Paper Mills

SIC 2621

Industry report:

This category covers establishments primarily engaged in manufacturing paper from wood pulp, wastepaper, and other fiber pulp. In addition, these establishments also may manufacture converted paper products. Establishments primarily engaged in integrated pulping and papermaking are included in this industry if they primarily ship paper or paper products.

Industry Snapshot

The United States produces more paper and paperboard than any country in the world. It has maintained this position by consistently producing about one-third of total world production, far more than any other country. Historically, domestic U.S. paper and paperboard mills have produced about 90 percent of the paper consumed in the United States. The entire U.S. pulp, paper, and converted paper products industry is one of the largest U.S. manufacturing industries in dollar sales. Domestic paper and newsprint mills shipped $49.6 billion worth of products in 2007, according to the U.S. Census Bureau. While imports account for about 10 to 12 percent of the paper consumed each year in the United States, domestic manufacturers dominate most segments of the industry.

Although paper mills are separate from pulp mills in the Standard Industrial Classification System (SIC), in reality the two are directly connected. About 70 percent of all paper is produced at mills that are "integrated" with a pulp mill at the same site, with both mills typically owned by the same company. Most high volume "commodity" paper and paperboard grades, such as newsprint, uncoated free sheet, and linerboard, are produced in this fashion. Some smaller paper mills producing specialty grades may not be connected with a pulp mill. They buy pulp from other mills owned by the same company or buy "market pulp" produced by other companies.

Converters of paper products, which are often owned by paper companies, add value to paper and distribute their products to consumers and industrial users. This sector has a wider distribution and includes firms that are directly integrated with paper manufacturers, as well as firms that purchase paper, paperboard, and plastic film from manufacturers. Converters transform these materials into thousands of different finished products. Most converters are fully independent operations. However, the converters that are directly owned by or connected to paper and board manufacturers tend to be very large and account for a disproportionate percentage of total industry sales.

While papermaking is an energy intensive industry, and one of the largest U.S. industrial consumers of energy, the pulp and paper industry itself produces more than 50 percent of the energy it uses through cogeneration and burning of waste fuels, such as bark and spent pulping chemicals.

Organization and Structure

Papermaking starts where the pulping process leaves off. The first step in papermaking is piping the pulp to the headbox of the paper machine. At this point the pulp, which is called the furnish, is 99 percent water and 1 percent fiber. At the headbox, the pulp is laid onto a large mesh belt made of plastic, which is called a wire or forming fabric. This wire can be as wide as 33 feet. As the water drains out, the fibers bond to each other and form a strong web. This web is taken off the wire by a series of rolls and put into a press section, where more water is squeezed or vacuumed out of the web. Then the web enters a long series of dryer rolls that are heated by steam. As the web comes in contact with these rolls, the water flashes off. By the time it leaves the dryers, the web is 3 to 4 percent water. After the paper is wound on a reel at the end of the paper machine, many things can happen, depending on the grade. It can be slit and shipped as a large roll or converted into paper products at the same location.

Paper mills are organized by the type of paper they produce. For example, some paper mills produce only printing and writing paper, while others produce newsprint. Many paper mills produce "white" paper, in which brown wood pulp is bleached to remove color and other impurities. Many paperboard mills, which are discussed in SIC 2631: Paperboard Mills, manufacture unbleached "brown grades" of paperboard, some of which are used for making corrugated shipping containers. However, some paperboard mills produce "white" products, such as the bleached paperboard used to make folding cartons for products such as breakfast cereal boxes. Some paper mills produce unbleached brown paper for products such as grocery sacks.
Financial Structure.
The paper industry is the most capital intensive of all basic U.S. manufacturing industries, requiring nearly continuous major investments for plants and equipment. According to one ranking, the pulp and paper industry is twice as capital intensive as any other major U.S. industry. This situation has led major paper companies to invest in enormous, high-speed machines that can use economies of scale to produce paper at the lowest possible cost.

