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
- 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 and small
tree branches which will not be used for anything other than fuel. In fact it
is moving towards being a by-product 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 70- 80 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 90%.
- Long distance transportation of corrugated board is not economical.
Hygiene Paper Products
The manufacturing of hygiene tissue in US will survive because the following
- 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.
Newsprint used to be 25% of all paper consumed in US.
Now it is around 10% and decreasing every year. The consumption of newsprint is
affected by online newspaper, Internet news sites, free classified ad sites, Twitter etc. and printed
newspaper are going out of fashion and many large and small newspaper have
stopped printed version of the paper.
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
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