Paper Mills
SIC 2621
NAICS 322121
Paper mills manufacture paper from wood pulp, wastepaper, and other fiber or chemical pulp; many of the same firms also produce converted paper products. Integrated pulping and papermaking operations are considered in this discussion when they have a sizable presence in papermaking. See also Paperboard Mills, Paperboard Containers and Boxes, and Pulp Mills.
Papermaking has been a global industry for centuries. After paper was invented in China in the second century, the craft of papermaking slowly spread throughout the world. The mechanization of papermaking in the nineteenth century spurred a near-simultaneous development of paper businesses in all major industrial economies. While paper mills and pulp mills are considered separate industries, the two are, in reality, directly connected. A majority of the world's paper is produced at mills integrated with pulp production at the same site and is used for packaging and printing.
Countries with large forest resources, such as the United States, Canada, and the Scandinavian countries, dominate the paper industry since most virgin paper is produced close to its primary raw material—trees. However, recycled fiber plays an increasingly large role in paper production, and many countries—notably Germany, Japan, and South Korea—base the majority of their paper manufacturing industries on recycled paper.
While growth rates in industrialized countries have not been spectacular, developing nations have made strong gains in the per capita usage of paper. As of the mid-2000s, the United States was by far the world's largest manufacturer and consumer of pulp, paper, and paperboard. As the Forest Products Association of Canada reported in 2005, paper demand has doubled since 1985 and is forecast to double again between 2005 and 2010. Overall annual consumption rates are expected to grow by about 3.2 percent by 2015, with consumption growing by about 2.5 percent annually in developed countries but by 5.5 percent in developing nations.
Most paper machinery, equipment, and chemical suppliers sell their products worldwide. Although some countries possess more sophisticated equipment than others do, the process of industrial papermaking is largely the same throughout the world.
The paper industry is among the world's most capital-intensive manufacturing industries because it requires nearly continuous investment in plants, equipment, and maintenance. Due to the vast amount of money required to build and maintain paper mills, large companies dominate production of papermaking worldwide. To maximize their returns, these firms purchase enormous, high-speed machines to achieve economies of scale by producing paper at the lowest possible unit cost. Since many grades of paper are widely exported, and thus are subject to international standards, most large paper mills throughout the world must remain technically up-to-date. Technological advances have helped paper mills to simultaneously improve quality while driving down production costs.
The volatility of the pulp and paper business cycle was illustrated by changes in the global price of market pulp from 1994 to 1997. In 1994, the price of pulp increased 75 percent in one year, due to increased demand and limited supply. However, in late 1996 the price of pulp began falling, and in six months the price dropped nearly 50 percent due to reduced purchases by customers and increased capacity by suppliers. In May 2002, after years of depressed prices, the paper industry was optimistic when the Canadian government announced that increased demand and shrinking inventories boded well for the industry in coming years. Nonetheless, that same month International Paper Company furloughed some of its mill workers, saying the demand for coated papers failed to meet inventoried stocks.
Two major factors have affected the financial performance of paper companies worldwide: general economic expansion and the capacity rates in individual countries. As with most commodities, when paper is in oversupply its prices tend to fall, and when demand exceeds supply prices typically rise. For paper manufacturers, higher prices usually signal higher profits. The industry's health can be predicted by the health of magazine and catalog ad sales; declining ad sales translate to fewer printed pages and depressed coated stock prices.
The invention of paper is generally credited to Ts'ai Lun, a member of the Chinese imperial court, around 105 A.D. Ts'ai Lun's paper was made from mulberry and other barks, fish nets, hemp, and rags. The fibers separated from this pulp were passed through a screen, formed into a web, and dried. This handmade process was used for centuries thereafter. The ancient Egyptians also used a substance made of mashed reeds called papyrus for writing purposes and the word "paper" is derived from papyrus. The Greeks wrote on the dried leather skins of animals.
Papermaking arrived in Japan in the seventh century. The process of making paper began to spread into Europe during the twelfth century, and Araba settlers built paper mills in Spain. These mills used rags almost exclusively to make paper. With the advent of book printing in Europe in the middle of the fifteenth century, the use of paper began to grow rapidly. By 1690 papermaking had spread to the American colonies, when William Rittenhouse established the first U.S. paper mill near Philadelphia.
In 1798, a Frenchman named Louis-Nicolas Robert invented a machine to produce paper in a continuous process, instead of the handmade process that used vats and molds. In the early 1800s, two English papermakers, Henry and Sealy Fourdrinier, purchased patents for the machine. After modification, the Fourdrinier's machine became very popular in England and spread to other countries. This machine had, in effect, turned papermaking from a handmade process into an industry. The name "fourdrinier" is still used to describe certain paper machines.
Another revolutionary event in the manufacture of paper occurred in the middle of the nineteenth century. Recycled rag fibers from clothing were used almost exclusively to make paper until the end of the 1860s, when straw fibers began to be used. Straw was quickly followed by the use of groundwood and chemical pulp, both of which were in use in Europe and North America by the early 1870s. Wood pulp had thus become the preferred method because, at the time, it was in plentiful and inexpensive supply for papermaking.
The size and speed of paper machines increased rapidly between 1850 and the beginning of World War I, and by the late 1880s paper use was booming. After World War I, the global paper industry began producing more paper containers and packaging, increasing its use of corrugated medium and linerboard, to make shipping boxes, and producing a host of new products such as tissues and sanitary napkins. During World War II, paper and paperboard were vital materials for the armed forces of both the Allied and the Axis powers, which used paper packaging to ship and store military supplies. Paper drives became common during the war years and marked one of the earliest efforts to recycle paper.
After World War II, the global paper industry developed more scientific approaches to forestry and papermaking. Europe rapidly re-industrialized after the war, and modern paper mills were built. By 1945, there were as many as 14,000 different paper products produced worldwide, and that number continued to expand as new uses were found for paper—such as in milk cartons and drinking cups. Many industry growth trends were centered on the use of disposable paper products.
For centuries, papermaking had been considered an art practiced by experts who used instinct and intuition in manufacturing. The 1950s saw a shift in papermaking from art to science. In the 1950s and 1960s wider and faster paper machines were invented, which helped to greatly increase the supply of paper and board throughout the world. By the early 1970s the paper industry faced challenges worldwide from environmental groups. In question were their emissions of waste products into the air and water. New rules concerning clean air and water forced paper businesses in most industrialized countries to install expensive new air and water treatment systems.
In the 1970s Europe forged ahead in the production of alkaline paper and recycled paper; however, North American producers did not begin manufacturing these types of paper until the late 1980s. The 1980s and early 1990s saw extensive modernization in paper industries throughout the world as new, high-speed equipment and extensive automation brought papermaking quality and efficiency to new highs.
The forestry practices of Canadian pulp and paper companies—particularly clearcutting—began to be attacked by environmental groups such as Greenpeace, in the early 1990s, and a sophisticated media campaign against Canadian producers continued through much of the 1990s. These efforts also spawned a well-organized European campaign to boycott purchases of Canadian market pulp. The Canadian industry mounted a strong defense of its forestry practices. In Europe, many paper mills converted to totally chlorine-free (TCF) bleaching systems to comply with public pressure to remove all chlorine-based chemicals from the papermaking process.
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