US greetings cards manufacturers (and by extension paper producers) have even more to lose from a switch to e-cards: according to the US Greeting Card Association (US GCA) approximately 7 billion greetings cards are purchased each year by US consumers, generating an estimated $7.5 billion in retail sales. Some 2 billion of those cards are sent over the holiday season. By contrast, just 500 million e-cards are sent in a calendar year, although the figure is growing.

If the tradition of sending handwritten cards via the mail is lost, it is not just large firms such as Hallmark or Paperchase that will suffer. Many of the more than 3,000 US firms that publish greetings cards are small businesses. In the UK, which sends more cards per head of population than any other country, there are some 800 publishers, most of which have fewer than five employees.

Yet does the card industry really have anything to fear from online? Not necessarily. While it is true that some people (mostly men - 85% of cards are sent by women reckons the UK GCA!) will opt to send greetings electronically to save time, money or because of the inevitable wave of 'it's more environmentally friendly' propaganda (researching this blog I discovered four recent newspaper articles saying just that), there are still strong reasons to believe that most people will stick with a card, an envelope and a stamp for the foreseeable future. Firstly, there is the fear of computer viruses, which are often spread via links to bogus e-cards. Secondly, and more significantly, it is simply nicer to receive a physical card that you can display at home or work than it is to receive an email with a dancing snowman singing 'Deck the halls', no matter how many (jingle) bells and whistles are attached.

The (latest) results of last week's (admittedly unscientific) RISI Poll seem to bear this out. While 29.8% of respondents said they would not be sending Christmas or other season's greetings cards this December, more than half of the 70.2% who will be are going to send a physical card same as always. Just 14.9% of all respondents plan to send mostly e-cards.

Email: justin@justintoland.com

Pundits have been expressing surprise the past few days that the House version of healthcare reform includes a seemingly unrelated provision to block the so-called "Son of Black Liquor" loophole that could be worth $50 billion in tax credits to U.S. pulp mills. But as The Reel Time Report newsletter pointed out this week, that doesn't seem to be the first time that black-liquor subsidies have been entwined with healthcare politics.

The newsletter, published by Forestweb, suggests Democrats used the oldest trick in the book to get a woman to say yes -- plying her with liquor. In this case, the woman is Sen. Olympia Snowe (R-Maine), and the liquor is black liquor, an energy-rich byproduct of the kraft pulping process.

The following chronology from the past eight months tells the story:

• March 5: Domtar Corp. announced it would indefinitely idle its Woodland pulp mill in Baileyville, ME in May, putting 300 people out of work.
• Late March: Stock analysts and the news media revealed that some pulp companies had discovered a loophole in a U.S. law that was meant to encourage production of "green" motor fuels. By mixing a bit of diesel with black liquor, the companies were able to get government alternative-fuel payments equal to one-third to one-half the market value of the pulp they produced. See Pulp Fiction: Eco-Credits for Black Liquor.
• April 5: Word started circulating that Sen. Max Baucus (D-Montana), chairman of the Senate Finance Committee, wanted to close the black-liquor loophole before its scheduled expiration at the end of this year. Reports indicated that legislation, supported by the Obama Administration, was imminent.
• April 6: Sen. Snowe visited the Woodland mill and told workers that her goal was to save the mill.
• April 23: "The black liquor tax credit is crucial to the survival of the paper industry, and to maintain and create jobs," said Sen. Snowe as she joined joining several other senators from pulp-making states to urge continuation of the credits. NewPage, Verso, and Sappi also own kraft pulp mills in Maine.
• June 10: Domtar announced it would reopen the Woodland mill, partly because of black-liquor credits.
• June 11: Baucus and Sen. Chuck Grassley (R-Iowa) released a draft of legislation that would close the black-liquor loophole.
• Sept. 16: After months of Finance Committee work on the subject, Baucus introduced his version of healthcare-reform legislation.
• Late September: Baucus and other Democrats backing healthcare reform stepped up their wooing of Sen. Snowe because she was the only Republican member of the Finance Committee who was not clearly opposed. A yes vote by Sen. Snowe, some said, would kill any hopes of a Republican filibuster if the legislation made it to the Senate floor.
• Oct. 13: Sen. Snowe joined 13 Democrats on the Finance Committee in approving Baucus' bill.
• Nov. 5: The Reel Time Report published a special report estimating that about $6 billion in black-liquor credits have been paid out to U.S. pulp mills this year and that the total will surpass $8.5 billion by the end of the year. If anything, the estimates appear to be a bit low because in some cases the newsletter used companies' reports of black-liquor credits "net of expenses" rather than the full, pre-tax amount of the credits.
• Nov. 8: As of this date, the Baucus-Grassley draft on black liquor has not been introduced. The Reel Time Report notes that Baucus and other Democratic critics of the credits "became quiet" at the same time that Snowe "took up the cause of the kraft pulp producers." The newsletter adds, "The point is that Senator Snowe was the key that kept this money flowing."

