Uncoated groundwood: New capacity offset by shutdowns, robust U.S. advertising

GRADE STRUCTURE: Uncoated groundwood papers (also known as groundwood specialties papers) are higher valued from newsprint, but are less costly than free-sheet grades. By definition, uncoated groundwood grades contain more than 10% mechanical pulp and varying proportions of chemical pulp and fillers. They are used in a variety of printed products such as telephone directories, catalogs, advertising inserts, Sunday newspaper magazines, direct mail flyers, business forms, and paperback books.

Typically, most uncoated groundwood papers are considered value-added from newsprint, with higher printing quality, higher brightness levels, smoother surfaces, and a higher price. Several of the uncoated groundwood grades, such as machine-finish (MF) offset and rotonews, are marketed as cost-effective, slightly higher-quality substitutes for newsprint. In the case of supercalendered (SC) papers, they are a lower-cost alternative to lightweight coated (LWC) groundwood paper. Super-calendering and soft calendering add a glossy surface to make a paper (grades SC-A+, SC-A, SC-B, SC-C, and soft-nip) that competes with LWC for some end uses.

PRODUCTION/CAPACITY: The American Forest & Paper Assn. revised downward its latest estimate of U.S. uncoated groundwood capacity by 6% or 130,000 tpy in 1999 reflecting conversions to other grades. A new machine this year at the former Donohue Industries Inc.’s mill in Lufkin, Texas, will contribute to capacity growth of 1.9% annually over the three-year period ending in 2002, yet overall uncoated groundwood capacity in 2002 will be about 4% below its 1996 peak of 2.3 million tpy, AFPA said.

The Lufkin mill, now owned by Abitibi-Consolidated Inc., is near the end of a $178 million project to install the former Gold River newsprint machine from British Columbia as a 250,000 mtpy uncoated SC-B paper machine. Three older machines are being shut down.

Most recent growth in uncoated groundwood capacity has occurred in Canada, where Alliance Forest Products Inc. is nearing startup of a C$275 million, 152,000 mtpy new machine to make SC-A paper. Two older units at the Donaconna, Que., mill will be closed. Stora Enso Port Hawkesbury started up the world’s largest SC machine, a 385,000 mtpy unit in Nova Scotia, in 1998.

U.S. groundwood paper shipments in 1999 of 1.983 mtons were down 3.8% from the year earlier. For the first quarter of 2000, annualized shipments of 1.928 mtons were running 2.1% higher than the year earlier, according to AFPA. Canada’s shipments of uncoated mechanical printing papers in 1999 of 3.026 million mtons was up 17.2% from the year earlier, reflecting the Port Hawkesbury startup.

Recent notable closures in North America include a 140,000 tpy high-bright machine at Fort James Corp.’s Wauna mill in Clatskanie, Ore., that was permanently shut down early in 2000 and a 50,000 tpy groundwood specialties machine at Abitibi’s mill in Trois Rivieres, Que. Also, Uniforet Inc. said it would permanently close its Tripap mill in mid-2000.

MARKET OUTLOOK. As with other printing/writing paper grades, a wave of imports to the U.S. compounded overcapacity problems for newsprint and groundwood paper markets in the U.S. Imports to the U.S. in 1999 of 3.384 million tons were 9.8% higher than the year earlier, while exports of 154,000 tons were down 5.0% Imports in 2000 are expected to be 7% higher than 1999, tapering off in 2001.

Still, a strong U.S. economy, and record advertising volumes related to dot-com marketing, led to strong demand conditions in the U.S. from late 1999 into 2000. A long labor strike against Abitibi in mid-1999 crimped supply, but the market softened as production resumed in full by early 2000.

By mid-year, prices were moving upward across several key uncoated groundwood business.

By James McLaren

Executive Editor-Pulp & Paper Week