SIC 2621
PAPER MILLS



This category covers establishments primarily engaged in manufacturing paper from wood pulp, wastepaper, and other fiber pulp, and they may also manufacture converted paper products. Establishments primarily engaged in integrated pulping and papermaking are included in this industry if they primarily ship paper or paper products.

NAICS Code(s)

322121 (Paper (except Newsprint) Mills)

322122 (Newsprint Mills)

Industry Snapshot

The United States produces more paper and paper-board than any country in the world. It has maintained this position by consistently producing about one-third of total world production, far more than any other country. By the early 2000s overcapacity, combined with slack demand and a weak domestic and global economic climate, led to difficult times for the paper industry. Amid these conditions, the industry also was challenged by an overvalued U.S. dollar and growing foreign competition, as U.S. customers purchased paper from other nations at lower prices.

Historically, domestic U.S. paper and paperboard mills have produced about 90 percent of the paper consumed in the United States. Taken as a whole, the U.S. pulp, paper, and converted paper products industry is among the largest U.S. manufacturing industries in dollar sales. While imports account for about 10 to 12 percent of the paper consumed each year in the United States, domestic manufacturers dominate most segments of the industry.

While paper mills are separate from pulp mills in the Standard Industrial Classification System, the two are, in reality, directly connected. About 70 percent of all paper is produced at mills that are "integrated" with a pulp mill at the same site, both of which are typically owned by the same company. Most high volume "commodity" paper and paperboard grades—such as newsprint, uncoated free sheet, and linerboard—are produced in this fashion. Some smaller paper mills producing specialty grades may not be connected with a pulp mill. They procure pulp from other mills owned by the same company or buy "market pulp" produced by other companies.

Converters of paper products, which are often owned by paper companies, add value to paper and distribute their products to consumers and industrial users. This sector is more widely distributed and includes firms that are directly integrated with paper manufacturers as well as firms that purchase paper, paperboard, and plastic film from manufacturers. Converters transform these materials into thousands of different finished products. The most converters are fully independent operations. However, the converters that are directly owned by or connected to paper and board manufacturers tend to be very large and account for a disproportionate percentage of total industry sales.

While growth in domestic markets has slowed in recent years, the U.S. paper industry still produces a vast amount of paper and paperboard. In 2001, total production was 88.9 million tons of paper and paperboard, down from 94.6 million tons in 2000 and 97.0 million tons in 1999. Of all the paper and paperboard produced in 2001,42.1 million tons was paper and 46.8 million tons was paperboard.

While papermaking is an energy intensive industry—among the largest U.S. industrial consumers of energy—the pulp and paper industry itself produces more than 50 percent of the energy it uses through cogeneration and burning of waste fuels, such as bark and spent pulping chemicals.

Organization and Structure

Papermaking starts where the pulping process leaves off. The first step in papermaking is piping the pulp to the headbox of the paper machine. At this point the pulp—now called the furnish—is 99 percent water and 1 percent fiber. At the headbox, the pulp is laid onto a large mesh belt made of plastic, which is called a wire or a forming fabric. This wire can be as wide as 33 feet. As the water drains out, the fibers bond to each other and form a strong web. This web is taken off the wire by a series of rolls and put into a press section, where more water is squeezed or vacuumed out of the web. Then the web enters a long series of dryer rolls that are heated by steam. As the web comes in contact with these rolls, the water flashes off. By the time it leaves the dryers, the web is 3 to 4 percent water. After the paper is wound on a reel at the end of the paper machine, many things can happen, depending on the grade. It can be slit and shipped as a large roll or converted into paper products at the same location.

Paper mills are organized by the type of paper they produce. For example, some paper mills produce only printing and writing paper, while others produce news-print. Many paper mills produce "white" paper, in which brown wood pulp is bleached to remove color and other impurities. Many paperboard mills, which are discussed in SIC 2631: Paperboard Mills , manufacture unbleached "brown grades" of paperboard, some of which are used for making corrugated shipping containers. However, some paperboard mills produce "white" products, such as the bleached paperboard used to make folding cartons for products such as breakfast cereal boxes. Some paper mills produce unbleached brown paper for products such as grocery sacks.