Another black-liquor/healthcare-reform connection arose a few days ago when House Democrats decided to help "pay" for healthcare legislation by closing the "Son of Black Liquor" loophole. (See Son of Black Liquor: A $50 Billion Loophole for the U.S. Pulp and Paper Industry for an explanation of the loophole and 'Black Liquor' Tax Credit Restriction Rides on Health Care Bill for a description of the House's action.)

Never mind that closing the loophole would not add any money to the federal budget, just prevent the government from doling out funds that weren't in the budget. And never mind that the Son of Black Liquor loophole probably doesn't even exist because EPA regulations won't allow it. (See Will the EPA Stop 'Son of Black Liquor'?)

With the kind of Alice in Wonderland accounting that occurs only in Washington, House Democrats can claim they found a way to help pay for healthcare legislation and to prevent a continuation of controversial pulp-mill subsidies. But if Democrats once again find themselves coveting some key moderate votes from paper-producing states, don't be surprised to see Son of Black Liquor rise miraculously from the dead.

This article originally appeared at Dead Tree Edition (http://deadtreeedition.blogspot.com), which is written by a magazine-industry manager who goes by the pseudonym D. Eadward Tree. Comments made in this blog are the opinion of the author and do not necessarily reflect that of RISI, Inc., its parent company or sponsors.

Opposition lawmakers state that the broadcast reform bill that was recently approved in Argentina will open the country's airwaves to new players, but critics say it will increase the state influence on the media. Meanwhile, some experts believe it will be a great step to decentralize Argentina's audiovisual licenses explorations as it will reduce the license numbers each company can own from 10 to 24.

Increased inspection of newsprint suppliers

In a market where overall media has been managed by few players - Grupo Clarín currently owns an assortment of broadcasting stations, TV channels, magazines and newspapers - it's easy to understand why this bill has become a nightmare for media companies, which will certainly have their media concessions restricted. On the other hand, the text of the new bill enlarges the state's control as Argentina's government will be responsible for the media licenses approval.

The subject becomes more complex as Clarín coverage is currently reporting Kirchner's government irregularities, which is - again - a nightmare for Argentina's government. In a response, President Kirchner has started narrowing in on the daily newspaper with increased inspection procedures and also started questioning the legality of the board of its newsprint supplier Papel Prensa.

Papel Prensa, which has a production capacity of 185,000 tonnes/yr of newsprint at its San Pedro mill, is mainly controlled by the newspapers Clarín and La Nación, but the government also has a minority stake. It supplies paper to around 95% of medium and smaller newspapers in Argentina as well as its main controllers. The Papel Prensa's newsprint facility was created in 1978 in a state-private initiative to supply paper to the local newspapers. Since then, though, things have changed a lot. Clarín has become the main critical media to the local government worsening their relationship and consequently their common business.

