Supercalendered paper bucks downturn in printing papers.

While publication papers are experiencing big declines, SuperCalendered papers are showing remarkably strong and consistent growth patterns. Although printing papers have been on a downward slide for the last four years, one grade has been bucking the trend--SuperCalendered (SC) paper. Spurred by solid marketing and promotion efforts by The SC Council and profiting from technological upgrades in the manufacturing process, SC paper producers are "bullish" on 2004 and beyond.

To say that SC paper has grown rapidly is an understatement. In 1980, consumption of SC paper in North America was approximately 300,000 tons. In 2000, consumption reached 2 million tons. This year consumption will exceed 3 million tons.

Although there are many reasons behind this growth, the most prominent one is quality improvement. Walter Vail, president, St. Marys Sales Co., Westchester, Illinois, USA, the sales and marketing arm for St. Marys Paper Ltd., explained that catalogers, publishers, and other users of high-volume printed materials are under intense pressure to control the rising costs of postage and production. This is why they thoroughly examine every aspect of their printing costs.

Toward this goal, Vail notes that companies and individuals who use machine-finished paper and newsprint can achieve a significant upgrade in quality when they select SC papers. On the other end of the scale, lightweight coated (LWC) paper users should look to SC papers because they compare favorably with LWC, according to Vail. "There is a significant economic advantage," he said.

Eric Liquori, director of marketing and communications, Myllykoski North America, said that quality improvements are another important reason for the growing demand for SC paper. He noted that SC paper is not the only grade of printing paper seeing quality changes for the better. The quality improvements in SC are producing better print reproduction results. SC producers claim that this translates into cost savings without compromising quality for readers and advertisers.

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USERS

In 2003, North American purchases of SC papers reached nearly 3 million tons. This is a considerable accomplishment considering that total purchases in 1992 were only 1,424 million tons. Of the 2003 amount, approximately 60% of the purchased paper came from Canada, 22% from Europe, and approximately 18% from the United States, according to The SC Council, CPPA, and AF & PA.

In recent years, the largest users of SC paper have been retail companies sending advertisements to customers as flyers, inserts, and coupons. Catalogers are the second biggest users of SC paper according to The SC Council. This group has a New York City base and represents five major North American suppliers of SC paper.

Besides these users, the next biggest users of SC paper are magazine publishers followed by Sunday magazine publishers such as the New York Times, Chicago Tribune, and LA Times.

GROWTH FACTORS

In recent years, the primary factors growing SC papers have been an increase in the use of SC paper in catalogs due to a lack of major postal rate increases and an improvement in SC paper quality without a commensurate increase in price.

This latter factor is very telling. SC papers have undergone significant improvements in paper quality characteristics such as brightness, opacity, and gloss. These improvements are encouraging retail advertisers to examine more closely the costs vs. print quality equation for SC papers.

Paper companies are now able to produce SC papers with increased brightness, improved opacity, and higher gloss. "The advent of the speed former or the gap former has improved formation of SC paper so that the manufacturer can improve brightness and opacity," said Reed Perry, senior vice president, Norske Skog USA. These improvements in SC paper quality and manufacturing consistency allow The SC Council to state that SC papers are comparable to LWC paper grades.

Vail added that significant changes in paper chemistry have achieved quality changes in SC paper that allow its use by web offset printers with very good results. "The industry has constantly been improving its manufacturing process so that we are now well suited to serve our customers," Vail said.

Improvements in quality characteristics have also prompted SC producers to distinguish or stratify SC paper according to SC-A, SC-B, and SNC. Primarily thought of as marketing tools for paper suppliers to differentiate themselves from competitors, these stratified grades have different specifications and prices.

INDUSTRY COMMENTS

When asked to forecast the outlook for SC papers in 2004, SC paper producers were "bullish" on SC's growth prospects. SC paper companies see the U.S. gross domestic product (GDP) rising to 3%-4% in 2004. They also see the demand for SC papers growing 6.5%-7%. Note that much of this growth is the result of the every four-year appearance of the Summer Olympics in Athens, Greece, and the presidential elections.

