Stop me if you have heard this before

The Paperloop Global Outlook conference, which was held in November in New York, presented some sobering insights about the state of the pulp and paper industry, to the point where more than one speaker asked, not entirely tongue in cheek, if it was possible to skip 2002 and move directly into 2003.

From grade to grade - uncoated woodfree, newsprint, coated - the situation appears to be worsening, with the exception of tissue (as per usual). Demand is flat if not declining. There is huge downward pressure on prices and the promised positives of the corporate mergers have yet to be seen.

Overcapacity is still a problem, especially in Europe where new coated fine paper and uncoated publication paper machines are scheduled to come on line in 2002-2003.

By the numbers, the Morgan Stanley research firm noted that from 1990-2000, average paper consumption in Europe grew 3.6%/yr, matched by the average 3%/yr increase in capacity. In 2000, consumption leaped by 5.9%, outstripping the capacity increase of 4.2% that same year. But, in 2001, consumption fell 4% and it is expected to grow by just 1% in 2002. This meager 1% growth is expected to last through 2003 while capacity will increase 3.4%/yr (2001-2003).

While most producers sing a song of woe, the tissue sector rolls merrily along. Why not? It is busy making tissue and absorbent towels for the rest of their papermaking confreres to cry into. Seriously, the tissue sector is at the point the rest of the industry would like to reach. Shipments are predictable, pricing is stable and consumption per capita continues to increase, even in the relatively mature North American market. So for the first half of 2002 at least, please pass a tissue.

Not wanting to leave their audience in total despair, the speakers at the Global Outlook Conference were optimistic about the latter part of 2002 and 2003. Consumption should grow for paper and packaging grades, inventories will be rebuilt and advertising should increase. The only downside for Europe is that the promised recovery will first make its mark in the US. It may be a bit longer coming to Europe and if the US economy does not rebound as sharply as predicted, it could put any European recovery at risk.

But is all of this really new to anyone who has worked in this industry for any length of time? The French have a wonderful expression: plus ça change, plus ça reste la même chose. In English, the more things change, the more they stay the same. Other than the tragic events and subsequent effects of September 11, could most of the above have been written many times before: 1991, 1982, 1975, for example? Probably, and it probably has. If history tells us nothing else, it tells us that the pulp and paper industry is a cyclical one. There is nothing wrong with that, as long as the cycles are fairly predictable (timing and shape). It is the extremes and volatility that hurt the industry, that destroy investor confidence. These are problems the industry is continually saying it is working to solve, that it has learnt its lesson. The great theory is that all of the recent mergers and acquisitions, the domination of markets by a few players, the hoped for economies of scale will make the pulp and paper industry consistently profitable over the long term and attractive to investors once again. Time will tell. (I probably could have saved myself a lot of work by simply going back into the archives for some long forgotten column/analysis and inserted new dates.)

As this is my first issue as editor of PPI, a short introduction is also in order. I have covered the forest products industry for more than 20 years, mostly in a variety of positions with Pulp & Paper Canada magazine, the last 7.5 years as editor. This has given me the opportunity to visit continental Europe and the Nordic countries often and it's always been a delight (although I must say most of the visits have been in the summer months). In my role as editor and European Editorial Director of Paperloop, I am looking forward to covering and studying the industry from a truly global perspective.

One of my first tasks here will be to get out of my office (nice though it may be) and make myself known to mills, research institutions and suppliers alike. If you think you have something we should be covering, please let me know.

Moving across the Atlantic to start a new life is a great challenge. However, my wife had lived in Europe when she was younger and based on numerous business and holiday trips here recently, we admired the lifestyle and felt we could adapt without great difficulty. Therefore, there was little hesitation on our parts in accepting this position. Professionally, it is also a great opportunity. We are both looking forward to our life here with great anticipation.