On September 30, Group Clarín's board and Argentina's Secretary of Interior Commerce, Guillermo Moreno, had a meeting asked by Kirchner government in order to review Papel Prensa's current executive board formation.

Control of newsprint equals power

A company material fact submitted on Oct. 6 to the Argentinean Securities and Exchange Commission detailed the meeting. On the occasion, Moreno aggressively reported that Clarín monopolized the public opinion in the country and the government would not allow it. According to Moreno, Papel Prensa has been restraining newsprint supply to other newspapers in the country, which would force its competitors to import paper for higher and disadvantaged prices. Due to that, Moreno said the government would interfere in the company's shareholders composition by means of an emergency decree.

Local contacts say that all domestic newsprint output is preferentially directed to Clarín and La Nación. The remaining tonnage - very low, by the way - is shipped to other competitors. Some sources also question the paper distribution system, alleging the two dailies' controllers usually obtain Papel Prensa's newsprint for better price conditions. I learned that Clarín and La Nación pay a price for newsprint around $50-80/tonne cheaper than its competitors do.

In a response to the government, Group Clarín accused Moreno of abuse of authority and intimidation to the Public Income Federal Administration (AFIP) in Argentina, the same entity which is investigating the government representative's entry to Clarín offices on Sept. 10.

On Oct. 10, Clarín reported that the local government head chamber Aníbal Fernández denied that Kirchner government has a plan to nationalize or dispossesses Papel Prensa, but he reinforced that "the State will intervene in any action that might harm essential rights of product supply, which means paper in Papel Prensa case."

Under pressure, some executives have left Papel Prensa's board, alleging "personal reasons". Public Finance and Economy Ministry's representatives were named to replace them.

Far from being solved, Grupo Clarín and Argentina's government quarrel is one example of how paper control can dictate who is stronger in a media dispute. If you have the newsprint, you have the power.

By Fernanda Belchior, PPI Latin America assistant editor, fbelchior@risi.com

So it's business as usual? I don't think so. You can be sure that the pressure on industry to play its part in reducing climate changing emissions will intensify. Treaty or not, Governments need to act, and be seen to act: and they cannot act without the industry.

So it is with a great sense of anticipation that we await Ola Alterå's keynote speech at the CEPI Annual Meeting next week during European Paper Week in Brussels. As Sweden's Secretary of State for Energy and Enterprise at the time of that country's EU presidency, Mr Alterå holds the brief that could significantly affect the business of producing paper. The other keynote speaker is MEP Dr Romana Jordan Cizelj, who is deeply involved in the work of the Committee on Industry, Research and Energy: her knowledge of, and support for, the industry mean she is exceptionally well-placed to shed light on the likely implications of Copenhagen. Just as we are getting our heads around carbon footprint, the phrase "water footprint" is becoming common currency. We need to be informed.

We see European Paper Week as a vital opportunity to prepare for Copenhagen, and believe me, we really need to be prepared. Forestry will be central to the debates in December, when critical issues will be thrashed out, such as the carbon status for biomass and forest credits from logging. If our voice is to be heard, if we are to be perceived as credible, we need to show joined-up thinking with respect to climate change.

There is no need to approach Copenhagen defensively. If we succeed in presenting our industry to legislators not only as economically vital, but as a positive force for tackling climate change, then there is a better chance that our role will be understood. We know that the paper industry's packaging solutions, for example, are based on renewable resources, are recyclable and sustainable. With Government backing throughout Europe and beyond, our industry stands to gain rather than suffer from future policy decisions made in the wake of Copenhagen.

Let's get this right. See you in Brussels next week.

Although the growth in softwood log imports in India is impressive, at least 80% of India's log imports are hardwood. Teak logs are imported from Myanmar, various African countries, and Central and South America. According to ITTO data, prices for teak logs imported into India range from less than $300/m³ for logs from Panama to more than $500/m³ for logs from some African countries. Of course, prices for larger, older teak from Myanmar can command much higher prices.

