OK days are here again!

In his first U.S. presidential campaign in 1932, during the Great Depression, Franklin Delano Roosevelt used as his campaign song "Happy Days are Here Again." It's a catchy tune about blue skies and optimism and was used to lift the nation's spirits after 3 years of a collapsing economy and other grim news.

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Now that the U.S. paper industry appears to be rebounding after years of bad news, we can confidently say "OK days are here again!" I can't quite bring myself to say "Happy Days" because I'm not sure how long this will last, but for now we can enjoy a fair amount of overdue good news.

Paper markets appear to be rebounding quickly, according to the experts. Year-to-year volume gains are picking up steam and, as expected, the weaker U.S. dollar is having a salutary effect on operating conditions. Better domestic demand, coupled with more exports and fewer imports, are providing U.S. mills with much-needed breathing room.

Prices are moving up for several grades, product shipments are up, and the cyclical upturn is broadening. For example, demand for nearly all grades of printing and writing papers started to rise quickly in the first quarter of 2004 and that trend has held up so far. U.S. imports for coated paper have dropped due to the weaker U.S. dollar, producing very tight supply conditions. Of course this is not good news for European producers, but after years of being hammered by stagnant demand and heavy imports, U.S. producers are welcoming the news.

Box shipments--a good indicator of overall economic trends--started climbing before printing and writing papers and demand continues to be strong. Newsprint consumption is still relatively flat, although its recovery tends to lag rebounds in the general economy.

Standard & Poor's, a credit rating agency, believes that producers will gradually realize announced price increases during the rest of 2004, with the potential for additional increases in some grades. They caution, however, that volumes and prices are generally rising from very depressed levels, and stated that "the magnitude and duration of this improving climate are still uncertain."

With the general economic recovery appearing to be sustainable, paper demand may continue to rise. However, we can't delude ourselves into thinking that hard times have gone away to stay. Fundamental issues such as demand growth slower than GDP, cheap pulp from South America, growing offshore capacity, and lack of investment in infrastructure are still lurking beneath the now tranquil waters.

The big question is how the U.S. pulp and paper industry will use this respite from hard times. Will it fall back into old habits or use its good fortune to build for the future by investing in new processes, developing new products and exploring new markets? As the saying goes, it takes money to make money, and the industry should use this financial breather to reinvest not only in better papermaking, but in better and more diverse paper products. As we emerge from the Great Papermaking Depression of the 1990s, it is up to us to turn "OK days are here again" into a rousing version of "Happy Days."

EDITOR'S NOTE: In his regular "Nip Impressions" column in the June 24th edition of the TAPPI online weekly newsletter Over the Wire, Jim Thompson writes on a theme similar to this one. TAPPI members can subscribe to this newsletter for free on www.tappi.org. If you'd like me to email you a copy of Jim Thompson's June 24 column, "Optimism is Contagious," drop me an email at [e-mail].

Alan Rooks Editorial Director

Contact Alan at [phone], or by e-mail at: [e-mail].