SIC 2631
PAPERBOARD MILLS



This industry consists of establishments primarily engaged in manufacturing paperboard from wood pulp and other fiber pulp. Paperboard mills may also manufacture converted paperboard products. Establishments primarily engaged in integrated pulp production and paper-board manufacturing are included in this industry if they ship mostly paperboard or paperboard products. Establishments primarily engaged in manufacturing converted paperboard products from purchased paperboard are classified in Industry Group 265 or 267. Establishments primarily engaged in manufacturing insulation board and other reconstituted wood fiberboard are classified in SIC 2493: Reconstituted Wood Products.

NAICS Code(s)

322130 (Paperboard Mills)

Industry Snapshot

U.S. paperboard mill production was 46.8 million tons in 2001—a 4.5 percent decrease from 2000, when production was 49.0 million tons. At this rate, paperboard outpaced production of paper in the United States in 2001, which checked in at 42.1 million tons. The capacity of U.S. mills to produce paperboard totaled 52.0 million tons in 2002, down from 53.3 million tons in 2001 and a high of 54.3 million tons in 2000. Paperboard production typically is about 88 percent to 98 percent of total capacity, depending on economic conditions.

The most extensive use of paperboard is to make shipping containers, cartons, and packaging. U.S. paper-board producers manufacture the vast majority of paper-board consumed in the United States. In addition to dominating the domestic market, U.S. paperboard producers hold a strong position in the international market, although exports remained flat as the industry entered 2003 due to an overvalued U.S. dollar.

Two grades of paperboard—corrugating medium and linerboard—are used to make corrugated shipping containers. These two grades account for the majority of paperboard produced in the United States. A third grade—solid bleached sulfate (SBS), used for folding cartons such as those used in retail stores—accounts for a large share of the remaining production. Paperboard grades also are distinguished between folding and nonfolding grades. Folding grades have to be flexible enough so that when the board is folded to make a box—such as a cereal box—the surface will not split or crack.

Organization and Structure

Paperboard production in the United States is divided into four major categories:

More paper and paperboard is used to make packaging than in any other single application. While most paperboard is still made from virgin fibers (trees), paper-board mills have traditionally used a large percentage of recycled fiber because of favorable economics. The use of recycled fiber in paperboard production is growing quickly, especially in products in which the reclaimed pulp does not need to be cleaned. Combination boxboard, for example, is used in cereal cartons where two white outside layers mask a recycled, gray inner layer.

Paperboard produced on cylinder board machines has commonly been made from recycled fibers. Cylinder machines form the paperboard web in separate layers, which are then pressed together. This process makes it possible to hide a layer of recycled board, which can have poor appearance and lower strength between two outside layers of virgin material.

Fourdrinier paperboard machines, which traditionally have made paperboard in a single web, are generally used to make virgin paperboard since it makes a superior web from one fiber source. Newer paperboard machines, however, include machinery that allows the formation of a single web from different fiber sources.

Kraft softwood has been the preferred pulp for making paperboard because of its superior strength characteristics. While most paperboard is unbleached, retaining the characteristic brown color of the pulp, bleached grades are often used where the consumer is likely to see the box—such as gift boxes and food and beverage packages. Besides food applications, cosmetics and other high-profit products use the more expensive bleached board because they can afford its higher cost.

Paperboard comes in a wide variety of styles and qualities but can be divided into two categories based on its use: containerboard, which includes all the materials used for making corrugated boxes, and boxboard, which includes all the materials used for making non-corrugated packaging such as food containers and department store boxes. Containerboard is divided further into two subcategories: corrugating medium, the inner fluted part of the box; and linerboard, which makes up the outer faces, or layers, of the box. Corrugating medium—or just "medium," as it is often called in the trade—is made from both semichemical pulp and recycled fiber.

Boxboard is divided into three subcategories: folding boxboard, set-up boxboard, and milk carton/food service boxboard. Most paperboard can be coated with a pigment such as clay to improve printing properties. Most grades of paperboard can also be made impermeable to air and liquids by using plastic coating and laminating, which is essential for products such as milk carton stock.

Corrugated Boxes. The universal use of corrugated containers for shipping manufactured goods by truck, train, or ship makes this grade one of the largest in the paper and board industry. Many converting plants located throughout the country use corrugating medium and linerboard, which are glued together to make boxes. These converting plants are located close to users of the containers and are often owned by the same company that manufactures the linerboard and medium.

