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Holding, folding ... and playing your hand.

Kenny Rogers, the popular singer, may or may not be a great businessman but he had some good advice for people who run companies in his famous song, The Gambler: "You got to know when to hold 'em, know when to fold 'em, know when to walk away and know when to run." The part he left out was knowing when you play your hand.

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The global paper industry is that proverbial card game today. There are a lot of players at the table, all with strong hands of some kind: Asia, Europe, North America and South America. Several are playing their hands or else thinking about it. China's investment in its paper industry is well documented and there have been several other interesting developments, all within the last few weeks:

In December, Cia. Suzano De Papel e Celulose announced that it would begin detailed engineering and feasibility studies for a second, one million metrics tons/yr eucalyptus pulp line at its Bahia mill.

In January, Nippon Paper Industries said it would transfer three paper machines from Japan to a new joint venture in China with Chengde Dixian Textile.

In January, NCT Forestry Coop (South Africa) agreed with Sodra Cell (Sweden) to study the possibility of a new 300,000 metric tons/yr eucalyptus pulp mill in Richards Bay, South Africa.

In January, Australia's Griffin Energy said it was in talks with a Chinese company to build the first pulp and paper mill in Western Australia. The mill would be close to Griffin's coal energy operations.

What these varied companies all have in common is that they are (or are considering) major pulp and paper projects that exploit a specific market advantage. Cia. Suzano has low cost fiber and access to global pulp markets; Nippon Paper has excess capacity that can be better used in the booming Chinese market; NCT has low cost energy and fiber, and Griffin has energy assets and close access to fiber-hungry China. These players are putting their cards on the table.

Contrast this with the news coming out of North America during the same time period:

* Rayonier to sell 5500-acre timber harvest lease for US$ 26 million

* Caraustar to close Cedartown, Georgia paperboard mill

* Smurfit-Stone Container may close four plants

* Graphic Packaging to close plant, consolidate production

* Domtar to shut machine at Vancouver mill, reorganize production

Hand after hand, the North American players are folding, repeating a pattern that has not varied for the past three to five years.

Of course you can make the argument that this capacity and these assets need to be rationalized, and I don't doubt that. The United States and Canada find themselves in much the same position as Europe 20 years ago, when out-dated, uncompetitive plants had to be shut down. The difference is that North American companies have become very good at the disinvestment side of this equation, but are neglecting to reinvest. North American companies must draw better cards if they want to stay in the game, and that means investing in some of the big advantages they still have: great transportation, highly trained workers, ready access to high quality recycle and virgin fiber, the biggest paper market in the world, etc. If the North American paper market has any faith in its future, the time to start thinking creatively about and investing in future business opportunities is now. You can't keep holding and folding forever. Eventually, you'll be out of the game.

On that same note, Individuals can invest in their futures in a very simple and low cost way--attend the upcoming Paper Summit May 3-5 in Atlanta and PIMA's 2004 Joint Leadership Conference June 27-30 in New Orleans. I've been involved in some of the preparations for these conferences and the range of programs, seminars, and other educational opportunities is amazing. I've always wondered why people in the U.S. don't attend conferences at nearly the same rate as their counterparts in Canada, Finland, Sweden and other countries, so here is your chance to prove me wrong! Go to www.tappi.org and www.pimaonline.org for more information.

Alan Rooks

Editorial Director

Contact Alan at +1 847-998-8093, or by e-mail at: arooks@tappi.org.
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Title Annotation:Viewpoint
Author:Rooks, Alan
Publication:Solutions - for People, Processes and Paper
Date:Feb 1, 2004
Words:702
Previous Article:What is the future for key pulp grades?
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