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Old newspaper projected as fastest growing scrap paper grade

By Ken McEntee
With projected recovered fiber consumption outpacing paper and paperboard production capacity growth through 2003, scrap paper consumption as a share of overall feedstock is expected to increase, the American Forest and Paper Association (AFPA) said.
In announcing the results of its annual industry production capacity survey on December 6, AFPA said consumption of old newspaper (ONP) will see the fastest growth of the scrap paper grades.
Overall, AFPA said, the current slow pace of paper and paperboard capacity expansion is expected to continue during the next three years.
Paper and paperboard capacity increased only 0.6 percent in 1999 and 1.3 percent in 2000, compared with an annual average of 2.1 percent during the 1991 to 2000 period. The new survey projects capacity to rise at an annual average rate of only 0.7 percent in the next three years; specifically 0.8 percent in 2001, 0.9 percent in 2002 and 0.5 percent in 2003.
Those numbers include some capacity that has already been shut down, but is still included because AFPA leaves capacity in the survey until it is off-line for one year or is dismantled.
In comparison, consumption of scrap paper is projected to rise an average of 2.2 percent per year through 2003 - more than three times the growth in paper and paperboard production. The growth will take the scrap paper share of feedstock from 36.2 percent in 2000 to 37.3 percent in 2003.
AFPA said ONP will see the greatest growth in consumption among major scrap paper categories. Through 2003 use of ONP is projected to increase at an average of 3.5 percent per year. Mixed paper is projected to grow at 2.6 percent per year; old corrugated (OCC) 2.3 percent; high-grade deinking paper 1.2 percent; and pulp substitutes are projected to decline at an average of 0.9 percent per year.
APFA said growth in demand for paper and paperboard is not growing as fast as it had in the past. Meanwhile, more paper is being imported, cutting into demand for domestic producers.
AFPA said this year's survey accounts for 98 percent of the overall paper and paperboard production in the U.S. A substantial amount of production was brought under AFPA membership with the merger of AFPA member Georgia-Pacific with non-member Fort James Corp.

Continuation of trend

AFPA said the survey points to a continuation of the slow pace of capacity expansion that has been evident during recent years. It indicates that paper and paperboard capacity rose 0.6 percent in 1999 and 1.3 percent in 2000 as compared with an annual average of 2.1 percent during the 10-year period from 1991 to 2000.
Two-thirds of the capacity growth during the period will be in groundwood grades mainly due to conversions of newsprint machines to coated groundwood.
At an estimated level of 7.4 million tons in the year 2000, newsprint capacity in the survey is 0.7 percent - or some 50,000 tons - below the projection for the same year in last year's survey. The reduction reflects net swings from newsprint to uncoated groundwood and packaging grades, a newsprint machine shutdown and a delay in one mill's expansion plans.
Newsprint capacity is scheduled to decrease to less than 7.0 million tons by 2003, for an average annual decline of 2.0 percent. During the previous 10-year period, it increased at an average rate of 0.9 percent per year.
Only four of the roughly 20 newsprint producers surveyed anticipate appreciable changes in capacity during the next three years. Three producers reported major decreases, reflecting publicly-announced scheduled conversions to uncoated and coated groundwood capacity. The other producer reported an increase in newsprint capacity due to the continued ramping up of a new machine which will only partly offset the capacity lost from the three conversions.
Several newsprint projects have been publicly announced over the last few years. However, they have not been included in the current survey because they do not meet the survey's criteria of board approval, assured financing and site acquisition.


Coated groundwood capacity over the three-year period ending in 2003 is scheduled to rise to almost 5.2 million tons, or 3.4 percent annually. This relatively rapid growth in part reflects a conversion from newsprint starting in 2001. This expansion also includes one producer's investments in U.S. coater facilities that will use imported newsprint as a base stock.
The 2000 estimate for coated free sheet capacity in the current survey is down 1.0 percent - or 58,000 tons - from the 2000 capacity level anticipated in the last survey. This result reflects the net impact of capacity changes by numerous producers for a variety of reasons, including some machine closures, swings from uncoated free sheet and coated groundwood and the modification of previously scheduled expansion plans.
The sum of uncoated and coated groundwood capacity accounted for about 23 percent of total printing-writing paper capacity in 2000. Yet these two grades will account for 68 percent of the expected incremental printing-writing paper capacity scheduled to come on line during the next three years, according to the survey's results. In the previous decade, the groundwood grades represented just 6.5 percent of total printing-writing paper additions.
The uncoated groundwood capacity estimate of 2.0 million tons for 2000 is down 2.9 percent - or 60,000 tons - from the level expected in last year's survey. In part, the reduction results from the removal of a closed machine that was still included in last year's survey because the one-year shutdown rule had not been satisfied then. In addition, the reduction reflects the net impact of swings into and out of uncoated groundwood from newsprint, specialty packaging and other printing-writing paper grades.
Over the three-year projection period ending in 2003, uncoated groundwood capacity is estimated to rise by 5.9 percent per annum to over 2.4 million tons. Most of the expected growth is attributable to several producers shifting capacity from newsprint to uncoated groundwood, in addition to a machine rebuild.
At almost 4.7 million tons, the 2000 capacity estimate for coated groundwood is up 0.8 percent - or about 35,000 tons - from the estimate provided in last year's survey. The increase results from the net impact of numerous swings between coated groundwood and newsprint and the other principal printing-writing grades, as well as from machine shutdowns.

