Not seeing the forest for the newsprint - Globe and Mail
Abitibi, which is the world's largest newsprint producer, did show some verve in slashing capacity over a few months, thus forcing up newsprint prices by one-third, but failing to deal with the fundamental problem.
In 2007, the Canadian forest industry's reinvestment ratio was 0.4, according to PricewaterhouseCoopers, in painful contrast to 3.08 in China and 2.84 in Latin America. That low rate has been not enough to compensate for the depreciation of existing forestry assets.
Abitibi could have moved much more promptly away from newsprint into paper grades with higher added value at its Canadian mills. Evidently, the habit of not reinvesting was too strong. Although the company is now insolvent in both the U.S. and Canada, its eight Canadian mills together have only half the combined value of its Catawba mill in South Carolina and Calhoun mill in Tennessee, inherited from the Bowater side of the merged company's parentage.
The Canadian forest industry has asked the federal government for accelerated rates for writing off its capital investments, but that could not solve the industry's woes at the 11th hour, after years of underinvestment.
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