A New Chapter (Eleven) for Paper

On a day when North America's largest newsprint producer (finally) went Chapter 11, here is a small piece of good news for the paper industry: Half of the respondents to a Dead Tree Edition poll expect little or no erosion in coated-paper prices during the next few months.

AbitibiBowater, aka AbitibiUnderwater, gave up trying to re-refinance its massive debt and filed for bankruptcy protection today in both the United States and Canada. The company, also a significant maker of coated and uncoated groundwood papers, has arranged debtor-in-possession financing that will help it continue operating while the courts restructure its debt.

Some newsprint customers, anticipating the filing, have been talking to competitors to ensure adequate supply if AbitibiBowater collapsed, even asking at least one paper company to re-enter the newsprint business. (Sort of like asking someone to head up the George W. Bush Fan Club, isn't it?) But all indications are that the company's mills will continue producing.

AbitibiBowater's move "will have greater implications for the company than for the newsprint market," writes Jim Rosenberg, a senior editor at Editor & Publisher.

One of those implications is that employees will not receive bonuses that were due them for 2008 performance, though I'm not sure what kind of performance bonuses are due for taking the company's stock from $20.47 to 47 cents in the calendar year. All incentive compensation for 2009 has also been suspended.

The filing puts the final nail in the coffin for the idea that the merger of Abitibi and Bowater would give one company enough market share to manage newsprint supply so that prices wouldn't collapse. More than ever, AbitibiBowater will be pressured to maximize immediate cash flow rather than managing supply to keep prices up.

Now as to that poll: Dead Tree Edition asked readers to vote on what the price of 40# coated #5 would be in July. When the poll was launched, RISI's Paper Trader had the market price as $900 per ton ($45/cwt.); the March number was $880. Half the voters thought the price would be at least $860, including 10% who thought it would be $900 or higher (wonder what they were smoking -- or what paper company they work for).

Only 29% voted for a crash, with pricing of less than $820, while another 21% voted for a modest decrease to the $820-$859 range.

Now I'm asking my readers another question: What will be AbitibiBowater's fate? Cast your vote in the poll, which appears on the right just above the "Featured Articles" listing.

One more question: Why was Google Adsense, which places ads based on the content of a Web site, posting an ad for E-Harmony on Dead Tree Edition today? Perhaps with all the talk of black liquor here lately it thought that romance was just around the corner.