Domtar Corp. (UFS), Canada’s largest paper producer by market value, jumped the most in four years after International Paper Co. (IP:US) said it will close an Alabama mill, reducing output of so-called white paper.
Domtar gained 16 percent to C$79 at the close in Toronto, the biggest increase for the Montreal-based company since August 2009. The plant closing, which removes about 7 to 8 percent of North American capacity, may be the single largest in the industry’s history, Mark Wilde, an analyst with Deutsche Bank AG in New York, wrote in a note to clients today.
International Paper’s announcement comes after Atlanta-based Georgia-Pacific LLC and Idaho-based Boise Inc. (BZ:US) cut output. Electronic commerce and the rise of the Internet have reduced office paper demand, which is shrinking about 4 percent a year, said Daryl Swetlishoff, an analyst with Raymond James Ltd. in Vancouver.
“The reason the stock’s up so hard is the removal of this kind of capacity is so significant,” he said in a phone interview today. “It goes a long way to balancing the market going forward.”
The plant closing will cut production of uncoated freesheet by 765,000 tons, Memphis, Tennessee-based International Paper said in a statement. Uncoated freesheet is used in forms, envelopes, copiers and printers.
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