Financial Structure. The paper industry is the most capital intensive of all basic U.S. manufacturing industries, requiring nearly continuous major investments for plant and equipment. According to one ranking, the pulp and paper industry is twice as capital intensive as any other major U.S. industry. This situation has led major paper companies to invest in enormous, high-speed machines that can use economies of scale to produce paper at the lowest possible cost.

The late 1980s and early to mid-1990s were a roller coaster for the U.S. paper industry. After paper companies enjoyed record profits in the late 1980s, the early 1990s saw a dramatic drop in paper prices and very difficult financial circumstances for many paper companies. Prices for most paper products started to drop in mid-1989 and remained low well into the 1990s. Despite low prices being paid for paper, many paper companies had embarked on major capital projects to build new paper machines and expand existing units. The twin conditions of new capacity coming on line and soft demand conspired to keep prices low even when demand began to recover in 1992 and 1993.

However, the spring of 1994 saw the beginning of one of the sharpest run-ups in paper prices ever. Supplies tightened, prices rose, and customers began stocking unusually large amounts of inventory in anticipation of future price increases. The result was that average prices for all paper and paperboard rose 8 percent in 1994 and a whopping 41 percent in 1995. However, the boom in paper prices was destined to be one of the shortest on record. Customers began to take stock out of inventory in the fall of 1995 and prices began falling again. By mid-1996 prices of some grades had fallen by a third. Prices for paper stabilized in late 1996 and stayed basically in the same low range until mid-1999, when prices began to creep upward. Prices fell during the early 2000s, amid weak demand. However, some industry analysts indicated that conditions were improving in early 2003, as prices were recovering gradually.

This business cycle has plagued the paper industry for years. Plans for big greenfield (new) mills and machine additions are usually made in the middle of an economic recovery, when paper company profits are rising. These projects involve complicated engineering and take about three to four years to complete. In other words, new or expanded mills tend to come on line in the middle of a recession, which is what happened in the early 1990s. Also, since paper is a largely nonperishable product, both mills and customers can stock large amounts of paper in inventory. As a result, inventory adjustments can produce large swings in paper pricing.

After a burst of new mills and paper machines in the early 1990s, the mid-1990s saw relatively low growth in papermaking capacity. After increasing capacity at a 2.6 percent average annual rate from 1986 to 1995 and by 3.5 percent in 1996, paper and paperboard companies added just 2.8 percent capacity in 1997. In the early 2000s capacity fell drastically, dropping from 103.9 million tons in 2000 to 101.6 million tons in 2001. In 2002 capacity dropped 1.0 percent, to 100.5 million tons. A 0.5 percent improvement was forecast for 2003, as capacity was projected to reach 101.1 million tons.

Large capital investments have created high fixed costs for paper companies. The expense of building and maintaining plants and equipment have become a much greater percentage of a paper company's total costs, while labor has become a lower percentage of costs. Because huge, automated mills need fewer people to run them, many in the industry assumed that paper companies could not adjust to lower demand by laying people off and taking capacity out for short periods. However, while that assumption appeared to be true during the paper industry's recession in the early 1990s, the industry used a completely different approach when prices began dropping in the mid-1990s. Beginning in 1996, many U.S. paper companies—particularly newsprint producers and linerboard producers—took extensive downtime to try to reduce both their own inventories and those of their customers. Paper companies continued to take extended periods of downtime throughout the mid- to late 1990s. Some companies took this a step further and announced permanent shutdowns of older, uncompetitive mills. For example, in 1998, Smurfit-Stone Container Corp. announced the shutdown of four mills that produced about 1.1 million tons of containerboard. The move followed the creation of Smurfit-Stone Container by the merger of Jefferson Smurfit Corporation and Stone Container Corporation in November 1998.