The late 1980s and early to mid-1990s were roller coaster years for the U.S. paper industry. After paper companies enjoyed record profits in the late 1980s, there was a dramatic drop in paper prices in the early 1990s, which resulted in very difficult financial circumstances for many paper companies. Prices for most paper products started to drop in mid-1989 and remained low well into the 1990s. Despite low prices being paid for paper, many paper companies embarked on major capital projects to build new paper machines and expand existing units. The twin conditions of new capacity coming on line and soft demand conspired to keep prices low, even when demand began to recover in 1992 and 1993.

However, the beginning of one of the sharpest run-ups in paper prices ever began in the spring of 1994. Supplies tightened, prices rose, and customers began stocking unusually large amounts of inventory in anticipation of future price increases. The result was that average prices for all paper and paperboard rose 8 percent in 1994 and 41 percent in 1995. However, the boom in paper prices was destined to be one of the shortest on record. Customers began to take stock out of inventory in the fall of 1995 and prices began falling again. By mid-1996, prices of some grades had fallen one-third. Prices for paper stabilized in late 1996 and stayed in the same low range until mid-1999, when prices began to creep upward. They fell again during the early 2000s amid weak demand.

This business cycle has plagued the paper industry for years. Plans for big greenfield (new) mills and machine additions are usually made in the middle of an economic recovery, when paper company profits are rising. These projects involve complicated engineering and take three to four years to complete. In other words, new or expanded mills tend to come on line in the middle of a recession, which is what happened in the early 1990s. In addition, since paper is a largely nonperishable product, both mills and customers can stock large amounts of paper in inventory. As a result, inventory adjustments can produce large swings in paper pricing.

With a burst of new mills and paper machines in the early 1990s, there was relative low growth in papermaking capacity in the mid-1990s. After increasing capacity at a 2.6 percent average annual rate from 1986 to 1995 and 3.5 percent in 1996, paper and paperboard companies added just 2.8 percent capacity in 1997. In the early 2000s capacity fell drastically, dropping from 103.9 million tons in 2000 to 101.6 million tons in 2001. In 2002 capacity dropped 1 percent, to 100.5 million tons.

Large capital investments created high fixed costs for paper companies. The expense of building and maintaining plants and equipment became a much greater percentage of a paper company's total costs, while labor became a lower percentage of costs. Because huge, automated mills need fewer people to run them, many in the industry assumed that paper companies could not adjust to lower demand by laying off employees and taking capacity out for short periods. However, while that assumption appeared to be true during the paper industry's recession in the early 1990s, the industry used a completely different approach when prices began dropping in the mid-1990s. Beginning in 1996, many U.S. paper companies, particularly newsprint producers and linerboard producers, took extensive downtime to try to reduce both their own inventories and those of their customers. Paper companies continued to take extended periods of downtime throughout the mid- to late 1990s. Some companies took this a step further and announced permanent shutdowns of older, uncompetitive mills. For example, in 1998 Smurfit-Stone 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.

Background and Development

Papermaking in the United States began in the late eighteenth century in Philadelphia. In September of 1690, an entrepreneur named William Bradford, who was a recent English immigrant, built the first American paper mill on the shore of Wissahickon Creek. At the time, paper manufacturing had not yet become an important part of the colonial economy. The small amount of paper consumed in the colonies was produced in Holland and France.

However, economic growth in the colonies created a booming market for paper, and Bradford and other papermakers were soon ready to meet this growing demand. Bradford built his mill with the assistance of William Rittenhouse, an immigrant from Holland, and other financial backers. The mill produced about 20 pounds of pulp, paper, and board a day. Although there was some mechanization of papermaking, it was largely a handmade process at this time.

After 1690, the population of the American colonies grew quickly, as did the number of U.S. paper mills. By the time of the American Revolution, in which printed materials played a key role, there were more than 45 mills producing about 300 tons of paper per year. This production was used by more than 50 printers throughout the new nation.

