, and plans to completely replace its current Pampers Premium line in the U.S. by the end of August. The changes reflect the latest trend in adding "bells and whistles" being added to absorbent products to claw a greater share of the saturated, $4 billion U.S. diaper market. Many observers believe that new absorbent core technology-based more heavily on airlaid nonwovens-will be the next major advance, with one major airlaid producer predicting the launch of such a product by mid-1998.

The latest changes come as private label diapers continue to lose market share in the U.S. to most major brands. In the four weeks to June 22, figures from IRI show private label dollar market share for diapers and training pants, down 1.2% to 16.2%. This compares with almost 20% several years ago. Kimberly-Clark Corp.'s (K-C) share was up slightly to 41%, P&G's was static at 37.4%, and Drypers Corp.'s was down slightly to 3.1%. By product, the biggest gains were made by Pampers Premium, with a 6.4% market share, and Huggies at 23.8%.

New ingredients. P&G has been granted three patents so far this year that relate to the application of emollients to diaper topsheets, and one that describes a similar process for tissue products. "They seem to be building a patent estate," said one observer. In July, Drypers launched a diaper with aloe, following an earlier addition of baking soda to some diaper lines. The company did not make any medical claims for either product, but implied that the added ingredients could have a beneficial effect to babies' skin. Full product rollout of Drypers' aloe diaper is not expected to be complete until August.

Following P&G's latest minor changes, Paragon Trade Brands told analysts that it plans to launch a skin-care diaper later this year, and K-C said it would add skin-care ingredients to diapers in the future if consumers demand them. P&G is widely expected to lead the market with the launch next year of a diaper product with redesigned absorbent core.

SPECIALTY PAPERS

Wausau, Mosinee in $477 million deal

Two of the industry's most profitable specialty paper companies, Wausau Paper Mills Co. and Mosinee Paper Corp., announced in late August they have agreed to merge. Under the deal, which is expected to close by year end, Wausau would acquire Mosinee for about $477 million in stock ($31.33/share). The combined company, Wausau-Mosinee Paper Corp., would have a market capitalization of about $1 billion, making it one of the largest U.S. makers of specialty paper products.

The merger did not come totally as a surprise as the two companies have headquarters in Wisconsin just 15 miles apart and share a chairman, San W. Orr Jr., who will serve as chairman of the combined company. Orr said in a news release that the combined company will be "a far more formidable competitor, well-positioned to grow by increasing size, by pursuing high-return capital projects, and selective acquisitions."

The markets the companies serve do not really overlap, enhancing the value of coming together. Wausau is one of the largest players in the pressure sensitive label market through the Rhinelander division and produces 170,000 tpy of fine uncoated printing/writing papers in the cover, text, bristol, and offset grade classifications. Mosinee makes niche and technical papers used in such applications as decorative laminates, masking tape, filters, and food packaging as well as away-from-home tissue products through its Bay West Paper Corp. "They don't really directly compete, but touch," said one analyst. "It broadens both companies and is synergistic."

The combined entity, which will have headquarters in Mosinee, will operate seven paper mills and four converting plants and have a total of 3,600 employees. Mosinee had 1996 net income of $26.9 million on sales of $314.5 million; Wausau's net profit was $41.2 million on sales of $542.7 million.

Mosinee Paper Corp.'s Bay West Paper division announced plans to increase tissue production and converting capacity with a $16 million expansion and upgrade at its Ohio and Kentucky sites. The company's 61,000 tpy towel machine at the Middletown, Ohio, mill will be rebuilt, increasing capacity by 10,000 tpy, taking Mosinee's total tissue and towel capacity to 106,000 tpy. Following startup in June 1998, the machine will produce only recycled paper products.

In addition, Bay West plans to expand its Harrodsburg, Ky., converting and warehouse facility from 268,000 ft2 to 800,000 ft2, with completion scheduled for May 1998. Bay West Paper manufactures and converts towel and tissue products for the commercial and institutional markets. Its products are based on recycled fiber and marketed under the EcoSoft brand name.

