You are here

Strike keeping paper prices up, analysts say


The strike may be costing Abitibi-Consolidated and its workers but the rest of the industry is reaping the benefits of the two-and-a-half months of downtime.

At a time when the market is weak, analysts are predicting the price of newsprint and groundwood specialty paper will drop once the Abitibi mills are up-and-running again.

John Duncanson, of Duncanson Investment Research in Toronto, said even with the world’s largest newsprint supplier down, inventories were actually going up. With the Asian markets crumbling, much of the supply that would’ve been shipped off-shore is staying in North America.

If the Communication, Energy and Papermakers union wasn’t striking, Duncanson felt the producers would be running around 90 percent capacity. But with the strike, they’re running flat out.

“They’re going to beat the band because Abitibi’s taking all the down time,” he noted Friday from Toronto. “Without Abitibi on the scene, they’re actually producing more.”

“The strike is impacting everybody, except the mills on strike, positively,” agreed Ross Hay-Roe, managing director of Equity Research Associates in Vancouver, B.C.

He said the striking mills represented about 10 percent of the newsprint supply in North America and about 20 percent of the groundwood specialty paper, increasing the demand for it at a time when market trends saw other paper prices coming down.

“So I think you could argue that the only reason the prices of newsprint and specialty papers aren’t going down is because of the Abitibi strike,” Hay-Roe concluded.

He felt the prices probably would come down when the strike was over, but admitted that was speculation.

“It’ll fall very sharply when they go back to work,” echoed Duncanson.

According to RISI, which follows the industry stats, the average transaction price of newsprint has stayed at $585 (U.S.) per metric tonne since March.

That’s down from $590 in February and $595 in January but up $20 per metric tonne from this time last year.

< *c>Surprised

But Susan Rogers, Abitibi’s vice-president of corporate communications in Montreal, said she found it hard to believe the strike was having that much of an impact on paper prices, especially newsprint.

“I’d be surprised at that because it’s only 40 percent of our newsprint capacity [that’s down],” she said yesterday. “Sixty percent is still running.”

But she noted almost 70 percent of Abitibi’s groundwood capacity is down, adding the company only had nine percent of the North American market with the strike.

“Normally, we have 27 percent of the North American value-added groundwood market,” she noted.

And with a Nova Scotia mill starting up a new machine, the Christmas flyers already made, and the North American consumer markets changing, Duncanson felt workers making groundwood specialty paper could go back to work and be laid off for a significant time.

“I think if they stay out too much longer, they could damage their customer base,” he warned.

But CEP spokesperson Cecil Makowski felt that was an alarmist view, noting the pulp and paper industry was a fairly volatile one.

“There’s no question that the paper prices have firmed because of the strike,” Makowski said Friday.

Meanwhile, Rogers admitted losing customers was a big concern for Abitibi, given the fierce competition in the specialty market.

“It’s a risk we have with all our groundwood specialty mills,” she said.

In related news, the two sides here, nor at Abitibi’s other mills in Ontario, haven’t come together since talks broke off in July. And that has the company looking at going back to the Ontario Labour Relations Board to see what can be done.

“It’s something that could be considered,” Rogers said, explaining the labour board’s ruling that the two sides negotiate mill-by-mill stands even though the union plans to appeal that decision.

The two other non-striking unions here, which have been laid off since the strike began June 15, are slated to negotiate main table items Sept. 15-16.

In the meantime, Fort Frances Mayor Glenn Witherspoon said yesterday the town had no intention of getting involved in the strike at this point.

“One doesn’t want to get involved. Hopefully, they can work things out,” he added.

Twitter icon
Facebook icon
Google icon
LinkedIn icon
Pinterest icon
Reddit icon
e-mail icon