Sunday, December 28, 2008

Watch out! It's the IMb Express!

If you’re one of those sick people who like to rubberneck at accidents, keep an eye on the U.S. Postal Service’s Intelligent Mail Barcode initiative. It’s a train wreck waiting to happen.

Industry contacts report continuing frustration getting problems resolved and questions answered regarding IMb, one of USPS’s major strategic efforts. Mailers are having trouble getting postal officials even to discuss the challenges that might derail the program and are questioning whether IMb, already delayed twice, will be ready for implementation next year as scheduled.

USPS last month pushed off implementation of IMb once again to a three-phase process -- as Dead Tree Edition predicted -- that is to begin in May. Some chastised me for improperly abbreviating the name, which USPS refers to as IMb. That seems DUMb to me, but so be it.

Representatives of mailers, printers, and mailing-industry vendors in such organizations as Idealliance and the Association for Postal Commerce (PostCom) are nearly unanimous in their frustration with the Postal Service’s lack of communication and planning regarding IMb.

“How can we implement IMb when we customers are uncovering things at the eleventh hour? When the switch is flipped will it work?” reads one of a litany of concerns recorded at a recent Idealliance meeting. “There is a lack of direction,” reads another. “We seem to take one step forward and two back."

Some in the mailing industry who must communicate IMb requirements to their own organizations now find themselves in hot water: Their bosses can’t believe the Postal Service’s decisions, planning, and communication regarding IMb could possibly be so bad.

Since the Idealliance meeting, yet another communication breakdown has emerged: Postal officials have decided that mailers must presort addresses before assigning an IMb. That will force mail vendors to undo much of the work they have already done on IMb because they were planning to assign bar codes before presort. Perhaps the Postal Service's IMb folks have been attending the William Burrus School of Customer Relations. (See “When business is down, kick the customers.”)

Intelligent Mail Barcodes are a printing issue as well as a postal issue because there have been questions regarding how well USPS equipment can read IMbs produced by printers’ current inkjet machines. Despite their complaints about implementation, mailers are generally supportive of the IMb concept, which should enable the Postal Service to track mail as it moves through the system, spot problems, and optimize its processes.

A source reports that when he asked an industry expert to explain what was going on with the program, the expert replied that “IMb is too complex for mere mortals to understand.”

To get a taste for the complexity, check out the slide below from an IMB DPP that had MTAC LOL because the TWTDSTR. Translation: At a recent Mailers Technical Advisory Committee meeting, industry representatives laughed at a postal official's Death by PowerPoint presentation because of this slide in which the type was too darn small to read.

Not that anyone could have understood the slide even if the type had been larger.

Saturday, December 27, 2008

Prices dropping for all grades of paper

Deflation has now officially hit the market for publication papers: Prices for everything from newsprint to coated freesheet have declined this month, several sources indicated in the past week.

December prices were down even in the formerly rock-steady market for high-grade supercalendered paper (SCA) paper, according to both Pulp & Paper Week and Deutsche Bank. Mark Wilde of Deutsche Bank put the December drop at $10 to $20 per ton and said SCA prices could continue declining if demand for lightweight coated (LWC) remains weak. Until recently, analysts were predicting that SCA prices would remain steady or even rise during 2009.

“Newsprint prices are slipping,” Wilde wrote, with declining costs and the Canadian dollar making mills more willing to accept lower prices rather than shutting down. The Deutsche Bank analyst agreed with Pulp & Paper Week that newsprint dropped about $10 to $15 per metric ton in December, breaking a string of consecutive monthly price increases that had pushed newsprint prices up more than $200, or about 35%, since the summer of 2007.

FOEX reported a slight drop in U.S. newsprint prices last week, while Forestweb reported that newsprint prices are flat. But Forestweb’s North American Publishing Papers Index decreased in December because of declining prices for coated papers.

Prices for LWC and other coated-groundwood products dropped $35 to $70 per ton in December and are “coming under increased pressure, wrote Wilde. “With consumption likely to remain weak and the US$ rising (increasing threat from imports), producers will remain at battle stations through 2009,” he added. High customer inventories, decreasing catalog circulation, and a weak advertising market for magazines are all dragging down coated groundwood.