FOREST RESOURCES

IP sells timberlands for $200 million

International Paper Co. (IP) said it sold management rights on 175,000 acres of mostly hardwood timberland in western Pennsylvania and New York to Forest Investment Associates of Atlanta, Ga., for approximately $200 million (or about $1,140/acre). The deal, announced Aug. 4, is part of an IP effort to generate $1 billion in proceeds through sales of assets.

IP spokesman Neal Linkon described the arrangement as a "partnership" between FIA, a Timberland Investment Management Organization (TIMO), and IP Timberlands to manage the lands "over the long haul." Transfer of management rights will be made in five phases over the next 12 to 18 months, with the first-worth $40 million-closing in September. Transferals will be made on the basis of timber value rather than contiguous tracts.

The acreage produces high-quality cherry and red oak sawtimber as well as some pulpwood used at IP's mills in Pennsylvania and New York. While Linkon would not indicate the length of the agreement, he said terms change after 40 years. Eventually, FIA will take over full ownership of the land.

Since the announcement of its restructuring in July, IP has received intense interest on the land offering. Numerous inquiries and bids were received, Linkon said.

New tax package will benefit industry

The forest and paper products industry should be among the corporate winners to benefit from the balanced-budget and tax-cut package passed by the U.S. Congress. Although the tax reform pact failed to fully deliver all of the proposals favored by forest and paper companies, a compromise tax agreement reached between the White House and congressional Republicans and the final version passed by both the House and Senate, drew praise from the American Forest & Paper Assn. (AF&PA) which, along with many in the corporate community, lobbied hard for numerous reforms. The President was expected to sign the budget and tax bills in August.

The $91 billion tax-cut package-the first of its kind in 16 years-provides a capital gains tax break, estate tax relief, and changes to the alternative minimum tax, all of which should aid forest and timber landowners and lighten the tax load on capital-intensive corporations, such as pulp and paper companies.

The capital gains tax reduction-a complex and tiered plan that offers different tax rates for different holding periods-will lower tax rates to 20% from 28% on profits from the sale of assets or securities held for five years or more. AF&PA president and CEO W. Henson Moore called the tax cut, "... a positive step for forest landowners, who often must hold their land in trees for 25 to 70 years before they are ready for harvest." In addition, beginning in 2001, the maximum capital gains tax rate will be 18% but only on the sale of assets purchased that year or later, and held for five years or more. The tax cut could stimulate investments in forest and paper companies.

REGULATION

Clinton, G-P exec talk world climate

In preparation for an international meeting to discuss global warming and establish a world climate treaty, President Clinton in August met with 10 key business leaders from major corporations to hear their views on how to reduce pollution from greenhouse gases. Georgia-Pacific Corp. (G-P) was the only forest and paper company to attend the talks, which also included business chiefs from utility, oil and gas, steel, chemical, and financial service companies. None of the company executives attended as industry representatives.

The White House invited the 10 executives, the Administration said, both to build U.S. support for Clinton's still-unfolding position on global warming, and to solicit views on how to stem the release of greenhouse gases without hurting the economy. G-P's chairman and CEO, A.D. "Pete" Correll, participated in the informal talks, but a company spokesperson said that G-P does not yet have a position on global warming. The company position will likely mirror the industry's position, which is still being formulated by the American Forest & Paper Assn. (AF&PA).

INTERNATIONAL

Aracruz Celulose reports earnings

Aracruz Celulose SA of Brazil reported net income of $16.7 million for the first six months of 1997 compared with $53.2 million for the same period in 1996. Aracruz's average price for bleached eucalyptus market pulp dropped to $443/metric ton from $456/metric ton in 1996.

Second-quarter 1997 average prices, however, improved to $450/metric ton. This reflects the more balanced market conditions since the end of the first quarter, with lower producer inventories, the company said.

