The Structure of the Forest Products IndustryFairly extensive government and trade data exist for the pulp and paper subgroup of the Forest Products Industry. In part, this is because pulp, paper, and paperboard mills are large, have a work force of just a few hundred, and receive statistical attention as an important, major primary wood processing subgroup. Less data exist for secondary mills, sawmills (a primary wood processing group), and fuelwood processors because their facilities are usually smaller and number in the thousands. In some cases, secondary mills produce a broad range of commodities and value-added products, which also contributes to the unavailability of detailed data. The Census Bureau, using the Standard Industrial Classification (SIC) system, reports industrial activity according to specific end-product manufacturing categories.13 Large corporations, of course, do not always conduct busi ness according to sharply defined product and industry distinctions. Their corporate divisions frequently manu facture products in several of the cited categories. Figure FE2 identifies some of the characteristics of three key SIC industries that include major wood processors.14 Subgroups of these industries that are not primary or key secondary wood processors were not included in the summary data on which the figure was based. For example, the subgroups of the SIC for paper and allied products, which primarily manufacture bags and cartons from purchased mill stock, were eliminated. The adjusted subgroups that result are highly wood energy-intensive. Figure
FE 2. The Three Largest Wood Processors in the forest products Industry,
1992 It is interesting to note that while nearly 36,000 businesses make up the adjusted lumber and wood products subgroup, only 529 mills constitute the pulp, paper, and paperboard products subgroup. With respect to employment profiles, only 19 percent of lumber and wood product businesses employ more than 20 people, compared to 98 percent of pulp, paper, and paperboard businesses. The lumber and wood products industry is a significant component of American small business and a key factor in the national rural economy. Census data indicate that 72 percent of pulp mills, 95 percent of paper mills, and 89 percent of paperboard mills produce all of their primary manufacturing inputs. These data, supported by information in annual reports, demonstrate that pulp, paper, and paperboard manufacturers represent a major market for lumber and wood products companies, especially in the logging subgroup of the latter.15 In turn, the paper industry unquestionably supports thousands of small businesses and is important to the rural economies of several regions. Likewise, some large corporations also participate in the fiber supply infrastructure via their raw material and commodity divisions. As stated above, corporate ownership characteristics do not always link conveniently to specific SIC's. Company annual reports and investment analysis publications provide some of the detail to better understand front-end industrial pro cesses.16 These processes consume most of the primary manufacturing energy used in the forest products industry. Investment publication data aggregated for this paper reflect that 1995 sales by the 25 largest U.S. corporations classified as primarily pulp and paper manufacturers totaled $110 billion. Comparison of this information to the pulp and paper sales data in Figure FE2 indicates that approximately half the business volume of these corporations is in products other than pulp and paper commodities. Although these companies are diversified into a few unrelated areas, their operations portfolios reveal that most of their non-pulp-and-paper business is related, being mainly found upstream or downstream of primary operations. That is to say, pulp and paper companies are frequently vertically integrated either on the raw material side of primary manufacturing (i.e., forestry and logging) or on the finished product side. The latter category includes converted paper products such as boxes, containers, sanitary products, and coated or laminated papers. Acquisitions and mergers have resulted in a substantial restructuring of the pulp and paper industry, causing it to become less fragmented and more global.17 As an example, a divestiture was recently announced by a large American container manufacturer that transferred ownership of a $1.5 billion pulp and newsprint subsidiary to a Canadian company.18 Examples of horizontal integration include operations such as sawmills; veneer and panel board mills; and flooring, siding, and structural product mills. The characteristics of these 25 largest pulp and paper corporations are differentiated by their mix of integration in such areas. Some are oriented toward raw material resources, while others concentrate on finished goods, production, and consumer marketing. Miscellaneous Converted Paper Products, a second paper-related SIC category isolated for this article, converts a small amount of wood-based waste to energy. Analysis of this sector indicates that converters are heavily concentrated in populous states with a heavy manufacturing and con sumption base. Adding directly related19 Census data for this SIC category (about $40.4 billion in 1992) to the aggregate sales of the selected wood processors in Figure FE2 yields an adjusted total of $204.4 billion in 1992. This total (adjusted for interim economic growth up to the same statistical year for comparative purposes) is very similar to the AFPA estimate of Industry sales volume of $230 billion cited earlier.
|