But India imports other hardwoods besides teak, and the country's role in Asia's hardwood log market has been growing rapidly. We estimate that India's share of the "major country" hardwood log market in Asia (including China, Japan, South Korea, and India) has increased from about 15% in 2000 to almost 30% in 2009. For Malaysia in particular, India has become a very important log market. Malaysian log shipments to India exceeded those to China beginning in 2006, and in 2009 some 59% of Malaysian log exports went to India, in the January-July period.

This growing importance of India in the international log markets is intriguing, but the pulp and paper sector in India is also growing rapidly. I'll have the chance to see some of this in-person, and to meet representatives from many of the Indian companies, at RISI's first conference in India next month. The RISI Indian Seminar ("Opportunities and Challenges for India in the Global Pulp and Paper Industry") will take place in New Delhi on December 3, 2009 (www.risi.com/indianseminar), and should be a great opportunity to gain insight on the future for this very interesting market.

Bob Flynn is Director, International Timber, and co-author of the 2007 RISI publication "India's Forest Products Industry" (www.risi.com/india).

The company received permission Friday from a Montreal Superior Court to increase its debtor-in-possession (DIP) financing from $140 million to $370 million, despite the objections of some creditors.

Ernst & Young Inc., the court-appointed monitor, recommended approval of the DIP financing because it believes AbitibiBowater will remain under bankruptcy protection until at least late next summer. The accounting firm told the court that AbitibiBowater, North America's largest newsprint maker, projects negative cash flow of $70 million next year.

AbitibiBowater was hoping to exit bankruptcy protection in just a few months. But Ernst & Young says "it will take a number of months to complete the business plan and consider all of the restructuring scenarios, negotiate the Plan of Arrangement, raise exit financing, conduct creditor meetings, complete negotiations with employee groups and complete all of the other tasks required to emerge" from bankruptcy protection.

The company's liquidity requirements "are highly dependent upon the market price and demand for paper and wood products as well as the exchange rate of the Canadian dollar relative to the U.S. dollar," notes the report.

AbitibiBowater's projections assume that announced newsprint price increases of $120 per ton from the August low will be implemented by the first of the year and then level off. That is more conservative than independent projections from RISI, which show newsprint prices continuing to rise during 2010.

But the projections also assume an exchange rate of 1 Canadian dollar to 90 U.S. cents, while in recent weeks the Canadian dollar has been a few cents stronger. With each penny in the exchange rate equating to $17 million in annual cash flow and the recent volatility in the U.S. dollar, AbitibiBowater needs access to additional DIP funds so that it can weather fluctuations in currency and paper markets, the Ernst & Young report says.

Meanwhile, a provincial official has made vague comments in recent days about Quebec possibly investing in AbitibiBowater, and a Canadian union has delayed contract negotiations until it gets resolution on the company's $1.3 billion in unfunded pension liabilities.

AbitibiBowater (AKA AbitibiUnderwater) entered bankruptcy protection in April and has subsequently been damaged even further by declining paper prices and the strengthening Canadian currency.

This article originally appeared at Dead Tree Edition (http://deadtreeedition.blogspot.com), which is written by a magazine-industry manager who goes by the pseudonym D. Eadward Tree. Comments made in this blog are the opinion of the author and do not necessarily reflect that of RISI, Inc., its parent company or sponsors.

For other AbitibiBowater and magazine paper commentary at Dead Tree Edition, see "There's Little Clarity About Some SCA Papers" and "Noisy Boise Is Reviving Its Newsprint Sales".

The best that can be said is that the market seems to have stablized this fall after months of plummeting prices. North American shipments of coated paper were up in September versus the previous month - 8% for coated freesheet and 5% for coated groundwood, according to the Pulp and Paper Products Council. But compared with September 2008, shipments declined 15% and 8%, respectively.

Actual consumption of coated papers in the U.S., was even less favorable, according to data from printers compiled by Idealliance. September consumption of coated was down more than 5% versus the previous month. Usage of coated freesheet was down a whopping 32% versus September 2008, while coated groundwood dropped "only" 23%.

