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Thu, Jun 8, 2023 08:22
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Management Side

A dramatic change

Large paper companies have changed themselves dramatically in, let's say the last 15 years. In 1998 when I joined International Paper, there were a lot more paper companies, many large. Do you remember: Union Camp (gone in 1998), Champion Paper (gone in 2000), Willamette, and even Weyerhaeuser (as a producer of paper)? Yes, the playing field has changed dramatically. IP changed itself dramatically under CEO John Faraci versus its days under CEO John Dillon. Anyone remember, IP Mobile, IP Lock Haven, IP Millers Falls (with the other Strathmore mills having shut before this last one closed its doors), IP Hamilton (Beckett), IP Erie, IP Louisiana (Bastrop), or IP Camden (Arkansas)? Under John Dillon's leadership there was a focus on being big and highly diversified (multiple kinds of paper, huge assets in timberlands, lumber, chemicals - Arizona Chemical, etc.).

Mr. Faraci took the reins and began to quickly transform to containerboard and white papers - growing only a little now and in non-US/non-European markets. Will Tres Lagos in Brazil ever see a second white paper machine built on that huge site by IP? IP's Fine Papers group was eliminated from the portfolio quite a while ago now, and that business continues to shrink (see the recent closures of Wausau, Brokaw mill; SMART Paper, Hamilton; Mohawk Beckett, Hamilton, OH; and several others). These were once strong businesses and they had lifetimes of history in the business.

Domtar once wanted to be the largest paper company in North America (or was that the World?). They succeeded in becoming the largest manufacturer of fine white papers in North America with the acquisitions of Willamette and Weyerhaeuser's white paper businesses. Is this a decision that they are glad to have made with demand for printing and writing papers continuing to slowly diminish (copy paper, tablet, envelope, forms, etc.). CEO John Williasm is doing all he can, but will nanotechnology and the nanofibers that can be produced rescue Domtar? Not in a time-frame that can support the company as a whole. Domtar has converted some of its white papers capacity to manufacture base paper for coating by Appleton, but is that enough?

Newsprint? That is a very sad story; some have moved from newsprint to book papers - how long can this "new" market last? Coated papers for magazines, labels, etc. do not look good either. Think of how many coated paper companies once existed in the U.S. alone. Now how many are left - NewPage, SAPPI, and Verso. Okay, Evergreen Packaging has one coated paper machine as does IP. But there's no more Consolidated Papers, and others are gone as well.

IP has positioned themselves in containerboard in the U.S. and other grades in developing markets/economies - i.e. China, Russia, and Brazil. Bet on them to continue to evaluate their white paper assets (5 mills left in the U.S. + 3 in pseudo Europe (France, Poland, far Eastern Russia). Domtar has to be weighing many options as well.

The only safe bets seem to be tissue, toweling, containerboard, and non-wovens.


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