At the beginning of the 1800s, an event occurred that revolutionized the paper industry throughout the world. A Frenchman by the name of Louis-Nicolas Robert invented a machine to produce paper. Eventually, the machine patents were purchased by two English papermakers, brothers Henry and Sealy Fourdrinier. After modification, the Fourdrinier machine began to catch on in England, and it later was produced in the United States as well. The name Fourdrinier is still used today to describe certain paper machines. The development of the paper machine changed what had been a lengthy and time consuming handmade art into a manufacturing process.

The other event that forever changed papermaking occurred in the middle of the nineteenth century. After 1851, the preferred fiber source for papermaking began to change from old rags to wood pulp. This event, along with the invention of the paper machine, in effect created the modern paper industry (see SIC 2611: Pulp Mills). The size and speed of paper machines increased rapidly between 1850 and 1916. Paper use was booming by 1889, when the annual U.S. production of paper reached 1 million tons. This figure doubled in the next 10 years.
At the end of World War I, the United States began a period of rapid economic growth, and the paper industry grew along with the general economy. Several new associations, including the Paper Industry Management Association and the Technical Association of the Pulp and Paper Industry were founded and developed during this time. Paper containers and packaging, a growing use of corrugated medium and linerboard to make shipping boxes, and a host of new products, such as tissues and sanitary napkins, emerged as major trends in the postwar era. During this time Canadian mills became dominant in newsprint manufacture, producing the majority of U.S. newsprint. Much later U.S. manufacturers produced the majority of newsprint consumed in the United States.

Southern Growth.
The Pacific Northwest also became a major pulp producer during the post-World War I period, but the southern United States experienced the greatest growth. Prior to this time, it was difficult to use southern pine to make paper because of its high resin content. However, new processes were developed using southern pine to make bleached and unbleached kraft paper. Southern pine was ideal for this type of paper because its long fibers produced very strong paper and board. Kraft production in the South shot up from just 258 tons per day (tpd) in 1919 to 9,128 tpd in 1940. By the end of World War II, this total was up to about 13,000 tpd.

The growth of southern paperboard mills and other board mills around the country was greatly enhanced by a 1914 Federal Trade Commission (FTC) decision to legalize the use of corrugated medium packaging in shipping. Prior to that, wooden boxes were used for shipping goods around the country. Military development of paper packaging materials during World War I helped to provide new technology and methods for producing superior paper packaging. Southern newsprint production also began during this time, due in large part to the talents of Charles H. Herty. Methods developed by Herty and his relentless promotion of southern papermaking helped to create the twenty-first century paper industry in the South.

While the Great Depression of the 1930s severely hurt other industries, it did have as great an effect on the pulp and paper industry since paper began to be used in new ways. Around 1930 machine coated paper was first manufactured in the United States.

During World War II, the paper industry worked closely with the federal government to ensure that adequate supplies of paper were available both for domestic use and for the armed forces. Paper was one of the main materials used for shipping and storing military supplies. Recycling of paper reached a peak during the war years as well, with paper drives being common in many big cities.

Postwar Growth.
After World War II, the paper industry continued growing. New pulping strategies and tree planting allowed the paper industry to develop the fiber sources it needed to meet the expanding demand. Prior to this time, paper companies tended to cut down trees and not replant. However, during this time southern pine first began to be used to make white printing paper.

During the late 1940s, all areas of the paper industry were growing fast, but some new areas, such as milk cartons and drinking cups, experienced exponential growth. Many of the growth trends were centered on the use of disposable paper products, a trend that had started in World War II.

In the 1950s and 1960s, paper machines grew wider and faster, which helped multiply the supply of paper and board. However, by 1970 the paper industry faced sustained challenges to its environmental practices. New clean air and water rules from federal and state governments in the early 1970s forced the industry to install expensive new treatment systems. Many other capital projects were put on hold and then frozen when the economy entered a recession in the early 1980s. However, in the mid- to late 1980s the paper industry initiated what has been called its greatest modernization ever. These capital-intensive projects included mill-wide automation, technological innovations, mill modernization, environmental upgrades, and a push for total quality. The U.S. paper industry began competing more effectively in global markets during this time as well.

