Paper Makers Hit by Drop in Demand, Cheap Imports

From the Associated Press

Tom Ratzlaff is mayor of a small town reeling from the closure of its more than 100-year-old paper mill. He's also one of the 300 workers who lost good-paying jobs at the facility.

"Some days, I just wake up and I don't know what I am going to do, but you just got to keep going," said Ratzlaff, 45, who worked at the mill for three decades. "You can only cry in your beer for so long."

What Park Falls faces is not new among cities with strong links to an industry that has made Wisconsin the No. 1 paper producer in the United States for decades.

The part-time mayor has plenty of company at the unemployment line.

New competition from foreign paper makers, a recession at the turn of the century and new technology -- such as e-mail and online advertising that have tamped down demand for paper -- have hurt an overbuilt industry throughout the U.S., said John Mechem, a spokesman for the American Forest and Paper Assn. in Washington. Nationally, 95 paper mills have closed and 123,000 jobs have been eliminated since 2000, he said.

Since the late 1990s, Wisconsin has lost more than 17,000 jobs, or 30% of the workforce, at paper mills, pulp mills and converting operations, and five mills have closed or are in the process of closing, according to the Neenah-based Wisconsin Paper Council, an industry organization representing 25 paper companies with factories in the state.

Ratzlaff said he had been aware of that trend but had seen it as a positive for him and the Park Falls mill.

"You were always hoping that was enhancing your ability to stay open," he said. "Many of those that have shut down were competitors for this mill."

Patrick Schillinger, president of the Wisconsin Paper Council, said more job cutting was likely. The lost jobs -- some of the highest-paying manufacturing careers in Wisconsin -- are gone forever, he said.

"You will probably see more consolidation or mergers within the industry," he said.

According to Schillinger, the number of paper- and cardboard-making jobs in Wisconsin peaked at 54,300 in July 1999 before plunging to 36,800 at the beginning of this year.

The job losses, in part, occurred as a once mostly regional industry faced new competition and lower prices from paper makers in China and South America, industry experts say.

Printers can buy paper from China that is cheaper than what is available at a local mill, Schillinger said.

For some products, prices have fallen back to 1996 levels just to compete, he said.

Tom Howatt, president and chief executive of Wausau Paper Corp., which operates mills in Wisconsin, Minnesota, Ohio, New Hampshire and Maine, said prices for some writing papers were down 10% from just five years ago.

In addition, according to Schillinger, during the roaring economy of the 1990s, U.S. manufacturers expanded to produce more paper. Then a global recession hit, easing demand but not stopping the growth of technology unfriendly to paper makers, he said.

The increasing business use of e-mail for communication and the Internet for advertising and other functions has reduced the need for paper, and that decline has not been offset by a growth in the use of paper in homes because of computer printers, Schillinger said.

"It was sort of the perfect storm," he said. "All of those factors have meant a leaner paper industry."

For Park Falls, a city of 2,800 carved out of a forest in northern Wisconsin -- it calls itself the Ruffed Grouse Capital of the World -- the mill's sale a year ago to Smart Paper of Hamilton, Ohio, rekindled hopes about the factory's future.

The sprawling plant's mill sits just a block from the city's main street, dominating the downtown landscape along the Flambeau River. A yard is piled with 120,000 cords of logs -- a mountain of wood waiting to be made into paper.

Smart Paper filed for bankruptcy protection in March and shut down the mill, citing high fuel costs and a "rapid deterioration" of market conditions.

"Most people have the feeling that they just came in and bled the place dry and that was it," said Ratzlaff, whose wife, brother-in-law and sister-in-law also lost jobs in the shutdown.

On average, the mill's workers earned $17 an hour, and jobs just don't exist to readily absorb them, Ratzlaff said.

The ripple effect of the closure affected at least 300 loggers, he said.

Gerry Ring, professor of paper science at the University of Wisconsin-Stevens Point, the only college in the state offering such a degree, said the Park Falls mill's shutdown had more to do with outdated, inefficient paper-making machines than anything else.

"What should have happened a long time ago -- at a lot more of the mills, if they wanted to keep the market -- was reinvest in modern machinery," he said. "We could make good paper on old machines far longer than we should. Eventually, the costs get to you when the latest and the greatest comes on line, and then all of a sudden, 'Oh my God. They can make in a half a second what it takes us an hour to make.' "

Ring believes that a continuing rise in energy prices will ultimately lead to a resurgence of regional paper markets for the industry as transportation costs rise.

"You are not going to make paper in China and sell it in Wisconsin ultimately. They can do it for the short run, but oil prices will change that whole picture," he said.

Jim Stueber, owner of True Value Hardware in Park Falls, called the paper mill the life of the community, and said so far his business hadn't been hurt. In fact, it's picked up a little, and that worries him.

"They are fixing their homes up," the businessman said. "I have a feeling they are fixing them up to move."

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