Consumption of uncoated groundwood held its own versus August and was actually up versus the same month last year for the fifth month in a row, according to Idealliance.

To keep their coated machines busy amidst the declining demand for coated papers, several companies have recently begun making supercalendered and other uncoated-groundwood papers on machines that have coaters.

The new supply continues to place pressure on uncoated-groundwood prices, which seem to be continuing a downward drift.

Though coated-freesheet prices are at their lowest in more than two years, there was speculation a few months ago that they could crash even more. The black-liquor credits subsidizing U.S. kraft-pulp mills to the tune of about $200 per ton threatened to make freesheet papers a virtual byproduct of the kraft process, with the resulting glut continuing to drive paper prices until the credits expire at the end of this year. (See "Black Liquor" Credits Are Helping Paper Buyers.)

But the surprising recent strength of global pulp markets, which by some accounts are experiencing their strongest rebound in history, has provided an outlet for all that subsidized U.S. pulp. And the weakening U.S. dollar has discouraged imports of paper into the U.S. from overseas.

Coated prices seem unlikely to move much for the remainder of the year. And what about next year?

Some paper-company executives claim that prices "must" go up because the black-liquor credits that have kept them solvent will disappear.

But a need for higher prices does not translate into higher prices. (Exhibit A: rates for magazine advertising). And bankruptcy reorganizations of major players don't necessarily stabilize prices (Exhibit B: the newsprint market this year). Prices won't move up significantly until demand recovers significantly, which seems unlikely in 2010, or more machines are closed.

This article originally appeared at Dead Tree Edition (http://deadtreeedition.blogspot.com), which is written by a magazine-industry manager who goes by the pseudonym D. Eadward Tree. Comments made in this blog are the opinion of the author and do not necessarily reflect that of RISI, Inc., its parent company or sponsors.

For other coated paper and magazine paper commentary at Dead Tree Edition, see "The Rush to Make Uncoated Paper on Coated Machines" and "There's Little Clarity About Some SCA Papers.".

I choose the cheap sparkling wine because, well, it's nice that the recession is over and for many people and businesses, the third quarter was far better to them than the first or second quarters of this year. But in order to assess the near- and medium-term future, it is more important to remember the more than 7 million US workers who have lost their jobs since the beginning of the recession and the 768,000 jobs that fell off payrolls just in 3Q09 alone.

The point, of course, is that we are not out of the woods yet. Unemployment is still on the rise and household incomes are falling. Initial claims for unemployment insurance are still running above half a million per week, which is hardly a signal that the labor market is improving, and we expect the unemployment rate to reach 10% by the end of this year. If everyone who reads this article takes my advice and buys Californian sparkling wine, then at least we will help a state whose unemployment rate reached 12.2% in September.

The third quarter numbers showed strong consumer spending growth of 3.4% that was only made possible by considerable government stimulus measures (i.e., "cash for clunkers" and the first-time homebuyer's credit). The "cash for clunkers" program ended and auto sales dropped off the map. The first-time homebuyers credit is expected to expire at the end of November and we can only speculate about how negative that might be for home sales and related purchases (if the credit is not extended or expanded).

Third quarter data did see a revival in residential investment after many consecutive quarters of double-digit declines. Residential fixed investment climbed at an annual rate of 11.4% in 3Q09, which is good news for many in our industry. However, residential investment now accounts for just a 2.5% share of GDP compared with a 6.3% share at the peak of the housing boom. Again, let's celebrate with the cheap stuff.

The trade picture improved considerably in that goods started moving. Net trade detracted from headline growth because imports rebounded stronger than exports, but we expected that would happen since the rebuilding of US inventories requires imports, and growth abroad is not strong enough to support an export-led recovery in the US despite the weakening of the dollar.

