Wait till this year?

In Chicago, after the baseball season, we say till next year"--or at least we have since 1917 seems that the North American paper industry has been saying "wait till next year" for about as long. will 2003 be our year? A few months ago, I would have said no, but now I will confidently say ... maybe.

For once, there are a few positive signs on the horizon. One was John Dillon, chairman of International Paper, being quoted as saying, "During the hard times, you can cut back on capital. But over time you have to spend to improve your competitiveness." He cited IP's recent upgrade at a container plant and a revamped online order management system as examples of new capital spending. His quote was part of a larger article in The Wall Street Journal about how the release of pent-up capital spending plans may lead to greater investment in plants and equipment throughout the U.S. economy in 2003.

There are other signs that the North American paper industry may be loosening its purse strings a bit and planning for that strange phenomenon, growth. There are rumors of some major machinery orders in North America that may be placed soon. Also, paper companies may attempt spring price hikes in several different grades, according to analysts. Said Mark Wilde of Deutsche Bank, "domestic demand is slowly getting better and currency (a lower U.S. dollar) is beginning to help with trade."

In addition, The Institute of Supply Management survey index, a good leading indicator for industrial activity, was up sharply late in 2002, rising from 49.2 in November to 54.7 in December. That could be good news for the paper industry, which only grows if the rest of the economy grows. And despite the general doom and gloom about the economy, it appears that economic growth is indeed underway. Consumer spending is growing, the stock market has rebounded from cyclical lows, U.S. productivity continues to rise, and--this is particularly significant for the paper industry--the inventory to sales ratio is at or near an all-time low; when sales eventually rise, inventory investment is likely to grow substantially.

It seems a bit strange to be optimistic at a time like this, right after the Ecusta mill in North Carolina and Great Northern Paper in Maine both declared bankruptcy, and after UPM-Kymmene shut down 175,000 tons of LWC paper capacity at its mill in Blandin, Minnesota. A lot of workers and managers are feeling the pain of "rationalization" right now.

And yet, for the mills and people that are left in the North American paper industry, maybe 2003 will be a bit better than last year. Optimism is ultimately what fuels the economy and all of its constituents. If we think that things might actually get better--even if it is only a little bit better--then we take economic actions that make that feeling a reality. We buy, invest, and plan for the future. When others do the same, the economy recovers.

We can at least be glad that we have weathered the economic storm so tar. Let's hope there is stone clear sailing ahead. And maybe the Cubs will win the World Series this year--just kidding.

ALAN ROOKS Editorial Director [e-mail]