Background and Development

American papermaking began just over 300 years ago in Philadelphia. In September of 1690, an entrepreneur named William Bradford—a recent English immigrant—built the first American paper mill on the shore of Wissahickon Creek in Philadelphia. At the time, paper manufacturing had not yet become an important part of the colonial economy. The small amount of paper consumed in the colonies was produced in Holland and France.

However, economic growth in the colonies soon created a booming market for paper. Bradford and other papermakers were soon ready to produce products for this market. Bradford built his mill with the assistance of William Rittenhouse, an immigrant from Holland, and other financial backers. The mill produced about 20 pounds of pulp, paper, and board a day. While at the time there was some mechanization of papermaking, it was largely a handmade process.

After 1690, the population of the American colonies grew quickly and so did the number of U.S. paper mills. By the time of the American Revolution—in which printed materials played a key role—there were more than 45 mills producing about 300 tons of paper per year. This production was used by more than 50 printers throughout the new nation.

At the beginning of the 1800s, an event occurred that revolutionized the paper industry throughout the world. A Frenchman, Louis-Nicolas Robert, invented a machine to produce paper. Eventually, the machine patents were purchased by two English papermakers, the brothers Henry and Sealy Fourdrinier. After modification, the Fourdrinier machine began to catch on in England, and it later was produced in the United States as well. The name Fourdrinier is still used today to describe certain paper machines. The development of the paper machine changed what had been a lengthy and time consuming handmade art into a manufacturing process.

The other event that forever changed papermaking occurred in the middle of the nineteenth century. After 1851, the preferred fiber source for papermaking began to change from old rags to wood pulp. This event, along with the invention of the paper machine, in effect created the modern paper industry (see "Background and Development," SIC 2611: Pulp Mills) . The size and speed of paper machines increased rapidly between 1850 and 1916. Paper use was booming by 1889, when the annual U.S. production of paper reached one million tons. This figure doubled in the next ten years.

At the end of World War I, the United States began a period of rapid economic growth, and the paper industry grew along with the general economy. Several new associations, including the Paper Industry Management Association and the Technical Association of the Pulp and Paper Industry were founded and developed during this time. Paper containers and packaging, a growing use of corrugated medium and linerboard to make shipping boxes, and a host of new products—such as tissues and sanitary napkins—all emerged as major trends in the postwar era. During this time Canadian mills became dominant in newsprint manufacture, producing the majority of American newsprint. Much later U.S. manufacturers produced the majority of newsprint consumed in the United States.

Southern Growth. Also during the post-World War I period the Pacific Northwest became a major pulp producer. But the southern United States, however, saw the greatest growth. Prior to this time, it was difficult to use southern pine to make paper because of its high resin content. However, new processes were developed using southern pine to make bleached and unbleached kraft paper. Southern pine was ideal for this type of paper because its long fibers produced very strong paper and board. Kraft production in the South shot up from just 258 tons per day (tpd) in 1919 to 9,128 tpd in 1940. By the end of World War II, this total was up to about 13,000 tpd.

The growth of southern paperboard mills and other board mills around the country was greatly enhanced by a 1914 Federal Trade Commission (FTC) decision to legalize the use of corrugated medium packaging in shipping. Prior to that, wooden boxes were used for shipping goods around the country. Military development of paper packaging materials during World War I helped provide new technology and methods for producing superior paper packaging. Southern newsprint production also began during this time, due in large part to the talents of Charles H. Herty. Methods developed by Herty and his relentless promotion of southern papermaking helped create the twenty-first-century paper industry in the South.

While the Great Depression of the 1930s severely hurt other industries, it did not affect the pulp and paper industry as much since paper was being used in new ways throughout the economy. Around 1930 machine coated paper was first manufactured in the United States.

During World War II, the paper industry worked closely with the federal government to make sure that adequate supplies of paper were available both for domestic use and for the armed forces. Paper was one of the main materials used for shipping and storing military supplies. Recycling of paper reached a peak during the war years as well, with paper drives being common in many big cities.

