Business: Joys and Sorrows of Pulp

Late last week Defense Advisory Commissioner Edward R. Stettinius Jr. made a cheerful announcement. For the first time in 30 years the output of the U. S. wood-pulp industry practically equaled U. S. consumption. Production this year, said he, should hit a record 9,000,000 tons, up 27% from 1939’s 7,107,000 tons. Furthermore, if U. S. pulpsters bring old, inefficient plants into action, they can boost production another 10 or 12%.

Last year the U. S. was the world’s No. 1 pulp importer. Of the 2,026,209 tons it imported, more than half came from Scandinavia. The U. S. is still the No. i importer, but now it is also the No. 2 world pulp exporter, second only to Canada. Fortnight ago the Department of Commerce announced U. S. pulp exports in July hit an all-time high of 65,548 tons, nearly six times a year ago. Raw-materials Watchdog Stettinius added that full-year shipments would total 400,000 tons (mostly to the United Kingdom, Latin America and Japan), against 140,000 tons last year.

From this lush new export market (where prices are $10 to $21.40 a ton over the domestic level) U. S. pulp makers are skimming the cream. But they do not consider it permanent. A break in the British blockade would release a tidal wave of low-cost Scandinavian pulp, force prices far below anything U. S. mills could meet. Already pulpmen have had reason to be leery of the Latin-American market. Last spring, after Norway’s collapse, they were hounded by Latin-American purchasing agents. Suddenly the agents vanished. Nazi salesmen had promised them low-priced pulp deliveries (backed by bonds) before Oct. 1. When Nazi pulp failed to show up, Latin Americans returned to the U. S. market. But for so fidgety an export market, U. S. pulpmen have built no new plants, plan none.

World War II has done more than turn the U. S. into an exporter of pulp. Pulp prices have soared, are 50% above what the industry itself regards as normal. Contract prices on domestic kraft pulp have jumped from $25 a ton to $61 ; bleached No. 1 book sulfite pulp, at $72.50, is 45% above August 1939. For integrated paper companies with their own pulp supply, this is caviar. International Paper & Power earned $3.61 a common share in six months ended June 30 as against a deficit of $1.22 last year. But for the nonintegrated units (“converters,” who buy their pulp), high pulp prices mean a tight squeeze. One integrated paperboard producer recently found he could sell unbleached kraft pulp, his raw material, for $61 a ton, while finished board, costing him $10 more to make than the pulp, was worth only $55 a ton. He therefore could make $16 a ton by closing his board plant, selling his pulp and buying board for his customers from a converter. The converter has to foot the bill or go out of business.