Pulp and paper demand, supply and trade
A world on Pulp and Paper Demand, Supply and Trade took place at FAO Headquarters at Rome from 14-19 September 1959. Twenty-seven experts and advisers from the following countries participated: Argentina, Australia, Brazil, Canada, Federal Republic of Germany, Finland, France, India, Italy, Japan, Norway, Sweden, Union of South Africa, United Kingdom, United States, Uruguay.
1. Also taking part in the Consultation were representatives of the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the Organization for European Economic Co-operation (OEEC). A list of participants is attached to this report as Annex I.
2. Mr. (Glesinger, Director of the Forestry and Forest Products Division of FAO, welcoming the participants on behalf of the Director-General of FAO, outlined the principal developments in the world pulp and paper situation which had occurred in the decade since the FAO Preparatory Conference on World Pulp Problems was held in Montreal in 1949, and gave a short account of the aims and progress of FAO's own program in the field of pulp and paper.
3. Mr. Robert Fowler, President of the Canadian Pulp and Paper Association, was unanimously elected Chairman of the Consultation.
TABLE 1 - ESTIMATES OF PAPER AND PAPERBOARD DEMAND: 1965 AND 1975
Demand for paper and board
4. After the Secretary, Arne Sundelin of FAO, had briefly outlined the documentation prepared for the meeting, the Consultation discussed, on the basis of document FAO/WPPC-59/15: "Comparison of Earlier Demand Forecasts", the various attempts at forecasting pulp and paper requirements which had been made by international and national agencies during the past decade ¹. The review of these demand forecasts led to the following conclusions:
(a) practically all the earliest attempts at demand projection had underestimated - in most cases seriously - the actual course of consumption. This was particularly true of those projections which were in the nature of informed guesses rather than based upon explicit statistical procedures. While in general the more sophisticated approaches had yielded superior results, not all these had been successful in closely predicting the actual course of consumption. In these instances, however, it was usually possible to see clearly the reason for the discrepancy between projected demand and actual consumption, e.g., the economic growth rate or the population trend had been different from that assumed, or incorrect relationships between consumption growth and income growth (income elasticities) had been used.Two facts had to be borne in mind in assessing the validity of past estimates: (i) until quite recently the statistics available for studies of this kind have been far from satisfactory; (ii) the pattern of economic growth during the last decade has been disturbed by the Korean crisis and the cold war.
(b) Two developments had made possible an improvement in the techniques of demand projection during the decade. Firstly, there had been a considerable improvement in the scope and geographical coverage of the statistical information necessary for the prosecution of demand studies, e.g., pulp and paper production and consumption figures, national income data, population data, etc. Secondly, considerable experience has been acquired in carrying out demand studies for other commodities and some of this experience has been applied to the pulp and paper field.
(c) The most promising approach, particularly in studies of regional consumption and in cases where paper consumption statistics are available only for broad categories of paper, lay in establishing a relationship between the growth in paper consumption and the growth in the general economy
¹ In the following pages, all tons are metric tons. Unless otherwise stated, pulp refers to pulp for paper-making only (whether of wood or of other fibre) and excludes dissolving pulp.
Fibreboard (building boards) are excluded from all paperboard figures.
The projections of demand (and hence the estimates of regional balances, etc.) have been arrived at by statistical methods, but the number of significant figures given is no indication of precision.
5. After reviewing earlier attempts at forecasting demand for pulp and paper, the Consultation discussed Secretariat Paper FAO/WPPC-59/2: " A Forecast of Demand for the Period to 1975 ". It was agreed that demand projections, based on statistical analysis and adjusted where necessary to take into account local circumstances which might call for special treatment, presented valuable indications to all those in government and industry concerned with development planning. They made possible the formulation of policies designed to ensure market stability and to avert serious imbalances between supply and consumption. While recognizing the limitations of demand forecasting, as stated in the Secretariat paper, the Consultation attached great importance to such investigations, not as predictions, but as working tools.
6. The Consultation noted that the demand projections presented by the Secretariat claimed only to give an indication of growth in consumption that could be expected to attend a given income growth. The realization of these forecasts is conditioned by the economic growth rates which will actually occur; the forecasting of these is a matter of judgment. The estimates should be viewed as relating to future income levels rather than particular years.
