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The good news is ...

The good news is, from an economic standpoint, we've hit bottom. Things should be looking up from this point on, with a modest recovery for the U.S. economy and pulp and paper industry through the end of the year, according to Rod Young, president of Resource Information Systems Inc. (RISI).

The good news is, from a Wall Street perspective, all the mergers and consolidations we've weathered have made the industry stronger. They have helped to stabilize a notoriously volatile and cyclical market, Young told Paper Summit attendees. Perhaps we have learned that an increase in paper prices does not mean every company should rush to add new capacity to produce those grades. Perhaps there are simply fewer companies able to invest in new capacity.

The good news is, American companies have aggressively closed and shut down older, inefficient mills and machines. That has helped to limit the damage from weak demand conditions, Young said. It does not remove the temptation to resurrect and recommission mills or machines as demand improves.

The good news is--at least from a supplier and technology viewpoint--that American pulp and paper companies will have to start spending some money to remain competitive. Instead of investing in increased capacity, however, the money will be spent to enhance efficiencies, Young suggested.

The good news is, demand for containerboard and printing and writing grades will noticeably increase through 2003, with a modest, but steady increase continuing for tissue as the U.S. population grows. Boxboard, newsprint and other grades, such as kraft paper, may see little or no growth in demand over the next couple of years.

After the ups and downs of the last decade, we probably know better than to become overly excited about all that good news. Indeed, one of the factors that will likely temper future prospects for prosperity is the strength of the U.S. dollar, Young noted. The strong dollar means it is harder for U.S. manufacturers to sell their products overseas. It also means that, as the dollar softens, U.S. markets and companies become more attractive to outside competitors.

U.S. pulp and paper industry efforts to increase exports will be helped and hampered by abundant capacity expansion in various regions of the world. Some of that expansion, especially in Asia, relies heavily upon a continuing supply of low-cost recovered paper from North America. Even so, that supply has become less abundant and and less profitable in recent years, Young indicated. With reduced tipping fees at landfills, there has been less incentive to recycle, especially when prices dipped to the US$ 50 range for old corrugated containers (OCC). The mixed news is, prices for OCC are forecast to climb steeply this year, possibly exceeding the price for virgin softwood pulp by 2003.

The good news, according to Inland Paperboard and Packaging's Willis Potts, who gave the keynote address at the 2002 TAPPI Technology Summit held in conjunction with Paper Summit, is that paper products are an essential commodity, they are "the building blocks of our society." Americans use lots and lots of paper in lots and lots of ways.

The challenge for us now is how to achieve and exceed such "good" prospects beyond the immediate future.
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Title Annotation:Last Word
Author:Meadows, Donald G.
Publication:Solutions - for People, Processes and Paper
Date:Apr 1, 2002
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