The main raw material used in making corrugating medium is semichemical hardwood pulp. Hardwood pulp, which is made from deciduous trees such as oak and maple, is used rather than softwood pulp made from conifers such as southern pine. Hardwoods are used because they are less costly and help make the corrugating medium stiff since they are less flexible than softwood fibers.

Unlike the pulp used in other types of paper and paperboard, the pulp used for making medium still contains some lignin, the chemical "glue" that holds fibers together in the tree. The lignin is present because medium pulp is not washed as intensively as pulps used in making other grades. As a result, the lignin and other wood byproducts are left in the pulp and formed into the web of paperboard. When the paperboard web goes through the corrugator, the remaining wood by-products help form the rigid fluted shape.

Growth of Recycling. Like other predominantly virgin paper and paperboard grades, semichemical medium has seen its share of total capacity decline as a result of increased production of recycled products. Semichemical medium's share of total medium production declined to 60.4 percent in 1998 compared with 79.0 percent in 1980, while recycled medium's share grew to 39.6 percent. Much of that change occurred in the 1990s, when many paperboard mills expanded their capacity to produce recycled medium.

While there are many basis weights for both semichemical and recycled medium (including 22, 26, 33, 36, and 40 pound), the standard weight is 26 pound. It accounts for nearly 80 percent of all production.

Medium production is directly related to U.S. corrugated box shipments. In the late 1980s and early 1990s, box shipments grew faster than the general economy. Through the rest of the 1990s, growth in box shipments tracked more closely with growth in the general economy. In 2000 and 2001, rising competition from imports and the migration of production to countries like Mexico caused box shipments to fall 6 percent. According to Pulp & Paper, this drop represented the first two-year decline in 26 years.

Linerboard. Unlike medium, linerboard is made mostly from softwood fibers. However, linerboard may contain up to 20 percent hardwood pulp or recycled fiber. The recycled fiber may be made from cuttings from corrugating plants or other recovered corrugated material. Softwood is needed to give linerboard adequate strength. Most softwood pulp for linerboard is produced using the kraft pulping process. To suit the varied packaging needs of box consumers, bleached kraft linerboard is made in many different basis weights. The standard variety is 42 pound, but other major grades include 26 pound, 33 pound, and 69 pound. While production of recycled liner-board is significantly less than virgin linerboard, 100 percent recycled linerboard grew very fast in the United States from the late 1980s through the 1990s.

Solid Bleached Sulfate. Solid bleached sulfate (SBS) is a top-quality paperboard made from pulp that includes at least 80 percent bleached virgin fiber. Most U.S. produced SBS is coated with a clay solution to improve its surface for printing. SBS used as linerboard, folding box-board, and for food packaging—such as milk carton stock—and is often coated with polyethylene. Basis weights for SBS range from 40 to 100 pounds. SBS is also used for products such as disposable cups and plates and as linerboard for corrugated boxes and displays that need an outside surface for high-quality, four-color printing.

Another product made by some mills that produce SBS is bleached bristol. This product, usually a lightweight grade, is used for greeting cards, paperback book covers, and telephone directories, among other products. Bristol is usually classified under paper production, rather than paperboard.

Background and Development

Since the majority of paperboard capacity is used to make materials for corrugated boxes, the background and development of paperboard mills tends to mirror growth in the use of these boxes.

Before corrugated containers became the accepted standard for domestic and international shipping, wooden crates and boxes were the preferred method. However, this practice began to change dramatically after the U.S. Federal Trade Commission (FTC), in the 1914 Pridham decision, legalized the use of corrugated packaging in shipping. Also, during World War I, the U.S. military spurred research and development of corrugated packaging to ship military supplies.

As new methods helped improve the strength and durability of corrugated containers, their use in the general economy increased dramatically. For example, between 1935 and 1942, 29 new paperboard machines came on line. Collectively, these machines produced 15,545 tons per day. During World War II, military needs fostered improvements in corrugated shipping containers, including water and temperature resistance. In the postwar years, the growth of corrugated containers more than kept pace with the general economy, which itself was growing rapidly. Also, the development of more disposable containers for products such as food and beverages fueled noted increases in the production of SBS board. Paperboard accounted for 52.6 percent overall production of paper and paperboard in the United States in 1998.

