By: Dylan Sikes - AllPennyStocks.com News

Friday, August 22, 2014

Paper mills in the United States have suffered the fate of the digital movement and the “go paperless” mantra that is so often heard to save the environment. Many mills, some with roots back nearly two centuries, have been forced to shutter their doors as the once thriving industry that was so vital to the country has fallen prey to technology, leaving it a fraction of what it once was. Nationally, the number of people employed at paper and pulp manufacturers has been nearly halved from about 180,000 jobs to less than 110,000 in the last 10 years. The newest victim is FutureMark Paper, which said that it will be indefinitely idling its FutureMark Alsip mill in Illinois starting in September. Alsip, which employs 170 people at the mill, is the only facility in North America that makes coated publication and printing papers predominantly from recycled materials. Alsip said that it explored all options, but slumping demand and increased pricing pressures by low-quality substitutes coupled with rising energy costs has made it impossible to continue operations.

FutureMark pointed to Canada as part of the straw that broke the camel’s back, saying that the Canadian government’s estimated $200 million subsidy that allowed the re-opening of the previously bankrupt Port Hawkesbury paper mill in Nova Scotia in 2012 flooded the market with low cost supercalendered (thinner) paper. The overcapacity forced most U.S. coated paper makers to operate at a loss, according to FutureMark. U.S. regulators were not happy when the funding was made public in October 2012, calling for Canada to withdraw the payments under the allegation that they were illegal subsidies that distort trade and could be challenged under World Trade Organization rules. From what we can tell, the situation is still under investigation.

If the subsidies indeed played a role, it came back full circle to a small Canadian company, Burlington, Ontario-based EcoSynthetix Inc. (TSX:ECO), a renewable chemicals company that makes a line of bio-based products. EcoSynthetix's lead product, EcoSphere® biolatex® binders, is used commercially by a number of the global top 20 manufacturers in the coated paper and paperboard industry. The FutureMark Alsip mill was one that utilized EcoSynthetix products and accounted for about $2.5 million in revenue for the company, or roughly 12 percent of EcoSynthetix sales on a trailing-twelve-month basis.

EcoSynthetix disclosed on Friday that it has approximately $800,000 in credit exposure with FutureMark Alsip right now and that is in contact with them regarding collecting.

Calling it a “disappointing setback” for North American sales, EcoSynthetix chief executive John van Leeuwen said it’s now clear that FutureMark was experiencing significant pricing pressures. “FutureMark had consistently increased their substitution rate of our EcoSphere® biolatex® binder as a means of reducing costs while maintaining quality. They saw the value in our sustainable alternative compared to the higher priced petroleum-based binders," van Leeuwen said in a statement.

“While this news is unfortunate, we remain confident in the value our bio-materials provide customers across multiple markets, from paper and paperboard to building materials like wood composites,” he added.

Confident or not, the markets are not pleased with the loss of revenue. Shares of ECO are trading down by 6.8 percent at $1.65, although they have pulled up from the $1.57 mark hit in early trading that marked an all-time low for EcoSynthetix.

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