The CEO of Abitibi Bowater (aka AbitibiUnderwater) admitted to the Globe and Mail this week that his biggest fear was a collapse of demand in the first half of next year. Despite the bearish news on pricing, shares of the newsprint giant doubled in price during the week (to 52 cents, down from $20.47 at the beginning of the year). AbitibiBowater stock was boosted by news of an apparent sale of some hydroelectric assets, production cuts by competitors, and the company's statement that the current quarter will be more profitable than the previous quarter. All of that boosted hopes that the company will remain solvent despite having $1 billion in debt payments due during the coming year.

Stocks of such other publicly traded paper companies as Verso, Domtar, and Catalyst were generally flat for the week. Wall Street had already accepted that demand and prices will decline. The big question is whether producers will idle enough capacity to prevent paper markets from collapsing.

Sunday, December 21, 2008

Huffing & Puffington with Cardboard Porn

Now that the left-leaning Huffington Post’s “green” site is talking about our “cardboard porn” item, perhaps those "adult services" operators need to make their come-on more politically correct. How about:
“Hey there, sexy guy, or gal, or guy who wants to be a gal, or vice-versa, how'd you like to go one on one with one of our hot, horny unionized young women, or young men, or women who used to be men, or whatever, for some real solar-powered conversation. We've got something that will get your free-range, cruelty-free meat steaming – or for you vegans, that will get your organic falafel really cooking."
Speaking of corrugated and being environmentally conscious, here’s a green idea: When you’re cleaning up the cardboard from all of those holiday gifts this year, don’t recycle it. Don't think “Corrugated Recycles,”think “Corrugated Reuses” or, at least for a few months, “Corrugated Stores.” Recycling operations all over the country are storing their scrap corrugated or even landfilling it because they can’t sell it.
The recycling crisis has gotten so bad that RecycleBills – run by a North Carolina poet and recycling manager who looks like a member of ZZ Top, only friendlier – is compiling a free listing of outfits that actually buy post-consumer recyclables. So if you know of one, be sure to send the info to
Meanwhile, I’ll note that the reindeer – er, caribou – are outsmarting us humans with the double entendres. Northern hardwood – wish I’d thought of that one. And speaking of reindeer, did you hear that biologists have declared that Rudolph and his sleigh mates are actually females – or maybe castrated males? That has absolutely nothing to do with the alleged focus of Dead Tree Edition – production and distribution of publications – but it’ll be a great conversation starter at Christmas parties (or, for you HuffPo folks, at winter-solstice bongfests).
Rudolph the Cross-Dressing Reindeer?

Saturday, December 20, 2008

Small Weeklies Not So Weak

In this season of “still printing is the new up,” can there really be a part of the ink-on-paper publishing business that is actually growing? Yes, small weekly newspapers are apparently experiencing healthy circulation growth.

The number of “in-county” Periodicals pieces mailed from October 2007 to September 2008 increased 12.8% over the previous 12-month period, says a Postal Regulatory Commission report released this week, while their weight was up 8.4%. Even the July-September period was strong despite the weakening economy – up 11.8% in pieces and 7.4% in weight.

By contrast, other Periodicals (“Outside County”) were down for the fiscal year, 3.5% in number of pieces and 6.6% by weight. Standard flats, the sub-category dominated by catalogs, probably declined even more, but the statistics do not clearly delineate those flats from other kinds of Standard mail, such as letters.

In-county periodicals receive preferential rates in comparison with their nationally distributed cousins. Postal regulations require that they have at least half their circulation within their county of publication and have total paid or requested circulation of less than 10,000. They are typically non-daily newspapers serving small towns or suburbs.

Some of the increases may be from postal-classification changes rather than from actual growth in such publications. The big rate increases of 2007 may have spurred publishers to shift Standard-class publications to the cheaper Periodicals class or to drop enough out-of-town circulation so that they could claim in-county status. It may also indicate a shift toward greater reliance on the U.S. Postal Service to deliver such papers, especially in response to spiking gasoline prices.

Still, local coverage seems to be the last bastion of ink-on-paper news coverage, especially in small towns. The Web has done little to replace small-town newspapers, and broadcast journalism (pardon the oxymoron) has never been up to the job.

So are we going to see members of the recently formed American Society of Shit-canned Media Elites abandoning Manhattan to run weekly papers in places Bug Tussle, Arkansas and East Marrycousin, West Virginia? Yeah, just as soon as they're done with the big George W. Bush Fan Club dinner.