Postwar Growth. After World War II, the paper industry continued growing. New pulping strategies and tree planting allowed the paper industry to develop the fiber sources it needed to meet the expanding demand. Prior to this time, paper companies tended to cut down trees and not replant. However, during this time southern pine first began to be used to make white printing paper.

During the late 1940s, all areas of the paper industry were growing fast, but some new areas—such as milk cartons and drinking cups—saw exponential growth. Many of the growth trends were centered on the use of disposable paper products, a trend that had started in World War II.

In the 1950s and 1960s, paper machines grew wider and faster, which helped multiply the supply of paper and board. By 1970, however, the paper industry faced sustained challenges to its environmental practices. New clean air and water rules from federal and state governments in the early 1970s forced the industry to install expensive new treatment systems. Many other capital projects were put on hold and then frozen when the economy entered a recession in the early 1980s. However, in the mid- to late 1980s the paper industry initiated what has been called its greatest modernization ever. These capital-intensive projects included mill-wide automation, technological innovations, mill modernization, environmental upgrades, and a push for total quality. The U.S. paper industry began competing more effectively in global markets during this time as well.

The paper industry of the late 1990s was highly competitive, both in domestic and foreign markets. It had a modern, efficient manufacturing base, labor peace, and strong markets. However, the industry faced several major challenges, including financial performance, environmental compliance, recycling, and alternative media.

The U.S. paper industry's financial performance throughout most of the 1990s was below average, particularly compared to the rest of the U.S. economy, which enjoyed general prosperity. Some of the reasons for this poor financial performance were structural, such as the Asian financial crisis in 1997 and the volatile currency swings that accompanied it, a prolonged period of low inflation, and increasing environmental pressures. However, the paper industry is also said to have caused some of its own problems, notably by building more capacity to make paper than was justified by demand growth. Also, a tendency by most paper companies to focus more on production than on marketing their products was also said to have contributed to the industry's financial problems. The industry's inability to return acceptable profits to shareholders led to stagnant stock prices through much of the 1990s, at a time when other industry's stock valuations were soaring.

For example, from 1988 to 1997, operating profits for the U.S. paper industry grew at an annual rate of 3.9 percent, just half the rate of the Standard and Poor's (S&P) 500 Industrials, which grew at a 7.7 percent rate. Likewise, the industry's return on equity (ROE) averaged just 8.68 percent from 1988 to 1997, well below the 18.6 average posted by the S&P 500. As a result, stock prices for paper companies showed a compound increase of just 6.3 percent annually from 1988 to 1997, compared with 16.5 percent for the S&P 500.

Paper industry executives took note of this problem and pledged to remedy the situation by curbing capacity growth and pursuing consolidation. In the late 1990s, they made good on both pledges. Capacity growth in the late 1990s was less than half of historical averages, and several major mergers and acquisitions reshaped the paper industry, notably Kimberly-Clark and Scott Paper; James River Corp. and Fort Howard; International Paper Co. and Union Camp; and Weyerhaeuser Co. and MacMillan Bloedel.

At the end of the 1990s, there was some evidence that this strategy was paying off. Stock prices for many paper companies rose sharply in 1999, as did company profits. Projections called for even further improvements in 2000.

Environmental compliance was a daunting—and expensive—challenge for the paper industry in the 1990s. There was sustained opposition from environmental groups and increased government regulation of nearly all steps of production. For example, the lumber industry in the Pacific Northwest was drastically reduced in scale. Due to successful court challenges by environmental groups under the Endangered Species Act of 1973, tree harvests in the early to mid-1990s dropped to one sixth of harvesting levels in the mid-1980s and stayed at those levels for the remainder of the 1990s.

Pulp and paper mills in the Northwest dependent on the residue of lumber operations for raw material were forced to look to new sources—even overseas—for sources of wood chips. Many northwestern U.S. mills converted partially or completely to the use of recycled paper. Also, the pulping and bleaching of wood fiber was the focus of proposals for stringent and costly new federal regulation in the mid-1990s.

