North American Newsprint Industry Issues, 2008

                                                                                                                                             Capacity Rationalization

                                                                                                                                                             By Rocky Wells

The biggest issue facing the North American newsprint industry in 2008 and beyond is how to deal with on going capacity surplus brought on by reduced newsprint demand.

The two largest industry participants did such a good job of rationalizing their high cost capacity over the last 5 years that they realized they would ultimately be better off as one company.

The largest Publisher owned newsprint company also had an epiphany and realized they would lose less money if they sold their newsprint assets. This permitted further industry consolidation as who in their right mind would want to get into this business?

East West differences will drive further optimization of capacity consolidation. In the end we are likely to see three dominant Producers with at least 80% of North American capacity which can more effectively and economically manage supply.

Where does this leave the 5 or 6 smaller newsprint companies? The efficient ones will continue to survive either producing newsprint or other grades. The less efficient ones will be either consolidated or closed. This may prove the adage “safety in numbers”, but only if the numbers represent low cost.

What does a buyer do? How does he or she ensure adequate supply at a reasonable cost in a changing landscape of supplying mills?

I think this will the most important issue facing newsprint buyers over the next few years.