They say that change is one of few universal truths. In time, everything changes. The North American paper industry, especially in the U.S., is certainly no exception to that axiom. In the past quarter century, at least, this industry has been changing its little head off, faster than you can say MeadWestvaco.
Today the paper industry in this country waits nervously for an economic turnaround, a lean, trimmed-down shadow of itself only five years ago. During this past half-decade or so, paper companies here have been de-diversifying like there's no tomorrow, which, for some, there probably won't be. The last we saw of the incredible shrinking man he was on a tiny leaf, fighting off a hungry bird.
Returning to the safe harbor of its "core competencies," the U.S. paper industry has decided in recent years that it probably makes pulp and paper better than anything else, especially if it can make less of it. Downsizing is so popular that today kids argue about whose dad works for the smaller paper company. My dad's paper company is down to just one mill. Oh yeah? My dad works at IP's Natchez, Miss., mill.
Makes Sense
I clearly remember that not too long ago, expansion and diversification was the in thing. In the 1970s and 1980s, no one had even heard of downsizing. "Indefinitely idled" would have made about as much sense then as "e-commerce."
With a century or more of economics lessons under its belt, painfully learned in the World School of Hard Knocks, the U.S. paper industry realized finally that paper markets are somehow tied to cycles in the general economy. In the 1970s, U.S. companies began diversifying to buffer against these unpredictable ups and downs.
Made sense. If newsprint or linerboard's not selling right now, maybe soybeans will. Overnight, some U.S. paper companies became producers not only of soybeans, but rice and even sugar cane in the Louisiana deltas. Others diversified into the lucrative medical field, and some got into real estate and finance/banking.
A little conservative perhaps, some paper companies thought that solid wood might be the more natural way to diversify and entered or expanded into the dimensional lumber/wood products and furniture sides of fiber processing. A few companies even explored the insane worlds of insurance and publishing.
Still Makes Sense
Although the industry's expansion binge of the 1980s bewildered most economic soothsayers at the time, diversification made sense then and still seems to make a little sense today. But for some reason, through the '90s, and with increased fervor in the 2000nds, paper companies have tossed aside diversified interests like hot potatoes.
Not much rice is being grown by the paper industry these days. Most of today's papermakers are back to the basics of newsprint, linerboard, or LWC, taking market related downtime as regularly prescribed by the local CFO. No more diversification nonsense, and absolutely no more new mills or machines. Big is bad, small is good.
In the recent past, the U.S paper industry has acted somewhat like a quick change artist, trying to discover its true functional identity, aimlessly searching for a better, more economically effective image. It certainly has become elusive if not unrecognizable in many regards.
The paper industry here maybe could take a few lessons from its dedicated and patient, though somewhat downsized supplier sector. Companies such as Metso, Voith, Kemira, Buckman Labs, Albany International, and Eka Chemicals, just to name a few, seem not to have lost their focus through these recently difficult and trying years.
As a whole, the paper industry's supplier companies have not had to overhaul their images or found it necessary to repackage their basic goods and services. Generally, they are the same suppliers today the industry knew and depended on when it knew what it was. And through it all, most suppliers today appear to be much better off than the pulp and paper producers they serve.
There are some positive signs that the U.S. paper industry might eventually rediscover its true self and solve its confusing identification problem. In a move toward revivalist diversification, it's also encouraging that Boise Cascade will be acquiring OfficeMax for $1.154 billion.
