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The end of an era or a new beginning?

There was more than a touch of nostalgia, but also a sense of inevitability, when Georgia Tech announced, without fanfare, that the Institute of Paper Science and Technology (IPST) would become The Renewable Byproducts Institute (RBI). The renamed institute will focus on "becoming the premier research Institute for the transformation of biomaterials into new products, including traditional and new forest products, renewable energy, chemicals, advanced materials and pharmaceuticals." The complete press release was featured in an earlier edition of PaperMoney.

RBI will continue the mission of IPST to provide graduate programs in Paper Science and Engineering. Currently, 50 funded graduate students are working towards Ph.D or MS degrees. Interestingly, 20 of the students are Chinese or of Chinese origin. The value of the education that has been provided by IPC/IPST is not lost to the burgeoning Chinese paper industry, now significantly the largest paper producer in the world.

In many ways, this transition demonstrates more definitively than all the published production and demand statistics that the era of the USA's pulp and paper leadership has peaked. The USA gave way to China a few years ago as the world's largest producer of paper and for over a decade total production and consumption has been declining. It is true that the USA will not be challenged for the No. 2 spot any time soon and that US companies (International Paper and Kimberly-Clark) are the two largest companies in the industry and seem likely to remain so for the foreseeable future.

IPST evolved from its more famous ancestor, the Institute of Paper Chemistry (IPC), which was for half a century synonymous with knowledge and learning for the paper industry, in the USA and internationally. More years ago than I care to remember, I was personally privileged, through the generosity of my employer at the time (Australian Paper Manufacturers - APM) to study at the "Tute" as it was affectionately known for a full academic year, when it was located at its own campus in Appleton, Wisconsin.

Those were the days when APM was growing strongly with real aspirations to become significant in the international sector. Planning horizons were then much longer than they seem to be today, and to support that growth, APM committed to sending one of its staff members to IPC every year for about 15 years.

The annual cycle ended when the Australian industry decided to establish its own version of IPC and so APPI came into being - the Australian Pulp and Paper Institute. In so doing, the model chosen was similar to what IPC decided on at the same time - to become an institute within a major University. APPI was established in its own building, funded by the industry, at Monash University - the largest in Australia, which had strong credentials in engineering and science. Like IPC/IPST, the model for APPI is one in which students are funded by industry. Unlike IPC/IPST, in the first two decades of APPI most students were in fact experienced employees of the member companies (the pulp and paper producers) who effectively were granted a sabbatical from their industry duties to become full time students and later part-time students in some cases as more flexible delivery modes were developed to address the increasing challenge of companies to release staff for a year or more. In recent years, graduate students have studied under industry funded scholarships and it is encouraging that many have subsequently been employed by the member companies.

I will return to the theme of transition, but I would first like to indulge in some reflection about IPC. The fact that it existed at all was something of a testimony to when long term planning in industry really meant something. IPC was incorporated on October 12, 1929, just before The Great Depression began on October 29, 1929. The kraft paper and container industry were amongst the hardest hit and yet IPC struggled on, even commencing construction of buildings appropriate to the aspirations of the Institute. Its first class of only two students was a small step, but IPC did hit the ground running and a parallel purpose of research and education quickly grew with exciting developments in science and knowledge and a roll call of first-rate students who became leaders who shaped stellar growth over the golden years of the US industry. By the 30th anniversary of IPC in 1959, there were 270 staff and 66 regular students and more than 130 companies were members of IPC, representing over 80% of the production of US pulp and paper. Over the years, more than 1,500 students have been supported to receive what has been arguably the best education possible. The fact that there are now only 19 member companies perhaps is the most telling observation, although it has to be said that the membership includes some rather significant companies such as International Paper and Kimberly-Clark. Part of the rationale in transforming to RBI is to attract engagement with new industry partners to create future opportunities.

It is not clear to me exactly what is happening with RBI. The press releases are all positive, but RBI subsequently announced that the IPC Foundation (IPCF), the legacy of the Institute of Paper Chemistry, has gifted $43.6 million to Georgia Tech. Without knowing the detail, it could be interpreted that the industry is distancing itself from direct responsibility for the future direction of training and research. Inevitably, this means RBI will have to sink or swim in the jungle of academic competition for funding. For the moment, Georgia Tech is committing itself to the industry, indeed it is investing heavily in staff and facilities, but the reality is that benevolence is only appreciated within its generation.

In a compressed format, APPI had plotted a similar trajectory to IPC. This year, APPI celebrated its 25th year, but made a decision about two years ago, with the support of its industry members to recreate itself as BioPria (Bioresource Processing Research Institute of Australia), although technically it is an innovation center within APPI. To date, the industry remains connected and committed, despite the challenges.

BioPria's mandate is to provide broader education and expanded research in functional materials and "green" chemicals and biofuels. Against a backdrop of tightening Government funding for research and very limited industrial funding, BioPria has been successful in winning significant funding for research to underpin its mandate.

As the paper industry consolidates, the number of operating units decrease and the reality is the number of required technical, engineering and operating positions decreases at a faster rate. The same numbers of people are simply not needed. There is an overused quote attributed to a Charles Holland Duell, the US Commissioner of Patents at the dawn of the 20th century that everything that can be invented has been invented. The quote is false, but there is a certain resonance with the paper industry. For sure not everything that is known is all there is to know, but through the efforts of IPC and others great strides have been made. Technology know-how has substantially transitioned from the pulp and paper makers to the machinery and equipment makers however. With only two significant suppliers of paper machines these days, the inevitability is that the industry has different needs, as well.

The more than 80 years of IPC/IPST history has seen an amazing transformation of paper manufacture. In a paper for Appita some years ago, I examined the evolution over 100 years of paper making. The time frame does not match the time line of IPC/IPST but it makes the point. As an example, the annual capacity of a state of the art newsprint machine in 1907 was about 5000 tpa, increasing to about 100,000 tpa by 1957. In 2007, the annual capacity was 400,000 tpa, an eighty fold capacity increase over the century. This may not be the best example as newsprint seems to be heading to extinction, but similar incremental growth has been achieved with other grades.

Of course, not all of that growth can be attributed to IPC. Nevertheless, working closely with industry over those years, researchers at IPC/IPST developed technologies and fundamental scientific understanding that helped the U.S. paper industry reach its zenith as an efficient, competitive and profitable industry for so many years. The faculty of IPST/IPC also trained generations of industry leaders, many of whom became CEOs of their companies.

US apparent consumption peaked in 1999 around 96 million metric tons and has declined significantly to about 70 million tons annually and few new machines are on the horizon. In China, growth shows no sign of abating and capacity now exceeds 100 million tons annually. Paper machines grow ever larger. There are several one million ton Cartonboard machines. Containerboard machines and printing and writing machines with capacities in excess of 500,000 tpa are increasingly the norm.

The new directions for IPST and APPI acknowledge that whilst paper manufacture is increasingly standardized and growth has stalled in mature economies, the potential that the raw material resource has to offer and the opportunity to increase the returns from processing fiber has yet to be realized. Some potential chemical products currently sell for prices that can only be dreamed about. Although prices would decline significantly if production was able to be ramped up they remain intrinsically valuable.

North America and Australasia are blessed with significant forest resources. RBI and BioPria offer the opportunity to significantly contribute to harnessing the potential of this resource to reignite the significance of the forest products industry from days gone by. However, it will take the courage of industry and investors to make this happen. Will they have that courage?

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