Making the Grade

In January 2015, Verso Corp., a paper products supplier based in Memphis, Tenn., completed the acquisition of NewPage Holdings Inc., a once-leading producer of printing and specialty papers, headquartered in Miamisburg, Ohio. The transaction, valued at approximately $1.4 billion, aimed to strengthen Verso Corp., with expectations for substantial cost synergies to follow. “The combination of Verso and NewPage creates a stronger, more stable company with an effective strategy to weather industry headwinds and reduce operating costs, while ensuring our customers continue to benefit from the distinctive quality and service that they have come to expect from us,” David J. Paterson, Verso Corp.’s then president and CEO, said in a press release.

But a lot can change in a year. In a letter dated Jan. 26, 2016, Michael Weinhold, Verso Corp.’s senior vice president of sales, marketing and product development, informed customers that the company had filed for Chapter 11 bankruptcy protection in order to facilitate a debt restructuring that would, hopefully, strengthen its balance sheet.

Verso Corp. had become the latest victim of a market undergoing violent shifts in demand, particularly surrounding coated paper products—and that wasn’t the only variable at play. “As Verso has experienced secular decline for its coated paper products, the company has consistently stayed ahead of the curve by balancing our supply of products with our customers’ demand for them,” Weinhold wrote. “In recent months, however, a confluence of external factors, including an accelerated and unprecedented decline in demand for our coated paper products, a significant increase in foreign imports resulting from a strong U.S. dollar relative to foreign currencies, and Verso’s impending financial obligations, made it clear that action was needed.”

Approximately five months later, Verso Corp. announced that it had emerged from bankruptcy following a successful financial restructuring and confirmation of its Chapter 11 plan of reorganization, having shed $2.4 billion of debt. While it may be too early to predict the next development in Verso Corp.’s story, one thing is certain: The paper industry’s same challenges remain. “Volume decline and market contraction combined with increased imports have destabilized the entire industry,” noted David Dickerhoof, director of converting papers for Glatfelter, York, Pa. “Margins continue to be squeezed, which negatively impacts the ability for paper manufacturers to make the needed investments to maintain very old equipment. This is leading to the reduction of choices for the paper consumers.”

And what about all those coated paper mills that are, undoubtedly, feeling the repercussions of waning consumer demand? They have responded by diversifying their offerings, which has introduced a new set of problems for uncoated mills, according to Dickerhoof. “Many coated paper mills have developed uncoated products to make the increase in imports and declining markets even more devastating to uncoated mills,” he remarked. “The U.S. taxpayer has had to fund multiple bankruptcies by some coated manufacturers here in the U.S.”

Others maintain a more positive outlook. Take Mohawk, a manufacturer of fine papers, envelopes and specialty substrates, for example. “In a technological era punctuated with email, smartphones, tablets and texts, Mohawk believes that a new maker culture is emerging and with it, incredible growth in uncoated, tactile paper grades, fueled by a new generation of designers and print buyers who appreciate craft and are looking for print to perform on multiple levels with the highest impact possible,” said Bart Robinson, senior vice president of marketing for the Cohoes, New York-based company.

In response to the renewed interest for uncoated textured and colored papers, Mohawk recently released a comprehensive tool called “A Maker’s Field Guide to Texture and Color.” “This resource was developed to equip printers, communicators and designers with practical strategies and powerful demonstrations of how persuasive uncoated textured and colored papers can be when fully understood and utilized,” Robinson explained.

For Mohawk, commoditization of print is the bigger concern. “Mohawk has embraced technology and innovation, and has created demand for its products in order to thrive amid a dramatic shift in demand for traditional paper and print,” said Robinson. “Our products have not been heavily impacted by imports.”

One way Mohawk is staying competitive is by expanding its wide-format inkjet portfolio. “Mohawk’s portfolio now features [more than] 30 different products engineered for vibrant color and durable print quality across a wide range of applications and ink types,” Robinson shared. “The expanded wide-format inkjet portfolio includes backlit, lightblock, black polyester, adhesive, Dupont Tyvek and tear-resistant fabric.”

