Q.1053: What is the future of Paper Industry in USA
Ans. Future of Pulp & Paper Industry in US
The future of pulp and paper industry in US/Canada in general tied to the future of other chemical and/or manufacturing industry, but it also has some specific issues of its own.
Historically, when the pioneers (European settlers) came to America, all they have were the natural resources to depend on and to build their future. Forests were main natural resource and pioneers cleared forests to use land for plantation and cultivation and used wood to build houses. Saw mills were main industry.
The saw mill scrap and small tree branches were used for fuel or left in the forest for decomposition/biodegradation. There was much more wood than the pioneers could used for house building, rag (main raw material for papermaking) was getting in short supply and demand for paper was increasing.
Paper mill based on wood as fibrous raw material started coming up around saw mills. There were times when the presence of a paper mill was considered as sure bet for the success/survival of a community. Paper mill emissions used to smell much worse than what these smell now but that time it was smell of money.
The public image of paper industry is getting bad to worse. For environmentalist paper industry is worst of worst. Their main concerns are
- It is one of the so called most polluting industry.
- It uses wood as raw material and cause deforestation and
- Used paper is the biggest component of landfill.
One can argue for and against this but that is the public perception. No one wants a paper mill in its backyard anymore.
Paper industry like all other industries has come a long way in reducing pollution. It uses more and more of saw mill waste/scrap small tree branches which, will not be used for anything other than fuel. In fact it is moving towards being a byproduct or waste reduction industry for timber industry. Almost 50% of the paper is now recycled. So what is the problem? That is 100 billion dollar (size of paper industry) question.
Whatever the public/environmentalist perception, people need paper and it has to be produced some where. What and how much will be produced in US and how much will be exported will now depend on market dynamics.
In my opinion, America will continue to produce and consume almost 100 Million Ton of paper/paperboard it consumes now, in the near future also. What will change is the product mix. Paper industry will be more lean and mean. Some winners and losers are,
Corrugating media and liner almost constitute 50% of the paper/paperboard used in US. The use of corrugated board if not increasing is not decreasing either. Use at the first point of packaging may be shifting as more and more smaller items are manufactured outside US, but internet marketing is more than compensating it as more items in smaller packages are delivered to the customer directly.
Three factors in favor of corrugated boards are;
- Corrugated media and liners are mostly made from unbleached pulp and create very low pollution compared to bleached pulp so meeting EPA regulations are much easier. Most of media is made from high yielding semi-chemical and/or thermo mechanical pulp.
- Corrugated board recycling rate is very high, more than 85%.
- Long distance transportation of corrugated board is not economical.
Newsprint constitutes about 25% of paper used in US. The consumption of newsprint is affected by online newspaper but printed newspaper are not going out of fashion or business any time soon. The factors in favor of newsprint being manufactured and used in US are
- Most of newsprint is made from high yielding semi-chemical and/or thermo mechanical pulp. Newsprint is not bleached to very high degree of brightness as copying paper and less polluting bleaching sequences are used.
- Productivity is very high as no time lost in grade change, low sizing requirement, high deckle utilization, finished in roll, no coating or surface treatment.
- Newsprint recycling rate is high. Public awareness is increasing.
- The joint venture between newspaper publisher and paper mill have reduced or eliminated marketing cost and increased recycling of pre-consumer newsprint. This also help in optimizing deckle usage.
Hygiene Paper Products
The manufacturing of hygiene tissue in US will survive because the following two factors
- Hygiene tissue are bulky and long distance transportation make it uneconomical to import.
- The import from Europe is not cheaper and American will not trust hygiene products made in 3rd world countries.
High Value Specialty Paper
Paper such as coffee filter, tea bag, candy wrap etc. will continue to be made in US because the price is not a factor here. The cost of coffee filter paper compared to the cost of coffee it filter is negligible and demand on quality of paper is high.
Writing Printing & Copying Paper
These papers are normally made from virgin high brightness chemical pulp. With the advancement in technology, equally good paper can be made from mixed hardwood (short fiber) and or non-wood fiber with small portion of long fiber on high speed machines. US has no real advantage over any Asian/Latin American countries in producing these grades of papers.
All types of Low Volume Colored Paper
Highly colored effluent generation, small volume and frequent grade change will make these grades of paper economically unviable to be manufactured in US.
In US paper industry will survive but will not flourish. It will get leaner and meaner. More horizontal & vertical integration will take place. More merger and acquisition will happen. New capacity will be mostly added in Asia and Latin America.
To be continue