Boise Inc.’s effort to claw its way back into the newsprint market with record low prices got off to a slow start but may finally be gaining traction.
The company’s 2nd Quarter newsprint sales declined 53% from the previous quarter and 73% from a year ago, the company revealed last week in an SEC filing. Its average net selling price dropped a whopping $154 per ton, to $434, in a single quarter.
The 3rd Quarter is looking much busier, with the larger of its two newsprint machines running mostly full and likely to stay that way through September, company officials told analysts last week. But pricing has not improved, they said.
Low newsprint prices have provided much-needed cost relief for newspaper publishers. But they are making the prospects even dimmer for some paper makers with higher-cost machines and more dependence on newsprint than Boise has.
Boise blamed the termination of a marketing agreement with AbitibiBowater, along with weak market conditions, on the poor 2nd Quarter performance.
Until late February, AbitibiBowater handled all of the newsprint sales for Boise, which mostly makes uncoated freesheet and linerboard. Boise’s anemic 2nd Quarter newsprint sales, amounting to only 28% of its capacity, suggest it lost most of its newsprint customers when it ended the marketing agreement.
Boise fought back in May with a stunning public announcement that it would sell newsprint for $430/ton, about $150 below market prices, in the five states surrounding its DeRidder, Louisiana mill. Price cuts spread like wildfire across the country as competitors scrambled to hold onto their customers, causing newsprint prices to drop more than $100 in just two months.
Boise could afford such low newsprint prices – below the cash costs of many newsprint mills – partly because its newsprint contains kraft pulp, which is subsidized by the federal government’s “black liquor” tax credits. The irony is that these supposed eco-credits are subsidizing Boise's virgin-pulp newsprint at the expense of mills that rely partly or completely on recycled fiber.