BANGOR DAILY NEWS FILE PHOTO Despite filing for bankruptcy protection in Canadian and U.S. courts on June 18, the Toronto-based Fraser Papers states that the Madawaska mill will continue operations, as will the affiliated Katahdin Paper mill in East Millinocket. Fraser’s Edmundston, New Brunswick, facility, which is across the river from the Madawaska site, suspended operations in early June. Buy Photo

Brazil’s emergence as a leading pulp manufacturer and China’s as a papermaker. The crippling impact of high electricity costs. The downturn in the newspaper and magazine industries, the home building market and the continued uptick in paperless computer usage.

And, of course, the worst economic recession since the 1930s.

To the common eye, Maine’s forest products industry has been like a battered boxer for most of the last 20 years: hammered by layoffs, declining markets and international competition. But take a minute to peel away the recession and its impacts, and what’s left?

What within Maine’s largest and proudest manufacturing industry looks likely to survive, if not flourish, over the next five to 10 years?

Lincoln Paper and Tissue LLC co-owner Keith Van Scotter, Maine Forest Products Council spokesman James Cote and University of Maine professor Habib Dagher spend most of their workweeks tackling that kind of question.

They agree that Maine’s rich forest products history, diverse mills and crops of hard and soft woods give it a foundation to create new products to dominate the post-recession world.

“This latest recession is really hitting us for a whack. Everybody has suffered through this downturn,” Van Scotter said. “That has been a fact of life, but if you look beyond it, the balanced integration of the industry will be its strong point.”

By percentage of its overall size, Maine is the state with the most land devoted to forestry and, by tonnage of trees turned into forest products, is the second-largest forest products state in the nation, Van Scotter said.

“I would not go so far as to say that the paper industry is just stringing along,” Cote said. “It was producing more paper than ever within the last couple of years.”

An investment banker he met in New York drew for Van Scotter an intriguing parallel.

“He said the paper industry today reminds him of the steel industry in 2001 — in terrible shape. Two-thirds of the industry was bankrupt,” Van Scotter said. “Then they went through an intense phase of restructuring and, from 2004 to ’07, had some tremendously good years.”

Speaking of bankruptcy, Fraser Papers began a court-supervised bankruptcy restructuring in Canada last month. The company said it lacks enough cash to meet its financial obligations. The list includes ongoing operating losses, a $25 million Canadian loan repayment due in September and $7.8 million in severance payments from the temporary shutdown of a Quebec pulp mill.

It also needs $10 million to help pay its suppliers and $7.7 million owed on municipal property taxes. Fraser blames weak lumber and pulp markets for its losses.

More generally, the recession is forcing mill managers to trim bureaucracy and old products. What remains, Van Scotter and Cote said, will sell. Those mills that survive will find new products.

UMaine scientists and engineers are working with more than 80 Maine companies to develop those products, Dagher said. An example: Louisiana Pacific invested $140 million in 2007 in its New Limerick mill to turn it into a laminated strand lumber facility making home-building products.

Laminated strand lumber is engineered wood that increases design flexibility and cuts labor costs.

“The biggest advantage with it is that you don’t need large saw timbers to produce large structural members. You can use smaller trees, low-value trees and wood wastes of just about any species,” Dagher said. “And the composite you make is two to three times stronger than the parent wood.

“This is the next generation of solid timbers for this state,” he said.

Correct Building Products LLC of Biddeford is the nation’s first manufacturer of polypropylene-based wood-plastic composites. The company’s decking boards are by weight equally sawdust and plastic. This technology should eventually replace pressure-treated wood as the home decking material of choice, Dagher said.

It’s not a new technology, but pellets are another fledgling enterprise. Maine has two large-scale pellet producers, according to the Pellet Fuels Institute, a nonprofit association that serves the industry. Corinth Wood Pellets LLC is in Corinth and Maine Woods Pellet Co. is in Athens. A third company, Northeast Pellets LLC, is in Ashland.

Van Scotter said pellet manufacturers might find New Hampshire, Vermont or New York more likely states in which to expand than Maine because they face less competition in those states for raw wood products. “They will go more towards where there is less wood usage,” he said.

RE-Gen LLC of Rockport announced plans late last month to create as many as 150 jobs in five years with a $20 million biomass furnace factory at the Huber Industrial Park in Millinocket that the company hopes to build next year. The 50,000-square-foot factory would employ welders, fabricators, service technicians and administrators to build Italian-designed, enviro-friendly biomass gasification furnaces capable of generating 700,000 to 5 million Btu.

The units would be large and efficient enough to heat schools, hospitals and office and apartment buildings for a fraction of the cost it takes to heat with No. 2 heating oil. Woodsmen would provide the very low-grade green waste wood chips (up to 80 percent moisture) that would burn in the ultra-high heat furnaces.

Another promising technology is at Old Town Fuel and Fiber, which will produce wood pulp for the papermaking industry and work closely with UMaine researchers to develop new technologies for converting pulp-processing waste into renewable biofuel.

Still on the drawing board: cellulose nanocomposites that break wood down to its nanostructure, and bioextractive technologies that use trees to produce base green chemicals that can be used in a number of applications, such as pharmaceuticals and bioresins. “The research we have done at the university is very positive,” Dagher said.

“The recession will not end tomorrow, but we don’t see the paper industry going away,” Cote said. “I think that the forest products industry continues to be resilient. If any industry can fight tough times and withstand downturns, this one can.”

The Canadian Press contributed to this report.