Maine pulp and paper industry:

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• is the largest manufacturer in Maine.

• makes up $1.4 billion, or 4% of the Gross State Product.

• mills spent nearly $900M statewide on goods and services in 2004

• mills employed nearly 10,000 workers as of 2004.

• paid nearly $600M in wages in 2004.

• workers are paid the highest reported manufacturing average wage in the state at $58,136.

Source: Maine Pulp & Paper Association

ORONO – Labor is only one area where Maine papermakers are losing ground to foreign competitors, but it’s a humdinger.

According to a Bureau of Labor study, the cost of one U.S. mill production worker equals 2.8 workers in Asia, 7.6 in Brazil, and 23 in China.

And Maine papermakers are getting older, incurring more expenses for health care and other benefits, while younger professionals are being snapped up by competing industries like biotech and laminates, some from overseas. The scenario was just one presented at a two-day conference on the challenges confronting Maine’s pulp and paper industry organized by the University of Maine Pulp and Paper Foundation.

Consultant Michael Luciano of Farmington suggested a partial solution to the labor problem: Align workers and management to address the problem collectively.

“And we need to start soon, or my next presentation will be in Mandarin Chinese,” he joked.

The levity was appreciated by the dozens of paper industry people who attended the conference looking for ways to find a competitive edge in an increasingly global market. There wasn’t a lot of good news. More than 250 American paper mills have closed in the past five years, victims of fierce competition.

In addition to labor, the price of energy, transportation and raw materials continues to rise while newer, more efficient mills produce paper for less. Energy costs in Maine have skyrocketed and are expected to continue to rise. The state hasn’t kept pace with its highway maintenance work, necessitating the posting of about 2,000 miles of road each spring. The detours and delays mean more transportation costs for Maine’s papermakers.

Locally, the cost of a ton of hardwood pulp has risen from $28 to $40 in the last few years, with similar increases for softwood pulp. New pulp crops from Asia and Latin America, such as eucalyptus trees, threaten Maine’s pulp industry.

“It’s pretty simple,” said Don Tardie, a former Fraser Paper executive who now consults. “There are plantations in South America, China and Indonesia that can get a tree (to maturity) in seven years and our balsam fir takes 40 years to mature. That’s pretty difficult to beat.”

Speakers also touched on the often-mentioned liabilities of doing business in Maine: excessive regulations, personal property taxes, lack of capital and the political impotence to change things.

Geoffrey Colvin, senior editor at Fortune magazine, brought the issue of competitiveness to a global platform in his remarks. He noted that more jobs throughout the world are information based and can be done anywhere. The key to American success is to create high-value jobs that can’t be done by the rest of the world yet.

That means investing in K-12 education to recapture U.S. dominance in science and math, a position the United States ceded years ago to other countries.

Colvin said it won’t be easy, given this nation’s pop culture endorsement that dumb is cool, and the entrenched warfare between government and labor unions.

“But there are other people with a deep hunger and deep willingness to sacrifice today for a payoff tomorrow,” he said.

The news wasn’t all glum. Tony Lyons, mill manager for NewPage in Rumford, said that mill is doing well, benefiting from new owners who invested $6 million in a new paper-making machine that will be installed next month. A similar machine is being installed at a sister mill in Michigan, giving the company more flexibility in its production of coated paper.

The company sold its Maine forestlands in 2002, but retained rights to a 50-year wood supply. Since its purchase by Cerberus Equity last year, NewPage has paid down its debt and focused on its core business, making top-quality coated paper.

“We have competitors in Europe,” said Lyons, “but we are competitive in logistics and quality. And we have a good solid customer base that’s been with us a long time.”

Ford Reiche, president of Auburn’s Safe Handling, also had good news to share. A handler of raw materials to most of Maine’s paper mills, Safe Handling has been looking for ways to reduce production and transportation costs. A grant the company received last year has begun to pay off. Working with other partners, Safe Handling has been testing a new technology that converts organic trash such as wood waste and sludge into energy at a low cost with negligible environmental impact. Acknowledging that the technology carries “a ton of risk” and costs “a ton of dough,” Reiche said it also represents exciting potential to lower energy costs.

“I may be too embarrassed to come back next year (if it doesn’t pan out), but I’m too excited to wait until next year to talk about it,” he said.

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