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Mergers and acquisitions expected to continue in paper industry E-mail the author

 Expect more mergers and acquisitions in the containerboard and paper recycling industry. Most paper industry experts agree that the $6 billion purchase of Weyerhaeuser Co.’s packaging assets by International Paper is unlikely to be the last major deal.

International Paper, headquartered in Memphis, Tennessee, which expects to close the deal to buy the assets from Weyerhaeuser in the third quarter, is facing higher raw material and energy costs, along with the rest of the paper industry.

The entire industry is working to reduce capacity to cut costs, said Tom Runiewicz, an economist in Philadelphia with forecasting firm Global Insight, Inc.

The paper industry has no control of the price of raw materials. There is no control of the price of energy. Even with paper pulp, there is no control of the price of chemicals needed in the process. There is also only limited control of labor costs.

“But they do have control of their capacity and their overhead,” Runiewicz said.  

Cutting costs, therefore, is the best way to boost the bottom line. The paper industry is feverishly working to become more efficient by consolidating and closing mills, giving the industry pricing power and increasing capacity utilization rates.    ...read more

 

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