This post originally appeared on Fisher International's FI Insights blog.
From nosediving demand for printing and writing paper to soaring toilet paper sales, Fisher International has extensively covered the effects of the COVID-19 pandemic on the pulp and paper industry.
With the crisis ongoing and the effects being felt globally, The Washington Post focused on the story of Verso Corp.’s Wisconsin Rapids Mill, which closed its operations at the end of July and left 900 people without jobs.
The in-depth feature titled “A warning from Wisconsin” details how the pandemic proved to be the final blow for the struggling mill that produced coated printing paper, and chronicles its impact on the Wisconsin Rapids community.
The story featured analysis from Fisher International senior consultant Katie Mencke (firstname.lastname@example.org), who offered insight into the decline in demand for printing and writing products and the considerations that lead to a mill shutdown.
The following is an excerpt from the story:
Known as the Dairy State, Wisconsin is also a paper state. The industry in Wisconsin sells more paper, employs more people and has more paper mills than any other state, according to a 2019 study.
But the paper market, like everything, has been rocked by the coronavirus.
When it announced the shutdown, the company cited research that found demand for printing paper fell 38 percent year-over-year in April. The research forecast an even greater plunge to come, with operating rates falling 70 percent in the second quarter.
The trend line for the Wisconsin mill’s paper had been pitched downward long before the pandemic, however.
Katie Mencke, a senior consultant for paper industry researchers and advisers Fisher International, noted that the market for coated paper had been in decline for more than a decade as digital media supplanted print. Covid-19, the disease caused by the coronavirus, only accelerated it, though dramatically.
“It was a very sudden stop,” said Mencke, comparing it to the last economic downturn to hammer the paper industry. “With the Great Recession, it was a very slow start.”
She noted some of the ways the coronavirus has eroded demand for magazines: Retail stores have removed them from end caps to reduce “touch points” for shoppers, salons are closed or have discarded them, and flights that haven’t been canceled don’t have airline magazines onboard to keep the planes cleaner.
At the same time, the market for other kinds of paper, such as packaging, is improving. But the costs of retooling the highly specialized machinery in a paper mill is enormous, she said.
In a statement, the company said it explored options for the plant, including converting it to make different paper, but has “been unsuccessful in finding a viable, economical and sustainable alternative.”
“There is so much capital invested in those mills, it is never easy for a company to walk away from that,” said Mencke. “When a company decides to shut something down, it is because it is the best case for the dollars, but it hurts the town and all of these families.”
To read the full story published by The Washington Post, follow this link.
Katie Mencke has extensive consulting experience in the pulp and paper industry advising clients on operational strategy and capital planning. As a member of Fisher’s consulting team, she is tasked with developing effective asset performance analyses and modeling for long-term asset investment planning. She can be reached at email@example.com.