7. The Consultation considered that the analysis presented by the Secretariat clearly established the existence of the two following phenomena:
(a) The change in consumption corresponding to a given change in national income differs according to the level of national income. The response is relatively higher at low income levels than at high income levels (i.e., demand elasticity declines as income rises).(b) At any given income level, the relationship between income and consumption established on the basis of country by country comparisons (i.e., cross-sectional analysis) differs slightly from the relationship established on the basis of historical data (time series). In general, country by country comparisons seem to indicate a slightly lower response of consumption to income change than do the historical data for particular countries or regions (i.e., demand elasticities at a given income derived from cross-sectional analysis slightly exceed those derived from time series).
8. Regarding (a), the Consultation believed that the analysis presented by the Secretariat, embodying techniques developed in the study of demand for other commodities but not previously applied to pulp and paper, succeeded in accounting satisfactorily for this observed phenomenon and represented a considerable advance on the methodology used in previous pulp and paper demand studies. Participants expressed the hope that the Secretariat would continue its studies and report its findings from time to time.
9. Regarding (b), the Consultation expressed particular interest in the Secretariat's analysis of the growth in demand that may be ascribed to miscellaneous factors other than income and population growth (referred to in the Secretariat paper as the "time trend"). The Consultation believed that this offered a particularly fruitful field for further investigations.
Among the factors which may influence this residual trend positively (or negatively) may be instanced: technological developments affecting the use of paper (or its alternatives); changes in national habits; changes in the relative price of paper; and governmental policies. For example, an exceptionally rapid rise in the demand for printing, and writing paper may occur in low income countries where intensive efforts are being made to reduce illiteracy. On the other hand, trade barriers in the form of duties, quantitative or currency restrictions which impede the free exchange of goods between countries can, through their effects on the price structure, tend to inhibit the growth in consumption. The existence and uncertain impact of these other factors pointed to the desirability of further investigations into the elements constituting the " time trend ".
10. Endorsing the methodological approach adopted by the Secretariat, the Consultation emphasized the following reservations included in the Secretariat paper:
(a) The method was suitable for medium - and long-term projections only. Short-term projections, which lay outside the scope of the Secretariat paper, called different techniques.(b) Other, and more elaborate, procedures could be applied to projections for individual countries where ample data were available on consumption of paper by detailed categories and on the various economic factors influencing the demand for each category.
They added that:
(c) The fact that the projections might be influenced by the limited base period selected constituted a further argument for continuous review.
11. The Consultation recommended that the Secretariat of FAO:
(a) continue to study the methodology of forecasting pulp and paper demand, especially as regards methods appropriate to projections for individual countries;(b) periodically review its regional and world demand forecasts in the light of the latest trends in economic and population growth and in paper consumption;
(c) extend its investigations of factors other than income and population growth which may influence demand trends.
12. In reviewing, region by region, estimates of future paper and board demand presented in the Secretariat paper and summarized in Table 1, the Consultation offered the following comments:
NORTH AMERICA
Demand projections recently carried out in Canada though prepared on the basis quite different from that used by the Secretariat (including a somewhat lower economic growth rate to 1965), had yielded figures extremely close to those included in the Secretariat Paper. Similarly, a recent United States projection (by the American Pulp and Paper Association), when adjusted to eliminate building paper and board (not included in the Secretariat estimates), also came close to the Secretariat's estimates, though the United States projection had been based on a somewhat lower rate of economic growth and a slightly higher population trend. In general, the North American projection envisaged a somewhat greater rise in paperboard requirements than in the Secretariat paper. It was the view of the North American participants that the Secretariat's estimates represented a reasonable assessment of the demand trend in the North American region.
LATIN AMERICA
Participants from Latin America endorsed the estimates for the region submitted by the Secretariat with the minor reservation that the growth rates selected might prove to be slightly low. It was noted that a further rapid increase in paper requirements was expected in Argentina, where paper consumption has been artificially restricted during much of the postwar period.
WESTERN EUROPE
The Consultation noted that estimating the future trend of demand in Western Europe presented special problems. In interpreting the past trend it had to be borne in mind that much of the region's capacity had been destroyed during the war, and that restrictions on consumption had continued in a number of countries until quite recently. At the same time, economic growth had been extremely rapid. Factors other than income growth had thus influenced the recent rise in consumption; the problem was to quantify these other factors and assess their future impact. The Secretariat estimate included in Table 1 incorporated a small arbitrary adjustment to take account of these factors.
