As the coronavirus pandemic continues to cause disruption worldwide, its impact to the print and paper industries cannot go unnoticed. Advertisers have cancelled print orders or reduced print frequency, travel and tourism publications have halted, and newsstand sales have fallen off. The cut-size UFS market has diminished as schools and offices are closed for the time being. Printers and mills are implementing furloughs and shuttering equipment in hopes to weather this crisis. Markets for all paper grades will suffer.
Packaging Corporation of America will take down-time at its Jackson AL uncoated freesheet mill, which produces Boise brands. (source: press release)
Domtar will temporarily idle the Kingsport, TN paper mill and their A62 paper machine at their Ashdown, AR mill for three months due to the COVID-19 pandemic disruption. This will reduce their UFS production by 144,000 tons. (source: press release)
Kruger implemented a temporary shut of its Brompton, QC, newsprint paper mill starting Apr. 3, and for an undefined period. (source: press release)
Rayonier Advanced Materials announced that it will cease or reduce operations at all softwood sawmills and halt production at its newsprint facility in Kapuskasing, Ontario for at least two weeks due to COVID-19 impacts. (source: internet website)
Verso has completed the sale of their Androscoggin and Stevens Point mills to Pixelle Specialty Solutions. (source: press release)
Norske Skog has ceased paper production, and announced temporary layoffs at Saugbrugs magazine paper mill in Norway due to COVID-19 economic impact. (source: press release)
UPM has temporarily halted production at its Caledonian lightweight coated (LWC) mill in the UK, due to government measures on COVID-19. (source: press release)
Resolute Forest Products has temporarily halted production on PM9 at their Alma, QC mill that produces uncoated groundwood, directory and machine finish grades. They have also idled their Baie Comeau, QC newsprint mill and their Dolbeau, QC uncoated groundwood SC mill. (source: Resolute Forest Products)
Catalyst Paper IT system was affected by malware earlier this year, impacting their enterprise business systems that drive fulfillment of paper manufacturing at their three paper mills. Catalyst has since resumed papermaking. The Crofton mill is making pulp, but producing newsprint two weeks per month. Their Powell River and Alberni mills alternate production as needed. Each paper mill runs two weeks per month, but not simultaneously. (source: Catalyst)
Advertisers have drastically cut spending and cancelled print orders due to the pandemic of 2020. The tourism, travel and entertainment industries have also cut print orders during this time.
Wood Pulp prices rose slightly in March, with prospects of higher prices in April due to increased tissue paper production requirements amidst the coronavirus.
Currency Exchange rates vs. the USD have fluctuated. The euro is down 3% vs. 2019, and has reached its lowest (1.07) level since 2017. The CAD has dropped over 6% YTD, down to .71 in April. This benefits Canadian and European exporters as they incur costs in their weaker currency while selling at prices in the stronger U.S. dollar.
Paper Grade Review
Coated grades – Additional coated capacity closures will be necessary to balance supply with demand as current market disruptions run their course. Mills are currently taking temporary downtime to curtail production. Expect mill operating rates (shipments/capacity) to remain very low for the foreseeable future, unless significant supply is shuttered.
Uncoated freesheet grades (UFS) – Due to COVID-19, many people aren’t at work and school, which is having significant negative impact on demand for cut-size sheetfed UFS grades. Coupled with the inventoried imports, surplus supply has quickly become a problem for producers. Fastmarkets RISI forecasts UFS shipments in North America to drop 9% this year, causing mill capacity to shipments ratios to drop below normal this year.
Uncoated groundwood grades (UGW including SC) – Fastmarkets RISI forecasts demand for UGW to fall another 14% in 2020…following a 17% drop in 2019. The coronavirus has forced businesses to temporarily close, thereby forcing advertisers to cancel print and paper orders for the time being. Mill operating rates will fall, pressuring UGW prices. It’s noteworthy to mention that almost 75% of UGW capacity comes from Canada, so there is considerable risk of UGW supply shortages if cross-border shipments becomes an issue during the pandemic.
Newsprint grades – Newsprint producers continue to manage downtime in the face of secular declines in demand and being exacerbated by the coronavirus disruptions. Fastmarkets RISI now forecasts an 18% drop in demand for newsprint in 2020, and exports have been declining. However, some offshore mills have closed due to the coronavirus, which could create short-term opportunity for additional domestic exports.
Quad is closely monitoring the latest information from the Centers for Disease Control and Prevention (CDC) and the World Health Organization (WHO) about COVID-19. We are proactively taking measures to protect our employees’ well-being and maintain business continuity for Quad and our clients. During this time and as always, Quad/Paper Services is closely monitoring paper market dynamics, mill announcements and risk assessments. We are working closely with each of our mill partners to ensure continuity of paper supply during this crisis. For more information, please see our COVID-19 response.