Mergers and acquisitions expected to continue
in paper industry
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
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