Like other sectors of the U.S. pulp and paper industry, the 1990s were volatile for U.S. paperboard mills. The industry saw depressed conditions in the early 1990s; booming demand and huge price increases in 1994 and 1995; and falling prices in 1996. For example, year-end transaction prices for 42-pound kraft linerboard were $315 per ton in 1993 before shooting up to $430 per ton in 1994 and $480 per ton in 1995. However, this huge run-up was followed by a huge drop in 1996, to $360 per ton. Prices remained at those depressed levels for the remainder of the 1990s but began a cyclical recovery in 1999. One of the reasons prices for linerboard and other paperboard grades plummeted in 1996 was that capacity increases far out-paced demand for the product, which was in some cases falling as customers worked off large amounts of inventory they had purchased in anticipation of future price increases.

In the late 1990s, the U.S. paperboard industry made only modest increases in capacity. In addition, many mills took extensive downtime to reduce excess inventories of paperboard. Also, some paperboard companies went so far as to shut some aging mills that were contributing to excess capacity. For example, in 1998, SmurfitStone 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.

The total capacity of U.S. mills to make paperboard reached 53.9 million tons in 1998, just a 1.3 percent increase over the previous year. Within the overall paper-board category, containerboard grades were up 1.6 percent in capacity during 1998, an increase of 600,000 tons, and boxboard capacity was up 1.0 percent in 1998, by 100,000 tons.

In 1998, the dollar value of U.S. production of paper-board commodities increased nearly 3 percent due to strong domestic and export performances by U.S. containerboard mills. U.S. producers of containerboard had noticeably higher sales to export markets, domestic corrugated and solid fiber box plants, and non-packaging containerboard end-use markets. In the mid- to late 1990s, U.S. paperboard mills—particularly the containerboard segment—had record sales opportunities for many of their products in corrugated box, shipping container, and carton plants in southeast Asia, Europe, and Latin America, which led to a significant increase in paperboard exports.

While capacity, demand, and prices are the key elements determining the status of the U.S. paperboard industry, other factors also have come into play. U.S. linerboard is recognized worldwide as being the highest quality and best performing linerboard for most packaging applications. One of the major changes in linerboard occurred in the early 1990s when "Rule 41, Item 22" of the freight classifications was changed to emphasize "ring crush," which measures resistance to compression instead of bursting strength. This change allowed U.S. manufacturers to begin making more "high performance" linerboard, which is lighter in weight than traditional liner but still useful for shipping. As a result, U.S. producers have developed a number of high performance bleached and unbleached linerboard grades.

Current Conditions

By the early 2000s, weak global and domestic economic conditions plagued paper and paperboard producers. In addition, the industry also faced overcapacity and slack demand. Production of paperboard dropped from 51.1 million tons in 1999 to 46.8 million tons in 2001. Production levels were estimated at 48.0 million tons in 2002 and were expected to total 47.8 million tons in 2003. According to the American Forest & Paper Association (AF&PA), by spring of 2002 an overvalued U.S. dollar was having a negative impact on exports and was effectively handing larger shares of the domestic market to international competitors. In particular, kraft linerboard exports suffered. Once a leading export category, kraft linerboard exports declined sharply to 2.7 million tons in 2002 from levels of 4.5 million tons in 1997. Shipment vales for U.S. paper-board mills, which climbed to $23.4 billion in 2000 from $21.3 billion in 1999, were likely impacted by the industry's challenging climate in 2001 and 2002.

The industry's difficulties on the trade front have led to a number of mill closures. The AF&PA explained that, over a five-year period, domestic paper and paperboard companies shuttered some 72 mills, leading to a workforce reduction of about 32,000. From a high of 54.3 million tons in 2000, paperboard capacity fell to 53.3 million tons in 2001 and 52.0 million tons in 2002. However, capacity gains were expected in 2003, as levels climbed to an estimated 52.3 million tons.

Consolidation was taking the containerboard segment of the industry by storm in the early 2000s. According to Official Board Markets, by late 2002 the Association of Independent Corrugated Converters (AICC) was concerned that more than 71 percent of the North American market was controlled by the leading five producers. This statistic marked a significant increase from 1995, when the leading five firms controlled almost 44 percent of the market. Worldwide, the 10 leading containerboard manufacturers controlled 40 percent of the industry's total capacity in 2002. While some analysts noted that industry consolidation was having a stabilizing effect on prices, the AICC argued that it provided "containerboard producers inordinate power to influence the price of raw material with no relation to demand for corrugated boxes."

Industry Leaders

Major paper companies produce large quantities of both paper and paperboard, thus the industry leaders are many of the same companies listed under SIC 2621: Paper Mills. However, some large companies, such as Smurfit-Stone Container Corp., Packaging Corporation of America, Inland Paperboard & Packaging, and International Paper, have much larger interests in paperboard than other companies in the industry.

