The Pulp & Paper Industry - Where Do We Go From Here? - a Feature of "Navigating the Currents of Change" on Industrialinfo.com

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The Pulp & Paper Industry, like most manufacturing industries in the U.S, is looking to the future with a level of uncertainty given the current economic climate and an upcoming election that, depending on the outcome, could make it tougher for businesses. Already operating in a "survival of the fittest" mode, the question for many vendors and suppliers to the industry's manufacturing plants becomes one of how many of those plants are going to be operational next year and for the ones that are---will budgets be in place for capital and maintenance expenditures. Research by Industrial Info offers insight into what the industry is doing and what expectations are.

Demand for most paper and paperboard products has been fair and prices have remained steady. The industry is taking painstaking measures to maintain demand and supply balances. For many, this underscores the need to further reduce capacity either by production curtailments, shuttering paper machines permanently or even closing mills. More than ever, strategic investments are aimed at short-term returns and are critical in moving forward quarter by quarter.

Energy, particularly, rising oil and natural gas prices is affecting the input cost for manufacturers. Overall, oil prices have less of an impact on the industry compared to natural gas, considering that oil is factored into the input cost based on the chemicals used to make paper and paperboard products; whereas, natural gas has a direct effect because nearly half of the industry's purchased energy is natural gas. Over the years, rising natural gas prices led mills to increase their use of renewable biomass to more than 60% across the industry, today. Moving forward more investments will be geared towards renewable energy projects including biomass and biorefineries.

The industry is keeping a close eye on the presidential election and would most likely favor the Republican candidate because of his position on corporate taxes. Pulp and paper companies, maintain that the current tax laws places them at a disadvantage compared to competitors who enjoy favorable tax rates. Because natural gas is a major component of manufacturing cost, the industry supports legislative measures that increase access to domestic natural gas supply. Both parties are proponents of expanding natural gas supply and building the infrastructure to support it.

Pulp and paper producers have made strides in reducing costs, managing supplies in an effort to compete globally. The industry has transformed itself into a lean, fiscally disciplined machine. Profitability remains a challenge to an industry that struggles to attract investment from Wall Street at a time when it needs it most. Overdue investment in mill equipment and machinery are expected to make it to the approval stage in the next 1-2 years. On its own, the industry continues to find ways to be position itself as a force in the world markets with an eye towards the future.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.