Waiting for Godot.

In "Waiting for Godot," a play by Samuel Beckett, two characters spend the entire play speculating about when another character, Godot, will arrive. Even when they are convinced that Godot will not arrive, they cannot bring themselves to leave the spot where they are waiting.

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Something in this absurdist plot reminds me of the paper industry's current plight that unfortunately is very real. We have been waiting in the same spot since 1995 for our Godot--good pricing and profitability--to arrive. We keep talking and speculating about the return of "better times" only to end up back in the same old place. Some companies such as Georgia-Pacific and Boise Cascade have been trying to leave by shifting from basic paper production into value-added businesses like tissue and office products, but most companies are trying to make do with their current assets.

At the moment, "making do" is hard to do. For example, Standard & Poor's, a New York-based credit rating service, said that the outlook for credit quality among U.S.-based forest products companies remains fairly negative. Standard & Poor's has undertaken numerous negative rating actions on both investment--and speculative--grade companies, including several industry leaders, during the past few months. Many of the ratings still remain under pressure, with about one-half of outlooks currently negative.

This is not to say that paper companies have been sitting still. Many have made hard decisions on staffing, assets, and mills--reducing capacity and "rationalizing" other resources to restore profitability. Competing in any United States manufacturing business is incredibly difficult. While European manufacturing companies have fared better due to the lower Euro, they too face challenges today as the Euro remains strong against the dollar. Similarly, Canadian manufacturing companies are grappling with the unfamiliar role of having a strong currency that has largely cancelled the value of recent newsprint price hikes.

The situation is far from hopeless, but it remains "challenging" as CEOs like to say in their annual reports. Many attempted price hikes such as the recent one in the United States uncoated freesheet market have largely failed. Most companies still do not want to sacrifice volume and are adjusting pricing to retain business. That means a few more months or quarters in the doldrums.

Good reasons exist for this situation as they always do. United States demand for paper and paperboard is still weak, and European demand is reportedly even weaker. Some manufacturers are grade switching from these products where demand is even worse. For example, some United States coated freesheet and carbonless basestock mills are reportedly making uncoated freesheet. This adds capacity to an already troubled market. Improved uncoated groundwood grades are also competing with uncoated freesheet.

Paper markets are as flat as a pancake. If an economic recovery exists, it is barely registering with the paper industry. The demand for paper and board is already growing slower than GDP. Without a sustained economic recovery, little change will likely occur in the fortunes of the paper industry.

The paper industry seems to be treading water. It is not going under, but it is also not making any progress. Without big new products or big new markets, this kind of motionless "growth" is probably all we can expect at least for the near term. With the overall manufacturing sector in a long-term decline in the United States and under pressure in other developed markets such as Europe, the paper industry must decide how to run its businesses leaner and tighter and with a smaller margin for error. We are in a mature industry and must accept our situation. Like retirees comparing their health woes, we do not feel so great, but it definitely beats the alternative.

ALAN ROOKS Editorial Director [e-mail]