Much has been written about the challenges facing the paper industry in Maine. In most cases, however, all paper manufacturers are lumped together without regard for the specific types of paper they produce.

The majority of the paper produced in Maine is what’s known as coated paper, which is used to make magazines, catalogs and newspaper inserts. The market for coated paper has been in decline as digital media eats into demand for the printed page. However, there is a type of paper not under siege by digital technology: tissue.

“There is some renewed interest in tissue,” said John Williams, president of the Maine Pulp and Paper Association. “Unlike some types of paper, the tissue market in the U.S. is growing. In addition Maine’s proximity to major population centers provides an advantage since tissue is bulky and difficult to ship.”

Demand for tissue — which includes toilet paper, paper towels, paper napkins and specialty tissue paper — has been increasing, albeit slowly, according to Gregory Rudder, editor of the trade publication PPI Pulp & Paper Week. In the past 19 years, total U.S. tissue capacity — meaning the amount of tissue that would be produced if all tissue machines operated at 100 percent all year — has grown on average 1.8 percent per year, from 6.55 million short tons to an estimated 8.92 million short tons in 2015, according to Rudder, who noted most U.S. mills operate on average at 95 percent to 97 percent capacity.

“So it has been the steadiest of paper and paperboard grades in the United States in terms of sustaining demand,” Rudder said. “I think there have been two years out of the past 15 where there was negative demand growth.”

While Maine may have a history of tissue production, only one mill currently produces the product. That mill, Lincoln Paper and Tissue, faces heightened competition from an aggressive build-up of Asian production — and from U.S. firms looking to tap the tissue market.

Lincoln Paper and Tissue produces 200 tons of tissue a day that is destined to become dyed paper napkins, the kind one would buy for a birthday or holiday party. The paper leaves the Lincoln mill as a raw product, then is dyed and converted into final form by its customers.

The company was formed in 2004 when Keith Van Scotter and John Wissman acquired the Lincoln mill from Eastern Pulp and Paper Co. for $23.7 million. An additional $36 million investment in 2006 doubled the mill’s capacity.

However, despite the growing demand, that doesn’t mean it’s smooth sailing for the mill. The tissue market may be growing, but Van Scotter, the company’s CEO, told the BDN the mill is “facing some challenging times.”

Lincoln Paper & Tissue in December said it would lay off 200 of its 400 or so employees for an “indefinite” period of time. The company first blamed the layoffs on a boiler explosion in early November, but the Bangor Daily News later discovered a federal document — one filed by the company in an effort to get its laid-off employees job placement assistance — that revealed the layoffs were a result of the loss of a major customer to a mill in Indonesia.

Asian tissue mills pose a significant — and growing — challenge to U.S. tissue manufacturers, including Lincoln.

In late 2012, Jakarta, Indonesia-based Asia Pulp and Paper made an announcement that rattled the global market for tissue. It announced plans to over the next few years build 42 new tissue machines at its paper mills in China and another 15 new tissue machines at its mills in Indonesia. Such an expansion, if successful, would add 2.9 million metric tons of capacity to the global market and vault the company past major tissue producers such as Kimberly-Clark and Georgia-Pacific to become the largest tissue manufacturer in the world.

While much of that new capacity would meet the growing demand for tissue in the Asian market, where more people are rising into the middle class, Van Scotter expects the company to ship a good portion of that new tissue across the Pacific Ocean to the United States, which is the largest market for tissue products in world. Americans consume 53 pounds of tissue product a year, according to RISI, an organization that provides news and analysis of the global forest products industry. ( An article in Tissue World magazine even goes so far as to suggest more toilet paper is thrown on trees in the United States during Halloween than some African countries consume in an entire year).

“China is a fast growing market, but it’s not growing that fast,” Van Scotter said. “This player is looking to bring tissue into any market they can get it into.”

However, U.S. tissue manufacturers have the distinct advantage over their Asian competitors of not having to pay as high transportation costs.

While a U.S. tissue manufacturer might face transportation costs of roughly $15-$18 per ton to ship tissue from the Port of Los Angeles to a port in China, an Asian company that wants to ship tissue on the opposite route is facing charges closer to $120 a ton, according to Rudder at PPI Pulp & Paper Week.

Even that large price disparity won’t stop Asia Pulp and Paper from attempting to flood the U.S. market, Van Scotter said. He expects the Asian company will be a significant threat as it builds tissue machine after tissue machine in China and Indonesia.

“They can ship their product into the United States and pay that kind of money and they’ll still be competitive,” Van Scotter said. “The Chinese have shown a willingness to sell product at or below cost to get a foothold in the market.”

The U.S. government does not currently levy any tariffs on imported tissue. Convincing the federal government to impose a tariff on a product is no easy feat, and has not been something the industry has considered seriously, Van Scotter said.

Van Scotter also sees a challenge closer to home.

As the rest of the paper industry struggles with falling demand, the growing demand for tissue makes it an attractive market for U.S. paper manufacturers that are considering converting other types of paper machines to produce tissue. Just last year a paper mill in Virginia converted an uncoated freesheet machine to produce tissue, and another paper company is working to convert another uncoated freesheet machine to tissue production at a mill in Oregon, according to Rudder.

In Maine, John Williams at the Maine Pulp and Paper Association has heard that the Woodland mill in Baileyville may install a tissue machine at some point in the future. And just across the border in New Hampshire, Patriarch Partners invested $35 million to install a new tissue machine at its mill in Gorham, N.H. Patriarch also owns Old Town Fuel and Fiber, which supplies pulp to Gorham Paper and Tissue.

Van Scotter views all these plans to expand tissue production in this country and elsewhere warily.

“It’s going to take some time to play out,” he said. “But one thing we do know is the tissue market is a mature market. It’s not oversupplied yet, but I think it will be this year. We’ve already seen signs of market weakness and we think that will be a problem.”

He continued: “I won’t say it’s dire, but I don’t like the signs I’m seeing. When you have way more capacity than the market can absorb, something is going to give. I think we’re going to see a challenging market this year.”

Despite the trepidations about the health of the market, Van Scotter isn’t pessimistic about Lincoln Paper and Tissue’s ability to continue operating. He declined to answer whether the mill has or will be able to replace the major customer it lost to an Indonesian mill, but said he’s still confident in the mill, its roughly 200 remaining employees and its tissue product.

“We’re there, we’re established, we know what we’re doing,” he said. “It’s a tough business, but I feel confident about our future. We’re working hard at it every day.”

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