The paper industry of the late 1990s was highly competitive, both in domestic and foreign markets. It had a modern, efficient manufacturing base, labor peace, and strong markets. However, the industry faced several major challenges, including financial performance, environmental compliance, recycling, and alternative media.

The U.S. paper industry's financial performance throughout most of the 1990s was below average, particularly compared to the rest of the U.S. economy, which enjoyed general prosperity. Some of the reasons for this poor financial performance were structural, such as the Asian financial crisis in 1997 and the volatile currency swings that accompanied it, a prolonged period of low inflation, and increasing environmental pressures. However, the paper industry is said to have caused some of its own problems, notably by building more capacity to make paper than was justified by demand growth. Furthermore, a tendency by most paper companies to focus more on production than on marketing their products was also said to have contributed to the industry's financial problems. The industry's inability to return acceptable profits to shareholders led to stagnant stock prices through much of the 1990s, at a time when other industry's stock valuations were soaring.

For example, from 1988 to 1997, operating profits for the U.S. paper industry grew at an annual rate of 3.9 percent, just half the rate of the Standard and Poor's (S&P) 500 Industrials, which grew at a 7.7 percent rate. Likewise, the industry's return on equity (ROE) averaged just 8.7 percent from 1988 to 1997, well below the 18.6 percent average posted by the S&P 500. As a result, stock prices for paper companies showed a compound increase of just 6.3 percent annually from 1988 to 1997, compared with 16.5 percent for the S&P 500.

Paper industry executives took note of this problem and pledged to remedy the situation by curbing capacity growth and pursuing consolidation. In the late 1990s, they made good on both pledges. Capacity growth in the late 1990s was less than half of historical averages, and several major mergers and acquisitions reshaped the paper industry, notably Kimberly-Clark and Scott Paper; James River Corp. and Fort Howard; International Paper Co. and Union Camp; and Weyerhaeuser Co. and MacMillan Bloedel. At the end of the 1990s, there was some evidence that this strategy was working. Stock prices for many paper companies rose sharply in 1999, as did company profits.

Environmental compliance was a daunting, and expensive, challenge for the paper industry in the 1990s. There was sustained opposition from environmental groups and increased government regulation of nearly all steps of production. For example, the lumber industry in the Pacific Northwest was drastically reduced in scale. Due to successful court challenges by environmental groups under the Endangered Species Act of 1973, tree harvests in the early to mid-1990s dropped to one-sixth of harvesting levels in the mid-1980s and stayed at those levels for the remainder of the 1990s.

Pulp and paper mills in the Northwest dependent on the residue of lumber operations for raw material were forced to look to new sources, including overseas, for sources of wood chips. Many northwestern U.S. mills converted partially or completely to the use of recycled paper. In addition, the pulping and bleaching of wood fiber was the focus of proposals for stringent and costly new federal regulation.

In the mid-1990s, recycling began to change the geographic distribution of paper mills. "Mini mills" began to crop up near major U.S. cities. These mini mills remove ink and recycle old newsprint and other grades of wastepaper and make new newsprint and linerboard on relatively small paper machines. Since they are near locations where much of the country's wastepaper is collected in major cities, they are able to greatly reduce shipping costs.

In the early 1990s, the paper industry produced more paper than ever before but was unable to maintain effective pricing. Paper prices fell in 1991 and 1992 before beginning a sharp recovery in 1994 that lasted through most of 1995. In fact, in 1994 and 1995 average paper prices were up more than 50 percent, with prices of some grades increasing at even higher rates. These high prices led to record U.S. paper company profits in 1995. However, 1996 saw prices as well as profits plummet once again, although they did not fall as low as they had in the early 1990s. Prices remained at this same general level for the rest of the decade, although they prices climbed slowly and steadily throughout 1999.

Operating rates are another key to profits in the paper industry. In general, operating rates, which are based on the percentage of time that mills are in operation, need to be at or over 90 percent for the mill to be profitable. Thus, most large mills operate 24 hours a day, seven days a week. Operating rates dropped in 1990 and 1991 but rebounded to about 90 percent for paper producers and 95 percent for paperboard manufacturers in 1992. In 1993, the operating rate for all producers reached 93.7 percent and then 96 percent in 1994 and 1995. However, operating rates dropped dramatically in 1996 to about 89 percent as many producers took extensive downtime in an attempt to work off large inventories of pulp and paper products. In 1997, the average operating rate climbed to about 94 percent, but it dropped back to 92.2 percent in 1998.

