Printing and Writing Paper

SIC 5111

Companies in this industry

Industry report:

This industry classification includes wholesale distributors of printing and writing paper. Products of the industry include fine paper, envelope paper, and ground wood paper. Wholesale distributors of computer paper and stationery are classified in SIC 5112: Stationery and Office Supplies.

Industry Snapshot

In 2010, there were about 1,677 printing and writing paper wholesale distributors in the United States, according to Dun & Bradstreet (D&B). Together these firms employed 23,005 workers and generated annual revenues of $1.9 billion. More than 72 percent of establishments were small, employing fewer than 10 people.

According to Hoover's, in the early 2010s the industry was divided among specific product segments, and the largest 50 companies generated about 65 percent of total revenues. D&B figures showed that every state in the nation had at least one printing and writing paper wholesaler in 2010; California was home to the most, with 212. That state also accounted for the largest share of revenues, with $299.6 million, or about 16 percent of total industry sales, followed by New York ($229.9 million), Texas ($130.1 million), Florida ($120 million), and Illinois ($107.7 million).

Organization and Structure

Printing and writing paper is grouped in four large categories: uncoated groundwood, coated groundwood, uncoated freesheet, and coated freesheet. Groundwood refers to paper made from mechanical pulp, and freesheet refers to paper made from chemical pulp (see SIC 2611: Pulp Mills). Coated refers to paper that has been treated to improve printability and/or appearance. Printing and writing papers range from the lower-quality paper used to print advertising circulars to the high-quality coated paper used to print upscale magazines. These categories do not include newsprint, which is considered to be a low-quality paper.
Through the 1990s, distributors and wholesalers of printing and writing paper focused on forming strategic alliances with major commercial printers and with other high-volume end users. In some cases, distributors became sole suppliers to certain printers. On the "imaging" side of the business, the growth of desktop computers, software graphics programs, and new output devices challenged paper distributors to more closely match paper requirements to their customers' imaging needs. To do this, distributors had to provide more technical assistance to customers.

Background and Development

In the 1980s and 1990s, printing and writing paper distributors had to deal with wide price swings brought about by the volatile market for paper products. For example, after several years of below average pricing in the early to mid-1990s, the average price for all pulp, paper, and paperboard products rose 34 percent in 1995, with some printing and writing grades rising as much as 75 percent. However, the next year prices dropped as much as 30 percent in some grades. This volatility was brought about by a complex cycle of mill capacity additions, changes in inventory, and paper usage. For example, as the cost of printing and writing paper soared in 1995, publishers and printers increased their inventories dramatically in anticipation of future price increases. When publishers and printers began using this inventory, they stopped buying new supplies and prices for printing and writing paper tumbled.

For distributors and wholesalers, this pattern made business planning difficult. When demand and prices were high, they could make incremental profits, but down cycles were difficult since they were carrying the double burden of excess inventory and low unit prices.

The growing popularity of electronic modes of communication such as the Internet and electronic mail contributed to the slowdown in demand for printing and writing paper in the late 1990s. Earlier in the decade, however, wholesalers of printing and writing paper experienced consistent sales growth, moving from $32.3 billion in 1990 to $37.9 billion in 1993 and $43.2 billion in 1996 and sustaining average growth of 5.6 percent, well ahead of inflation.

By the turn of the century, many analysts attributed a share of the paper industry's woes to the accumulated effects of the shift toward electronic media. While these effects were predicted--often to dramatic extremes--in the 1980s and 1990s, only around 2000 did the combined shift to electronic media play out across fields and sectors--from electronic plane tickets to online advertising, for example--to rear up and create a major and lasting dent throughout the paper industry. However, some advertisers, disappointed with the outcomes of Web-based banner advertising, were slowly returning to the printing fold.

The early 2000s represented a period of recovery from the chronic aggregate paper production overcapacity in the United States and of adjustment to rising foreign competition and continued weak demand. After capacity growth leveled off in the late 1990s, paper production capacity fell 1.9 percent in 2001 and an additional 1.3 percent in 2002 to reach a total of 100.5 million tons, down from 101.3 million in 1999, according to the American Forest & Paper Association (AF&PA). Projections for aggregate production capacity remained very low.