What about retailers who are the major consumers of SC paper? Will major retailers trying to reduce their printing costs switch from SC papers to other communication vehicles such as the Internet? Media and advertising consultants say the simple answer to these questions is "No!" They note that no postal rate increases will occur for the next two years. They add that better customer relationship management programs are allowing catalogers to target their customers better. Print advertising is an important vehicle for carrying the message of retailers to customers.

Liquori noted that catalogers have concerns with printing costs and want to become "multi-channel communicators." As a result, they are looking at the Internet and catalogs as communication vehicles for sending their messages to customers.

Breen Blaine, vice president, glossy and directory papers, Abitibi-Consolidated Sales Corp., said that his company now sells SC-A to magazines and catalogers and to retailers. He noted that 20 years ago when he joined the SC paper business Europeans were the dominant suppliers of SC paper to the North American market. Today, Europeans hold a 22%-24% share of the SC paper market in North America. This is a considerable decrease from the 70% share they had in the late 1980s.

Blaine says that the single market in which SC paper has made great strides is the heat-set web offset printing market. Vail adds that SC paper was an excellent paper for rotogravure presses but not for heat-set web offset. "It was a struggle to get web offset printers to use SC papers," Vail said.

Only when the industry showed printers the manufacturing changes made to improve paper quality characteristics were printers willing to use SC papers. "Porosity has improved, brightness has increased, and the reproduction of pictures on the printed page has changed for the better," Perry stated.

Considerable credit goes to The SC Council for the growth in heat web offset printing presses. The organization produced a booklet entitled "Guidelines for Printing on SuperCalendered Paper." This booklet and an accompanying video taught printers how to obtain the most from SC paper on heat web offset printing presses.

CAVEATS

While the outlook for SC papers in 2004 and beyond looks good, some caveats do exist. The first involves new capacity coming into the marketplace. The Millinocket mill formerly owned by GN Paper was a large producer of SC paper that closed due to bankruptcy in 2003. With a new owner, the Katahdin mill should return SC capacity into the marketplace in 2004. Nobody knows how much this additional capacity will affect the market-place--particularly concerning pricing.

A second concern arises from serious questions about the future of print advertising. With the quadrennial uptick in advertising pages predicted in 2004, industry observers wonder whether the surge in growth this year is merely a blip in the downward trend in print advertising pages that began in 2000 or a harbinger of better times ahead. No matter which scenario is correct, the future of print advertising poses serious concern because of intense competition from alternative media such as the Internet and cable television.

The success of the SC paper industry raises questions about meeting growing demand. Although SC producers can now meet a growing demand, they will need to add new capacity in the near future. Unfortunately, the industry will require some time to recover from the tough business conditions of the past three years before it can even think of additional capacity. If it does not add capacity, Europeans will likely take up the slack. This is the proverbial "Catch 22" in which the industry knows it must make capital investments but cannot due to poor profitability.

SC IN PERSPECTIVE

Although the order book for SC paper is strong in 2004, the depressed marketplace for printing papers and increased imports from Europe will probably hold profitability down. "We are at an interesting point in the market," Blaine said, "because the weakened U.S. dollar in relation to the Euro has not slowed the rate of [SC] paper imports to the United States. At what point does it not pay Europeans to ship their products to the United States?" Blaine asked.

A review of the growth record of SC paper reveals some interesting actions the industry pursued to grow and stay competitive. First, SC paper is the only printing grade that has its own organization (The SC Council) and public relations firm. Competitors should not minimize the positive effect of these two organizations on the "awareness factor." The SC Council ensures that all printers, consumers, and publishers are well aware of the price of SC paper and the quality benefits. In addition, industry consultants now confer with The SC Council as the industry source for statistical information on SC paper production, sales, and use. The SC Council has done an excellent job of achieving its goal of increasing awareness of SC paper and promoting its use in North America.

At a time when the industry is struggling with a depressed printing paper marketplace, SC papers stand out for their growth and continuous changes. The changes in manufacturing technology, the changes in paper chemistry and surface sizing agents have all helped to improve paper qualities and increase growth.

