Trade dispute involving newsprint causing heartburn for many U.S. newspapers, printers

A petition by a paper maker in Washington state has set off alarm bells at newspapers and printing plants across the country whose leaders say the outcome could drastically increase newsprint costs, adding more financial pressure to an industry already struggling with the drain of advertising and subscription revenue in recent years.

The North Pacific Paper Company, or NORPAC, asked the U.S. Department of Commerce to investigate Canadian imports of "uncoated groundwood paper," the grade of paper widely used by newspapers and other commercial publishers.

The company was acquired in late 2016 by One Rock Capital Partners, a New York-based hedge fund. It has essentially claimed that Canadian government subsidies are giving Canadian newsprint producers an unfair advantage over U.S. paper producers, and that the Canadians are dumping paper on the U.S. market at prices below the cost of production.

Commerce has been investigating the matter for the past four months and is expected to issue a preliminary decision this week on one aspect of the case. U.S. newsprint buyers fear that steep import duties of up to 50 percent could increase both Canadian and domestic ­newsprint prices.

"It's a big deal if it happens," said Lisa Hills, executive director of the Minnesota Newspaper Association, a trade group that represents about 320 daily and weekly newspaper members, including the Star ­Tribune.

"That's a huge increase when you look at the business costs for a newspaper," she said. "Newsprint is one of the largest expenses that a newspaper has, probably second to labor costs."

Mike Klingensmith, publisher of the Star Tribune, said Minnesota's largest newspaper spends about $10 million annually on newsprint. Even if the tariff was only 10 percent, he said, it would represent a seven-figure cost for the company that was unbudgeted and unanticipated.

"It would be very significant economic stress on the company," he said, "but it wouldn't put us under."

Many newspapers don't print in their own facilities, so an increase in newsprint prices would also affect the printing industry, which sent a letter last month to Secretary of Commerce Wilbur Ross urging him to reject a tariff on Canadian newsprint because it would further stress the financial viability of newspapers.

"As for our customers, many can barely pay their printing bills now," the letter said. "An escalation in paper prices would push some over the edge, and cost their communities not only the newspaper jobs but the news and advertising support that drives other local jobs."

To be sure, U.S. newspapers are using less newsprint. But industry officials said that's due primarily to the shift from print to digital media consumption, not to unfair trade practices.

The Department of Commerce decision this week would likely increase duties temporarily beginning later in the month, and another aspect of the case would be decided in March. After that, the International Trade Commission would take up the matter and conduct hearings to determine whether the preliminary duties would become ­permanent.

Also weighing in are more than 1,100 small- and medium-sized newspapers, including 13 in Minnesota, that sent a letter to Ross last month urging denial of the petition because it could result in "very severe" impacts on the industry.

"If Canadian imports of uncoated groundwood paper are subject to duties, prices in the whole newsprint market will be shocked and our supply chains will suffer," the letter said. It further states that NORPAC does not reflect the views of the paper industry in the United States, and its petition has been opposed by most other domestic newsprint makers and by the American Forest and Paper Association.

Given its "outlier status," the letter said, "it appears that One Rock Capital Partners may be using the petitions as a means of increasing the short-term value of this one mill, without any regard for the dramatic negative implications for U.S. newspapers in thousands of small cities and towns."

Officials at both One Rock Capital Partners and NORCO did not respond to requests for interviews or statements about the case.

At the time its petition was filed last August, the company blamed unfair Canadian competition for recent cutbacks at its plant in Longview, Wash.

In May 2017, NORCO's 400 nonunion employees received a 10 percent wage cut and reductions in retirement benefits. A week after filing the petitions in August, the company announced that it would shut down one of its three paper machines in October, resulting in an undetermined number of layoffs and reducing the plant's capacity by nearly one-third to 540,000 tons per year.

At the time, company CEO Craig Anneberg said in published reports that NORCO would use all the tools at its disposal under U.S. trade law to address and counteract the dumped and subsidized imports from Canada.

Tom Meersman • 612-673-7388