Thursday, December 18, 2008

Porno cardboard gets me an extension

Huffington Post has joined the call for double-entendre comments about my article, "Hey big boy, can I recycle your cardboard?"

That prompted a clever item about "woody biomass." But otherwise the response has been pretty limp -- two entries at and an argument between two reindeer on my site.

While pulling Christmas ornaments out of decade-old boxes it struck me that this cardboard porn will be around for a long time, some of it on boxes with large logos of prominent retailers and catalogs. (I have one example, but would love pix of or info about others; send them to

I wonder how many kids working on recycling projects for school or Scouts will call the number, which (as of this morning) still has the same message.

Wednesday, December 17, 2008

Who's it gonna be, me or the PRC?

Who is right about next year’s increase in postal rates, the Postal Regulatory Commission or Dead Tree Edition?

The PRC updated a chart yesterday suggesting that next year’s rate increases will be capped at 4.2%, while here at "The Tree" we predicted it would be in the 3.7% to 3.9% range. If you’re budgeting for next year, shouldn’t you go with the official number, rather than one developed by a guy who once predicted that “The Simpsons”, though brilliant and funny, was too weird to catch on with the American public?

Not so fast. Both PRC and “the Tree” are correct.

The PRC chart is not a prediction but a straight calculation. What it shows is that from November 2007 to November 2008, the average monthly increase in the relevant Consumer Price Index (CPI-U) has been 4.2%. But it’s the change from December 2007 to December 2008, rounded to the nearest tenth of a percent, that will determine the rate cap.

The PRC, probably wisely, makes no attempt to project what will happen to CPI in December. Going where bureaucrats fear to tread, Dead Tree Edition’s position is that, because of recent deflation (a 3.5% drop in CPI-U from July to November), the December-to-December number will be lower than 4.2%.

Specifically, consumer prices would have to rise about at least 2.6% in December (an annualized rate of 36%) for the cap to end up at 4.2%. With energy prices continuing to drop and the economy still circling the drain, that ain’t happenin’.

Even if December bucks the recent trend and the CPI-U doesn’t change, the cap would be 3.9%. If prices drop about 1%, the cap would be 3.8%, and a drop of much more than 2% would put it at 3.7%. Here are the relevant CPI-U numbers if you want to check my math:

YEAR 2007 2008
Jan 202.416 211.080
Feb. 203.499 211.693
March 205.352 213.528
April 206.686 214.823
May 207.949 216.632
June 208.352 218.815
July 208.299 219.964
Aug 207.917 219.086
Sept 208.490 218.783
Oct 208.936 216.573
Nov 210.177 212.425
Dec 210.036 ?
Ave. 207.342 215.764

A final note: The Postal Service also has a tiny bit of "unused rate authority" left over from this year's rate change. The cap was 2.9%, but the average Periodicals increase was only 2.724%, so USPS has an extra 0.176% it could use for Periodicals. That means if the cap ends up at 3.9%, the Postal Service could actually increase average Periodicals rates by up to 4.076%. Standard's unused rate authority is only 0.025%, and the number for First Class is 0.014%.

Tuesday, December 16, 2008

Postal Rate Hikes: Less Than 4% in 2009

For a more in-depth discussion of how the CPI will determine next year's postal rates, see "Who's it gonna be, me or the PRC?"

Deflation of consumer prices means that next year's postal rates will almost certainly average less than 4%, rather than the 5% that most commentators were expecting until recently.

The Consumer Price Index decreased 1.9% in November, the Department of Labor announced today, following a 1.0% decrease in October. The average increase in prices for most classes of postage will generally be capped by the change in the average monthly Consumer Price Index for 2008 versus 2007. The new rates are scheduled to be announced in February and implemented in May.

Another 1.9% decrease in December would yield a rate cap of about 3.75%. No change in the December CPI would yield a cap of about 3.9%.

Recent deflation isn't all bad for the Postal Service: Lower energy prices will probably save the USPS at least several hundred million dollars, perhaps a billion dollars, this fiscal year.

The Postal Service reported that every 1% change in diesel and natural gas prices cost it $29 million during the last fiscal year, which ended on Oct. 31. With the average diesel price being down 22% and the average natural gas price being down 27% so far this fiscal year, that suggests energy savings of about $150 million so far this year.

