Lincoln mill to see ‘slow' progress

LINCOLN, Maine - They expect this year to be better than last, but the owners of Lincoln Paper and Tissue LLC see 2010 as a moderately successful period of no major investments or substantial new hiring, they said Tuesday.

"The recession was very deep last year, and improvement is coming along, but it's a slow process," said Keith Van Scotter, the company's chief executive officer. "Slow is OK, so long as it is steady" and the economy doesn't swoon.

Lincoln Paper and Tissue's customers have placed enough orders to keep the Katahdin Avenue plant and its 400 workers running around the clock so far this year, excluding maintenance shutdowns.

That's a far cry from 2009, when the company's No. 5 paper machine was down about 110 days due to a lack of orders, said John Wissmann, the company's chief financial officer.

Order volumes are good, but the lean economy forces Lincoln Paper to charge customers about 10 percent less per ton of product than it charged last year, Wissmann said. That provides enough profit to meet payroll, pay bills, pay down debt and otherwise keep the company running, but not enough for any substantial new investments, Van Scotter said.

"There are no [big investments] close by or even on the horizon," Wissmann said.

This trend will prove problematic if it continues for several years or if raw materials costs rise dramatically as the company must continually reinvest in itself to remain competitive. Energy costs, particularly with electricity and No. 2 heating oil, are constant worries despite the mill's having a biomass boiler to help cut into its electricity costs, the owners said.

The cost of hardwood pulp the company uses to make its products skyrocketed to "Mount Everest" levels in 2008; now the cost is down to "Rocky Mountain" heights, Wissmann said wryly, not yet having returned to where it was in 2007.

Van Scotter has examined running natural gas lines to Lincoln Paper and Tissue to help wean the company from No. 2 heating oil, which it uses to make steam for papermaking, but the company couldn't do it without state or federal government help. The credit market hasn't rebounded enough to make applying for credit advisable, he said.

An occasional critic of state and federal energy policies, Van Scotter said he doesn't see that help coming anytime soon. He believes that while government pursuit of alternative energy sources is basically worthwhile, wind power is still far too erratic to provide much immediate relief to state industry.

"Now and for the foreseeable future, electricity costs will be set by the price of natural gas in this region and the price of coal for the rest of the country," Van Scotter said. "We expect natural gas prices to stay about where they are for the balance of the year. It's a more secure fuel than oil."