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| FORECAST (000 tons) |
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1998e |
1997 |
1996 |
| Shipments |
1,785 |
1,902 |
1,970 |
| Capacity |
2,360 |
2,409 |
2,409 |
| Utilization rate, % |
75.6 |
79.0 |
81.8 |
| Imports |
204 |
215 |
197 |
| Exports |
315 |
238 |
239 |
| Apparent U.S. consumption |
1,674 |
1,879 |
1,928 |
| lb/capita |
12.3 |
14.0 |
14.5 |
| GDP ratio(1992) |
0.23 |
0.26 |
0.28 |
| e = Pulp & Paper estimate. American Forest & Paper Assn.data for prior years. |
| TOP N. AMERICAN PRODUCERS |
| Company* |
Annual capacity (000 tons) |
Market share (%) |
| 1. Longview Fibre |
500 |
20.8 |
| 2. Stone Container |
450 |
18.7 |
| 3. Gaylord Container |
275 |
11.4 |
| 4. Georgia-Pacific |
255 |
10.6 |
| 5. International Paper1 |
260 |
10.8 |
| 6. Union Camp |
200 |
8.3 |
| 7. St. Laurent2 |
125 |
5.2 |
| 8. Champion |
100 |
4.2 |
| 9. Port Townsend |
100 |
4.2 |
| 10. Gilman Paper3 |
100 |
4.2 |
Total U.S. capacity (1998): 2,409 Capacity share of top five companies: 7% Capacity share of top ten companies: 98%
1. IP also has 120,000 of bleached kraft paper capacity. 2. Purchased Chesapeake West Point, Va., kraft mill in 1997. 3. Gilman also has 115,000 of bleached kraft paper capacity. |
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GRADE STRUCTURE. Grocery bags and sacks and retail bags are the largest market for unbleached kraft packaging papers, accounting for about 47% of total shipments, followed by multi-wall shipping sacks at 41% and wrapping and converting papers at 12%. Basis weights for most bag and sack papers range from 30 lb to 80lb/3,000 ft2.
PRODUCTION/CAPACITY. A long-term decline in demand for unbleached kraft packaging papers, particularly for grocery bags, caused producers to reduce production capacity for these grades by 1.4 million tons, or 40%, over the 10-year period from 1985 to 1995. U.S. production capacity for unbleached packaging papers appears to have stabilized at about 2.3 million tons, which includes as much as 200,000 tons of "swing" capacity between kraft paper and linerboard. No new capacity additions are planned in 1998.
Industry shipments of unbleached kraft paper are forecast to decline about 6%, or 117,000 tons, this year, after declining by 70,000 tons in 1997 and 1996 and 300,000 tons in 1995. Lower shipments of grocery bag and sack paper account for most of the decline due to market share loss to plastic grocery bags. Shipments of multi-wall shipping sack papers declined about 2% in 1997. The shipping sack grades remain competitive with alternative materials and provide cost-effective packaging solutions for a wide range of industrial and consumer markets.
Operating rates for kraft paper mills are estimated to be only 76% this year, but linerboard production on "swing" machines raises the actual industry operating rate closer to 90%.
Exports of unbleached kraft paper have been rising the past several years, reflecting stronger demand for shipping sack paper in the fast growing markets of Latin America and Southeast Asia. However, foreign producers are also producing kraft paper for these markets.
OUTLOOK. Kraft paper is the only segment of the packaging market that is expected to weaken over the next 6 to 12 months due to continued market losses to plastic grocery bags. Unbleached kraft paper will continue to battle with plastics in all of the major markets. Although many consumer polls indicate a preference for paper, it has had virtually no impact on the market because of paper's higher costs vs. plastics for supermarkets. Kraft paper producers have responded to these changing dynamics by adjusting their product mix by shifting production to lightweight linerboard and specialty grades and introducing handle bags. Also, multi-wall shipping sack paper remains a stable market for kraft paper producers. Overall supply and demand should remain in balance, and industry operating rates should remain stable as kraft paper mills adjust to changing market dynamics.
PRICING. Heavyweight kraft paper prices closely tracked linerboard prices over the past 12 to 18 months, falling from a peak of $590/ton to approximately $410/ton and then rising to about $460/ton in early 1998. Multiwall shipping sack paper prices also declined, dropping to approximately $600/ton from $720/ton. Multiwall paper prices recovered to about $650/ton during the first quarter of 1998. Prices should remain stable over the next 12 months.
Year-end price history for 70-lb grocery sack paper: 1988, $455; 1989, $495; 1990, $465; 1991, $425; 1992, $390; 1993, $320; 1994, $490; 1995, $530; 1996, $410; 1997, $460. Multi-wall shipping sack paper (50-lb): 1988, $520; 1989, $560; 1990, $580; 1991, $560; 1992, $580; 1993, $550; 1994, $620; 1995, $700; 1996, $600; 1997, $650.
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