Another measure of paper industry economic health is capital expenditures for new plants and equipment. When paper companies are profitable, they tend to reinvest a large share of their profits in capital expenditures. Capital expenditures for the U.S. pulp and paper industry peaked in 1990 at about $18 billion, and they stayed high in 1991 at about $17 billion. However, from 1992 to 1996, the rate of capital expenditures stayed within a range of $12 billion to $14 billion, and 1997 capital spending barely topped $10 billion. That decline continued in 1998, when capital expenditures dropped to $8.2 billion, and again in 1999, when they dropped to $7.2 billion, the lowest figure since 1984. Low capital expenditures were further evidence that domestic growth in paper capacity would remain low for some time.

By the early 2000s, the paper industry faced a number of challenges. Weak domestic and global economic conditions, combined with overcapacity and slack demand, had resulted in a difficult climate. Production of paper and paperboard dropped from 94.6 million tons in 2000 to an estimated 88.8 million tons in 2002. Furthermore, the American Forest & Paper Association reported that by the spring of 2002, an overvalued U.S. dollar was harming exports and allowing foreign competitors to capture larger shares of the U.S. market. Although domestic consumption rose about 3.5 million tons during the late 1990s and early 2000s, about 90 percent of this growth was attributed to imported paper. The association explained that over a five-year period domestic paper companies shuttered some 72 mills, leading to a workforce reduction of about 32,000.

As advertising levels decreased in the early 2000s, affecting page counts in publications like magazines and catalogs, so did the demand for paper. Making matters worse, financially strained magazines turned to Europe for cheaper supplies of paper. This pattern had a direct impact on U.S. paper mills. In addition to cutbacks and mill closures, these conditions led to reduced levels of capital spending, making it difficult or impossible for many mills to upgrade their equipment and stay competitive.

Some paper customers were concerned about the negative implications caused by falling paper prices, reduced production levels, and subsequent workforce reductions and shuttering of paper mills. In October 2002 Folio, a trade publication for the magazine industry, reported, "Up to this point, dwindling capacity and mill closures have had little consequence for magazine publishers. In fact, publishers have benefited from low demand, as it forced down prices. But when the economy rebounds and magazines once again prepare to place paper orders, the seesaw effect of sudden demand and low supply will send prices soaring."

By the spring of 2004, such warnings about price increases began to play out. Some industry analysts predicted magazine grade coated groundwood, for example, would show a price increase of 6 percent by the end of 2004 and another 10 percent in 2005. Mills were also back up to near-capacity production levels, from 84 percent in 2003 to 96 percent in 2005. At production levels of 93 percent or greater, end users could expect rising prices to accompany the rising demand. Capacity for newsprint producers, for example, was nearly 15,300 tons at the close of 2003, and this sector experienced an 11 percent increase in production that year. Linerboard rose more than 3 percent from February to March that year, and containerboard rose 4 percent, increasing 8 percent from the previous year. According to U.S. Census Bureau statistics, the largest segment of this industry by product value was sanitary tissue paper, followed by uncoated freesheet paper and clay-coated printing and converting paper.

Facing pressure from some environmental groups, consumers, and the government, the U.S. paper industry challenged itself to meet self-imposed goals of recycling 55 percent of all paper produced in the country by 2012. While highly touted as an environmental "silver bullet," recycling itself has some environmental liabilities. Most recycling mills generate a major waste stream and consume large amounts of purchased energy. With recycled newsprint, for example, only 85 percent of incoming newsprint is usable as fiber. The rest is unusable sludge that must be cleaned out of the process and then burned or placed in landfills. In some recycled grades, sludge can be up to 50 percent of the incoming waste paper. Considering that some mills make up to 2,500 tons of paper each day, sludge can become a major waste problem. In addition, since recycling mills cannot burn bark or spent pulping chemicals to generate electricity on their own, they must purchase large amounts of power from local utilities.