Current prices are even lower -- down 37% for diesel and 39% for natural gas, according to the Department of Energy. The Postal Service's energy costs would have to be down an average of 35% this fiscal year for the savings to reach $1 billion.

By business standards, the Postal Service is a big gambler when it comes to energy costs. Unlike most freight and delivery businesses, the Postal Service cannot use fuel surcharges to pass higher energy costs along to its customers; its prices can be adjusted only once per year in accordance with changes in CPI.

Most major businesses facing that kind of situation would hedge their risk, using futures markets to minimize the uncertainty and fluctuations in their energy costs. But that's not the way government agencies operate, especially when there's a risk some Congressman will try to grab headlines by attacking USPS for playing around with derivatives.

That leaves the Postal Service benefiting greatly when energy costs are low but at risk of needing a Congressional bailout when energy prices spike. Sounds as if the Postal Service learned its risk-management techniques from the investment-banking industry.

Thursday, December 11, 2008

Hey, big boy, can I recycle your cardboard?

Warning: Adult content. Contains suggestive language
and veiled references to unnatural acts with corrugated boxes.

I got word today that those naughty folks in the box industry had come up with a way to perk up interest in recycling: Sex.

Hmm, slip some Viagra into drooping prices for recycled cardboard? Offer "special favors" to those who use waste paper so that it doesn't end up getting landfilled?

Turns out it was a mistake. The official "Corrugated Recycles" logo used to include the number to a toll-free information line, (800) 879-9777. Call that number now and you're greeted with "Hey there, sexy guy" and offered a chance to go "one on one with hot, horny girls ready to talk to you."

The toll-free number was phased out last year and "unfortunately has been purchased by an adult services organization," says an announcement from the spoil-sports at the Fibre Box Association. Some companies are still using it, and the Technical Association of the Pulp and Paper Industry (TAPPI) was still displaying it today it in a list of industry resources.

"To avoid issues with your customers and their supply chain partners and printing plate providers, we would suggest you prioritize removing this referral from all printing dies," says the announcement. "Please also remove this phone number from all documents, websites and any other form of communication in which this number may appear." The organization provides a new logo (with a URL but no phone number) and tips for scraping the phone number off of printing plates.

Still, with recycled fiber starting to pile up because of low prices, maybe we could use the help of that "adult services organization" to arouse interest in buying waste paper. I can hear one of those breathy operators purring to a paper-company executive, "Hey, big spender, how would you like to go one on one with a couple of truckloads of post-consumer office paper? No flocculation, I promise."

Based on what I know of paper executives, that would definitely get their attention -- more so than Candace the Caribou.

Dec. 13 Update: TAPPI removed the phone number from its Web site yesterday. Good thinking, since it was on a page of paper-related resources for students and teachers. But Google the phone number and you'll find plenty of sites that still list it. Also, U.S. News & World Report's Web site is inviting folks to submit double-entendre comments about this article. Let me throw out a few paper-making terms to stimulate your creativity: stiffness, bulk, wet-end chemistry, couch (pronounced "koosh"), and beaters.

Tuesday, December 9, 2008

Recycled paper piling up

The New York Times has discovered the recycling crisis – nearly a month after Dead Tree Edition's "Awash in Paper" reported on it. Yesterday’s article in the Times even uses one of the same examples, the Charleston, WV area.

The article reports various instances of communities suspending or restricting their recycling programs and of recyclers storing materials rather than selling them for next to nothing. All kinds of scrap, not just paper, are affected.

The second sentence actually understates the problem, saying that the economic downturn has “decimated” the market for recyclables. Once upon a time, the Times had copy editors who knew that “decimate” means to destroy only 10% of something and who would have realized that “devastated” was more appropriate in this case.

One irony of the article is that it came out just after a minor recovery in the market for recycled paper as Chinese buyers tentatively returned to the market. For example, Pulp & Paper Week reports that the December price for mixed paper for export from New York to Asia was a whopping $0 to $5 per ton, up from -$10 to -$15 (yes, prices were negative) in November.

Speaking of ironies, here’s another from the same issue of Pulp & Paper Week: Material recovery facilities (MRFs) in Quebec are struggling and looking for relief from city-government contracts because of the crash in export prices to China. Hmm, Quebec, aren’t there a lot of paper mills there? Yes, but the newsletter reports that the MRFs take in material from single-stream recycling operations that “isn’t good enough quality for domestic paper mills.”