The Secretariat had prepared an alternative estimate on the assumption that these factors would continue to influence the course of demand though less strongly than in the course of the past decade. This led to the following figures for 1965:
|
|
Million tons |
|
Newsprint |
4.60 |
|
Other papers and board |
16.76 |
|
TOTAL, PAPER AND BOARD |
21.36 |
The OEEC representative gave an account of a projection to 1965 recently carried out by the Pulp and Paper Committee of the OEEC, based on historical trends and assuming a 3 percent annual rise in gross output, which yielded figures close to those of the alternative Secretariat estimate.
Comments by other West European participants demonstrated general agreement that the two Secretariat estimates might be regarded as reasonable lower and upper limits of the likely trend in demand in Western Europe.
OCEANIA
The Australian participant agreed that the estimates for Oceania represented the right order of magnitude, but suggested that for the year 1975 the newsprint estimate might prove slightly low and that for paperboard somewhat high.
THE FAR EAST
The Consultation recognized the validity of arguments submitted by the Asian participants criticizing the figures in the Secretariat paper as being serious underestimates, but hesitated to pronounce themselves on how far these figures should be augmented.
Japan
The Japanese participants pointed out that the economic growth rates assumed (4.5 and 4 percent per caput the current and succeeding decades respectively) were substantially lower than those provided for in the current development plan.
Current plans for paper production in Japan envisaged an output of 5.4 million metric tons for 1966 and 10.5 million metric tons by 1975 compared with the current (1958) production of 3.14 million metric tons.
These plans correspond to per capita income growth rates of approximately 5.65 percent to 1965 and 5.3 thereafter until 1975. Doubt was expressed by the Consultation as to the possibility of maintaining these high growth rates through two decades.
Far East, excluding Japan and Mainland China
The Indian participants pointed out that government and industry plans in India provided for a much more rapid rise in paper production and consumption than would correspond to income growth and, hence, than provided for in the Secretariat estimates. This was a deliberate policy to provide the paper necessary to fulfil the literacy campaign on which India was engaged. Similar factors certainly influence, though perhaps to a lesser degree, the trend of demand in the rest of this sub-region. India's plans envisaged a domestic paper production by 1965 of 150 thousand tons of newsprint and 700 thousand tons of paper and board. In the ensuing decade, to 1975, an annual rise in production of the order of 10 percent was foreseen.
The Consultation agreed that the estimates for the Far East (excluding Japan and Mainland China) required some upward revision. It noted that the Conference on Pulp and Paper Development in Asia and the Far East, sponsored by FAO and by the Economic Commission for Asia and the Far East (ECAFE) and which was being held in Tokyo in 1960 at the invitation of the Japanese Government, would provide an opportunity for improving these estimates and getting a clearer picture of prospects in the region.
AFRICA, NEAR AND MIDDLE EAST
No comments were offered by participants on the estimates for these two regions. The Secretariat pointed out that the estimates for the Near and Middle East were in conformity with the projections included in the Mediterranean Development report, recently prepared by FAO.
U.S.S.R., EASTERN EUROPE AND MAINLAND CHINA
The Secretariat explained that the relationship between income growth and the rising paper consumption was very different in countries with planned economies from that which pertained in free enterprise economies. Planned production figures (which closely approximate to consumption) covering the next few years were available for these regions; these plans fell far short of the expansion that might be expected to attend the planned paper production figures and had inferred therefrom a theoretical economic growth rate - in each case considerably below either past or projected income growth rates. This theoretical economic growth rate, adjusted downwards for the decade 1965 to 1975 in the case of the U.S.S.R., had then been used to project paper requirements for 1965 to 1975. The Consultation endorsed this procedure as being the most rational way to arrive at an assessment of likely trends in demand for these regions. It noted that there might conceivably be a "natural" level of consumption appropriate to a given income in countries with fully planned economies, somewhat lower than the "natural" level in free enterprise economies at corresponding income levels. It noted that the very high future paper requirements in Mainland China indicated by the Secretariat estimates represented extremely ambitious targets, the realization of which would depend upon the ability of the Chinese to produce or import the necessary equipment and develop the required raw material resources.
The Consultation requested the Secretariat to take account of the foregoing observations in revising the Secretariat papers for publication. It observed that the review it had conducted of the Secretariat estimates, region by region, led to the conclusion that the global estimates of the likely trends in world demand for paper and board by the years 1965 and 1975 could be broadly accepted. A world requirement of 88 million tons around the year 1965 and of 134 million tons a decade or so later, it was noted, represented an expansion rate somewhat lower than that which had prevailed in the recent past.
Pulp requirements
13. Having reviewed the estimates of future paper and board demand submitted by the Secretariat, the Consultation considered the pulp requirements implied by these estimates. The Secretariat invited comment on the conversion factors and waste paper recovery rates which had been assumed.