In the mid-1990s, recycling began to change the geographic distribution of paper mills. So-called "mini mills" began to crop up near major U.S. cities. These mini mills remove ink and recycle old newsprint and other grades of wastepaper and make new newsprint and linerboard on relatively small paper machines. Since they are near locations where much of the country's wastepaper is collected—major cities—they are able to greatly reduce shipping costs.

In the early 1990s, the paper industry produced more paper than ever before but was unable to maintain effective pricing. Paper prices fell in 1991 and 1992 before beginning a sharp recovery in 1994 that lasted through most of 1995. In fact, in 1994 and 1995 average paper prices were up more than 50 percent, with prices of some grades increasing at even higher rates. These high prices led to record U.S. paper company profits in 1995. However, 1996 saw prices—and profits—plummet once again, though they did not fall as low as they had in the early 1990s. Prices remained at this same general level for the rest of the decade, though prices climbed slowly and steadily throughout 1999.

Operating rates are another key to profits in the paper industry. In general, operating rates—the percentage of time that mills are in operation—need to be at or over 90 percent for the mill to be profitable. Thus, most large mills operate 24 hours a day, 7 days a week. Operating rates dropped in 1990 and 1991, but they rebounded to about 90 percent for paper producers and 95 percent for paperboard manufacturers in 1992. In 1993, the operating rate for all producers reached 93.7 percent and shot up to 96.0 percent in both 1994 and 1995. However, operating rates dropped dramatically in 1996 to about 89 percent as many producers took extensive downtime in an attempt to work off large inventories of pulp and paper products. In 1997, the average operating rate climbed to about 94.0 percent, but it dropped back again to 92.2 percent in 1998.

Another measure of paper industry economic health is capital expenditures for new plants and equipment. When paper companies are profitable, they tend to reinvest a large share of their profits in capital expenditures. Capital expenditures for the U.S. pulp and paper industry peaked in 1990 at about $18 billion, and they stayed high in 1991 at about $17 billion. However, from 1992 to 1996, the rate of capital expenditures stayed within a range of $12 billion to $14 billion, and 1997 capital spending barely topped $10 billion. That decline continued in 1998, when capital expenditures dropped to $8.2 billion, and again in 1999, when they dropped to $7.2 billion, the lowest figure since 1984. Low capital expenditures were further evidence that domestic growth in paper capacity would remain low for some time.

Current Conditions

By the early 2000s, the paper industry faced a number of challenges. Weak economic conditions, both domestic and global, combined with overcapacity and slack demand had resulted in a difficult climate. Although a slight recovery was forecast for 2003 (90.1 million tons), production of paper and paperboard dropped from 94.6 million tons in 2000 to an estimated 88.8 million tons in 2002. Furthermore, the American Forest & Paper Association revealed that by spring of 2002, an overvalued U.S. dollar was harming exports and allowing foreign competitors to capture larger shares of the U.S. market. Although domestic consumption rose some 3.5 million tons during the late 1990s and early 2000s, about 90 percent of this growth was attributed to imported paper. The association explained that, over a five-year period, domestic paper companies shuttered some 72 mills, leading to a workforce reduction of about 32,000.

As advertising levels decreased in the early 2000s, affecting page counts in publications like magazines and catalogs, so did the demand for paper. Making matters worse, financially strained magazines turned to Europe for cheaper supplies of paper. This pattern had a direct impact on paper mills. In addition to cutbacks and mill closures, these conditions led to reduced levels of capital spending, making it difficult or impossible for many mills to upgrade their equipment and stay competitive.

According to Value Line, sales in the larger paper and forest products industry fell from $108.5 billion in 2000 to $71.0 billion in 2001. Sales were projected to reach $75.0 billion in 2002 and $85.0 billion in 2003. In 2000, manufacturer shipment values for U.S. paper mills totaled $51.4 billion, up from $49.2 billion in 1999. Although more recent figures were not available in early 2003, industry shipment values in 2001 and 2002 were likely impacted by the industry's challenging climate during those years.

