ORONO – There is likely a future for Maine’s pulp and paper industry, but it doesn’t look much like its past.

That was the unifying theme of presentations made at the second day of the University of Maine’s Pulp and Paper Foundation conference, examining the impact of global competition on Maine’s industry. Two standouts for long-term viability: product specialization and diversification into biorefinery and bioproducts.

Papermakers here are facing increasing production costs, while overseas competitors are flooding the markets with lower-cost pulp and paper goods. Pulp mills in China and Brazil have the capacity to produce pulp at less than half the cost of New England producers. American mills are losing in the finished goods market as well. In 1997, the United States exported $1.75 billion in finished paper products; in 2002, that figure dropped to $500 million, a 70 percent plunge in five years.

Lean manufacturers with niche markets is one arena where Maine papermakers can still be competitive. It was a lesson learned the hard way by Lincoln Paper & Tissue.

The mill’s parent company, Eastern Pulp and Paper, filed for bankruptcy two years ago. But now the small, privately owned mill is on the rebound, building a new tissue machine and hiring paperworkers.

Lincoln is the dominant supplier of those reply cards that drop out of magazines, and colored napkins. To stay in business, it got lean fast, said Doug Walsh, vice president. Its work force (about 390 people) is 70 percent of what it was under Eastern. And everyone from management to paper workers took pay cuts ($2-$3 per hour for the workers) and got cross-trained for a more flexible work force.

The company uses sawdust waste to make its pulp and has a hog fuel boiler that generates steam, so it’s not dependent on fossil fuels. But it still faces major challenges in electricity and transportation costs. Plus the cost of hardwood pulp, which it mixes with the sawdust pulp, continues to rise.

“We’re not under heavy pressure from foreign competition yet, but you do have to consider whether someone else will do this cheaper offshore someday,” said Walsh.

Several presenters talked about the potential to convert wood into fuel or other products such as plastics and pharmaceuticals. Dana Dolloff, director of environmental affairs at Rayonier, a Florida company, said they have been successful in converting cellulose from wood into ethers, acetate and viscose, which are used in industrial applications. The company also reorganized itself into a real estate investment trust, which gives it certain tax advantages and greater flexibility to capitalize on its forestland.

Eric Kingsley of Innovative Natural Resource Solutions said UMaine is leading research into converting wood into energy. Despite regulatory and tax complications, there’s potential for Maine’s forest industry to find new life.

“Biomass is a real competitor for fiber and it’s only going to grow,” he said, but cautioned a new industry will be difficult to launch and likely controversial.

“Bioproducts may be our salvation, kiss of death or a great diversion,” he said. “Watch. Listen. Participate.”