The Future of Paper

I wrote this original blog posting March 23, 2006. What has changed in two years time?

I've been looking for blogs telling about the paper industry. There are less than expected. Paper manufacturer's and employees aren't passionate bloggers. That's one of the statements I'm ready to make. For the blogosphere paper making looks like a very traditional industry. The social media hype and Web 2.0 doesn't belong to paper making communities. The future seems to bring with it:

1. Paper import from China? (Today: less export from EU to China)
   
2. More foreign competition in Europe (Maybe?)
   
3. Large and modern mills are more competitive (Sure)
   
4. Internet, email, blogs and social media are eating up the markets for paper (True)
   
5. The industry has to look for new success routes and formulas
6. The future might be in smart and electronic paper
7. Research and development has to increase
8. Bioreactors and biofuel production (Today: maybe cellulosic but not from food)
   

What happens in North America?

Read more from an article published about a year ago and more comments in this blog. "Once again you are putting the blame in the wrong place. If you read the article it's right there - you just need to open your eyes. Outdated technology, outdated machinery that the company used longer than it should have. Maybe because Wisconsin is such a tax hell hole the company didn't want to invest anymore than necessary to make a buck!" writes one commentator from Wisconsin.

Wisconsin

What Park Falls faces is not new among cities with strong links to an industry that has made Wisconsin the No. 1 paper producer in the United States for decades. The part-time mayor has plenty of company at the unemployment line.

"New competition from foreign paper makers, a recession at the turn of the century and new technology - such as e-mail and online advertising that have tamped down demand for traditional papers - have hurt an overbuilt industry all over the United States, said John Mechem," a spokesman for the American Forest and Paper Association in Washington, D.C.

"Nationally, 95 paper mills have closed and 123,000 jobs have been eliminated since 2000," he said.

1. 95 paper mills have closed
2. 123 000 jobs have been eliminated since 2000
3. Wisconsin has lost 17 000 jobs
   

17 000 JOBS LOST IN WISCONSIN

Since the late 1990s, Wisconsin has lost more than 17,000 jobs, or 30 percent of the work force, at paper mills, pulp mills and converting operations and five mills have either closed or are in the process of closing, according to the Neenah-based Wisconsin Paper Council, an industry group representing 25 paper companies with factories in the state.

• Old mills have no future
  

Tom Ratzlaff is mayor of a small town reeling from the closure of its more than 100-year-old paper mill. And he's among the 300 workers who lost a good-paying job, his livelihood for nearly three decades. Ratzlaff said he was aware of that trend but saw it as a positive for him and his mill. "You were always hoping that was enhancing your ability to stay open," he said. "Many of those that have shut down were competitors for this mill."

• The downward trend started 1999
  

Patrick Schillinger, president of the Wisconsin Paper Council, said more job cutting is likely, and the jobs - some of the highest-paying manufacturing careers in Wisconsin - are gone forever. "You will probably see more consolidation or mergers within the industry," he said.

Recent developments highlight a trend that Schillinger said started at least seven years ago:

• SMART Papers LLC of Hamilton, Ohio, closed the Park Falls mill barely a year after buying it from Toronto-based Fraser Papers.
  
  
• Glatfelter Co. has announced plans to close a Neenah plant that makes specialty papers by June 30, costing 200 workers their jobs.
  
  
• Riverside Paper Corp. has said it will close its mill in Appleton, founded in 1893, eliminating about 100 jobs making specialty papers.

According to Schillinger, paper- and cardboard-making jobs in Wisconsin peaked at 54,300 in July 1999 before plunging to 36,800 in January. The job losses, in part, occurred as a once mostly regional industry faced new competition and lower prices from paper makers in China and South America, industry experts say.

Cheaper paper from China

Printers can buy paper cheaper from China than walking down to a local mill, Schillinger said. For some products, prices have rolled back to 1996 levels just to compete, he said. Tom Howatt, president and CEO of Wausau Paper Corp., which operates mills in Wisconsin, Minnesota, Ohio, New Hampshire and Maine, said prices for some writing papers are down 10 percent from just five years ago.

• We are facing the same reality in Europe
  
• The need to close mills started a little later
• UPM Kymmene Voikkaa 2006
  

In addition, according to Schillinger, during the "roaring" economy of the 1990s, U.S. manufacturers expanded to produce more paper. Then a global recession hit, easing demand, followed by the growth of new technology unfriendly to paper makers, he said.

We are working more online

The business use of e-mail, companies doing more work online and the growth of online and Internet advertising reduced the need for paper, a drop that could not be offset by a growth in paper used in homes because of computers and printers, Schillinger said. "It was sort of the perfect storm," he said. "All of those factors have meant a leaner paper industry."

• Should we complain Internet?
  

For Park Falls - a city of 2,800 carved out of a forest in northern Wisconsin and nicknamed the ruffed grouse capital of the world - the mill's sale to SMART Paper a year ago rekindled hopes about the factory's future.

The sprawling mill sits just a block off the city's main street, dominating the downtown landscape along the Flambeau River. A yard is piled with 120,000 cords of logs - a mountain of wood waiting to be made into paper. SMART Paper filed for bankruptcy in shutting down the mill, citing unprecedented high fuel costs and "rapid deterioration" of market conditions.

• Rapid deterioration of the market conditions
  

"Most people have the feeling that they just came in and bled the place dry and that was it," said Ratzlaff, whose wife, brother-in-law and sister-in-law also lost jobs in the shutdown. "A couple of weeks ago, somebody wrote on a piece of paper, 'Place for sale' and put it up front."

Good salaries gone forever

On average, the mill's workers earned $17 an hour, and jobs just don't exist to readily absorb them, Ratzlaff said. The ripple effect of the closure hits at least 300 loggers, he said.

Gerry Ring, professor of paper science at the University of Wisconsin-Stevens Point, the only college in the state offering such a degree, said the mill's closing has more to do with outdated, less efficient paper making machines than anything else.

• Outdated machines to be blamed?
  

"What should have happened a long time ago - at a lot more of the mills, if they wanted to keep the market - was reinvest in modern machinery," he said. "We could make good paper on old machines far longer than we should. Eventually, the costs get to you when the latest and the greatest comes on line, and then all of a sudden, 'Oh my God. They can make in a half a second what it takes us an hour to make."

RISING ENERGY PRICES
AND TRANSPORT COSTS

Professor Gerry Ring believes that the continuing rise in energy prices will ultimately lead to a resurgence of regional paper markets for the industry as transportation costs rise. "You are not going to make paper in China and sell it in Wisconsin ultimately. They can do it for the short run, but oil prices will change that whole picture," he said.

• Is paper making returning back home?
  

Jim Stueber, owner of True Value Hardware in Park Falls, called the paper mill the life of the community, and said so far his business hasn't been hurt. In fact, it's picked up a little and that worries him. "They are fixing their homes up," the businessman said. "I have a feeling they are fixing them up to move."