I don’t understand why the environmental movement has been largely asleep on single-stream recycling. Some organizations pressure major organizations to buy paper with recycled content but ignore the fact that, increasingly in North America, we are moving to single-stream recycling (glass, cans, paper, etc. in the same containers) that makes the recovered fiber virtually unuseable for high-quality paper. We have relied on shipping it to China, where labor is cheap enough to justify separating the recycled materials by hand.

Monday, December 8, 2008

Another Chapter 11 Filing Dings AbitibiBowater

Today’s Chapter 11 filing by Tribune Company could put a multimillion-dollar hurt on AbitibiBowater, another newsprint manufacturer, and perhaps some fellow newspaper publishers.

Tribune filed papers with a Delaware bankruptcy court indicating it owed nearly $7 million in “trade debt” to Abitibi -- $4.192 million to the Abitibi Consolidated subsidiary and $2.77 million to the Bowater subsidiary.

Also making Tribune’s list of top-30 creditors was “SP Newsprint Company c/o White Birch Paper Company” of Greenwich, CT, with $5.153 million in trade debt. SP is an Atlanta-based partnership owned by three newspaper chains (Cox, McClatchy, and Media General), while White Birch is a separate, privately owned newsprint manufacturer based in Greenwich.

White Birch was presumably a marketing agent or broker of SP paper sold to Tribune, but it's not clear which company is left holding the bag.

AbibitiBowater also has $13.3 million tied up in Quebecor World’s Chapter 11 filing from January. Put together the Quebecor and Tribune debts and you would have enough to buy 81% of AbitibiBowater stock, which closed down 10% today (and 98% from a year ago) at 43 cents per share. The heavily leveraged paper company lists assets of nearly $10 billion but has a market cap of only $25 million.

Quebecor World says it is in the process of exiting Chapter 11, but it’s not clear what kind of compensation its creditors would receive. Tribune’s various newspapers and other media properties are still operating, but the prospects are bleak for major newspaper chains with lots of debt – and for the paper companies that supply them.

Not making the Top 30 list was Catalyst Paper, the dominant newsprint supplier in the West and reportedly a major supplier to Tribune’s Los Angeles Times and other newspapers. That indicates Catalyst's exposure is less than the $1.691 million that the #30 creditor had.

The top of the list is dominated by holders of various debt instruments. The largest trade debt, $23.691 million, is owed to Warner Bros. Television, #13 on the list. Just below that Time Warner subsidiary is Mark Willes, CEO of Times Mirror until Tribune purchased it, with $11.229 million in “retirement and deferred comp”. Three other retired executives also made the list.

Saturday, December 6, 2008

Losing the Name Game

What idiot is in charge of picking the brand names for publication papers?

We noted yesterday the passing of the AbiBow Eco Gloss brand name that was created by the moniker-challenged AbitibiBowater. (Repeat either the brand name or the company name 10 times very quickly.)

SAPPI has supposedly given up on its Belgrade brand name. There is no truth to the rumor that it had considered coming out with a series of other brands named after the world’s bleakest places, such as Mogadishu Matte, Chernobyl Chrome, and Auschwitz Satin.

Catalyst had a pretty good LWC name in Pacifica Gloss, but then the Freudians in the marketing department changed it to Electracote. To become gender neutral, will Catalyst call its new coated #4 product Oedipuscote?

Myllykoski has tried to get hip to the Me Generation by naming everything MY something – MY GOLD, MY PLUS, MY SYMMETRY, MY BRITE, and so on. MY GOD, enough is enough!

Even the environmentalists pestering some paper companies have trouble with names. Remember Candace the Caribou (right), the character ForestEthics created to protest that logging in Canada’s boreal forest was destroying caribou habitat? The effort was targeted at American consumers, who responded, “What’s a caribou?” Answer: the Canadian word for reindeer.

Now if Greenpeace had created Rudolph the Homeless Reindeer and shown him pushing a shopping cart full of stuff, maybe we would have gotten the message.

Friday, December 5, 2008

AbitibiBowater says no way for Nuway

AbitibiBowater is finally giving up on a nine-year effort to turn base stock from newsprint machines into lightweight coated paper.

The company announced yesterday the closure of its Covington, TN converting facility, where it has the capacity to make 70,000 tons per year of lightweight coated paper using base paper from other mills. As a result, the company will no longer try to make LWC lighter than 36#.

