This is the second in a series related to Forisk’s Q3 2015 forest industry analysis and timber price forecasts for the United States.

Pulp and paper products literally touch our lives’ every moment and movement. From the boardroom to the washroom, we use paper when reading, wrapping, containing or cleaning. And give a child a large cardboard box, you give a castle or spaceship or playhouse.

So how does the U.S. paper and paperboard industry, a sector which continues to attract capital investments, look moving forward?   While total U.S. paper and paperboard production has declined, results vary across product categories as profitable categories continue to grow.  Over the past 20 years, total paper and paperboard production declined 0.9% annually while subsectors in (1) household and sanitary paper production and (2) paperboard had compound annual growth rates of 0.9% and 3.8%.  Newsprint has shown the greatest decline (69% since 1996), but it only accounts for 3% of total production today.

To update projections of paper and paperboard products in the U.S., we again worked with Dr. Jack Lutz of the Forest Research Group.  Key questions centered on the gross production in the industry given changes in the “digital economy” and how recycling trends may affect virgin fiber (pulpwood and chips) needs. Key findings from our 2015 research include:

• Reduced demand for pulpwood from projected declines in newsprint and writing paper production is offset by projected increases in paperboard production.
• We use less paper per dollar of GDP.  We analyzed the relationships between paper categories and GDP to forecast paper production and found that paper and paperboard ratios have been falling since the mid-1990s. However, this does not mean we use less paper….
• Projections indicate that total U.S. paper use increases slightly.  Paper production inches up as growth in paperboard and packaging offsets declines in newsprint and printing and writing paper.

 

Overall demand for wood used to make pulp for paper holds steady.  When forecasting potential impacts on pulpwood prices, strong growth in pulpwood use corresponds to those markets with substantive OSB capacity and operating or viable wood pellet projects.

 

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