AFPA Forecasts Capacity Declines

According to a recently published report by the American Forest and Paper Association, U.S. paper and paperboard capacity declined annually from 2001 to 2003 and is expected to remain unchanged during the 2004 to 2006 period.

The survey said that capacity rose at average annual rates of 2.1 percent a year in the 1980s and 2.2 percent in the 1990s, but declined 1.9 percent in 2001, 1.3 percent in 2002 and 0.4 percent in 2003.

Increased foreign competition, maturing domestic markets, and competition from plastics and electronic media were cited as among the factors that may have contributed to the lack of capacity growth.

Newsprint capacity fell 1.3 percent to 6.9 million tons in 2003, and is expected to decline another 2.8 percent in 2004 to 6.75 million tons. At that level, it will have dropped by almost 10 percent from its peak in 1997, and will be at its lowest level since 1989. Newsprint capacity is expected to remain relatively unchanged in 2005 and 2006.

Capacity for printing-writing paper declined by 174,000 tons in 2003, or by 0.6 percent. Among the four major grades of printing-writing paper, only coated groundwood registered an increase in capacity since 2000, growing by 2.6 percent. All the other major grades experienced significant declines during the same period.

Uncoated groundwood capacity fell by about 144,000 tons in 2003 to less than 1.9 million tons. It is now almost 20 percent under its 1996 peak and close to its 1993 level. Capacity for this grade is expected to rise about 2.3 percent this year, and then remain unchanged in 2005 and 2006.

Capacity for coated groundwood, at nearly 5.0 million tons today, dropped by 1.3 percent last year from its all-time high in 2002. The survey projected capacity to remain essentially unchanged through 2006.

Coated free sheet capacity, at 4.8 million tons in 2003, was down 4.2 percent from 2002. Capacity is now 14.2 percent below its 2000 peak, and is expected to rise at 2.1 percent annually during the forecast period.

Uncoated free sheet capacity was the only printing-writing grade to show an increase in this year’s Survey between 2002 and 2003, to about 13.9 million tons. The increase stemmed from the impact of producer changes resulting from de-bottlenecking projects, machine shutdowns and grade swings into and out of uncoated free sheet. Capacity for this grade is expected to remain unchanged during the survey forecast period of 2004-2006.

Capacity for unbleached kraft paper dropped 1.2 percent in 2003, to almost 1.8 million tons, and is expected to decline an additional 3.5 percent in 2004 and rise 1.7 percent in 2005, and remain unchanged in 2006.

Bleached kraft paper capacity rose 1.6 percent in 2003 and is expected to grow 0.7 percent in 2004 to 383,000 tons, according to the survey. It will remain stable in 2005 and 2006.

Tissue paper is one of the more dynamic grades of the paper industry in terms of capacity changes. Capacity for tissue rose 1.6 percent in 2003 to 8.1 million tons and is expected to increase 1.1 percent in 2004, 2.6 percent in 2005 and 0.1 percent in 2006. The changes reflect several developments, including one new tissue paper machine coming on line in 2003; four new machines expected to come on line in 2004; and another new tissue paper machine expected to start up early in 2005.

Linerboard capacity, at 25.5 million tons in 2003, showed no change and is projected to remain flat during the next three years. No new machines are coming on line, and while a previously closed machine is being restarted, its capacity will be offset by the swing of linerboard capacity to unbleached kraft paper production.

Capacity for corrugating medium fell 2.1 percent in 2003 and is expected to drop another 1.5 percent in 2004. These declines reflect the permanent shutdown of a recycled medium machine during the fourth quarter of 2003. Medium capacity is expected to edge up by 0.3 percent in 2005 and 0.4 percent in 2006.

Bleached board capacity (folding boxboard, milk carton and food service, and other) rose 1.7 percent in 2003 to 5.8 million tons, reflecting capacity swings from other grades and efficiency improvements. Domestic capacity to produce bleached board is projected to remain unchanged through 2006.

Recycled paperboard (excluding recycled containerboard) fell 2.0 percent in 2003, and is expected to contract another 1.9 percent in 2004. The declines are attributable to the closure of eight recycled paperboard machines in 2003 and the shutdown of another facility in 2004. Capacity for this grade is expected to rise 0.5 percent in 2005 and hold stable in 2006.

Recycled folding boxboard capacity fell 3.4 percent in 2003 and is projected to decline another 4.4 percent in 2004. Capacity for unbleached kraft folding boxboard declined 1.2 percent in 2003 to 2.4 million tons, but is projected to remain level during the three-year forecast period.

Market wood pulp capacity in this year’s survey totaled about 10.6 million tons in 2003, and is expected to fall by about 285,000 tons through 2006. Major changes in subgrades include strong declines in dissolving pulp capacity, growth in bleached softwood sulfate market pulp and declines in bleached hardwood sulfate market pulp.