North American and Scandinavian participants indicated that a fibre requirement of 1.06 air dry tons on average per ton of paper and paperboard was slightly higher than current practice in their areas. Having regard to practice in Western European pulp deficit countries and likely future trends, this figure was considered acceptable for projecting pulp requirements in North America and Western Europe. For other regions of the world the figure of 1.08 tons was accepted as a reasonable average for the regions as a whole.
14. The Consultation discussed some of the factors likely to influence waste paper recovery rates in the future. It was pointed out that, in several countries, a greater relative use of virgin fibre was required to meet consumer preferences. The development of new types of paper incorporating plastic and other materials had added to the difficulty and cost of sorting and cleaning for repulping. On the other hand, in most regions a relatively more rapid expansion was foreseen in the output of those paper categories in the production of which waste paper can be used in substantial amounts. The quantities of waste paper used depended on the cost of virgin fibre relative to that of waste paper; a sustained change in this relative cost might lead to higher or lower recovery rates.
On balance the Consultation believed that, for North America, Western Europe and Oceania, it would be reasonable to assume a continuation of current recovery rates. In other regions, where rising paper consumption per caput will greatly facilitate salvage, a rise in the recovery rates must, as indicated in the Secretariat paper, be assumed. The Consultation therefore, requested the Secretariat to re-calculate future pulp requirements on the basis of the following assumed waste paper recovery rates (Table 2)
TABLE 2. - ESTIMATED WASTE PAPER RECOVERY RATES: PERCENT OF PAPER CONSUMPTION
|
Region |
1955 |
1965 |
1976 |
|
North America |
26 |
26 |
26 |
|
Latin America |
20 |
21 |
23 |
|
Western Europe |
25 |
25 |
25 |
|
Eastern Europe |
22 |
23 |
24 |
|
U.S.S.R. |
14 |
16 |
18 |
|
Africa |
9 |
10 |
12 |
|
Near and Middle East |
8 |
9 |
10 |
|
Far East, excluding Japan and Mainland China |
17 |
18 |
18 |
|
Japan |
25 |
28 |
29 |
|
Mainland China |
12 |
14 |
16 |
|
Oceania |
12 |
12 |
12 |
Capacity
15. The Consultation turned to a discussion of Secretariat Paper FAO/WPPC-59/3: "Meeting Future Needs", taking up first the definition of capacity. It became evident in the course of the discussion that the capacity data submitted to the Secretariat and incorporated in the Secretariat Paper had been compiled on bases that differed from country to country. Some of the difficulties of arriving at an agreed concept of capacity for pulp and paper mills were touched upon, e. g., the number of days worked per year, the production programs (in the case of plants capable of producing a variety of papers), the quality of the pulp or paper produced, efficiency of operations, etc. The United States participants reported that agreement had been reached in the United States pulp industry on a definition of capacity, that figures had been collected and analyzed for many years past and had proved extremely useful. Similarly, capacity figures had been collected from paper mills, though the industry had recently decided to bring its definition of capacity into closer agreement with that used in the pulp industry, figures hitherto collected having been shown to understate production possibilities. In Canada also, detailed capacity figures on a satisfactory basis have been collected for many years.
The Consultation considered it highly desirable that a clear, and if possible internationally comparable, definition be established in all countries. The United States and Canadian definitions were made available to the Consultation and the Secretariat undertook to circulate these to all participants.
The Consultation learned with satisfaction that the Pulp and Paper Committee of OEEC is convening a Working Party specifically to consider this problem for Western European countries. The problem, however, was not limited to North America and Western Europe and the Consultation requested FAO, once it has been advised of the outcome of the discussions of the OEEC Working Party, to take whatever steps are possible to foster international agreement on definitions.
16. The Consultation next considered the validity of the presentation in the Secretariat paper of two concepts of capacity: rated capacity, representing maximum production possibilities under existing conditions; and normal capacity, which not only takes into account the fact that all-out capacity is unlikely to be realized in practice but which also makes allowance for a marginal reserve capable of absorbing temporary unexpected increases in demand as well as unforeseen set-backs in the production schedule. The Consultation agreed that, in the pulp and paper industries, as in other basic industries, failure to allow for a marginal reserve was as dangerous for market stability as an excessive reserve capacity. It was observed that, since the war when demand was buoyant, the industry in several countries had operated at close to rated capacity (as defined above) for prolonged periods; this was in marked contrast with prewar experience, and had undoubtedly encouraged investors, led to the multiplication of capacity expansion plans, and contributed to current excess capacity in North America and Western Europe. The Consultation recommended that, in the light of the discussion which had taken place on rated and normal capacity, a notional marginal reserve of 5 percent for both the pulp and paper industries (i. e., a normal operating ratio of 95 percent) should be adopted for the Secretariat presentation with the understanding that this was a provisional figure. It was recognized that for many countries a marginal reserve of 5 percent was an inadequate allowance and that it might prove necessary in future studies to assume lower operating rates in certain regions.
