Earnings for the first quarter of 2019 improved compared with the preceding quarter as well as the same quarter last year. The improvement in earnings was driven mainly from Paper and Wood. Higher pulp volumes due to the continued ramp-up of the expanded pulp mill Östrand also made a positive contribution to earnings. In the Pulp segment, work is continuing to gradually trim the expanded pulp mill Östrand to reach full capacity. Both production and deliveries increased compared with the preceding quarter. Following a strong pulp market in 2018 with several price increases, pulp prices fell in Europe during the first quarter of 2019. The pulp market in China improved after a weaker fourth quarter.
As you are aware, two U.S. producers of supercalendered paper, Madison Paper Industries and Verso Corporation, filed a petition several months ago with the U.S. International Trade Commission (ITC) and U.S. Department of Commerce, seeking the imposition of countervailing duties on supercalendered paper imported from Canada. The petition identified four Canadian mills, including Port Hawkesbury Paper. The process is expected to continue on into late 2015; however, on July 28th, we expect to know the results of an interim ruling by the Department of Commerce, which could see the imposition of an interim duty levied on the Canadian mills. It is important to understand that the duties would impact not only Port Hawkesbury Paper, but other members of the supercalendered paper industry in Canada.
We are currently preparing for a site visit involving representatives from the Department of Commerce in early August, with whom we are fully cooperating. This visit will allow us to further prove the points of our legal case. We are also in regular communication with our customers and suppliers, who continue to support the mill.
We are working on this matter in close coordination with the Canadian Federal and Nova Scotia Provincial governments. Our legal teams are focused on vigorously defending this matter, as the case is without merit. Once we know more about any interim measures, we will advise our stakeholders.
Below are a few questions we’ve been asked, and their corresponding answers. If you have any further questions, please contact me directly.
Thank you for your continued interest in, and support of, Port Hawkesbury Paper.
Tom Gallagher, President of Sales, Port Hawkesbury Paper
Will all Canadian manufacturers be assessed duties?
The Department of Commerce has selected two respondents for investigation – Resolute and Port Hawkesbury Paper. Irving and Catalyst will be subject to the average duties of Resolute and Port Hawkesbury Paper. However, if either Resolute or Port Hawkesbury Paper receive no duties (or a nominal duty), Catalyst and Irving would be subject to the same duty level as the respondent receiving the duty.
What will happen if Port Hawkesbury is assessed a significant duty?
We would interpret a significant interim duty as not being a fair, facts-based determination. We would continue to press our case, with a focus on (i) the final duty determination by the Department of Commerce, which comes approximately 75 days later – around mid-October, and (ii) the final determination by the ITC on the “harm” issue in late 2015. There are also various avenues for appeal following the final determinations. In the meantime, we are continuing our focus on safely and cost-effectively producing paper and fulfilling our customers’ expectations. And, of particular importance, we are consistently working to achieve our goal of being the highest quality, lowest cost producer of SC paper in North America.
What is the appeal process to reverse a decision if duties are assessed?
As mentioned above, the Department of Commerce will make its final determination on duties approximately 75 days after the preliminary determination. There is also the final ITC determination on the harm issue approximately 45 days after the final Commerce determination. If the ITC determines there has been no harm to the U.S. supercalendered industry, the case is concluded. If that doesn’t happen, there are various avenues for appeal –through the U.S. court system, the WTO and NAFTA, which we would evaluate at the time.
If final duties are assessed, is the timeframe indefinite?
No. There is an annual review process that examines subsidies during the prior year, and there is a “sunset” review every five years that re-examines “harm” and subsidies.
What are the Nova Scotia and Canadian governments doing to help?
The governments of Nova Scotia and Canada have been supportive, and we have been working in close alignment with them to defend this matter. The governments have been defending the Province’s and country’s interests since the day the claims were made several months ago. Our governments continue to underscore that this is an important industry for the region, the Province and the country. If duties are levied, who gets the money?
Duties are paid to U.S. Customs & Border Protection, with the funds ultimately making their way to the general treasury, i.e., the U.S. government.