Paths through the sands of time

By tradition, many publications and broadcast services finish the year with a review of the top five or 10 (or even 100) stories. A glance through the news items included in this issue of PaperMoney highlights a number of trends and events that could be included in such a list:

Sales of noncore businesses — International Paper is a prime example of this. Hugely (and even modestly) diversified companies have decided to shed business units that do not directly support an identified or preferred core business, such as coated fine paper production. Noncore units, even those making a profit, are sold off or closed down as companies seek the essence of their existence.

REITs and land value — A generation back, it made sense for paper mills to own the land and forests that supplied the pulp to make the paper. Used to be that forestland had relatively little commercial value, except for the timber it produced. Now that land is being eyed for other uses, particularly resorts, retirement communities, and various other developments. For some parcels, the balance has shifted, so that, from an accounting standpoint, it no longer makes sense to use the land to grow trees.

Investment in China — Still the hot growth area, with millions of potential customers. Most 2006 issues of PaperMoney included announcements of mill projects, machinery purchases, joint ventures, and fiber supply agreements in China.

Out with the old — It's always been a challenge to keep older mills running profitably. As companies react to economic conditions, and focus on core businesses, many old or duplicative mills have been shuttered.

Slump in the housing market — Let's just say an adjustment was due in a housing market that had stayed hot for longer than expected. For some companies, that's meant production and staff cuts, or at least curtailments, as demand for building materials began to slip.

Energy and environmental issues — In comparison with developers, the forest products industry has been the poster child for being "green." As oil prices peaked, and supply has became less certain, the industrialized nations again looked toward possible energy alternatives. Many issues loom, but the industry as a whole seems willing to adapt environmentally responsible process and practices, especially in regards to forest stewardship.

Brokers, money lenders, and private equity dealers — These are the deal-makers, the people with the money who factored into most of the mergers, acquisitions, and major transactions between companies during 2006. Who they are, and what influence they may have in 2007, will be worth monitoring.

Trade issues — The ongoing U.S.-Canadian dispute over timber subsidies nearly overshadowed the more substantial effects of NAFTA, a weaker U.S. dollar, growing trade deficits, and anticompetitive trade practices.

Most of these trends will extend into 2007, and beyond. Some may become less significant, some will demand more attention. Undoubtedly, it will be another interesting year to report about.