17. Taking into account new information which had reached the Secretariat since the preparation of the Secretariat paper, and following individual consultations between the Secretariat and participants, the Consultation agreed on the estimates of existing rated capacity and capacity expansion plans incorporated in Table 3.
Participants expressed their satisfaction at the opportunity this Consultation had afforded for a free and frank discussion of problems relating to capacity and which had led to the establishment of the estimates included in this Table. The Consultation expressed the hope that FAO provide similar opportunities in the future for a periodical exchange of information on capacity and participants indicated their willingness to do what they could to have the necessary data made available.
TABLE 3. - ESTIMATED EXISTING CAPACITY AND CURRENT EXPANSION PLANS, BY REGION
18. The Consultation noted that a comparison of rated capacity and production figures in 1958 showed operating ratios of 84 percent in North America and 83 percent in Western Europe for the newsprint industry, and of 82 percent in North America and 89 percent in Western Europe for other sectors of the paper industry. In the rest of the world the operating ratio averaged 90 percent for newsprint and 85 percent for other sectors.
Allowing 5 percent as a marginal reserve capacity, these figures indicated that in relation to current demand there existed in the year 1958 in the several regions excess capacity as follows in Table 4.
TABLE 4. - ESTIMATES OF EXCESS CAPACITIES1 IN THE PULP AND PAPER INDUSTRIES IN 1958
|
|
North America |
Western Europe |
Rest of the world² |
Total |
|
in million metric tone |
||||
|
Newsprint |
0.97 |
0.47 |
0.09 |
1.53 |
|
Other paper and board |
4.36 |
0.98 |
0.72 |
6.00 |
|
Total paper and board |
5.33 |
1.45 |
0.81 |
7.69 |
|
Pulp³ |
4.90 |
1.5 |
0.40 |
6.8 |
¹ Normal capacity (i.e., 95 percent operating ratio) lose actual production.² Figures for the rest of the world are largely conjectural; they have been calculated on a basis of a 5 percent marginal reserve, admittedly an inadequate margin in many areas outside Europe and North America.
³ See qualification in the text.
The existence of an estimated 7 ½ million tons excess capacity in the world paper and board industry in 1958 would suggest that industry in the preceding few years had seriously overestimated the recent trend in consumption. It should be borne in mind, however, that the 1957/58 check in economic growth and hence in paper consumption could not have been foreseen at the time when plans for recent expansions were initiated. Had paper consumption since 1956 followed the trend of preceding years, over 3 million tons more paper might have been consumed in 1958. From this standpoint, the degree of overexpansion can be fairly regarded not as 7 ½ million tons, but as 4 ½ million tons still a substantial figure.
As regards the excess capacity indicated for pulp, the Consultation drew attention to the fact that a substantial proportion of the excess shown represented capacity in integrated mills which is not normally diverted to the market.
TABLE 5. - BALANCE BETWEEN PROJECTED NORMAL CAPACITY AND PROJECTED 1965 DEMAND
|
Region |
New-sprint |
Other and board |
Total paper |
Paper pulp |
|
|
in million metric tons | |||
|
North America |
+ 0.43 |
- 1.40 |
- 0.97 |
- 0.70 |
|
Western Europe |
- 0.31 |
+ 0.08 |
- 0.23 |
+ 1.66 |
|
Subtotal |
+ 0.12 |
- 1.32 |
- 1.20 |
+ 0.96 |
|
Latin America |
- 0.44 |
- 0.21 |
- 0.66 |
- 0.20 |
|
Africa |
- 0.12 |
- 0.36 |
- 0.48 |
+ 0.14 |
|
Near and Middle East |
- |
+ 0.13 |
+ 0.13 |
- 0.26 |
|
Far East |
- 0.25 |
- 0.13 |
- 0.38 |
- 0.80 |
|
Oceania |
- 0.23 |
- 0.25 |
- 0.48 |
- 0.10 |
|
Subtotal |
- 1.04 |
- 0.82 |
1.86 |
- 1.22 |
|
Rest of the World |
+ 0.02 |
- 0.10 |
- 0.08 |
+ 0.08 |
|
TOTAL |
- 0.90 |
- 2.24 |
- 3.14 |
- 0.18 |
NOTE: Indicated surplus (+) or deficit (-)
TABLE 6. - COMPARISON OF CURRENT AND ESTIMATED 1965 BALANCES FOR PAPER AND PULP IN CERTAIN REGIONS
19. The Consultation next considered the situation that might arise in 1965 if demand in each region followed the trend indicated by the Secretariat estimates, taking into account existing capacity and capacity expansion plans as set out above, but making no allowance for any further expansions that might take place. A comparison of estimated 1965 demand and normal capacity led to the notional balances for newsprint, other paper and board and paper pulp in the several regions indicated Table 5.