Smurfit-Stone Container Corporation. Chicago-based Smurfit-Stone Container Corporation, one of the world's largest paper-based packaging companies, 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. Although its overall capacity declined by 1.8 million tons following the merger, by 2002 SmurfitStone's containerboard capacity totaled nearly 7.8 million tons. The company's capacity in the area of coated and uncoated boxboard amounted to 602,000 tons, followed by some 323,000 tons of solid bleached sulfate (SBS) capacity. Smurfit-Stone operates more than 300 facilities worldwide and had 2002 sales of $7.5 billion, all of it in pulp, paper, and converted products.

Packaging Corporation of America. Packaging Corporation of America (PCA) is a leading manufacturer of corrugated packaging and containerboard. In 2001 the company made 784,000 tons of semi-chemical medium, more than 1.3 million tons of kraft linerboard, some 2.1 million tons of containerboard, and its corrugated product shipments totaled 26.1 billion square feet. In 2002, PCA's sales totaled $1.8 billion. At that time, PCA had a number of different mills in operation, including facilities in Counce, Tennessee; Valdosta, Georgia; Tomahawk, Wisconsin; and Filer City, Michigan.

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 is 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 the U.S. company Federal Paper Board. 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) has 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.

MeadWestvaco Corp. Stamford, Connecticut-based MeadWestvaco Corp. is a forest products company with offices and operations in 30 countries. The result of a merger between Westvaco and Mead, the company had in 2002 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 also is a leading manufacturer and distributor of school supplies in the United States and Canada. In 1998, Mead divested several businesses, including its Zellerbach distribution unit.

America and the World

Paperboard—particularly linerboard—is one of the strongest export products for the U.S. pulp and paper industry. U.S. linerboard mills, mostly in the southern United States, have traditionally been among the world's lowest-cost producers. However, by 2003 foreign nations like China were vying for increasing shares of the world market. According to Pulp & Paper, after the United States, China was the second largest containerboard producer in 2003. On the consumption side, it also was the fastest growing global market for containerboard.

Linerboard exports tended to increase and decrease sharply due to global economic trends, though the long-term trend has been upward. Prospects for paperboard exports remain strong but are subject to currency and price fluctuation.

Exports from U.S. paperboard mills were highly volatile in the late 1990s and early 2000s. For example, export values fell almost 22 percent between 1998 and 1999, rose more than 44 percent between 1999 and 2000, and fell almost 36 percent between 2000 and 2001. Import values climbed more than 42 percent between 1998 and 1999, rose only 5 percent between 1999 and 2000, and then fell more than 13 percent between 2000 and 2001.

Research and Technology

Many of the research trends affecting paperboard mills are shared by paper mills (see SIC 2621: Paper Mills ). However, there is some interest in using new concepts such as stratification in making paperboard. Stratification involves using a special headbox that can produce three or more layers simultaneously from different fiber sources. In this way, a layer of recycled fiber or some other lesser quality fiber source could be sandwiched between layers of better quality fiber. With newer model headboxes, these layers can be extremely thin.

Like other grades, much of the effort in research and technology in paperboard is to create machines that will produce a wider web of paperboard at higher speeds. In this way, paperboard mills can run their mills more productively. Also, as in other grades, mill processes are becoming more automated and less subject to product variation. This shift and continual improvements in paperboard quality are the main reasons that U.S. paper-board mills can continue to lead the world both in price and product quality.

Further Reading

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

"Bleached Paperboard: Better Markets Ahead for Exports and Cartons." Pulp & Paper, October 1999.

"Consolidate for Recovery." Official Board Markets, 16 November 2002.

"Downtime, Mill Shuts, "Demand Turn Around Corrugating Medium Market in the U.S." Pulp & Paper, July 1999.

"Ongoing Consolidation Could Hurt." Official Board Markets, 21 September 2002.

Pace, Norma. "Recovery Uneven but Real." Official Board Markets, 14 December 2002.

"Recycled Paperboard: Some Signs of Life, but Oversupply Problems Linger." Pulp & Paper, June 1999.

Rudder, Greg, et. al. "North American Paper Industry Hopes for Clearer Sailing after Fiscal Storm." Pulp & Paper, January 2003.

U.S. Department of Commerce: Bureau of the Census; International Trade Administration (ITA). "Trade and Economy: Data and Analysis." 30 January 2002. Available from http://www.ita.doc.gov .

U.S. Trade and Industrial Outlook, 1999. New York: McGraw-Hill, 1999.

"West Leads Regional Industry Shipments." Official Board Markets, 4 January 2003.



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