The company also plans to unveil new specialty digital products at Graph Expo 2016, held Sept. 25 to 28 at Orlando’s Orange County Convention Center. “Mohawk will introduce 16 new specialty digital products designed for dry toner digital presses,” Robinson said.

Glatfelter is making strides in the inkjet market, thanks to its premium line of high-speed inkjet papers (HSIJ): Pixelle. Designed to run on all high-speed inkjet presses, the Pixelle brand offers five different paper types, which can be found on a dedicated website at pixellepaper.com:

• Pixelle Basic (Untreated): Suitable for pigment-based and dye-based inkjet systems, as well as laser printing and offset printing.
• Pixelle Enhanced (Treated): Ideal for high-color graphics and sharp images. Also suitable for pigment-based and dye-based inkjet systems, as well as laser printing and offset printing.
• Pixelle Book (Untreated and Treated): Made to accommodate breakthrough inkjet technologies in the digital book industry.
• Pixelle Extra (Coated Lightly): Provides enhanced image durability and a smooth surface. Suitable for pigment and dye inks.
• Pixelle Superior (Coated): Has a smooth surface and allows for crisp imagery. Meets USPS requirements.

Dickerhoof attributed the popularity of HSIJ to the use of variable data and the increase in shorter runs. However, as he pointed out, sometimes there is a trade-off. “Inkjet products continue to grow, but usually at the expense of another grade of paper, so really, no net growth,” Dickerhoof said.

THE GREEN EFFECT
Green initiatives, at one time a novelty idea, now are becoming mainstream in the industry. Robinson explained how environmental commitment, social responsibility and corporate stewardship are part of Mohawk’s culture and business practices. “Mohawk was the first U.S. manufacturer of commercial printing papers to match 100 percent of its electricity with wind power renewable energy credits and the first U.S. premium paper mill to shift toward carbon neutral production,” he said. “Mohawk’s portfolio of recycled papers is certified by Green Seal and the Forest Stewardship Council (FSC).”

Recently named as the recipient of the 2016 In Green Award for “Best Sustainable Initiative” from LuxePack NYC, the premier trade show for the creative packaging industry, Mohawk boasts a lengthy list of longstanding alliances with various organizations, including:

• FSC
• Green Seal
• The Rainforest Alliance
• Center for Resource Solutions Green-e Marketplace
• U.S. Environmental Protection Agency (EPA) Green Power Partnership
• EPA SmartWay Transport Partnership

Glatfelter also is serious about environmental sustainability. The paper manufacturer particularly is committed to meeting one of the industry’s biggest environmental protection endeavors to date in part due to the Clean Air Act, a U.S. federal law originally passed in 1973 and amended in 1990 with the intent to protect human health and the environment from the effects of air pollution. As a result, key regulations, like the “Best Available Retrofit Technology” and the “Boiler Maximum Achievable Control Technology” (BART/MACT), have required mills to adjust some of the fuels they use to power facilities.

But the reduction of greenhouse gases comes with a hefty price tag. “BART/MACT has caused mills, on average, to have to invest $30 [million] to $40 million per mill (and much more in some cases) for no return on investment other than the elimination of the use of coal, which is the least expensive form of energy,” Dickerhoof said.

To meet the BART/MACT requirements, Glatfelter’s mills in Spring Grove, Pa., and Chillicothe, Ohio, installed cleaner burning natural gas boilers and upgraded current equipment. It is an extensive investment, no doubt; however, it does position the company for success. Via Glatfelter’s blog:

This $95 million investment won’t generate a conventional return, but it will help Glatfelter comply with current requirements, and be prepared for the future. The work across our mills in Pennsylvania and Ohio will support more than 2,300 jobs in the local economies where we live and work.

Challenges aside, it is important to remember that the paper industry is in good hands. The motivated individuals who belong to this sector bring a certain dedication to their craft—the kind of dedication that will push their paper products to the top of the stack. “Dedication to detail, use of the highest quality materials and a commitment to craftsmanship will ensure printed projects remain memorable,” Robinson concluded.