Catalyst Paper mills caught in the middle of U.S. trade dispute

Punitive duties on newsprint sales to the U.S. do pose a threat to B.C.’s biggest papermaker, though its mills have other export options to mitigate the impact.

The U.S. Department of Commerce Tuesday ruled in a preliminary decision that Canadian producers of uncoated papers used to print newspapers, directories and catalogues are subsidized, acting on the complaint of a single American mill in Washington state.

“We’re obviously disappointed with this preliminary determination and we’re going to continue to defend ourselves against what we believe is an unwarranted trade action,” said Catalyst Paper spokeswoman Eduarda Hodgins.

Catalyst now faces countervailing duties of 6.1 per cent on its U.S. shipments; Quebec’s Resolute and Kruger face duties of 4.4 per cent and 10 per cent, respectively; and all other producers 6.5 per cent.

Catalyst is a private company, having been bought by a private entity and delisted from the Toronto Stock Exchange last year, so Hodgins wouldn’t disclose exactly how much of its newsprint it ships to the U.S., only that the duty will apply to a “substantial portion of our overall Canadian production.”

Catalyst produces newsprint at its Crofton mill near Duncan on Vancouver Island, which employs 578 people, and its Powell River mill on the Sunshine Coast, which employs 441.

Catalyst does have other export options to mitigate the impact, said industry analyst Kevin Mason with the firm ERA Forest Products Research, but argued the trade action is a self-serving move that will only hurt U.S. newsprint consumers in the long run.

“Catalyst is in a reasonably good position because they can export to Asia,” where customers in India and other countries are scrambling to secure newsprint supplies.

In North America, newsprint prices are high and companies are making profits — in the short term, Mason said.

In the longer term, however, Mason forecasts the industry still faces tough times due to plummeting demand that will likely be sped along by hitting its customers, largely U.S. newspaper publishers that have struggles all their own.

Craig Anneberg, CEO of North Pacific Paper Co. (Norpac), the company that launched the complaint, said it only seeks to “compete on a level playing field,” against Canadian mills that get cheap fibre and preferred rates for electricity.

However, Mason said Norpac, which is owned by the New York hedge fund One Rock Capital and operates a single mill, isn’t being backed by any other American newsprint producers.

Higher prices for newsprint will just speed up the decline of newsprint use, which is falling at 10 per cent a year as it is, Mason said, which will force more mill closures, and the decision on duties only benefits Norpac.

“There’s nothing against anyone making money, but when you’re doing it and throwing a whole larger industry under the bus, speeding its demise for one small player, it seems definitely unfortunate,” Mason said.

“But, the way U.S. trade law is, (that) happens.”