A rise in imports will weaken demand, with firms shifting to high-value products to survive
Los Angeles, CA (PRWEB) July 13, 2012
The United States is no longer the world's largest producer of paper, having been overtaken by China in 2008. IBISWorld estimates that revenue for the Paper Mills industry has declined at an average annual rate of 0.9% to $51.4 billion in the five years to 2012. During this period, the level of foreign competition continued its upward trend, interrupted briefly by an improvement in the trade conditions faced by US manufacturers and a subsequent increase in export revenue, says IBISWorld industry analyst Caitlin Moldvay. Simultaneously, however, domestic revenue contracted sharply as the recession pulsed through key buying sectors in business and advertising. While revenue is expected to grow 2.3% in 2012 as domestic business sentiment improves, the industry's outlook remains poor, reflecting a long-term decline in demand and profitability.
Industry profitability suffered over the five-year period due to skyrocketing commodity prices and anemic demand at home, continues Moldvay. Over the five years to 2012, wood pulp prices grew at an average annual rate of 5.7%, while industry product prices increased only 2.4% per year on average, forcing operators to absorb the difference. Poor economic conditions forced industry operators to exit the market or consolidate with other players, leading to an acceleration of merger and acquisition activity. As a result, the market share concentration of the four largest firms in the industry grew. Enterprise growth has demonstrated a similar trend: the total number of firms in the industry has decreased since 2007. Market share concentration within the Paper Mills industry is low but increasing. The top companies are the Domtar Corporation, the NewPage Corporation and the International Paper Company. The majority of the 170 companies operating in this industry are medium-size firms with less than 1.0% market share. Market share concentration has increased slightly over the past five years. The trend is attributable to buoyant merger and acquisition activity over the period. The overall effect has been a reduction in the number of companies operating in the industry, and an increase in the market share of those that remain.
The industry's prospects are not bright. Downstream demand for paper products will recover in the short term as the economy gains steam, but demand is expected to remain below prerecession levels. In the long term, demand is expected to continue falling as consumers increasingly substitute electronic recordkeeping systems for the industry's paper products. Furthermore, as the dollar strengthens, imports from paper-producing countries will increasingly squeeze domestic profit margins, encouraging industry operators to concentrate in high value-added papers. Overall, paper mills will remain in a state of decline, with revenue projected to fall over the next five years. For more information, visit IBISWorld’s Paper Mills in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry manufactures paper in paper mills from pulp; mill operators may manufacture their own pulp or purchase it. Industry products include paper rolls and reams, including printing paper and writing, newsprint, packaging and household papers. These products are sold to individual and business consumers as well as downstream manufacturers in product areas such as coated or treated paper, stationery, paper bags, newspaper or magazine publications and other printing services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.