Sales volume was 536,000 metric tons during the period compared with 561,000 tons a year ago. As a result of 15 days of shutdown related to an expansion project at the Espirito Santo mill, production was reduced by some 30,000 metric tons. Aracruz is planning an additional 14 days of shutdown in August for the same reason. Revenues were $222.8 million in the 1997 period vs $244.6 million in 1996.

China-Malaysia pulp, paper mill announced

A pulp and paper mill on the island of Borneo would be built as a joint venture between Malaysia and Chinese government and business interests, international news wires recently reported. The joint venture agreement was signed by the Lion Group of Malaysia and the China Pulp and Paper Industry Co. and has the backing of government officials in both countries. It would represent the largest foreign investment by the People's Republic of China outside that country.

The $1.6 billion project would produce 750,000 mtpy of pulp and 225,000 mtpy of paper. A substantial portion would be exported to China. In addition, the project would have about 220,000 ha of forest plantation with an annual production of 3.8 million m3 of pulpwood. The forest plantation portion of the project would be 60% owned by Malaysian equity and 40% Chinese owned; the mill would have a 60% Chinese and 40% Malaysian equity split.

Separately, in Malaysia, a worsening dispute between Ekran Bhd. and ABB Asea Brown Boveri AG over planned $5.7 billion Bakun hydroelectric dam is forcing the Malaysian government to consider bringing in a new party "to lead the project out of trouble," according to the Wall Street Journal. The Sarawak Pulp and Paper project is tied to wood from logging for the dam; previously the Tanoto family was involved in the joint venture. Last week in a story about currency turmoil in Asia, the newspaper reported that Malaysian deputy prime minister and finance minister Anwar Abrahim said the country would "put off some big projects, although he didn't specify which ones."

Hansol Paper has signed a letter of intent to construct a color offset book paper production line in China. The $100 million project would be a joint venture with Jincheng Paper Corp., according to the Korean Economic Daily. Groundbreaking is scheduled for June 1998 with full production of 100,000 mtpy set for the year 2000.

Stora AB and Brazil's Odebrecht SA are close to forming a 50/50 joint venture partnership in the planned Veracruz Florestal Ltda. pulp mill in Brazil, according to Swedish business daily Dagens Industri. "The project at Veracruz is very much in line with the strategy that Stora's managing director Lars-Ake Helgesson has outlined, Stora spokesman Mats Aguren told Reuters in late August. "Veracruz could be a project in this strategy."

SCA acquires Italian corrugated group

Sweden's SCA Packaging said it has acquired the Italian corrugated packaging group Cochis for SEK970 million ($123 million). Cochis operates four integrated corrugated box plants, four separate sheet plants and a small 60,000 mtpy recycled linerboard (testliner) mill. It produces about 150 million m2/year (1.6 billion ft2) of corrugated packaging. The mill and box plants are located in northern Italy and have a good geographical fit with SCA's existing operations.

SCA Packaging already operates Italcarta, a 300,000 mtpy partly integrated linerboard mill in Porcari, also in northern Italy. Since Cochis consumes 110,000 mtpy of linerboard, SCA's mill integration will exceed 100%.

As a result of the acquisition, SCA will increase its market share to 14% in Italy and becomes the largest company in the corrugated sector. SCA's current market share is 6% in boxes and 18% in the sheet segment. The Cochis acquisition is part of SCA's expansion strategy to increase its operations in southern Europe and to achieve an overall market share in corrugated packaging of approximately 15%. The Italian market is the second-largest in Europe and is growing faster than other European markets, the company said.

WOODFIBER

Chip mill projects total $155 million

A record runup of chip mill construction, notably in the U.S. South, has totaled more than $155 million in capital spending and 10 million tons of new or relocated fiber capacity in the 1995-98 period, according to surveys by International Woodfiber Report and Pulp & Paper Project Report. Yet U.S. chip mill suppliers and pulp mill managers indicate that growth is slowing and the focus of new projects is moving into the outer reaches of the South and offshore.