Some paper customers were concerned about the negative implications caused by falling paper prices, reduced production levels, and subsequent workforce reductions and shuttering of paper mills. For example, in October 2002 Folio , a trade publication for the magazine industry, reported: "Up to this point, dwindling capacity and mill closures have had little consequence for magazine publishers. In fact, publishers have benefited from low demand, as it forced down prices. But when the economy rebounds and magazines once again prepare to place paper orders, the seesaw effect of sudden demand and low supply will send prices soaring."

Recycling. While paper recycling was a major environmental challenge in the early 1990s, the industry's quick response to recycle more paper has convinced many of its critics—both in the public and government—that the industry is serious about recycling. The U.S. paper industry reached an overall recycling rate of 40.0 percent in 1993 and a 45.8 percent rate by 2000. It was expected that the industry would reach its goal of recycling 50 percent of all paper produced in the United States sometime in the 2000s. However, U.S. mill consumption of recovered paper was down early in the decade, amounting to some 35.2 million tons in 2002. This drop was attributed to reduced production at both containerboard and newsprint mills.

While highly touted as an environmental "silver bullet," recycling itself has some environmental liabilities. Most recycling mills generate a major waste stream and consume large amounts of purchased energy. With recycled newsprint, for example, only 85 percent of incoming newsprint is usable as fiber. The rest is unusable sludge that must be cleaned out of the process and then burned or placed in landfills. In some recycled grades, sludge can be up to 50 percent of the incoming waste paper. Considering that some mills make up to 2,500 tons per day of paper, sludge can become a major waste problem. Also, since recycling mills cannot burn bark or spent pulping chemicals to generate electricity on their own, they must purchase large amounts of power from local utilities.

Alternative Media. Another major challenge to the paper industry comes from the electronic display and storage of information. In the 1970s and early 1980s, some people predicted that computers would soon replace paper in the so-called "paperless office." In reality, computers encouraged users to print out even more paper than ever before, fueling a boom in printing and writing papers.

In the early 2000s, however, computers were being used more often to replace paper for the storage and transfer of information previously accomplished on paper, such as electronic bill payment and presentment, the rapid increase in e-mail use, and the electronic filing of some legal papers with the Securities and Exchange Commission (SEC). Some observers felt that this might curtail the growth of paper. However, other observers pointed out that computers had vastly expanded the amount of information that could be stored. Even if a smaller percentage of this information were printed out, it was predicted that the use of paper would still grow. Several studies concluded that alternative media were not likely to affect consumption of paper until 2005, and that even then, only select grades were likely to be negatively affected by alternative media. Still, some paper grades might feel the effects sooner than later. For example, newsprint usage in the United States was declining in the early 2000s. Some of the blame for this decline was attributed to growing demand for Internet-based publications.

Industry Leaders

International Paper Company. Founded in 1898 by the merger of 18 northeastern pulp and paper companies, International Paper Company (IP) of Purchase, New York, was the world's largest paper company in the early 2000s. In 2001, IP had total sales of $26.36 billion, 28 percent of which was attributed to paper and 23 percent of which came from the packaging market. IP was one of the largest producers of printing and writing papers, marketing these products under its Hammermill, Springhill, Strathmore, and Beckett brands and through its operations in Europe. IP was one of the industry's largest producers of kraft paper and packaging, containerboard and corrugated boxes, and folding boxboard. In 1995, IP made two major acquisitions: Carter Holt Harvey of New Zealand, and Federal Paper Board, a U.S. company. In late 1998, International Paper made another major acquisition, purchasing Union Camp Corp., the nation's twelfth largest paper company. In 2001, IP acquired Champion International, strengthening its position in the market for coated and uncoated paper.