In arriving at the balance for Western Europe, the alternative Secretariat estimate of demand in 1965 was selected (see pare. 12). The Consultation noted that for the current pulp and paper deficit areas, whose expansion plans in general covered the period up to 1965, the aggregate deficit in newsprint as compared with 1967/58 seemed likely to show little change, that for other paper and board would decline by about 200,000 tons, while the pulp deficit would rise from 450,000 tons to 1.22 million tons as shown in Table 6.
The Consultation considered that these estimated regional balances might lead to aggregate net import requirements in 1965 by these regions as follows:
|
Newsprint |
Other papers and board |
Total paper and board |
Paper pulp |
|
1.04 |
0.79 |
1.83 |
1.13 |
If it is assumed that these requirements are met by net exports from North America and Western Europe approximately in the proportions that have recently prevailed, this would signify net exports from these two regions in 1965 as follows in Table 7.
TABLE 7. - ESTIMATED NET EXPORTS FROM NORTH AMERICA AND WESTERN EUROPE IN 1965
|
Region |
Newsprint |
Other paper and board |
Total paper and board |
Paper pulp |
|
in million metric tons |
||||
|
North America |
0. 92 |
0.26 |
1.18 |
0. 52 |
|
Western Europe |
0.06 |
0.70 |
0.76 |
0.61 |
To satisfy internal demand and to provide for these net exports these two regions would by 1965 require a rated capacity (assuming an operating ratio of 95 percent) as indicated in the following Table. This table also reproduces figures of currently planned rated capacity and thus gives, by deduction, an estimate of apparent additional capacity requirements.
TABLE 8. - APPARENT RATED CAPACITY REQUIREMENTS IN NORTH AMERICA AND WESTERN EUROPE AS COMPARED WITH CURRENT PLANS
|
Region and Commodity |
Existing and currently planned |
Required |
Apparent additional requirements |
|
in million metric tons |
|||
|
North America |
|||
|
Newsprint |
9.20 |
9.72 |
0.52 |
|
Other paper sand board |
35.77 |
52 |
1.75 |
|
SUBTOTAL |
47.97 |
47.24 |
2.27 |
|
Paper pulp |
34.97 |
38.65 |
3.68 |
|
Western Europe |
|||
|
Newsprint |
4.52 |
4.91 |
0.39 |
|
Other papers and board |
17.72 |
18.37 |
0.65 |
|
SUBTOTAL |
22.24 |
23.28 |
1.40 |
|
Paper pulp |
19.69 |
19.69 |
- |
If no further additional paper and board capacity were added by 1965 in North America both sectors of the industry would be operating at their maximum capacity; alternatively if a reserve capacity of 5 percent were provided for, 520,000 tons of additional newsprint capacity and 1.75 million tons of capacity in the other sectors would be needed. So far as paper pulp is concerned, the additional requirements shown are subject to a number of qualifications; in particular, the possibility that substantial capacity for dissolving pulp may be devoted to the production of paper pulp. In Western Europe there would appear at present to be little margin for an expansion of paper pulp facilities and only limited scope for additional expansion in newsprint and other paper and board. Moreover, changes in operating schedules may lead to an upward revision of the estimates of existing rated capacity.
TABLE 9. - TENTATIVE PRODUCTIONS/CONSUMPTION BALANCE FOR 1965
20. The Consultation emphasized that undue importance should not be attached to the figures which had been arrived at, since these were largely hypothetical, resting on a series of successive assumptions and subject to explicit qualifications. Nevertheless, it believed that the exercise which it had carried out had been most useful, since it had clearly established:
(a) that expansion plans already afoot in the pulp and paper industry were sufficient to meet the major part of the increase in demand which may be expected up to 1965;(b) the need to keep both demand trends and capacity development under continuous review.
