Stormy Forecast for Paper Buyers

We’ll leave out some of the variables, but there are two key reasons why shutting down machines hasn’t been a shortcut to profitability. First, the enormous capital costs of paper making mean mills become profitable only when capacity utilization is extremely high. Roughly speaking, a mill might start turning a profit when it’s producing about 95 percent or more of all the paper it could possibly make. Notice the limited upside, as well as the long, brutal road to profitability. The gap between losing money and making money is very narrow.