Do we expect the US economy to contract again during this "recovery"? No. I wouldn't suggest any sort of celebration if that was our baseline scenario. Growth, however, will slow over the next two quarters before reaccelerating in a meaningful way. Think of it this way, that good champagne will taste better in 2011 (when we celebrate the return to GDP growth near potential) than it would today.

The best indicator of future pulp production in Brazil may be the annual planting of eucalyptus by the pulp and paper companies that are members of BRACELPA. The industry is mostly on a six-year rotation, so the 133,000 ha planted in 2002, along with other coppiced plantations and perhaps 20% supply from third parties, supported the 10+ million tonnes of hardwood pulp produced in Brazil in 2008. But annual planting (including replants) by the Brazilian pulp companies surged to nearly 200,000 ha in 2005 and then to almost 300,000 ha in 2006 and 2007. This indicates anticipation of a strong expansion in production of eucalyptus pulp in Brazil by 2012-2013. There may be market-related or financial reasons why some of the planned pulp projects in Brazil are delayed over the next five years, but one factor will NOT be a problem: lack of wood fiber. The trees are already in the ground, and growing a lot faster than they did in previous rotations. According to BRACELPA, the average productivity of eucalyptus pulpwood plantations in Brazil has increased from 24 m³/ha/yr in 1980 to 41 m³/ha/yr in 2008, with the potential to go to 70 m³/ha/yr.

Source: BRACELPA

Brazilian pulp producers have been expanding to new regions recently, for example Suzano is developing a plantation base of 250,000 ha in the states of Piauí and Tocantins in northeast Brazil. In Mato Grosso do Sul, there is a major expansion of the Votorantim plantations, but two other pulp producers are also establishing plantations which could support future mills. In addition to expanding their own plantations, Brazilian pulp companies are looking to strengthen their ties with third parties who are willing to invest in new plantations to support future pulp projects. For example, Klabin formed a partnership with The Forest Company, a UK-based investment fund, to plant new lands close to Klabin's operation in Telemaco Borba in Parana state. To date, The Forest Company has committed US$20 million to this, targeting a planted area of 2,500 ha. (Timber Capital is the asset manager for The Forest Company.) Other Brazilian pulp companies have spoken to me about their interest in similar partnerships in different parts of Brazil, with some companies aiming to have 30% of their plantation base established by third parties.

And in addition to the traditional pulp producers, some new players are trying to enter the pulpwood plantation space. Claritas Investments Ltd., a Sao Paulo-based firm with $850 million in assets under management, has several investment funds in the forestry sector, including Eco Brasil Florestas. This fund is a JV with the former owners of a large pulp and paper company in Brazil, which is targeting establishment of an industrial scale pulpwood plantation in a frontier region of northeast Brazil, with the ultimate objective of supporting a pulp mill. Another new player, GMR, has reportedly acquired over 150,000 ha in the state of Tocantins, where it intends to establish eucalyptus plantations for both the energy sector and yet another new pulp project.

Finally, although timberland investors have been somewhat disappointed that the South American pulp producers have not sold off their forest assets like North American pulp and paper companies have, some opportunities have been developing. This is partly the result of restructuring (e.g. the merger of Votorantim and Aracruz), and partly due to the surge in new planting offering possibilities for companies to consolidate land holdings in one area by disposing of or swapping assets in other areas. We understand that Aracruz may have already sold (or is selling) plantations established in Minas Gerais state which were intended for a future pulp cluster which Fibria will not be developing. Last week, Celulose Irani sold 3,285 ha of pine plantations in Santa Catarina state to a US-based TIMO. Other plantation sales are reportedly "in the works", so it looks like a great time to gather at RISI's conference in Sao Paulo to get the latest industry perspectives.

Bob Flynn is Director, International Timber, and in mid-2009 published the South American Tree Farm Update: Opportunities for Investment in Forest Industry and Biomass Energy Plantations (www.risi.com/satreefarm.)

.

