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Pulp & Paper, Aug 2005 by Rodden, Graeme

IN JUNE OF THIS YEAR, Pulp & Paper's annual survey of capital expenditures by U.S. pulp and paper companies was set to jump by 23% over 2004 levels, to $6 billion. It is the largest boost in more than a decade.

This month our Pulp & Paper Week newsletter editors return with the industry outlook through the end of the year. Unfortunately, the view is not so rosy. U.S. GDP growth is expected to slow in the second half of the year. The economy has been hampered by high oil prices, rising interest rates and a slowdown in manufacturing.

Any price increases that have taken effect in the first half of 2005 have been largely negated by increases in the price of energy, chemicals and transportation.

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Much of the outlook for the industry has a "same old, same old" feel to it. Tissue continues to lead any growth in capacity. Export demand for recovered paper continues to grow. Domestic newsprint consumption continues to dip. However, in this sector, producers are doing a good job of managing supply, such that operating rates in North America's newsprint mills in May reached 95%. Inventories were below their five-year average. Mothballing old machines or converting to other grades is a trend that will continue in the long-term. For more about newsprint markets, see the profile on Papier Masson on page 30.

Electronic substitution

The state of uncoated freesheet is interesting. Perhaps, it is the long-held fear coming to life: the famous "paperless office". Along with growing competition from high brightness mechanical grades, there is increasing electronic substitution for such things as invoicing and bill paying. E-mail has virtually replaced all other forms of communication. The fax machine is now almost an industrial relic. I recently received one of those old-fashioned airmail letters with glued edges so that the paper you write upon also becomes the envelope. I had a devil of a time trying to remember how to open it without slitting it in to several pieces.

As the PPW editors explain, the result of this for uncoated freesheet is that there no longer appears to be a correlation between business activity and office paper demand. As RISI's John Maine says, ".. the use of business paper per white-collar employee is declining for the first time in history."

A walk in the woods

I had the opportunity to visit Sweden recently to report on the hurricane damage. Hurricane, in Sweden, you ask? Yes, in early January a freak storm hit the southern part of the country and instead of dissipating once it hit land, the storm increased in intensity, with winds reaching the maximum 12 points on the Beaufort Wind Scale. In all, some 75 million m^sup 3^ of wood was lost, the great majority of it slow-growing spruce and pine.

In one day, many forest owners saw their lives ruined. While insuring against damage from fire and pests is commonplace, many had no insurance against something like a hurricane. After all, who needs hurricane insurance in Sweden?

Besides the physical damage and the subsequent financial cost, there was also a terrible toll in human lives. At least 10 forest owners lost their lives trying to clear their land themselves. Trees had fallen every which way, leaning against each other, or barely standing, ready to topple over at the least disturbance. It was extremely dangerous work. Which leads to my next point: the never ending importance of safety.

This issue cannot be understated. Harvesting operations and mills are inherently hazardous places to work. The indusltry works continuously to make them less risky, but constant vigilance and effort are required. It is not easy. But, as Weyerhaeuser's executive vice president and COO Richard Hanson says in this month's Comment (p. 64), "Improving safety is not easy. We choose to do it not because it is easy but because it is hard, and moreover because it is unquestionably the right thing to do."

Hanson earned the Executive Eagle Award from the Pulp & Paper Safety Association (PPSA) for 2004.

For more than 20 years, Pulp & Paper has been proud to lend its continuing support to the PPSA and safety programs conducted across the country (see sidebar, p. 9). We sponsor an annual "Best Safety Record" covering a number of mills, according to product and size. Pulp mill award recipients include Weyerhaeuser Columbus. Paper mill award recipients for 2004 include International Paper Pine Bluff, Georgia-Pacific Cedar Springs and Smurfit-Stone Container Carthage.

Congratulations to all award recipients. Please keep up the good work. You really are saving lives.

GRAEME RODDEN is Director, Magazine Editorial

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Pulp & Paper, Aug 2005 by Rodden, Graeme

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