"It looks a lot slower than 1997," one major equipment supplier contact told IWR, describing 1996 as a "boom year." A few small projects are quoted so far for 1998, including pending projects by Champion International Corp. in East Texas, St. Laurent Paperboard Inc. (formerly Chesapeake Corp.) in Virginia, and Stone Container Corp. in Louisiana.

More than 20 known projects include $35 million invested by Rayonier Inc. in four chip mills, all in Georgia, with estimated total capacity for 2.4 million tons. Rayonier contracted industry leaders Fulghum Industries Inc. of Wadley, Ga., to build one of the mills and Price Systems Inc. of Jones Mill, Ark., for three. Jefferson Smurfit Corp. has constructed two mills with Fulghum in Florida and Georgia for about $8 million each. In many cases in the industry, an operating company related to the equipment supplier owns and operates the new facility.

CONTAINERBOARD

Solvay expansion to triple production

Solvay Paperboard L.P. announced that it would proceed with a $150 million expansion to triple production of recycled linerboard at its mill in Solvay, N.Y., with the installation of a long-anticipated second paper machine. Construction on the 150,000 ft2 building expansion is scheduled to start in late 1998. A projected startup date was not available. The mill currently produces more than 300 tpd of recycled linerboard on its single Valmet paper machine. The Onondaga County Industrial Development Agency will issue $120 million in tax-exempt bonds to help finance the expansion. Southern Container Corp., the parent company of Solvay Paperboard, also received $6 million in tax-exempt bonds from the same agency to help finance an expansion at its corrugated container plant in nearby Camillus, N.Y. The company will build a 60,000 ft2 addition to its current 200,000 ft2 facility for additional manufacturing equipment and warehousing. No capacity or startup information was available.

Weyerhaeuser Co. and Union Camp Corp. have signed a letter of intent for Weyerhaeuser to purchase Union Camp's Denver, Colo., box plant. Terms were not disclosed; closure should occur in 60 days. The plant expands Weyerhaeuser's market coverage into the Rocky Mountain region for the first time and is part of the company's strategy of serving packaging customers in growth markets through acquisitions. Union Camp sold the plant as part of its plan to focus on other strategic markets.

Box USA said it will consolidate its Charlotte, N.C., box plant into the Laurens, S.C., facility. In addition, the company will redistribute its Port St. Joe, Fla., box plant business to four other plants in the South-Birmingham and Dotha, Ala.; Lake Wales, Fla.; and Stockbridge, Ga.

Visy Industries Inc. is studying the feasibility of adding a second machine to the Staten Island, N.Y. mill, which started up a 292,000 tpy recycled containerboard machine in April. Visy Deputy CEO Mike Harwood said newsprint, tissue, and uncoated free-sheet paper machines are among the grades being studied. He said the Staten Island site has room for a total of three machines, and Visy has a 10-year contract for gaining recovered paper from the city of New York. "We're trying to find the right value-added products," Harwood said.

DEINKED PULP

Restructuring, bankruptcy underway

Several new over-leveraged, air-dried market deinked pulp (MDIP) mills are involved in complicated financial and legal proceedings in an effort to tackle relentless money problems exacerbated by the unforgiving weak pulp market. Three mills have been undergoing restructuring, with one already having filed for bankruptcy protection and at least one other possibly to follow. Litigation and threats of litigation are also unfolding in other operations.

"All these mills are fundamentally fine, but they suffer from too much debt," said J.T. Atkins, managing director of Oppenheimer & Co. Inc., which represents bondholders in the restructuring of the bankrupt Fiber Resources L.P. (AFR), as well as the Great Lakes Pulp & Fibre and the idled 1st Urban Fiber Operations Inc. He noted that Great Lakes is one of the "easier" restructuring projects because it does not require refunding in order to make equipment corrections-as compared with some $15 million needed for AFR.

He said that as a result of the AFR bankruptcy, the debt will be cut to less than half of its original amount and that bondholders will probably get something less than $0.50 on the dollar. Atkins also said that there is "no reason" 1st Urban shouldn't accomplish the restructuring and start up again.

