Some market factors going in Corner Brook Pulp and Paper’s favour

Gary
Gary Kean
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Premier Tom Marshall will be making an announcement at the Corner Brook Pulp and Paper mill this afternoon.

CORNER BROOK  Corner Brook Pulp and Paper is hoping for more good news today, but it already has some factors going in its favour in the constantly changing newsprint market.

Interim Premier Tom Marshall will be making an announcement at the paper mill this afternoon and it is largely believed to have something to do with the $110-million loan the provincial government has on the table to help the company get through some of its challenges.

If that is what today’s press conference is about, it will be the latest in a string of good news for the mill’s position in the marketplace.

The plant and its employees have already worked out new labour contracts, a condition that had to be met before triggering access to the government loan. The deals have helped reduce the mill’s labour costs.

One of the other major factors affecting the operation’s bottom line is the Canadian dollar. The fact the dollar has dropped in value in recent months is welcome news for international exporters such as Corner Brook Pulp and Paper.

Kevin Mason, managing director of forest products research with Equity Research Associates in British Columbia, said the industry had been bracing itself for dropping prices to a point where more paper mills in Canada would close this year.

The dollar’s value has changed the game a bit, according to the industry analyst, including having an impact on where capacity is being removed from the marketplace.

“With the Canadian dollar taking a nice, surprising downdraft in the last couple of months, we have seen a couple of closures in the United States and that has helped stabilize prices,” said Mason.

One mill in Maine shut its operations for at least four months in January and is asking its government to help it get back on its feet. Another mill in Oregon recently made a surprise announcement that it will be converting its newsprint machine to one that manufactures lightweight packaging paper.

With the euro remaining strong, Mason said Canadian-made newsprint is also more attractive to the European market these days.

“As there are price negotiations going on in Europe, buyers want to use Canadian paper as a bit of leverage against the European suppliers,” he said. “So, we’re in kind of a not bad situation. Despite the fact we still have declining demand (globally), Canadians are not bearing the brunt of it at this point.”

With the cyclical nature of the newsprint market, Mason said remaining paper mills cannot get complacent as they constantly strive to lower costs and remain viable operations.

He said the loan being offered to Corner Brook Pulp and Paper has got to be spent on upgrading the mill before market pressures place Canadian producers back in the bull’s eye once again.

“(Investment) that has an energy and environmental focus would be good because it usually lowers the cost of production permanently,” noted Mason. “If you are in a declining industry, it’s the low-cost guys at the end of day who are still running. Anything you can do to lower costs and give that mill longer life is what you’re looking for.”

Organizations: Corner Brook Pulp and Paper Ltd. on Thursday.Joining

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