The enormous amounts of energy used in the paper industry for production and transportation continued to be felt by paper mills in the mid- to late 2000s. The same soaring fuel prices that hit consumers hard during those years also affected many commercial establishments, including those in the paper industry. Paper mills reacted by strengthening core operations and improving production efficiency to cut expenses.

Some industry experts indicated that the mills themselves could play a direct role in providing a solution to high fuel costs. In 2005, the industry announced plans to partner with the U.S. Department of Energy to pursue biorefinery research and development. By the late 2000s pulp producers could mix small amount of diesel with pulp byproducts and create the new fuel called "black liquor," which they used to run their factories. Lori Perine of the American Forest & Paper Association told Gas-to-Liquids News, "Transforming forest product mills into integrated forest product biorefineries promises to reinvent the forest products industry and rapidly advance national goals for energy, environmental performance, and new domestic bioindustry." There was some controversy, however, when in 2009 U.S.-based pulp producers qualified for a 50 cent per gallon refundable tax credit for making black liquor. Some said the tax credit could amount to as much as 30 percent of the selling price of the pulp, thus creating a massive subsidy.

Current Conditions

Paper mills in the United States faced uncertain times in the slow economic times of the late 2000s. Intense competition from China and other overseas producers cost thousands of U.S. paper mill workers their jobs and caused many companies to close their mills or cut back on production. According to the U.S. Census Bureau, paper mills in the United States numbered 241 in 2007, down from 346 in 2005. Newsprint mills accounted for 21 establishments in 2007. These two segments employed about 80,000 people. The Bureau of Labor Statistics cited the paper, pulp, and paperboard mills industry as one of the most rapidly declining in terms of employment and predicted that employment in the sector would decrease an average of 3.6 percent between 2006 and 2016.

Production figures were also low in the late 2000s. According to the American Forest & Paper Association, paper and paperboard manufacturing in the United States declined 4.9 percent in 2008 to 88.4 million tons, the lowest production figure since 1993.

Industry Leaders

International Paper Co.
Founded in 1898 by the merger of 18 northeastern pulp and paper companies, International Paper Co. (IP) of Purchase, New York, was the world's largest paper company in the late 2000s. In 2008, IP had total sales of $24.8 billion, almost two-thirds of which was from paper and packaging units. IP was one of the largest producers of printing and writing papers, marketing these products under its Hammermill, Springhill, Accent, Carolina, Williamsburg, and Great White brands. IP was 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, purchasing Carter Holt Harvey of New Zealand and Federal Paper Board, a U.S. company. 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 Corp.
Atlanta-based Georgia-Pacific Corporation (GP) was the nation's second largest manufacturer of forest products. This subsidiary of Koch Industries had major interests in building products, pulp and paper, and paper chemicals. In 2006 GP had total sales of $2.1 billion. GP produces containerboard and packaging, communications papers, market pulp, and packaging products at more than 300 manufacturing facilities worldwide.

Weyerhaeuser Co.
Based in Federal Way, Washington, Weyerhaeuser's main businesses were growing and harvesting timber; manufacturing and distributing forest products, including logs, wood chips, building products, pulp, paper, and packaging products; real estate development and construction; and financial services. In 2008 Weyerhaeuser had total sales of $8.0 billion. Weyerhaeuser owned 6 million acres of commercial forestland in the United States, with about half in the South and the other half in the Pacific Northwest. The company also had license arrangements on 15 million acres of Canadian forestland.

Workforce

In 2008, pulp, paper, and paperboard mills together employed 127,450 workers. During the 1990s and into the 2000s, the paper and allied products industry exhibited a trend of stable or slightly declining employment despite large capacity increases. Hourly employee wages averaged $21.34 in 2008.

Like other manufacturing industries, the paper industry employs many unionized workers. However, the heaviest concentrations of union employees are in older mills that were organized years ago. Almost all new pulp and paper mills are non-union operations, including mills constructed by companies with unionized mills in other locations. In general, the wages and benefits provided by non-union mills are comparable to unionized mills.