Free sheet

Coated free sheet capacity is scheduled to rise by 2.7 percent in 2001, in large part due to the continuation of a swing in capacity from uncoated free sheet that began this year. The average annual increase anticipated for the three-year period ending in 2003 is 1.5 percent. This compares with a 4.2 percent average annual increase in the preceding 10 years.
At more than 15.3 million tons, uncoated free sheet capacity for 2000 in this year's survey is 0.2 percent higher than the estimate for 2000 in last year's survey. This reflects the net impact of capacity lost due to closures and conversions to coated free sheet and capacity additions by numerous producers that were not anticipated in last year's survey.
Capacity is projected to remain essentially unchanged over the next two years and then rise by 0.9 percent in 2003, with virtually all the growth in that year being attributed to the ramping up of a major new machine. Over the three-year period, uncoated free sheet capacity on average is scheduled to rise at 0.3 percent per annum. This compares with 2.0 percent in the previous 10-year period.
AFPA said it should be emphasized that because of the one-year shutdown rule, these projections exclude the impact of major shutdowns that were publicly announced in late 2000. Were these shutdowns incorporated into the survey's estimates, the projected capacity figures would be several percentage points below those shown in this survey, creating a reduction in capacity.


The tissue sector is the only one with significant new machine additions.
Four new machines (two of which replace old machines) were added in the tissue paper sector during 1999 and several more came on line during 2000. The new projects, along with incremental growth on existing machines and subtractions for discontinued machines, resulted in tissue paper capacity increases of 3.5 percent in 1999 and 3.6 percent in 2000.
The survey anticipates four new machines starting up during the projection period - three in 2001 and one in 2002. Tissue paper capacity growth is projected at 3.3 percent in 2001, 2.7 percent in 2002, followed by no change in 2003.

Paperboard grades

Linerboard capacity declined 4.1 percent in 1999, reflecting the closure of several mills during late 1998 with capacities totaling some 1.9 million tons. The deductions associated with these closures were made in last year's survey.
Linerboard capacity rose 1.8 percent in 2000, reflecting the start-up of a new machine during late 1999 as well as incremental efficiency improvements.
The survey shows linerboard capacity remaining virtually flat during the next three years (2001-2003), with average annual growth of just 0.1 percent. However, this stable trajectory does not account for mill closures in 2000 or beyond.
Corrugating medium capacity rose 1.8 percent in 1999 and 2.1 percent in 2000, with most of these gains reflecting incremental increases and swings from other grades. Medium capacity is slated to decline 0.5 percent in 2001 and then grow 1.4 percent in 2002 and another 1.0 percent in 2003, partly due to the scheduled start-up of a new recycled medium machine during mid-2002.
With no new machines or shutdowns in this segment of the industry, changes in folding boxboard capacity are mainly due to the shifting of capacity in and out of folding boxboard and incremental efficiencies.
Total U.S. capacity to produce folding boxboard rose 2.9 percent in 1999 and 1.4 percent in 2000. Grade-specific changes in 2000 range from a 2.7 percent expansion in solid bleached folding boxboard capacity to a 1.6 percent increase in unbleached kraft folding boxboard capacity and no change in recycled folding boxboard capacity.
Total folding boxboard capacity is projected to rise at a 0.4 percent average annual rate during the next three years (2001-2003). The most rapid growth pace during this projection period is 0.8 percent for unbleached kraft folding boxboard. Projected capacity growth for recycled folding boxboard and solid bleached folding boxboard both average 0.2 percent.
Capacity to produce milk carton & food service board is projected to decline 1.0 percent in 2001, following a 0.5 percent increase in 2000. The anticipated decline reflects primarily, the shifting of bleached board capacity to other grades. Milk carton and food service board capacity is projected to average 0.1 percent growth per annum over the 2001-2003 period. This compares to an historic average annual growth rate of 1.9 percent over the 1991-2000 period.
Capacity to produce gypsum wallboard facing grew 9.8 percent in 2000 and is expected to expand by an additional 17.0 percent in 2001 and 2.4 percent in 2002. These increases are due to the startup of a new machine during early 2000, and the shifting of two machines from other grades to wallboard facings. Gypsum wallboard facing capacity is projected to grow at a 6.9 percent average annual rate during the 2001-2003 period.

Market pulp

A strong pulp market over the last 18 months led to a 6 percent upward revision for chemical grade market pulp capacity for 2000 in this year's survey compared with the estimate in last year's survey. The sector is slated to increase 4.0 percent each in 2000 and 2001. Market pulp capacity then will decline fractionally in 2002 and 2003.
For the 2001-2003 period as a whole, capacity is scheduled to increase at an average annual rate of 1.0 percent, according to the survey.

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