Georgia-Pacific Corporation. Atlanta-based Georgia-Pacific Corporation (G-P) had major interests in building products, pulp and paper, and paper chemicals. In 2002, G-P had total sales of $23.3 billion. G-P produces containerboard and packaging, communications papers, market pulp, and packaging products at more than 80 facilities in the United States and Canada. In 1999, G-P purchased Unisource, the nation's largest distributor of printing and imaging products (paper), packaging systems, and maintenance supplies.

Weyerhaeuser Company. Based in Federal Way, Washington, Weyerhaeuser's main businesses are growing and harvesting timber; manufacturing and distributing forest products (including logs, wood chips, building products, pulp, paper, and packaging products); real estate development and construction; and financial services. In 2002, Weyerhaeuser had total sales of $18.52 billion and employed 44,800 workers. Weyerhaeuser owned 5.9 million acres of commercial forestland in the United States, with about half in the South and the other half in the Pacific Northwest. The company also had license arrangements on 32 million acres of Canadian forestland. In 1999, Weyerhaeuser completed a major acquisition, purchasing MacMillan Bloedel, Canada's sixth largest forest products company.

Kimberly-Clark Corporation. Dallas-based Kimberly-Clark (K-C) is a leading global manufacturer of products for personal, business, and industrial uses. In 2002, K-C had total sales of $13.6 billion, mainly from pulp, paper, and converted product sales. K-C is best known for its consumer brands Kleenex, Huggies, Scott, and Kotex. In December 1995, Kimberly-Clark merged with Scott Paper Co., a global producer of sanitary tissue products. The $9.4-billion merger made K-C the largest tissue manufacturer in the world. As of 2003, K-C operated manufacturing operations in more than 42 countries, with products available in 150 countries.

The Procter & Gamble Company. This consumer products giant markets a wide range of household products, including paper products, worldwide. As of 2002, the company operated in 140 countries and had total sales of $40.2 billion. The company's Baby, Feminine, and Family Care segment, which includes branded paper products like Charmin, Bounty, and Puffs, accounted for 30 percent of sales in 2002. In recent years the company has spent billions of dollars on acquisitions, many of them in the paper business. Some of these include Tambrands Inc. and its brand Tampax; the Loreto y Pena Paper Company in Mexico; and the Ssanyong Paper Company in Korea.

Smurfit-Stone Container Corporation. Chicago-based Smurfit-Stone Container Corporation is one of the world's largest paper-based packaging companies and supplies about 11 percent of the world's containerboard. The company was formed on November 18, 1998, following the merger of Jefferson Smurfit Corp. and Stone Container Corp. Core products include corrugated containers, folding cartons, and specialty and bag packaging, supported by an integrated mill system and major fiber resources. The company operates more than 300 facilities worldwide and had 2002 sales of $7.5 billion, all of it in pulp, paper, and converted products.

MeadWestvaco Corp. Stamford, Connecticut-based MeadWestvaco Corp. is a forest products company with offices and operations in 30 countries. The result of a 2002 merger between Westvaco and Mead, the company had total sales of $7.2 billion, mostly from pulp, paper, and converted products. It is a leading producer of coated paper, specialty paper, coated paperboard, container-board, and multiple packaging. It is also a leading manufacturer and distributor of school supplies in the United States and Canada.

Workforce

Total employment in the paper and allied products industry was about 612,650 people in 2001, with pulp, paper, and board mills accounting for about 177,450 of that total. Throughout the 1990s, the industry exhibited a trend of stable or slightly declining employment despite large capacity increases. Employee wages averaged 17.43 per hour in 2001.

Like other manufacturing industries, the paper industry employs many unionized workers. However, the heaviest concentrations of union employees are in older mills that were organized years ago. Almost all new pulp and paper mills are non-union operations, including mills constructed by companies with unionized mills in other locations. In general, the wages and benefits provided by non-union mills are comparable to unionized mills.

There has been relative labor peace in the paper industry during the 1980s, 1990s, and early 2000s. In exchange for salary increases, management was able to obtain work rules changes that allowed workers to perform more jobs in the mill and eliminate pay differentials for Sunday and holiday pay. One dramatic strike in the 1980s ended in failure when unionized workers at International Paper's mill in Maine were permanently replaced by new workers. Only a handful of the original workers regained their jobs. Since that strike, there have been no major work stoppages in the paper industry.