This delay until at least 2011 had been expected, but the key part of this announcement was Putin's comment that the tax rate would not be lowered, and that at some point the planned increase in the export tax is still going to happen. According to Reuters, Putin said, " We will still do it (increase the export tax to 80%), but we will not do it stupidly...as the situation will change, you have time to calmly prepare." During 2009, there had been speculation that perhaps the tax would be rolled back or abandoned, but Putin's statements make this increasingly unlikely. Finland has backed down on its initial threat to block Russia's from joining the WTO because of the log export tax, with Finnish Prime Minister Vanhanen now saying that Helsinki backs Russia's bid.

It appears that Finnish companies have largely made adjustments to live without Russian logs in the future, and the importance of Russian roundwood in Europe in general has declined dramatically in recent years. Based on actual exports through the month of August, it appears that Russian hardwood log exports to Europe in 2009 will be 85% lower than in 2005, and exports of softwood logs will be 88% lower (Figure 1). Finnish import data indicate a 79% decline in imports of Russian logs in the first seven months of 2009, compared with the same period in 2008. Of course, demand for logs in general has declined in Europe in 2009, but the fact that all three of the big Finnish pulp companies (Stora Enso, UPM, and Metsäliitto) have reportedly either closed their logging offices or sharply reduced staffing in Russia sends a strong signal. As we've said numerous times, a "delay" in the very high log export tax Russia has threatened is just that.... Finnish companies had hoped for some reprieve, but have also been developing plans to live without Russian wood, and we do not expect to see a strong rebound in imports of Russian logs in the future.

(Figure 1 Source: Global Trade Atlas)

The average price of Russian softwood logs imported into Finland fell from US$95/m3 in June 2008 to $69/m3 in January 2009. Prices have fluctuated only slightly during the year, and in August softwood Russian logs imported into Finland averaged US$71/m3, according to Customs data. If the Russian log export tax had increased to a minimum of 50 Euros per cubic meter, and underlying log values had remained unchanged, the average August price would have increased from $71/m3 to $121/m3, a 70% increase. With Europeans largely turning up their noses at Russian logs, China becomes increasingly important for log exporters in Russia. Through the end of August, 40% of Russia's hardwood log exports and 84% of Russian softwood log exports went to China.

To date, any measurable impact of Russia's log export duty has been difficult to detect, in part because of the weak global wood markets over the past year. Through the end of August, Russia's exports of softwood lumber are up slightly (+2.2%), but this does not begin to offset the much larger decline in Russian softwood log exports. In total, Russian exports of softwood logs + lumber (on a roundwood equivalent basis) in 2009 will be more than 30% lower than in 2007 (Figure 2). Even with substantial new investment in log processing in Russia, it will likely be the middle of the next decade, or later, before Russia's importance in the global softwood markets even returns to the levels of 2007.

(Figure 2 Source: Global Trade Atlas, RISI)

The new controversy about cash-register receipts and the emergence of "biolatex" underscore the growing concern about the chemicals that papers contain.

ScienceNews revealed recently that many carbonless copy papers, which are typically used for cash-register and credit-card receipts, contain high levels of bisphenol-A (BPA). Research showing that the estrogen-mimicking chemical was leaching out of plastic bottles has led to calls for tighter regulation, but ScienceNews quotes a researcher who says the BPA exposure from carbonless copy papers is far greater.

Meanwhile, the folks at Better Paper, an environmental-advocacy organization, are touting the benefits of a new corn-derived biolatex known as EcoSphere as a replacement for traditional petroleum-derived latex in coated paper.

"Several major paper manufacturers are already testing EcoSphere® biolatex^TM binder in their coating formulations," writes Jeff van Leeuwen of EcoSynthetix, which manufactures the product, at Better Paper's blog. As far as I know, none of the paper makers have gone public with their use of EcoSphere.

The product has a lower carbon footprint, is friendlier to recycling operations, and costs less than traditional latex, the company claims. It's also biodegradable.

