By Michael Ducey

Weak pricing and predator discounting forces North American industry to cut capital investment, shut capacity and force consolidation.

The current global free fall of newsprint prices may be a relief to embattled newspaper publishers, but it is grinding investment in newsprint manufacturing to a complete halt. The slower economy knocked newspaper publishing profits off its growth path. Classified advertising lineage dropped eight percent and consumption fell as several titles trimmed paper size and cut special sections. Staff reductions, closures and electronic transitions were commonplace.

Over the past 25 years, the newsprint industry has done a great job replacing the old fourdrinier (table-like) forming equipment, to a twin or top wire former. These machines eliminate two-sidedness (small differences between the top and bottom sides of the paper).
Photo by Lisa Larson

This poor economic climate caused publishers to purchase less newsprint. Mills withdrew thousands of tons of production from the marketplace to balance inventories, which worked for awhile. By the first quarter of 2002, prices went soft and mills needed to take action to survive yet another tough year. The result is many capital equipment projects canceled or delayed.

Though most publishers can exact price discounts on their suppliers (remembering that newsprint costs are often 40 percent of cost), the rippling effect on the industry resonates for months and sometimes years. The paper business is very capital intense. Meeting every new quality demand (or government requirement) is costly and difficult, and with profits often falling below the cost of capital, it makes it impossible to even try. Consolidation is the only avenue to survival.

Building a new mill is a fantasy. New mills cost between $100 million and $500 million and higher, depending on size, location and equipment choice. More likely are closures, which cost just a few million at most. The latest capacity report, which does not include the Enron assets, shows another 1 million tons closed or converted, and Enron’s problems could shut another 250,000 tons.

Capital investment needs for strong fiber webs

The industry has done wonders working with new demands without consistent profits to fund them. In the past, expensive “virgin” forests were used in high-value woods like Canadian spruce and fir, and Pacific firs. Today, Southern pine is king in the United States; some Canadians use aspen (formerly a by-product of softwood harvesting); and of course, everyone uses recycled fibers from wastepaper.

The waste paper story is well known. Efforts to recycle old newspapers, office waste and converting trim has cut paper’s share of the waste stream from over 60 percent to under 40 percent — a big public benefit. But it didn’t come cheap.

Mills have to sort, classify and process the wastepaper. Processing requires intense washing, cleaning, screening and sometimes bleaching. Mills yield about 85 percent of the wastepaper’s fibers, and even the waste can be used for construction materials.

After the government order several years ago, mills poured hundreds of millions of dollars into equipment to process the wastepaper and make it work in printing lines that were requiring strong and brighter sheets. A new system costs between $10 million and $30 million, and upgrades are in the millions. Mills can no longer just add expensive chemical pulps and most operate very efficiently, for the little return they receive.

The waste chips and aspen have also been a challenge to process. Luckily, aspen helped mills with its inherent brightness. Waste sawmill chips reduce processing cost and make pulps stronger with proper refining.

Older systems that process virgin wood also have to be maintained and upgraded every year. Mechanical grinding and refining systems replacement cost can be $20 million to $50 million or more.

These fiber systems have tremendous impact on the quality of newsprint. The uniformity of the fiber qualities directly corresponds with the quality of your printing line’s runnability. The paper’s basis weight, smoothness and strength properties are all related to fiber refining, ahead of the paper machine. Lack of continued investment in secondary fiber systems or virgin systems make it very difficult for the paper maker to provide consistent physical properties.

Optical properties are mostly related to the amount of chemicals or removal of lignin (the sticky stuff that holds fibers together in a tree) or ink. That’s why brightness qualities often dictate price — because it relates to the amount of variable cost increase of hydrogen peroxide or sodium hydrosulfite (bleaches), optical brighteners and fluorescence, and chemicals to breakdown contaminants (surfactants and encapsulators).

Machine requirements for uniform production quality

Installing new paper machines at this stage of the business cycle would be impossible. Inland Empire did start up a new machine last year in Spokane, Wash., but it replaced an older, smaller machine. Several attempts to start up machines in urban areas such as New York City and Sacramento, Calif., based on cheap wastepaper sources have been met with rejections from banks. So, the paper industry has to make product with existing equipment, which always needs maintenance.