America and the World

In 2001 the value of U.S. paper mill exports totaled $5.9 billion, down from $6.6 billion in 2000. During this same year, import values totaled $10.7 billion, down from $11.1 billion in 2000, but up considerably from 1997 levels of $8.9 billion.

In the late 1990s, competition rose across the globe as new regions—notably Asia and Latin America—developed strong paper industries. In 1999, China and the United States agreed to liberalize trade in forest and paper products. The deal was tied to China's application to join the WTO, which took place in January 2002. By June of 2002, Pulp & Paper reported that China was shielding its paper industry from the effects of foreign competition, opting for partnerships with foreign firms instead of allowing them to fully own Chinese paper companies.

Research and Technology

Traditionally, papermaking research has focused on making faster, wider machines that experience fewer paper breaks. To support these goals, research is continuing in every area of the paper machine: the forming section, the press section, the drying section, and the finishing and converting areas. Much of this research is being performed by supplier companies to the paper industry, which have traditionally assumed a much larger research role than the paper companies. However, paper companies—as well as suppliers—are expanding their support of cooperative research at the nation's pulp and paper schools, such as North Carolina State University, the University of Maine, and the University of Wisconsin-Stevens Point. They also support non-profit research groups such as the Institute of Paper Science and Technology, the Pulp and Paper Research Institute of Canada (PAPRICAN) and the Herty Foundation.

Recycled Research. Much of the research in the paper industry has focused on how to effectively use more recycled fiber. This question was particularly important as the paper industry worked to meet its own challenge of recycling 50 percent of all paper produced early in the 2000s and government mandated such as presidential executives orders on recycled paper.

Much of this research was to focus on improving the physical chemistry of the "flotation cells" of the deinking process. This technology uses air bubbles to literally "float" detached ink particles to the top of a mixture of ground up paper and water, where the inky froth is skimmed off. Improving the efficiency of this system would speed up production and lower costs.

Research was also to focus on using new chemical processes to help produce recycled paper that matches virgin uncoated freesheet in quality. Uncoated freesheet, used in products such as copy paper, is one of the biggest grades of paper—and one of the most demanding in terms of quality.

One of the major initiatives involving the pulp and paper industry was Agenda 2020, a cooperative research project involving the U.S. Department of Energy (DOE), pulp and paper research institutions, and leading paper companies. Agenda 2020 was prepared by the chief technology officers of major paper companies under the auspices of the American Forest & Paper Association. The development of the document was spurred by the U.S. Department of Energy's "Industries of the Future" program, which sought to fund research in specific industries—including pulp and paper—that would reduce energy intensiveness and improve environmental performance. The DOE prepared a draft document on the "Pulp Mill of the Future." That document was reviewed by the team of chief technology officers and modified to create Agenda 2020, which outlined six specific areas for research and development: sustainable forest management; environmental; performance; energy performance; capital effectiveness; recycling and sensors; and control.

Information technology was another major area of development. Progress in paper machine process automation was ongoing, but several major areas of development had merged, including the following:

Further Reading

Ambroz, Jillian S., and Katie Caperton. "Crisis at the Mills." Folio, 1 October 2002.

American Forest & Paper Association. "Overvalued Dollar Threatens U.S. Paper Industry," 12 March 2002. Available from http://www.afandpa.com .

——. "Recycling Levels Remain High Despite Drop in Consumption, AF&PA Says," 12 March 2002. Available from http://www.afandpa.com .

Center for Paper Business and Industry Studies. "About the Paper Industry," 2 February 2003. Available from http://www.paperstudies.org .

"China's Paper Growth Continues." Pulp & Paper, June 2002.

Mishina, Mayu. "Paper—Market Outlook." American Printer, October 2002.

"Paper & Forest Products Industry." Value Line Publishing, Inc. 11 October 2002.

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