Boston, USA based RISI economists responded on February 5, 2007 to the recent news of the Abitibi-Bowater merger, stating their Boston, USA based RISI economists responded on February 5, 2007
to the recent news of the Abitibi-Bowater merger, stating their expectation that the North American newsprint market
will remain very weak for most of 2007.
Abitibi and Bowater commanded a 40 per cent combined share of the
North American domestic market in 2006. The proposed merger is
based on the continued operation of existing assets with no further
capacity closures. “The inability to reduce capacity will prevent
the two companies from playing a leadership role in arresting the
deteriorating supply/demand balance in 2007,” said Kevin
Conley, RISI's senior economist for newsprint. “In addition, it
increases the possibility that other producers' highest-cost
newsprint mills that have benefited from Abitibi-Consolidated's
and Bowater's past efforts to balance the market, will not
survive.”
Conley continued, “Consolidation of the North American
newsprint industry will prove to have a positive impact, creating a
leaner, more-efficient manufacturing platform over the long term
and the merger of Abitibi-Consolidated and Bowater is another
step in that direction. However, any short-term benefits will remain
unrealized as the North American market balance deteriorates and
profitability for newsprint producers remains elusive in 2007.”
Background
On January 29 Abitibi-Consolidated and Bowater announced plans
to merge the two companies in an all-stock deal to form
AbitibiBowater with headquarters based in Montreal. Pending
shareholder and regulatory approval, the merger will create the
third largest publicly traded paper and forest products company in
North America and the eighth largest in the world. The union will
also lift the new company to the position of largest global producer
of newsprint, commanding 15 per cent of global newsprint capacity, with Norske Skog slipping to second place.
Further information on RISI's suite of business intelligence for newsprint markets is located at www.risiinfo.com/newsprint .
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