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Positive Notes to End the Year
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So how did we (the pulp and paper industry) do in 2009? Surprisingly, and relative to everything else, we would have to say “not bad.” The PM40 has nearly tripled since January, a remarkable feat in any sector of the stock market this year. This is a record by any measure in the history of the PM40. The downside of this is the index is heavily weighted towards U.S. companies, and some of them benefited mightily from the infamous Black Liquor Tax Credit. Outstanding performers include Boise (BZ), up over 600%; Schweitzer-Mauduit (SWM), up nearly 300%; Louisiana-Pacific (LP) and Temple Inland (TIN), both up around 185%; and Cenveo (CVO), up over 170%.

One might say, after a decade and one-half of managing our own personal recession as an industry, when one hit the rest of the economic world, we were experienced and prepared to deal with the realities of the day. One ominous matter, we must admit, may have skewed the results: the black liquor tax credit, which dumped an enormous pile of money in the laps of companies operating recovery boilers.

Looking to the future, the linerboard manufacturers are working hard to push through a generally unprecedented first quarter price increase. In the United States, it appears the ability to fund projects with tax exempt bonds may return. The Chinese economy seems to be recovering faster than most others, which will have a large positive impact on demand. The black liquor tax credit will go away, but some companies, such as International Paper, seem to be proactively handling this with announced permanent shutdowns of several operations. Overall, it does seem management is running the business much better than it was a decade ago.

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