Paper & Paper Products Manufacturing
Description
Companies in this industry make paper and converted paper products, including paperboard, corrugated and paperboard containers, coated papers, and paper bags. Major companies include Georgia-Pacific, International Paper, Kimberly-Clark, Neenah Paper, and WestRock (all based in the US), as well as Domtar (Canada), Oji Holdings (Japan), and Stora Enso (Finland).
According to Statista, the industry produces about 400 million metric tons of paper products globally every year. China has surpassed the US as the world's top paper producer.
The US paper products manufacturing industry includes about 4,000 companies with combined annual revenue of about $190 billion.
COMPETITIVE LANDSCAPE
Demand is driven by general commercial activity and population growth. The profitability of individual companies depends on efficient operations, as products are sold mainly based on price. Big companies have advantages in distribution and can supply large customers. There are few economies of scale in manufacturing; large and small producers operate the same kinds of plants -- large producers just have more of them. Small companies can compete successfully by making specialty products or serving a small geographical market.
The industry is concentrated: the 50 largest paper manufacturers contribute to about 70% of the industry revenue.
PRODUCTS, OPERATIONS & TECHNOLOGY
Bleached bristols and clay-coated (about 8%), folding paperboard boxes (about 7%), and corrugated shipping containers (about 6%), are some of the industry's main revenue sources. Other revenue sources include unbleached kraft linerboard for about 6%. Tens of thousands of different paper products are produced, but most manufacturers concentrate on a limited product line.
The manufacture of paper products is mainly a commodity business. Manufacturing processes are standardized, as are the products. Paper products are made in three stages. First, wood is turned into pulp at pulp mills. Then, pulp is turned into large rolls of commodity product at paper or paperboard mills. Finally, the large rolls are used to make finished products at converter plants. Many of the large national companies that had been vertically integrated (they owned forests, cut their own trees, made their own pulp, etc.), have divested timberlands to free up capital and simplify regulatory compliance. Most smaller companies operate only converter plants, buying the paper or paperboard raw material from the large producers.
Paper is made from cellulose tree fiber, by dicing and pounding wood, and treating it with water, chemicals, heat, and mechanical beaters to dissociate the fibers. The resulting wood pulp is spread onto large moving screens to drain, then flattened by rollers, dried, and collected in large rolls. Many different types and thicknesses of paper are produced according to the type of raw wood used, the pulping process, the chemicals used and added, and the rolling process. The kraft (which means "strength" in German) chemical pulping process is the most common manufacturing process, using soft woods (mainly pine) to produce paperboard and heavy paper (used in grocery bags, etc.). Paperboard can be used directly to make cardboard containers (often with one white side made from recycled office paper), or can be glued together (two flat outside layers of "linerboard" and an inner layer of "corrugated medium") to make containerboard, used to make corrugated boxes.
Because the finished product is inexpensive and bulky, transportation costs can be a significant part of the total delivered cost. Due to high transportation costs, small manufacturers can compete effectively with big producers in their local market. The effective sales area for corrugated boxes, for example, is only about 150 miles from the production plant.
Pulp and paper mills are capital-intensive operations that may operate just one giant machine. Converting plants are more labor-intensive because of the large number of different customer orders they typically handle. Production machinery, both at mills and converting plants, is large and expensive. A corrugated-box producer will typically operate a production line with several large specialized machines (corrugating, gluing, slotting, shearing, stitching, etc.) that can be adjusted to make boxes of many different grades and sizes.
According to Statista, the industry produces about 400 million metric tons of paper products globally every year. China has surpassed the US as the world's top paper producer.
The US paper products manufacturing industry includes about 4,000 companies with combined annual revenue of about $190 billion.
COMPETITIVE LANDSCAPE
Demand is driven by general commercial activity and population growth. The profitability of individual companies depends on efficient operations, as products are sold mainly based on price. Big companies have advantages in distribution and can supply large customers. There are few economies of scale in manufacturing; large and small producers operate the same kinds of plants -- large producers just have more of them. Small companies can compete successfully by making specialty products or serving a small geographical market.
The industry is concentrated: the 50 largest paper manufacturers contribute to about 70% of the industry revenue.
PRODUCTS, OPERATIONS & TECHNOLOGY
Bleached bristols and clay-coated (about 8%), folding paperboard boxes (about 7%), and corrugated shipping containers (about 6%), are some of the industry's main revenue sources. Other revenue sources include unbleached kraft linerboard for about 6%. Tens of thousands of different paper products are produced, but most manufacturers concentrate on a limited product line.
The manufacture of paper products is mainly a commodity business. Manufacturing processes are standardized, as are the products. Paper products are made in three stages. First, wood is turned into pulp at pulp mills. Then, pulp is turned into large rolls of commodity product at paper or paperboard mills. Finally, the large rolls are used to make finished products at converter plants. Many of the large national companies that had been vertically integrated (they owned forests, cut their own trees, made their own pulp, etc.), have divested timberlands to free up capital and simplify regulatory compliance. Most smaller companies operate only converter plants, buying the paper or paperboard raw material from the large producers.
Paper is made from cellulose tree fiber, by dicing and pounding wood, and treating it with water, chemicals, heat, and mechanical beaters to dissociate the fibers. The resulting wood pulp is spread onto large moving screens to drain, then flattened by rollers, dried, and collected in large rolls. Many different types and thicknesses of paper are produced according to the type of raw wood used, the pulping process, the chemicals used and added, and the rolling process. The kraft (which means "strength" in German) chemical pulping process is the most common manufacturing process, using soft woods (mainly pine) to produce paperboard and heavy paper (used in grocery bags, etc.). Paperboard can be used directly to make cardboard containers (often with one white side made from recycled office paper), or can be glued together (two flat outside layers of "linerboard" and an inner layer of "corrugated medium") to make containerboard, used to make corrugated boxes.
Because the finished product is inexpensive and bulky, transportation costs can be a significant part of the total delivered cost. Due to high transportation costs, small manufacturers can compete effectively with big producers in their local market. The effective sales area for corrugated boxes, for example, is only about 150 miles from the production plant.
Pulp and paper mills are capital-intensive operations that may operate just one giant machine. Converting plants are more labor-intensive because of the large number of different customer orders they typically handle. Production machinery, both at mills and converting plants, is large and expensive. A corrugated-box producer will typically operate a production line with several large specialized machines (corrugating, gluing, slotting, shearing, stitching, etc.) that can be adjusted to make boxes of many different grades and sizes.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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