Paper Industry Predicts Modest Growth

Washington, DC - United States paper and paperboard capacity will expand slightly in years 2002 through 2004 - at an average of 0.4% according to the 42nd Annual Capacity Survey of the American Forest and Paper Association (AF&PA).

The expansion will reverse a 1.3 percent drop in 2001, the first decline ever recorded in aggregate domestic capacity.

Historically, domestic paper and paperboard capacity rose at a 2.5 percent average annual rate in the 1980-1997 period, and 0.9 percent from 1998 through 2000. The slowing of capacity growth has coincided with a number of factors, including the over-valued U.S. dollar.

Year 2000 paper and paperboard capacity 103.9 million tons remains virtually unchanged from the level estimated by last year's survey. However, the 2001 level of capacity has been revised downward by 2.0 million tons (1.9 percent) to 102.6 million tons - primarily because large amounts of capacity that have been closed for at least one year or are in the process of being dismantled were removed from this year's survey base.

Recovered Fiber

Recovered paper consumption was expected to drop by 3.5 percent in 2000 and an additional 1.4 percent in 2001, the survey showed. It is slated to grow at an average annual rate of 3.1 percent during the 2002-2004 period. Consumption of mixed paper, old newspaper and corrugated are expected to grow moderately during the three-year period covered by this survey, while pulp substitutes and high grade deinking papers will remain approximately stable during the same period.

This survey indicated that year 2000 recovered paper consumption by U.S. mills amounted to 35.7 million tons, 2.1 million tons or 5.6 percent below the level estimated by last year's survey. The large downward revision resulted from a sharp decline in paper and paperboard production during the third and fourth quarters of 2000, which had not been anticipated by respondents to last year's survey. The sharp drop-off in production translated into reduced fiber needs. Future expectations of recovered paper consumption have been reduced as well, with the 2003 reading down 5.0 percent as compared with last year's anticipated level.

This survey's year-by-year results show recovered paper consumption declining by 3.5 percent in 2000 and an additional 1.4 percent in 2001. It subsequently expands at a 3.1 percent average annual rate in the 2002-2004 time period, with most of the advance taking place in 2002.

The grade specific details indicate that mixed paper consumption declined 11.5 percent in 2000 and an estimated 3.1 percent in 2001. It is slated to expand at an average of 3.3 percent a year during the three-year period through 2004.

Consumption of old newspaper rose 4.9 percent in 2000 and 0.7 percent in 2001. It is expected to increase at a 3.5 percent average annual rate during the next three years.

Consumption of pulp substitutes declined fairly dramatically in 2000 and 2001-22.3 percent and 7.2 percent respectively. Consumption of pulp substitutes is slated to expand at a 0.5 percent average annual rate during the next three years.

High grade deinking was the only recovered paper grade other than old newspaper to post a gain in 2000. Specifically, consumption of high-grade papers at U.S. mills rose by 4.2 percent in 2000. It held stable in 2001 and is projected to remain fairly stable during the next three years.

Newsprint

Newsprint capacity fell by 5.6 percent in 2001 compared to 2000, from 7.5 million tons last year to 7.0 million tons in 2001. Most of the decline is attributed to the conversion of newsprint capacity to groundwood capacity, although machine shutdowns were also a factor. Industry capacity is expected to drop by another 4.5 percent to 6.7 million tons by 2004, putting it at its lowest level since 1989.

Containerboard

Linerboard capacity held approximately stable in 2001. There is little in the way of new linerboard capacity after 2001, with growth averaging 0.1 percent a year in the 2002-2004 period. Medium capacity also was essentially stable in 2001. It is expected to rise 1.6 percent in 2002 and an additional 0.7 percent in 2003 due to the startup of a new machine in mid-2002 and the rebuild of another machine. Medium capacity is expected to remain nearly unchanged in 2004.

Folding Boxboard

Total folding boxboard capacity-recycled, bleached and unbleached, will show only modest changes during the survey period. In particular, folding boxboard capacity is estimated to have decreased by 0.9 percent in 2001; it is expected to rise just 0.2 percent in 2002, 0.1 percent in 2003, and then hold steady in 2004.