The failed venture goes back to the Nuway technology Bowater purchased in 1999 with hopes of getting into the LWC business. It has what is probably the country’s most efficient coated-groundwood machine in Catawba, SC, but the Southern pulp used there is not suited to ultralight grades.

Bowater’s idea was to make base paper from a newsprint machine in Thunder Bay, Ontario (where it had considered putting in a full coating operation) then ship it to coating facilities near major U.S. printing plants, where it could be converted to coated groundwood on an almost just-in-time basis.

The product got a black eye in the business when Bowater rushed it to market, only to learn that it did not run well on heatset web offset presses. Holes that were acceptable for newsprint on coldest presses turned out to be too large and numerous for coated paper on heatset presses. When printers realized Bowater was using them to beta-test an unproven technology, they discouraged or banned their customers from buying the paper.

Bowater went back to the drawing board to fix the sheet and to develop various products with the Nuway technology. At various times, Bowater and the post-merger AbitibiBowater tried making discounted #5, regular #5, #5 with recycled content, and #4, under a variety of names including the ultra-sexy “AbiBow EcoGloss.”

With the Canadian currency having become so weak, it’s hard to see how Covington could compete with the low-cost Canadian machines at Kruger and Catalyst, which can coat and calender LWC in one pass. And the collapsing LWC market is hardly worth fighting over.

The Covington closure was part of a larger package of 1 million tons of annual capacity, mostly newsprint, that AbitibiBowater announced yesterday it is closing or idling. The stock market reacted negatively, with the stock closing at at 45 cents per share yesterday (low enough that the Quebecor money referenced in Monday’s post would have been enough to buy control of AbitibiBowater), then bouncing back to close at 48 cents today.

The closures and idlings are actually a sign of strength. With a current ratio (current assets to current liabilities) of only 1.07 at last report and big debt payments coming due in a few months, there was a danger that the company would have to keep all cash-positive newsprint machines running even if that caused prices to plummet. By idling so much newsprint capacity yesterday, North America’s dominant newsprint maker demonstrated that it still has the financial strength (or lenders’ patience) to exercise market discipline.

Wednesday, December 3, 2008

Death of the SCF, Part 3: Flats Sequencing

The U.S. Postal Service may have tipped its hand regarding significant consolidations of its dropship network that in some cases will move work 100 miles from the current location.

Information that USPS has released regarding the Flats Sequencing System indicates that, within two years, the handling of flats (catalogs, magazines, and newspapers) may no longer be performed in such major cities as Boston, Hartford, San Bernardino, and Fort Lauderdale. USPS officials have indicated that roll-out of FSS would result in some consolidation of dropship locations but have revealed few specifics.

To understand what is likely to happen, consider the case of the Norfolk-Virginia Beach area in southeastern Virginia. In 2010, the processing of flats for 28 ZIP codes in that area is scheduled to be shifted from the Norfolk Processing and Distribution Center to the new Richmond, VA FSS facility. Currently, Periodicals mailers can get ADC discounts by dropping Norfolk-Virginia Beach mail in Richmond and SCF discounts by dropping it in Norfolk.

(Here is a full listing of Phase I ZIP codes, but be forewarned that the Postal Service seems likely to amend this list and shift some machines to additional locations because of declining flats volumes.)

Part of the Postal Service’s FSS plan is to “induct mail where it is processed” – in this case Richmond. It seems unlikely that USPS would want mailers to drop FSS copies in Richmond while dropping non-FSS copies from the same three-digit ZIP codes in Norfolk. The most likely scenario is that USPS is planning to move the SCF location for all Norfolk-Virginia Beach area flats from Norfolk to Richmond.

That may lead to some Norfolk (pronounced NOR-fuk) postal workers amending the infamous Chant of the Norfolk Virgins to “We don’t smoke, we don’t drink, nor sort, nor sort! (The original chant is, “We don’t smoke, we don’t drink, Norfolk, Norfolk!” which is doubly ironic considering that prostitution used to be a major industry in that Navy town and that the first test-tube baby in the U.S. was conceived there. But I digress.)

Such subtle consolidation of the flats-dropship network is consistent with other moves the Postal Service is making, which Dead Tree Edition is calling “The Death of the SCF” as we know it. (See Parts 1 and 2 of our series.) Such “network realignment” is generally good news for mailers, who have to ship to fewer locations to obtain dropship discounts, but of course not so good for some postal employees whose work is being relocated.