The paper machine is a plethora of moving parts — all somewhat doing the job of removing water and making sure the sheet is consistent in physical and optical properties. Process control equipment affects small changes on line after readings are taken by scanning equipment. These computers are as expensive as they are important, costing anywhere from $1 million to $10 million. Just like your PC, they need to be replaced every few years. The newspaper printing industry is also adapting this equipment for their printing lines, which in addition to the computers, may include heat, steam and caliper actuators (machines to make small changes on line).

Over the past 25 years, the newsprint industry has done a great job replacing the old fourdrinier (table-like) forming equipment, to a twin or top wire former. These machines eliminate two-sidedness (small differences between the top and bottom sides of the paper). The paper sheet surface remains a bit rough, and the smoothness (known to you as PPS, an offline quality test of smoothness) is worked on by even more precise and expensive equipment.

A press section squeezes out more water and rolls make their first big contact with the fiber web surfaces. Mills can add press sections at $10 million to $40 million a piece, which helps reduce drying cost (steam or electricity) and begin the smoothness improvement cycle. A series of steam dryers, really big rotary drums, continue the removal of water to just a couple of percentage points. The moisture content must also be uniform, or it can effect the way your paper curls at the edge, accepts ink, unwinds on the stand and slits (affecting knife life).

The last two processing steps, calendaring and winding, are critical to press performance. In calendaring, a series of rolls (either a stack or a horizontal pair), which might be temperature controlled, impact heat and stress to the surface of the sheet, providing it with its final finish.

Mills have installed calendaring equipment to provide flexibility to their operations, i.e., getting away from producing standard newsprint grades, at least some of the time. Calendaring is adding value. The degree of calendaring, making the sheet super smooth and glossy and sometimes brighter (in combination with chemicals), makes the newspaper after-print qualities more prominent. Color, text, borders and even folding are improved. The only challenge is balancing strike-through and show-through, which can be controlled with filler material, basis weight increases or calendaring technique. Calendaring equipment runs $10 million to $30 million per project.

Winding is another area of work that simply must be kept up. The hardness and uniformity of your newsprint rolls are created by heavy-duty winders, which cost $5 million to $20 million new. They need replacement periodically because of the moving parts and drive system, as well as changes in roll sizes and diameters demanded by the pressroom. Obviously, poor winding causes big problems in the pressroom, including waste, misregister and equipment damage (at worst). Since the winder is at the very end of the process and often needs the most maintenance, it can hold up the entire production line. Thankfully, most winders are oversized for the machines they serve, making it easy to catch up after an upset.

Where mills are spending money

The paper mills are developing new products using equipment and chemicals, though not quite on the scale they did in the 1980s. Today, most money is spent converting newsprint into something else like lightweight coated paper (Bowater’s Nuway line) or supercalendared papers (Abitibi-Consolidated, Bowater, Madison have all done it recently).

On the newsprint machine, there are moves to make the sheet brighter and offer more lightfastness (reduced fade or yellowing). This involves changing the machine processing of the fiber slurry from an acid to a base, and using bright minerals like calcium carbonate to whiten the sheet. The process also allows for less fiber to be used, a cost savings. Projects are only found in Canada and the Northern United States, though in Europe the practice is commonplace. In the southern United States, sophisticated chemicals can aid in the removal of lignin and thus brighten the sheet. All sorts of chemicals are available for ink removal from waste paper, but mills tend to focus on mechanical means (screening and washing), which are cheaper in the long-term.

Printers may be familiar with new calendaring techniques like “soft-nip,” and arrangements like “hard-soft” or “soft-hard,” and multi-stage. These are just high-tech installations of temperature and pressure controlled calendaring rolls that add flexibility to production, dividing output in several value-added categories.

The next time your newsprint representative resists that extra discount, there may be a good reason — the future quality of your newsprint.

Michael Ducey is a writer and researcher in the pulp, paper and printing industries. He contributes to a variety of technical and business journals about paper, printing, packaging and converting, and publishes market research reports for a worldwide client base. He can be contacted by e-mail at paperinfo@excite.com.