However, some industry observers doubt that there are enough additional customers to go around. "If just one other mill is coming up and making quality, they would devour each other," said a pulp broker, adding that wastepaper prices would "ignite if the market picks up." 1st Urban receiver appointed; sale possible 1st Urban Fiber Operations Inc. in Hagerstown, Md., on Aug. 14 was put into the care of a receiver responsible for preserving the mill pending a possible sale, according to The Herald Mail in Hagerstown. The bondholders sought the receivership, awarded to G. Richard Gray, president of Financial Conservators Inc. in Baltimore, after assuming control of the mill in August.

Jay Smith, an executive of bondholders' trustee First National Bank of Maryland, said owners Hagerstown Fiber Limited Partners and general partner Pencor First Fiber Inc. had missed a semi-annual payment to the bondholders for the $159.8 million in tax-exempt revenue bonds that the State of Maryland issued to build the mill, according to the publication. Smith also reportedly said the owners also were in default because they used up the company's $15 million stabilization fund, ceased operations, fired employees and security, and left the premises. The article noted that Jefferson Smurfit Corp. has filed a breach of contract suit over an alleged failing to pay for wastepaper and that there is also an arbitration proceeding between Hagerstown Fiber and SBCCS Constructors, which built the mill; Hagerstown Fiber seeks $1.6 million from SBCCS to fix a wastewater treatment plant plus another $5 million to $6 million in liquidated damages for other claims.

CAPITAL EXPENDITURES

Willamette announces MDF, paper projects

Willamette Industries Inc. announced projects for its paper mills in Johnsonburg, Pa.; and Bennettsville, S.C.; its medium density fiberboard (MDF) plant, also in Bennettsville; and the construction of a new engineered wood products plant in Louisiana.

The company will upgrade its No. 1 paper machine at the Johnsonburg, Pa., uncoated free-sheet paper mill to improve paper quality and increase its capability to add a wider array of specialty papers to the machine's grade mix. The upgrade is expected to be completed by December 1998 and will increase the machine's capacity by approximately 15 tpd.

At its Marlboro Paper Mill in Bennettsville, a new 40 tpd chlorine dioxide generator will be installed by August 1998 to eliminate the use of elemental chlorine. At its MDF plant, the company will install air pollution control equipment by first quarter 1999. Neither project will increase production capacity.

Willamette will also construct a laminated veneer lumber (LVL) and wooden I-joist facility adjacent to its glue-laminated beam plant near Simsboro, La. The plant will convert high-grade veneer from the company's northern Louisiana plywood plants into LVL. The LVL will be sold in the beam and header market or combined with oriented strand board (OSB), made at a company facility in nearby Arcadia, and made into I-joists. The new facility will improve the company's vertical integration in the region and increase its participation in the value-added engineered wood products market. The plant is expected to begin production in the fourth quarter 1998.

OUTLOOK

U.S. pulp and paper industry looking up

The U.S. paper industry is beginning to emerge from a deep cyclical downturn and underlying demand appears to be strengthening across the board, according to a recent financial report published in Standard & Poor's (S&P) Credit Week. Pulp and paper inventories have been declining for the past few months and there is sufficient demand growth to justify some general firming in prices, the report said.

As a result, S&P's U.S. pulp and paper industry outlook for the next few years is "cautiously optimistic." The securities rating firm said that capital spending plans will not be "overly aggressive," and expansion plans will probably be scaled back given the current market conditions and weaker financial returns.

S&P currently rates 69 paper and forest products companies with ratings most heavily weighted toward the lower investment grade level (BBB-). The ratings are meant to be forward-looking, so anticipated cyclical upturns and downturns, whether industry related or resulting from changes in the overall economy, are factored into the rating process.

"The U.S. industry's cost competitiveness remains above average," commented S&P analyst Edward Brennan. "Plants and facilities are modern, large, and efficient by world standards, and producers have ready access to relatively low-cost raw materials. In addition, North American producers are expected to add very little new capacity as recent weak pulp and paper results made large, costly expansion projects very difficult to justify," said Brennan.