The Postal Service has said for years that it could gain efficiencies by consolidating dropship locations but has been stymied by members of Congress trying to protect jobs in their districts. The huge FSS machines, which are supposed to reduce the Postal Service’s costs of delivering flats (supposedly by at least 5 cents per piece, based on what little USPS has revealed), also seem more suited to a consolidated network rather than the current arrangement of more than 250 processing and distribution centers.

Listed below are other P&DCs indicated for consolidation in the Phase I listings, along with the locations to which the work would apparently go:

  • Boston to NW Boston (Waltham, MA)
  • Hartford, CT and Southern Connecticut (Wallingford) to a facility in Massachusetts, apparently Springield
  • Central Mass. (Shrewsbury) to Middlesex-Essex (North Reading, MA)
  • Fort Lauderdale to Miami
  • D.V. Daniels (Kearny, NJ) and West Jersey (Whippany, NJ) to Jersey City
  • Kansas City, KS to Kansas City, MO
  • Monmouth and Kilmer (Edison), NJ to Trenton, NJ
  • Brockton, MA to Providence, RI
  • Pasadena, CA to Van Nuys (Santa Clarita), CA
  • San Bernardino (Redlands), CA to Moreno Valley, CA
  • Santa Ana, CA to Aliso Viejo, CA
  • Flagstaff and Globe, AZ to Phoenix
  • Culpeper and Winchester, VA to Dulles, VA
  • Athens, OH to Columbus, OH
  • Columbus, IN to Indianapolis

Footnote: Based on the response to my post "Postal Service eyes mega-millions from FSS", there is huge interest in and many questions about FSS. That item has had more than 100 comments, most of them at such sites as,, and That prompted me to create "The Unofficial Guide to Flats Sequencing", which has a video of the equipment, links to more information, and answers various questions about the system.

For the record, Dead Tree Edition is neither accepting nor refuting what the Postal Service says about FSS, just trying to interpret what little has come out of "Elephant Plaza" on this important subject.

Monday, December 1, 2008

Maybe we should call it AbitibiUnderwater

Early this year, paper giant AbitibiBowater was stiffed for $13.3 million when Quebecor World filed for Chapter 11. That seemed like a minor wound at the time for a company reporting more than $10 billion in assets, but today it would have been almost enough to buy control of AbitibiBowater.

Just 13 months ago, North America’s two largest newsprint producers joined forces to create AbitibiBowater. Stock of the new company closed at $36.77 per share that day amidst investor optimism that the combination would lead to market discipline – that is, coping with reduced demand by shutting machines rather than cutting prices. In January, Citigroup chose it as a top stock pick for 2008.

AbitibiBowater stock closed today at 53 cents, giving the company a market capitalization of only $30.5 million. That’s less than 10 months after it sold a single mill (Snowflake, AZ) for $161 million.

The shares went as low as 43 cents a couple of weeks ago until a market analyst reported that demand for pulp was picking up in Asia. (Nope. Pulp prices are still collapsing in Asia and the rest of the world.)

It turns out that becoming the dominant newsprint producer in North America is as worthwhile a pursuit as striving to be the world’s best catcher of live hand grenades. Meanwhile, the crown jewel of the Bowater half – the coated-paper mill in Catawba, SC – has lost its luster now that the markets for coated have tanked, currency shifts have taken away the mill's position as a low-cost producer, and quality problems reportedly caused it to stop making rotogravure papers.

The publication-paper market in the least danger of crashing is the one for high-end supercalendered grades (SCA, SCA+) that compete with higher-priced coated groundwood. But one of the first things AbitibiBowater did after the merger is close its only mill that played in the true SCA market.

How can a company with $10 billion in assets have a market value of barely $30 million? Highly leveraged paper companies will struggle more than ever in this recession, and AbitibiBowater is among those with "the most pressing liquidity problems,” Fitch Ratings said last week.

It looks as if Wall Street is betting that another major Canadian/American company will join Quebecor World in Chapter 11.

Dec. 3 Update: S&P downgraded AbitibiBowater's credit rating two notches today, to CCC, and RISI reported that the company had rescinded the December increase in newsprint prices. RISI also said this week that newsprint prices continued rising in November and predicted that the price decline next year will be gradual despite falling demand.