Subsidized U.S. Mills Fight Back Against Subsidized, Cross-Dressing Coated Papers

Two paper companies benefiting from multimillion-dollar U.S. government subsidies went on the attack today against subsidized coated paper from China and Indonesia.

NewPage and SAPPI, along with Appleton Coated, announced that they have filed "antidumping and countervailing duty petitions" covering imports of paper for sheetfed presses "having a GE brightness of at least 80."

"Under the antidumping and countervailing duty statutes, the International Trade Commission is expected to make a preliminary injury determination in November 2009 and the Department of Commerce is expected to issue preliminary determinations in the countervailing duty and antidumping duty cases in December 2009 and March 2010, respectively," the statement says. It says that relevant imports of coated paper increased 40% in the first half of 2009 versus the first half of the previous year even though shipments by U.S. mills declined about 38%.

NewPage led a previously successful antidumping effort against coated-freesheet paper coming from Asia, but some Chinese and Indonesian mills have skirted the resulting tariffs by including enough mechanical pulp in their papers to have them classified as coated groundwood rather than coated freesheet. The more generic "GE brightness of at least 80" is obviously intended to close the loophole for such coated-groundwood papers cross-dressing as coated freesheet.

Through the second quarter, NewPage had received $120 million and SAPPI $37 million this year in "black-liquor" tax credits from the federal government. The amounts are likely to double before the program expires at the end of this year. The credits are a sort of accidental subsidy of kraft pulp, the main ingredient in high-brightness coated papers. Appleton Coated is apparently not eligible for the credits.

To be fair, the black-liquor program is temporary, while the Indonesian and Chinese competitors are allegedly receiving more permanent government help in a variety of ways -- tax subsidies, input subsidies, cheap timber, loans, grants, etc.

The statement makes several references to environmental practices, sustainability, and the like. But it makes no direct mention of Indonesia being the international poster child for rape-and-pillage forestry or of the questionable environmental practices of some Chinese paper mills.