21. So far as the presently deficit regions are concerned, the Consultation observed that the limited rise in net import requirements envisaged was conditional on the realization of ambitious current expansion plans (which connoted heavy investment programs), and did not allow for special government measures in certain of those regions which might cause paper requirements to rise more rapidly than the Consultation had assumed. In the developing regions, therefore, sustained efforts would be necessary if the rise in import requirements were to be kept within the limits imposed by the ability of those regions to import. Otherwise, consumption might have to be deliberately restricted, and economic, educational and cultural progress in those regions would be hampered.
22. Having concluded its review of prospects for 1965, the Consultation considered that the tentative supply pattern thus established, while subject to all the qualifications explicitly stressed in this report, nevertheless represented the most reasonable assessment it was possible to make with the information presently available of the world production/consumption balance as it is likely to develop by 1965. This tentative supply pattern is shown in Table 9.
Raw material supply
23. The Consultation noted that the long-term upward trend in consumption of pulp and paper might in some areas give rise to problems of raw material supply. Nothing is yet known, of course, of the likely trend in paper and board capacity during the decade 1965 to 1975, but the Consultation briefly reviewed, region by region, the possibility of industry obtaining the fibrous materials which would be required to satisfy demand as projected to 1975. It noted that improved utilization of long-fibres and various technical developments in the pulp industry will serve to reduce dependence on long-fibred material by permitting a greater use of short-fibred material derived from broadleaved woods, bagasse and agricultural residues, and that this trend would to some extent mitigate the supply problem in areas deficient in conifers.
In North America, recent exhaustive surveys (Outlook for Canadian Forest Industries and Timber Resources for America's Future) appeared to confirm that no major problems were likely to arise by 1975. In Western Europe, a recent survey carried out by the European Forestry Commission of FAO seemed less reassuring, since only a modest increase in total industrial wood output was foreseen to 1970 - considerably less, in fact, (apart from exports and imports) than would be required to meet the extra pulpwood needs arising from the projected increase in demand. Though the Commission itself had noted that its estimates of future output were conservative, and that there were many elements of flexibility in Europe's wood supply, the Consultation foresaw the need for intensive efforts in the coming years if the longer term needs - to the end of the century - of industry were to be met. Though considerably more use is to be made in Eastern Europe of non-wood fibres, felling forecasts and pulping capacity expansion plans indicate that serious problems may arise in covering pulpwood needs.
Latin America has ample resources of short fibre, and though in the short run difficulties may be experienced in satisfying long fibre needs these may eventually be overcome by supplementing natural conifer resources with plantations. In central and south Africa, short fibre resources are ample and extensive planting of conifers seems likely to take care of long fibre needs; the fibrous materials available in North Africa, however, are insufficient and limited to esparto, eucalypts, reeds, bagasse and other agricultural residues. The Near and Middle East is chronically short of fibre and, in spite of the use of non-wood materials and the limited forest resources not yet exploited, only extensive planting can provide a basis for long-term expansion of domestic pulp production.
Many countries in the Far East already experience difficulties in fibre supply. The industry in Japan is confident that its future needs can be largely met from forest resources still untapped and through increasing use of hardwoods, though a continuing need of pulpwood imports is foreseen; energetic afforestation programs are under way. In India, the industry is already based mainly on non-wood fibres, principally bamboo; a greatly increased use of bagasse is foreseen. Even so, fibre supply is likely to remain the principal preoccupation of the pulp industry in that country. In Oceania, the pulp industry is presently based on conifer plantations in New Zealand and on eucalypts, supplemented by long-fibre pulp imports, in Australia. Planting programs under way or being contemplated should secure the long-term raw material basis of the industry.
The U.S.S.R. has no shortage of suitable fibres, since besides possessing the world's largest reserve of conifers it has large areas of unexploited broadleaved forest and a great variety of non-wood fibres. Mainland China, deficient in forests, makes extensive use of straw, bamboo and other non-wood materials, the long-term outlook is good, since very large afforestation programs are under way.
24. Concluding its brief review of the long-term supply problem, the Consultation noted that difficulties already existed, or might arise by 1975, in Western and Eastern Europe, in the Near and Middle East and in areas of the Far East. Because of the time necessary for measures to raise forest output to take effect, the Consultation emphasized the importance of making long-term plans to secure the industry's future raw material supplies. It further requested the Secretariat to draw the attention of those concerned with forest policy to the raw material implications of the demand projections contained in this report.