Finally, SC paper producers have undertaken research studies conducted by well-respected marketing research organizations to support their claims that SC papers are "comparable in quality to LWC grades." When choosing one printing paper grade, printers and publishers are always looking for arguments to back up their decisions. SC paper producers not only talk the talk but also walk the walk.

Today, SC paper is a fast growing paper grade in North America. It has grown into a premium grade of mineral-filled, mechanical pulp paper with exceptional smoothness, opacity, brightness, and strength. Continuing advances in paper manufacturing technology have made the runnability, printability, optical characteristics, and consistency of SC papers a bright light in an otherwise depressed marketplace.

SC COUNCIL SC SHIPMENTS TO NORTH AMERICA 1980 Thru 2003 (Metric Tons in
000's)

                                      PROCESS
YEAR  SCA    OTHER  TOTAL  % CHANGE  GRAV%    OFF%

1980    190     91    281
1985    581    322    903
1990    921    433  1,354
1995  1,205    419  1,624           67         33
1996  1,016    412  1,428  <12.1>   73         27
1997  1,114    611  1,725   20.8    74         26
1998  1,208    559  1,767    2.5    75         25
1999  1,346    506  1,852    4.8    69.5       30.5
2000  1,411    571  1,982    7.0    68.3       31.7
2001  1,355    565  1,920   <3.1>   66.4       33.6
2002  1,803  1,164  2,967    0      50.6       49.4
2003  1,866  1,112  2,978    0.4    45.0 Est.  55.0 Est.

Note: Commencing in 2002, we include every manufacturer of SC paper,
both "in-line" and "off-line"

SC COUNCIL SC SHIPMENTS TO NORTH AMERICA 1995 thru 2003 (Metric Tons in
000's)

            SCA           OTHER            TOTAL         GRD. TOT.
YEAR    N.A.   EUROPE  N.A.    EUROPE  N.A.      EUROPE

1995    725.3  479.8    323.7   96.0   1,049.0   575.8   1,624.8
% Grd. Tot.                               64.5%   35.5%
1996    612.8  403.6    365.8   45.8     978.6   449.4   1,428.0
% Grd. Tot.                               68.5%   31.5%
1997    645.9  468.0    442.2  168.8   1,088.1   636.8   1,724.9
% Grd. Tot.                               63.1%   36.9%
1998    751.6  456.9    417.2  141.7   1,168.8   598.6   1,767.4
% Grd. Tot.                               66.1%   33.9%
1999    938.2  407.8    410.7   95.8   1,348.9   503.6   1,852.5
% Grd. Tot.                               72.8%   27.2%
2000    963.1  447.5    450.2  121.3   1,413.3   568.8   1,982.1
% Grd. Tot.                               71.3%   28.7%
2001  1,185.9  414.0  1,061.2  126.6   2,247.1   540.6   2,787.7
% Grd. Tot.                               80.6%   19.4%
2002  1,365.5  438.2  1,059.0  104.4   2,424.5   542.6   2,967.1
% Grd. Tot.                               81.7%   18.3%
2003  1,363.9  501.7  1,010.8  101.8   2,374.7   603.5   2,978.2
% Grd. Tot.                               79.7%   20.3%

Note: Starting with 2001 we have included every manufacturer of SC
papers both "In-Line" & "Off-Line".

IN THIS ARTICLE, YOU WILL LEARN:

* How much SC paper has grown in the last 24 years.

* The reasons for the growth of SC paper.

* The outlook for 2004 and beyond.

* Some lessons from the success of SC paper.

ADDITIONAL RESOURCES:

* The SC Council: www.SC Council.org.

JEROME A. KONCEL, CONTRIBUTING EDITOR

ABOUT THE AUTHOR:

Jerome A. Koncel is a contributing editor for Solutions! Magazine based in Schaumburg, IL. He is the former editor of American Papermaker, and has covered the pulp and paper industry for more than sixteen years. Contact him by telephone at [phone] or email him at [e-mail].

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