May 2005

Paper and paperboard capacity grows, but industry must address key competitive issues
By W. Henson Moore, The American Forest & Paper Association

American Forest & Paper Association’s recently completed 45th Annual Survey of Paper, Paperboard and Pulp Capacity shows that U.S. paper and paperboard capacity has stabilized after three consecutive years of decline. The report also indicates the industry’s capacity to make paper and paperboard will remain nearly flat 2007 — well below the 2.2 percent annual capacity growth the industry experienced in the 1990s.

While this is better news than the industry has received in recent years, the findings underscore the need for America’s forest products industry to continue aggressively addressing the key factors affecting its competitiveness. America’s forest products industry has several important competitive advantages over many overseas competitors, including an abundant fiber supply, highly skilled workers, world class mills, and the world’s largest domestic market. Restoring the industry’s competitiveness involves continuing the ongoing work to address some of the key policy issues affecting the industry. That means leveling the playing field with overseas competitors by insisting that everyone meet the same high environmental standards U.S. companies operate under. It means achieving a fair tax code in line with competitor nations, eliminating tariffs, and ending market-distorting practices such as government subsidies and currency manipulation. Following is a breakdown of the capacity survey’s findings for each product line our industry manufactures. For more information about the capacity survey or about the key issues affecting America’s forest products industry, please contact AF&PA at 202-463-2700.

U.S. printing & writing paper capacity (net of cotton fiber papers and bleached bristols) peaked in 2000 at 27.6 million tons. By 2003, it had fallen to 25.5 million tons, a decline of nearly 8% within a 3 year period. Capacity did resume growing in 2004 – but by less than 1%. It is scheduled to rise by about 2% in 2005 and then increase fractionally during the 2 remaining years of the survey. By 2007, capacity will still be below the level it was a decade earlier.

Free sheet capacity is expected to grow again over the 2005-2007 forecast period, but much more slowly – under 2.5% for coated free sheet and under 0.5% for uncoated free sheet. Coated mechanical is projected to remain basically unchanged over the survey period, while uncoated mechanical is expected to grow by nearly 6% this year, and then grow fractionally in 2006-2007.

Newsprint capacity declined in 2004 – from over 6.9 million tons in 2003 to some 6.6 million tons last year, or by almost 5%. Capacity is projected to decline another 500,000 tons to about 6.1 million tons in 2005. No appreciable changes in capacity are scheduled for 2006 and 2007.

Tissue paper capacity is expected to increase 3.3% in 2005. For the 3 year projection period (2005-07), tissue paper capacity growth is expected to average 1.3%. Unbleached kraft paper capacity will hold nearly steady during the next 3 years, declining 0.2% in 2005 and showing no changes in 2006 and 2007. Bleached kraft paper capacity declined 11.8% in 2004, but is slated to decline 17.3% in 2005 and then hold stable during 2006 and 2007.

Paperboard Grades
Linerboard capacity declined 0.2% in 2004 to 25.5 million tons. Linerboard capacity is slated to edge up an average annual rate of 0.3%. Corrugating medium capacity increased 1.5% in 2004 to 11.1 million tons. Capacity is slated to increase 0.6% in 2005 and then hold essentially stable after that. Recycled paperboard capacity (excluding containerboard and gypsum wallboard facings) declined 2.5% in 2004 to 5.9 million tons. Capacity to produce recycled paperboard is slated to decline an additional 2.3% in 2005. Recycled paperboard capacity is projected to level off in 2006 and 2007.

Unbleached Kraft folding boxboard capacity contracted 1.6% in 2004, to a level of 2.4 million tons. If these plans come to fruition, capacity to produce this grade will be up 0.7% in 2007 relative to 2003.

Bleached paperboard capacity (excluding bleached linerboard) rose 1.9% in 2004 to a level of 6.0 million tons. Bleached folding boxboard capacity declined 0.9% (29,000 tons) in 2004, while milk carton and food service board capacity rose 3.8% (95,000 tons).

Bleached folding boxboard capacity will decline 2.6% in 2005 and then remain essentially unchanged during the subsequent two years. Capacity to produce milk carton and food service board is projected to expand at an average annual rate of 0.2% a year during the projection period.

Market Pulp
Total market pulp capacity is expected to grow by 86,000 tons through 2007. Bleached softwood sulfate market pulp capacity is expected to approach 6.4 million tons by the year 2007. Bleached hardwood sulfate is expected to decline by 17,000 tons by 2007 to reach 2.8 million tons. Total chemical paper grade market pulp capacity is expected to reach 9.7 million tons by 2007.


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