There was relative peace among labor in the paper industry during the late twentieth and early twenty-first century. In exchange for salary increases, management was able to obtain work rules changes that allowed workers to perform more jobs in the mill and eliminate pay differentials for Sunday and holiday pay. One dramatic strike in the 1980s ended in failure when unionized workers at International Paper's mill in Maine were permanently replaced by new workers. Only a handful of the original workers regained their jobs. Since that strike, there have been no major work stoppages in the paper industry.

America and the World

In the late 1990s, competition rose across the globe as new regions, especially Asia and Latin America, developed strong paper industries. In 1999 China and the United States agreed to liberalize trade in forest and paper products. The deal was tied to China's application to join the WTO, which took place in January 2002. By June of 2002, Pulp & Paper reported that China was shielding its paper industry from the effects of foreign competition, opting for partnerships with foreign firms instead of allowing them to fully own Chinese paper companies. According to the San Francisco Chronicle, imports of paper from China increased tenfold in three years, from $21.5 million in 2004 to $224 million in 2006.

China's production continued to cause problems for the industry in the late 2000s, and many in the industry cited China's unfair trade practices as the cause of thousands of lost jobs. U.S. manufacturers also alleged that the Chinese government subsidized Chinese companies to support the illegal practice of selling their products below cost in the United States. The U.S. International Trade Commission investigated several related charges in 2009, and the U.S. Commerce Department considered antidumping and antisubsidy import duties on Chinese paper.

Research and Technology

Traditionally, papermaking research focused on making faster, wider machines that experience fewer paper breaks. To support these goals, research continued in every area of the paper machine: the forming section, the press section, the drying section, and the finishing and converting areas. Much of this research was performed by supplier companies to the paper industry, which traditionally assumed a much larger research role than the paper companies. However, paper companies, as well as suppliers, expanded their support of cooperative research at the nation's pulp and paper schools, such as North Carolina State University, the University of Maine, and the University of Wisconsin-Stevens Point. They also support nonprofit research groups such as the Institute of Paper Science and Technology, the Pulp and Paper Research Institute of Canada (PAPRICAN), and the Herty Foundation.

Much of this research focused on improving the physical chemistry of the "flotation cells" of the de-inking process. This technology uses air bubbles to literally "float" detached ink particles to the top of a mixture of ground-up paper and water, where the inky froth is skimmed off. Improving the efficiency of this system would speed up production and lower costs.

Research also focused on using new chemical processes to help produce recycled paper that matches virgin uncoated freesheet in quality. Uncoated freesheet, used in products such as copy paper, is one of the most-used grades of paper, and one of the most demanding in terms of quality. The question of how to best use more recycled fiber was at the forefront in the 2000s as the paper industry worked to meet its own challenge of recycling 50 percent of all paper produced.

One of the major initiatives involving the pulp and paper industry was Agenda 2020, a cooperative research project involving the U.S. Department of Energy (DOE), pulp and paper research institutions, and leading paper companies. Agenda 2020 was prepared by the chief technology officers of major paper companies under the auspices of the American Forest & Paper Association. The development of the document was spurred by the U.S. Department of Energy's "Industries of the Future" program, which sought to fund research in specific industries, including pulp and paper, that would reduce energy intensiveness and improve environmental performance. The DOE prepared a draft document on the "Pulp Mill of the Future." That document was reviewed by the team of chief technology officers and modified to create Agenda 2020, which outlined six specific areas for research and development: sustainable forest management; environmental; performance; energy performance; capital effectiveness; recycling and sensors; and control.

Information technology was another major area of development. Progress in paper machine process automation was ongoing, but several major areas of development emerged, including embedded process management, where automation, process and machinery know-how is totally integrated into new paper machines; open application platforms that allow the use of multiple systems; smart sensors and actuators that allow digital data transfer between field instruments and control equipment; and fuzzy logic and neural networks that imitate human decision making.

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