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KELLY H. FERGUSONis editor of Pulp & Paper magazine.
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From the EDITORS
The '80s and '90s a look back
The quotations below speak volumes about the turbulence of the paper industry. Looking through their history books, students of papermaking antiquity will look back on such commentary and realize just how tumultuous times were for the paper industry. They would be right.
If such historians study the situation in depth, they will see markets for most pulp, paper, and paperboard grades oversaturated by too much capacity, with the consequence of lingering low prices. With prices staying so low, they will note, it was necessary for papermakers to squeeze every ounce of efficiency from their machines, since, as one paper mill executive has put it, "It is the last ton or two that pays the profits.”
Maybe executives looking back at that time will see the violation of the fundamental law of supply and demand, realizing that there were just too many producers trying to serve a large but finite market. Consolidation was absolutely critical during that period, they might contend, so that companies can better manage the cycles that would cause product prices to first skyrocket and then plummet.
In such a time of economic Darwinism, the smaller producers that rely on aging assets are obviously forced out. But historians will also see the rise of new, low-cost producers that combined the latest pulp and paper technologies with fast-growing fiber and began pushing their product into existing lucrative markets.
WILL HISTORY REPEAT? Yes, the ’80s and ’90s will be viewed by historians to come as a time of turmoil in the paper industry. But the two decades to which the quotations at right refer are the 1880s and 1890s. It was during that time that prices dropped precipitously, causing numerous mills to begin banding together to better control the market. For example, in 1898, 20 mills in the Northeast consolidated their efforts into a new venture called The International Paper Company.
These quotations, modified slightly, were all drawn from History of Papermaking in the United States (1696-1969) by David C. Smith, published in 1971. Reading through some of the chapters is almost like reading a commentary on the current state of the paper industry.
The first three quotations are observations made by Smith regarding the industry in the late 1880s when there was a serious overcapacity problem caused by too many mills being built in the northern part of the U.S. The last quotation is a comment on the new mills that sprang up in the U.S. South during the 1920s. Using a relatively new technology called kraft pulping and a rich abundance of fiber, these huge new mills threatened the markets traditionally dominated by producers in the northeast.
So, when a historian decides to chronicle the current industry situation, will that history need to be written or just reprinted?
| "The changes, coupled with a general price fall in the United States…, [has] led the paper industry to several attempts at consolidation in an effort to halt the price slide, or …, to combine in order to maximize profits….”
"As the price [has] drifted lower and lower in the … ‘90s, [owners] of paper mills began to practice economies not necessary before, as frequently this was the difference between success and failure.”
"Some mills [have] closed; others [have gone] bankrupt; still others [suffer] from poor construction and poor management. … many mills [are] either losing money or barely breaking even. As prices [drift] lower, marginal mills [are] forced to the wall or into the hands of their competitors.”
"These new mills … [are] all huge, and with fast machines, and there is some evidence that because the industry [is] so new … that breakthroughs in machine and plant design could be made that [are] not available elsewhere. Over and over again, one reads of the ‘largest single tonnage machine as yet installed anywhere in the world for the manufacture of paper or board products.’”
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