Other chemicals that are frequently used in papers include various plastics, titanium dioxide, and calcium carbonates.

Calcium carbonates are a mixed bag environmentally. Some people have promoted rock-based papers (which are mostly limestone-derived calcium carbonates) as being green because they are "tree free". And precipitated calcium carbonate (PCC) is sometimes considered a "carbon sink" because it is produced by combining carbon-dioxide emissions with lime.

But limestone doesn't exactly grow on trees; it has to be mined. And its transformation into lime for shipment to PCC plants doesn't exactly sound like an environmentally sustainable enterprise.

Then there's bleach, which is commonly used to brighten papers but is also really good at killing just about everything. That leads me to Stupid Question #1: When you use white toilet paper, are you putting bleach on your derriere?

And that leads me to Stupid Question #2: Why do we insist on having such white toilet paper - or, for that matter, TP that's been dyed, decorated, or perfumed? Do you really want those chemicals, how shall we say, traveling to Uranus? Or dumped into the sewer system?

This article originally appeared at Dead Tree Edition (http://deadtreeedition.blogspot.com), which is written by a magazine-industry manager who goes by the pseudonym D. Eadward Tree. Comments made in this blog are the opinion of the author and do not necessarily reflect that of RISI, Inc., its parent company or sponsors.

For other toilet paper and magazine paper commentary at Dead Tree Edition, see "Marcal Challenges the Green-ness of Greenpeace" and "Rethinking the "Green" Magazine Issue".

The supply gap is now closing thanks to a partial recovery in demand combined with capacity shuts and shifts to other grades. In fact, the PPPC recently reported that operating rates in North America during September were at 99% for coated freesheet and 95% for coated mechanical. The market will never return to its previous levels of demand, but it has come back to some degree because buyers are no longer reducing inventory as they were earlier in the year. September may have been a bit of a fluke and operating rates will not stay at 95-99% for long, but the fact remains that much of the oversupply is now gone. Operating rates were in the low 70s earlier in 2009.

We have estimated that for coated mechanical, the current capacity base is 4.5 million tons, and for coated freesheet the current capacity base is 4.4 million tons, which includes 568,000 tons of coated Bristol capacity. In order to maintain a 95% operating rate, we only need to shut a further 100,000 tons to 150,000 tons of coated mechanical capacity and a further 400,000 tons of coated freesheet capacity. This latter number may end up being less if large tariffs are placed on Chinese and Indonesian coated freesheet paper and cause much of this tonnage to go away (the subject for another RISI Viewpoint later this year). These shuts may be announced in early 2010 if rescinded black liquor credits make it difficult for some marginal mills to survive.

The story in Europe is completely different. Primarily because of a huge collapse in exports, European mills have a much larger oversupply situation to deal with. The capacity closures in 2009 have been small compared to the drop in demand, only 150,000 tonnes of closure for coated mechanical (Plattling) and 400,000 tonnes for coated freesheet with various closures in Spain and Sweden. This led to European operating rates that also dropped into the low 70s, but they have yet to return to the upper 90s as North America did in September. In fact, the market needsto have about 1.5 million tonnes of further shuts in coated mechanical and 1.0 million tonnes of further shuts in coated freesheet to even come close to balancing the market. This assumes no miraculous recovery in exports, which seems like a safe assumption given the strength of the euro. In fact, we expect the Chinese to begin exporting more to the European market in 2010 and 2011 because of the new capacity in China and the problems that may arise with tariffs into the US market. Thus, there will be no easy fix for the coated paper oversupply in Europe in 2010 and it will be a very difficult environment for the selling side of the market.

John Maine, RISI Vice President for World Graphic Papers and author of the monthly Paper Trader, works out of RISI's Charlottesville, VA, office.

Tel: 434 978 2927 Email: jmaine@risiinfo.com

Stay updated on graphic paper markets with RISI's industry news, prices, forecasts, analysis and mill intelligence. Visit www.risiinfo.com and click on "Pulp & Paper."