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Taking the pulse of the industry.

The Annual Capacity Survey of the U.S. pulp and paper industry came out in late February and, as always, was a good measure of the fortunes of the U.S. paper industry. Back in the late 1980s and early 1990s, the release of the Capacity Survey was a guide to how fast and where the industry was growing. We seemed to be on an inevitable march to 100 million tons of annual production and about 110 million tons of capacity.

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As is well known, we never got there. Production has fallen back to about 90 million annual tons and, as the 44th Annual Capacity Survey states, "Reversing the positive growth trend of the last two decades of the 20th Century, U.S. paper and paperboard capacity declined annually from 2001 to 2003 and is expected to remain unchanged during the 2004 to 2006 period." That three-year period was the first time ever that capacity had declined in the U.S. The numbers speak for themselves:

* Newsprint capacity fell 1.3% to 6.9 million tons in 2003 and is expected to decline another 2.8% in 2004 to 6.75 million tons. At that level it will have dropped by almost 10% from its peak in 1997 and will be at its lowest level since 1989.

* Capacity for printing and writing paper declined by 174,000 tons in 2003, 0.6%. Among the four major grades of printing and writing paper, only coated groundwood registered an increase in capacity since 2000, growing by 2.6%.

* Capacity for unbleached kraft paper dropped 1.2% in 2003, to almost 1.8 million tons, and is expected to decline an additional 3.5% in 2004.

* Capacity for tissue paper rose 1.6 in 2003 to 8.1 million tons and is expected to increase 1.1% in 2004 and 2.6% in 2005.

* Linerboard capacity, at 25.5 million tons, showed no change and is expected to remain flat during the next three years.

* Capacity for corrugating medium fell 2.1 percent in 2003 and is expected to drop another 1.5% in 2004.

* Bleached board capacity rose 1.7% in 2003 to 5.8 million tons.

* Recycled paperboard (excluding recycled container-board) fell 2% in 2003 and is expected to contract another 1.9% in 2004.

* Recycled folding boxboard capacity fell 3.4% in 2003 and is expected to decline another 4.4% in 2004. (For more details on the numbers above, go to www.tappi.org and search "Capacity Survey."

The dollar falling against the Euro is potentially good news for U.S. papermakers but AF & PA cautioned that it takes a very long time for currency valuation changes to work their way through the papermaking system. They noted, for example, that European linerboard capacity was continuing to come on line despite the rise of the Euro, and that continuing capacity increases in other areas of the world would be difficult to absorb. One particularly sobering number was the market share of U.S. manufacturers in the printing and writing paper market, which dropped from 27% in 1993 to 21% in 2003.

So where do we go from here? In many ways, this survey is old news and we have already processed many of the changes indicated in the survey. The Capacity Survey is somewhat optimistic in predicting no net losses of capacity in the period from 2004 to 2006. It's tough to predict that far out and I seem to remember some Capacity Surveys in the early 2000s predicting flat capacity growth in the period we are now living through. But still, no more bad news on capacity would indeed be good news, and if we can right the ship and keep it from taking on more water, I'll take that as a positive sign.

Editor's Note:

Speaking of positive signs, why not put a positive spin on our current situation? Make plans to attend Paper Summit, May 2-5, at the Georgia World Congress Center in Atlanta. We've heard of several mills making plans to send more people this year than they did to the last Paper Summit. We hope your mill is one of them!

Alan Rooks Editorial Director

Contact Alan at +1 847-998-8093, or by e-mail at: arooks@tappi.org.
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Title Annotation:Viewpoint
Author:Rooks, Alan
Publication:Solutions - for People, Processes and Paper
Date:Apr 1, 2004
Words:714
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