Oct 31, 2006. /Lesprom Network/. Catalyst Paper Corp., a pulp and specialty paper group with five mills in British Columbia, signalled North American newsprint producers will have to cut more capacity to balance supply and demand by mid-2007, or prices won't improve, The Gazette reported. CEO Russell Horner said Catalyst has been steadily reducing its exposure to newsprint by switching machines to higher-grade products that fetch better prices. "We've only one machine left that's fully dedicated to newsprint," he told analysts, "but we must cut our 2007 output by more than 10% ... United States demand continues to fall." In the east, industry watchers said the move reflects newsprint's crisis. About 20% of North American capacity has been shut since 2000, but "the reality is that we must close more machines," one analyst said. Abitibi-Consolidated has led the way in capacity cuts, but U.S. firm Bowater, with most of its mills in Canada, must do more if producers are to regain some price momentum next year to cover higher wood and energy costs. On Thursday, Bowater said one of its Quebec mills is "still high-cost" after recent economies. North American newsprint demand dropped in September, especially in the U.S., where most Canadian newsprint is sold. Total U.S. consumption fell 8.5% to 788 000 tonnes from a year earlier. The decline in the first nine months was 6.3% to 6.5 million tonnes. In all of 2005, consumption dropped 5.1%. But in the key all-dailies (newspaper) sector, the drop was 8.8% in September and 7.8% in the first nine months as advertising lineage and circulation continued to fall and Internet use rose. Commercial printers used 6.2% less newsprint in September. Analysts said the restart of Stora Enso's coated groundwood mill in Nova Scotia will shift commercial printers away from newsprint and the restart of its 190 000-tonne newsprint mill will add more pressure. Lumber shutdowns are piling on problems for all paper producers. They disrupt supplies of chips for pulping, forcing wood costs even higher. The return of U.S.-held softwood lumber money is the only bright spot.