U.S. Paper and Paperboard Capacity falls Two Consecutive Years, Industry First

Press release from the issuing company

WASHINGTON – U.S. paper and paperboard capacity fell in 2001 and 2002, the first time that total industry capacity declined in consecutive years, according to the 43rd Annual Capacity Survey of the American Forest & Paper Association (AF&PA). The survey, released today, showed declines of paper and paperboard capacity of 1.9% in 2001 and 1.3% in 2002. “The contraction reflects the industry’s efforts to adjust to stiff foreign competition and a period of cyclically weak paper and paperboard demand,” the survey said. Total 2002 paper and paperboard capacity of 100.5 million tons has been revised downward by 2.5% from the projection of the prior survey. Two factors accounted for the revision: (1) removal of capacity that closed in 2001, but had not yet met the “one year rule,” which was still in effect at the time of the survey; and (2), removal of capacity that permanently closed in 2002 and was immediately removed from the survey under its new ground rules. Under prior ground rules, unless shuttered mills were immediately dismantled, they had to remain closed for one year before their capacity was removed from the survey. Current rules call for AF&PA to remove immediately from capacity those shut machines where the owner’s intention to close them permanently has been clearly stated in a public announcement. As a result, two years of capacity closures have been removed from this survey. A total of 40 mills and 104 machines were permanently closed in the 2001-2002 period. Looking ahead, the survey indicates that paper and paperboard capacity will remain essentially unchanged in the next three years, declining by 0.5% in 2003, and then increasing 0.8% in 2004 and 0.4% in 2005. The flatline projection for paper and paperboard capacity can be partially countered by Congress’ passage of the President’s economic growth plan, with its elimination of double taxation on dividends, said W. Henson Moore, AF&PA President and CEO. “It will make our industry more competitive globally and fuel a lasting economic recovery with increases in business, jobs and modern plants and equipment” he said.