SIC 3554
PAPER INDUSTRIES MACHINERY



This category covers establishments primarily engaged in manufacturing machinery used in the pulp, paper, and paper products industries. Establishments primarily engaged in manufacturing printing trades machinery are classified in SIC 3555: Printing Trades Machinery and Equipment.

NAICS Code(s)

333291 (Paper Industry Machinery Manufacturing)

Industry Snapshot

The United States is the world's leading producer of paper-making machinery. According to the U.S. Census Bureau's Statistics of U.S. Businesses , 319 establishments operated in this category for some or all of 2001. There were 13,169 paid employees receiving a payroll of about $581 million. The Annual Survey of Manufactures reported that about 7,800 people worked in production, putting in more than 16 million hours annually. Overall 2001 shipments for the industry were valued at more than $2.7 billion.

Background and Development

The first machines used for making paper were invented in France in the late eighteenth century. In 1799, Frenchman Nicholas Louis Robert received a patent on a machine that could produce a continuous roll of paper. Several years later, London stationers Henry and Sealy Fourdrinier financed improvements for Robert's paper-making machine, which eventually came to bear their name. Manufacturers began using the Fourdrinier machine for the commercial production of paper in England in 1812. Eventually, the Fourdrinier machine became the foundation of the paper-making industry.

The first Fourdrinier machine used in the United States was imported from England in 1827 and put into operation at a paper mill in Saugerties, New York. However, by 1829 the American company Phelps & Spafford began manufacturing Fourdrinier machines, the first of which was installed at Norwich, Connecticut. Phelps & Spafford reorganized after the recession of 1837 as Smith and Winchester, and continued to operate into the twentieth century.

Pulping. Until the mid-1800s, paper was made principally from rags rather than wood. Between 1840 and 1860, several mechanical processes were developed that produced wood pulp suitable for making rough-grained paper. One of these pulp grinders was known as the Jordan refiner. Invented in 1858 by two Americans, Joseph Jordan and Thomas Eustace, the Jordan refiner was the principal pulping machine until it was replaced in the early

SIC 3554 Paper Industries Machinery

twentieth century by disk refiners. In 1867, American chemist Benjamin Tilghman found that dissolving wood in a solution of sulfuric acid also could produce pulp. A German chemist, Carl Dahl, perfected chemical pulping in the late 1880s. Mechanical pulping was extremely efficient, converting as much as 90 percent of the basic raw material into usable pulp. Although chemical pulping was considerably less efficient, the pulp generated by this process could be used to produce a higher grade of paper. Newsprint was generally a blend of about 25 percent mechanical pulp and 75 percent chemical pulp. Top quality stationery was still made from rag pulp. Many of the machines manufactured by the paper machinery industry during this period, such as barkers, chippers, and refiners, were used for the pulping processes.

One of the most capital-intensive manufacturing industries in the nation, the paper industry has not always been able to invest in new mills or upgrade existing mills during demand shortages. In 1994, paper demand shot up in the United States, Japan, and Europe as economies improved. Lacking the capacity to match the demand, many mills were running at 98 percent capacity, so they were unable to slow production down enough to even oil their machinery.

In 1994, the industry had a shipment value of $2.8 billion and consisted of more than 300 companies with 17,400 employees. The U.S. Department of Commerce estimated that shipments peaked at $2.8 billion in 1990, after five years of steady growth, but subsequently declined by 7 percent during the global recession of the early 1990s. That period represented the paper industry's worst financial slump since the Great Depression. Shipments returned to $2.8 billion by 1994, when supply and demand drove paper costs up dramatically, and reached $3.4 billion in 1997.

The growth of the free market in Eastern Europe also resulted in a 25 percent increase in the export of U.S. paper products in 1991, further increasing demand for new or rebuilt paper industry machinery at home. According to industry figures, parts for rebuilt machines accounted for as much as 70 percent of the papermaking machinery market. There also was a growing market for used machinery, particularly in the specialties paper industry.

Current Conditions

The industry had begun to rebound slowly in the 2000s, primarily due to the need to retrofit products for existing machines, as well as rebuilding, which represents the majority of the market for this industry. Product shipments were projected to increase 4 percent annually through the mid-2000s. The climate was favorable for growth in the foreign market, and exports accounted for most of the new market growth. Manufacturers were looking to Asian countries for the bulk of new business, due to the recovering economies and favorable zoning regulations for building in those areas.

Industry Leaders

The industry leader in 2001 was Kadant Inc. of Acton, Massachusetts, with $186 million in sales and 1,200 employees. Kadant reported sales of $203 million the following year, an increase of nearly 10 percent. In second pace was Marquip LLC of Phillips, Wisconsin, with $92 million in sales and 500 employees. Rounding out the top three was CG Bretting Manufacturing Company Inc. of Ashland, Wisconsin, with $90 million in sales and 500 employees.

America and the World

Historically, the United States has been a net exporter of paper industries machinery, with Canada, the United Kingdom, Mexico, and Australia being its most important foreign markets. However, imports began growing in relation to exports during the 1970s, and in 1979 the balance tipped in favor of imports. Before the rise of imports, nearly 90 percent of all new papermaking machines installed in the United States came from U.S. based manufacturers. By the early 1980s, however, 50 percent of the new machines came from foreign manufacturers. There was a brief recovery in 1982, when exports exceeded imports by about $110 million. However, the downward trend returned in 1983, and by 1987 the industry's trade deficit had grown to almost $300 million. Much of the imported machinery came from Germany, the leading exporter of paper industries machinery in the world. Finland, Sweden, Switzerland, and Japan have also sold significant amounts of papermaking machinery in the U.S. market.

Exports began to improve in the late 1980s and early 1990s, with imports accounting for 25.8 percent of total shipments and exports comprising 19.7 percent. The Department of Commerce estimated that the U.S. industry would again be a net exporter in the 1990s. Because the machinery for this industry could be easily broken down to manageable sizes, foreign trade was not a problem for manufacturers.

In the early 2000s, industry leader Kadant had designs on the Chinese market. Kadant reported 2003 contracts with China valued at approximately $37 million, double what it reported in 2002, and in 2004 Kadant was building a manufacturing plant in Beijing, planning to position itself as the undisputed leader and capitalize on the growing needs of the Chinese market.

Further Reading

Baker, Deborah J., ed. Ward's Business Directory of US Private and Public Companies. Detroit, MI: Thomson Gale, 2003.

Darnay, Arsen J., ed. Manufacturing and Distribution USA. Detroit: Thomson Gale, 2003.

Hoover's Company Fact Sheet. "Kadant Inc." 3 March 2004. Available from http://www.hoovers.com .

"Kadant Receives $3.8 Million Order from China." Paper-board Packaging , February 2004.

"Kadant Reports 2003 Fourth Quarter and Year-End Results." Kadant Inc. Investor Relations, 18 February 2004. Available from http://www.corporate-ir.net/ .

U.S. Census Bureau. Statistics of U.S. Businesses: 2001. 1 March 2004. Available from http://www.census.gov/epcd/susb/2001/us/US332311.htm .

U.S. Department of Commerce. Annual Survey of Manufactures. Washington: GPO, 2002.

U.S. Department of Labor, Bureau of Labor Statistics. Economic and Employment Projections. 11 February 2004. Available from http://www.bls.gov/news.release/ecopro.toc.htm .

US Industry and Trade Outlook. New York: McGraw Hill, 2000.

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