Sappi to Cut Coated Paper Production in Europe

Dec. 10, 2008 - Sappi Ltd.'s chief executive Ralph Boettger said that the company will cut production of coated fine paper at its European mills by 20 percent this month to bolster prices, according to a Bloomberg news report.

“It could be as much as 40,000 tons depending on market conditions,” Boettger said in a telephone interview from the company’s headquarters in Johannesburg. “We are not going to produce more than we need to.”

Sappi is in the process of finalizing its 750 million euros ($963 million) acquisition of M-real's coated graphic paper business, which includes four mills—Kirkniemi and Kangas in Finland, Stockstadt in Germany and Biberist in Switzerland.

The South African company says the deal will give it enough momentum in the European graphic paper market to restore margins to double digits. As part of the deal, M-real will also shut down 600,000 tons of fine paper capacity.

Demand has fallen amid a worsening economic situation, Boettger said. Sappi will be monitoring demand “month to month” and had not ruled out further cuts. “We will have to see what our order intake for January will be, to see how much merchants are de-stocking.” It would not be a surprise if there were larger orders in January as Boettger thought there had been a degree of de-stocking of inventories.

Based on this year’s forecast for consumption, Sappi estimates it will have about a 30 percent share of the European market for coated fine paper after the M-Real deal is completed at the end of the year.

SOURCE: Bloomberg and Sappi

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