After experiencing annual capacity growth of 2.2 percent in the 1990s, printing and writing paper capacity dropped dramatically beginning in 1999. This trend continued into the 2000s, falling by 2.1 million tons between 2000 and 2002 to reach 27.3 million. Despite these dismal overall figures, the growth rate for uncoated groundwood capacity reached an astonishing 10.3 percent in 2002, as total capacity inched back towards its 1996 peak of 2.3 million tons. Uncoated groundwood, meanwhile, achieved capacity growth of 2 percent in 2003 to reach 5.04 million tons. Capacity for coated freesheet had fallen about 12.6 percent below its 2000 peak, due primarily to a string of mill closings, according to AF&PA. Uncoated freesheet capacity fell to its 10-year low of 13.6 million tons in 2002.

Resource Information Systems Inc. (RISI), in its 2003 North American Graphic Paper Forecast, reported that printing and writing paper was falling behind the pace of the U.S. economy. Notoriously chained to the performance of the overall economy, the paper industry as a whole tended to patiently weather downturns as a lapse in the broader market. In the early 2000s, however, that connection was beginning to slip, as demand for printing and writing paper lagged behind even the sluggish U.S. economy. In addition, overcapacity through the late 1990s and early 2000s was largely to blame for the decline in prices the plagued the industry. While demand and prices rebounded with the improving economy through the mid-2000s, the pace still lagged behind the overall economy. To make matters worse, the industry faced fierce foreign competition, as overseas firms delivered quality improvements at a brisk pace and sold them at aggressive prices, helping exacerbate the downturn in U.S. paper prices. Paper producers and paper wholesalers alike underwent a wave of consolidation in the 2000s in an effort to stay afloat. In addition, by the late 2000s, the paper industry, like many in the United States, was feeling the effects of the economic recession.

Current Conditions

According to the American Forest & Paper Association (AF&PA), after hitting a record level of 27.6 million tons in 2000, printing-writing paper capacity fell 17.8 percent in the next nine years. In 2009 total printing-writing paper capacity fell 6.6 percent from the previous year to 22.7 million tons. Of the four categories (uncoated and coated free sheet, uncoated and coated mechanical papers), uncoated mechanical paper was the only one that did not register a decline in capacity. The downward trend was expected to continue into the second decade of the twenty-first century.

Other figures from the AF&PA showed that in 2009 production in the overall paper and paperboard industry fell almost 11 percent from the previous year to 79.1 million tons. Stanley Lancey of the AF&PA, however, expressed optimism in an August 2010 press release when he commented, "These results reflected the effects of the economic downturn on the paper and paperboard industry in the United States. However, paper and paperboard production rebounded 8.6 percent versus year ago during the first six months of 2010." U.S. exports also fell almost 11 percent in 2009 to reach 13.8 million tons, whereas imports declined 20.5 percent to 13.4 million tons.

Challenges for the U.S. paper wholesaling industry in the early 2010s included competition from overseas imports, especially from China, where the government's policy of direct and indirect paper industry subsidies made it difficult for U.S. companies to compete; pressure from environmental groups and consumers to reduce the pollution emitted by paper mills and factories; and the growing popularity of e-mail and online transactions and communication, which contributed to a reduced demand for paper. Greg O'Brien of Cape Code Today commented in July 2010 that "Overall demand for paper is down due to market conditions and competition from electronic publishing. More than 73,000 printer and graphic communications jobs have been lost since mid-2008, with thousands more expected." O'Brien also noted the negative effects of the increase in price of paper on an already hurting industry.

Industry Leaders

As in other industries, diversification, acquisitions, and mergers dominated the business plans of the leading paper companies throughout the late 1990s and 2000s. Activity slowed in the late 2000s due to the economic downturn. According to PricewaterhouseCoopers (PwC), in 2009 there were more mergers and acquisitions than 2008, but the total value of deals was down, and only three deals in 2009 were worth more than $3 billion. Latin America was an important front and was home to four of the five top deals of the year, according to PwC.

By 2010, industry leaders included large, diversified companies like International Paper Co., Georgia-Pacific LLC, MeadWestvaco (MWV) Corp., and Weyerhauser Co. International Paper (IP) of Memphis, Tennessee, was one of the world's largest paper companies, generating $23.3 billion in 2009 sales with 56,100 employees. A subsidiary of Koch Industries, Georgia-Pacific had 45,000 employees and annual sales of $12.5 billion. MeadWestvaco (MWV) of Richmond, Virginia, had sales of $6.0 billion in 2009 and 20,000 employees, whereas Weyerhauser of Federal Way, Washington, recorded 2009 sales of $5.5 billion with 14,900 employees.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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