Uncoated Premiums: Getting Pricier

Good economic times pull paper consumption with them. As markets become more closely connected, through globalization of industry supply, paper consumption swings are amplified. China coughs, the U.S. sneezes. Right now, the trend is up. Coup led with surging prices for fiber, energy and transportation, paper companies have all the argument they need to raise prices. Bottom line: expect incremental paper price increases this year.

That includes uncoated free sheet grades. The low-end commodity grades in bond and opaque papers rose steadily in price all last year. There has also been pressure to raise quality levels, primarily for brightness and whiteness (see GAM PaperWatch, Jan. 06, p.44).

On the high end, premium text, writing and cover sets experienced strong demand and higher costs, and prices moved accordingly. The premium producers responded to customer needs for “value extraction” by primping up brands with features—environmental friendliness is a current example.

While data has not yet been finalized, it is likely that uncoated free sheet production in the U.S. will be flat compared to last year. Consumption may be up as Asian producers continue to ramp up production of commodity grades and feed regional markets—especially the West Coast—where distribution works efficiently.

Mill closures and consolidations have improved operating rates, which sailed along to highs of 90% of capacity utilization. This situation has allowed price increases to take hold.

One major move was Weyerhaeuser combining operations with Domtar, making it and IP providers of over 50% of North America's uncoated free sheet products. The 2006 deal cleared Canadian regulators January 9. Weyerhaeuser will spin off its fine-paper products into a new, publicly-traded company, which will merge with Domtar in a $3.3 billion deal. Weyerhaeuser shareholders will own 55% of the new company and Weyerhaeuser also will receive $1.35 billion.

In terms of cost of manufacture and delivery, energy costs have hit small mills hard, and the bigger mills even harder. Because their margins are quite a bit lower, and their operations so big, options for cost cuts are few.

One approach is increased mineral use, which decreases energy costs by reducing dryer loads and decreasing refining loads—two energy hogs in the mill. Filling the sheet during formation at the wet-end of the machine is a common practice, though not always possible at some mills owing to limits on the amount of readily available fiber and steam at an already integrated plant. But introducing minerals at the size press (where starch is “pressed” or “metered” onto the sheet) is gaining more acceptance, as its application not only provides the energy savings, but raises brightness.

Increasing the brightness of commodity grades is a market-driven fact. Off-shore producers have used this approach for years to grab market share, and today even bond and opaque products have brightness qualities that may seem excessive. Nonetheless, domestic producers have responded by increasing brightness of everything from copy paper to digital rolls. Using ground calcium carbonate in the starch mixture can increase brightness without high cost additives—a road more traveled today at the big mills.

The same advantages of reduced drying and refining to reduce energy costs is evident here. Plus, the economics of replacing fiber with minerals also is advantageous, since minerals cost less than fiber.

The impact on printers is significant. The sizing chemicals and minerals deposited in the paper during manufacture can infiltrate fountain solutions and ink trains, throw chemistries out of balance and wear plates.

The move to reduce energy usage at mills also gives rise to more moisture in the finished product. Water content in paper has been creeping up, and increased moisture is not good for press performance. Sheet curl increases, as does cutting knife replacement. Higher moisture may slow down presses a bit as ink lays on top and spreads a bit more, because more water tends to open up the sheet, making it more porous.

There are two inexpensive ways to test paper if you see dry times creeping up, or if ink tackiness and smearing appear, edges curl or knives go dull prematurely. The first is a $2,000 hand-held moisture meter. Pressmen hold the device against the roll or stack of sheets and see the measurement. Uncoated free sheet moisture contents vary on basis weight and other characteristics, but your mill will know exactly what the number should be, because it maintains it with cross directional control across the moving web. You can evaluate your inventory conditions and check “moisture migration,” a particularly troublesome issue in winter in the North and summer in the South. It is also a great way to see how well your producers are handling sheet formation—a key to your printability results.

The other measurement is contact angle. Though it has some detractors, a good off-line quality control regime with tight procedures will benefit from contact angle measurement. It is a bit more involved in that you need a specimen off the roll or sheet pack, and a computer helps to determine results quickly. The contact angle will reveal the paper's ability to form a dot and the quality of that dot. Contact angle measurement tools cost around $3,000.

Write me for details on how to obtain these two tools: paperinfo@excite.net.