Investment
25. The Consultation noted that the demand projections not only raised questions of future fibre availabilities, but implied heavy investments in industry. The rise in regional and world demand foreseen for the decade 1955/65 corresponds to the installation of additional industrial capacity at an average annual cost (at current prices) of more than a $1,000 million. In the ensuing decade, annual investment requirements may rise to an average of some $1,500 million (again at current prices). These figures do not include the substantial investment that will be necessary to develop the fibrous material resources. Over the two decades, roughly half of this investment would be required in North America and Western Europe. It is in the deficit regions, however, that investment needs will rise most rapidly. In Latin America, for example, approximately $65 million would be required annually up to 1965 on average, and $120 million annually between 1965 and 1975. It thus seems that, having regard to the limited capital resources available in developing countries and the competing claims on those limited resources, there will be both scope and need for investment from overseas.
International trade
26. Developments in international trade in pulp and paper were reviewed by the Consultation on the basis of Secretariat Paper FAO/WPPC-59/4: "Trends in Pulp and Paper Trade" and accompanying basic tables.
It noted that international trade in pulp and paper had grown to the point where, at close on $3,000 million, it accounts for over 3 percent by value of total world trade; this compares with less than 5 percent for iron and steel, 10 percent for all fuels; and 16 percent for all trade in food.
Trade in pulp and paper plays a vital role in the economies of the major pulp-and-paper-exporting countries, accounting, for example, for one fifth by value of all exports from Canada, one fourth from Sweden, and nearly one half from Finland. It is also of vital importance to the deficit regions and there are few countries in the world that do not depend in some degree on imports to meet their essential needs.
During the past decade, determined efforts have been made in many of these countries to increase their domestic production of paper. As a consequence, the dependency on imports in these regions has fallen considerably, as is shown in Table 10.
TABLE 10. - PAPER IMPORTS AS PERCENTAGES OF CONSUMPTION
|
Region |
1946/48 |
1956/57 |
|
Latin America |
54 |
31 |
|
Africa |
89 |
62 |
|
Near and Middle East |
70 |
61 |
|
Far East, excl. Japan |
64 |
54 |
|
Oceania |
57 |
38 |
Nevertheless, in spite of the steps taken to increase their domestic supplies, net imports of paper into these regions have risen by 40 percent to 2 million tons over the last decade, while net imports of pulp have more than doubled, now exceeding 600 thousand tons.
27. The Consultation noted that in recent years the countries with fully planned economies had participated increasingly in international trade in pulp and paper. In 1958, for example the U.S.S.R. and Eastern Europe exported close on 300,000 tons of both pulp and paper. These exports, however, were balanced by pulp and paper imports of roughly the same order. The Consultation noted that information available to the Secretariat suggested that net exports availabilities in these areas on a scale likely to affect world market stability were not likely to arise in the coming years, having regard to the rapidly rising domestic requirements in those regions.
28. The upward trend in interregional trade in the postwar decade has been accompanied by rapidly expanding intraregional trade in North America and Western Europe. Thus, the total level of world trade in wood pulp now stands at 7 ½ million tons, as compared with 4 ½ million tons a decade ago and 5 ½ million tons before the war, while world trade in paper and board has reached over 10 ½ million tons, compared with 6 ½ million tons a decade ago and 6 million tons before the war.
29. Several participants expressed the view that current trends towards economic integration in Europe and elsewhere might eventually lead to significant changes in the trade flows described in the Secretariat paper. Participants from countries associated with both the European Economic Community and with the "Outer Seven" pointed out that the arrangements contemplated or already initiated were in no way intended to lead to the establishment of "closed economies" but rather to serve as steps towards an expanding world trade. This process would be accelerated by the rising requirements which would flow from the economic growth that economic integration was expected to foster. Other participants expressed their gratitude for the explanation afforded. The Consultation considered that it might be useful to review from time to time the effects on trade in pulp and paper of progress towards economic integration.
Future work of FAO in pulp and paper
30. The Chairman drew attention to the fact that discussions to date had brought to light a number of problems which called for periodic international consultation and continued study on an international plane, problems which hitherto had not received the attention at the international level warranted by the growing importance of the industry and the role it was called upon to play in contributing to rising welfare. He instanced, in addition to the recommendations set out in paragraph 11 of this report, the need for opportunities for international discussion, leading perhaps to international agreement, on problems of conversion factors and of defining capacity, for the collection and analysis on a world basis of information relating to existing capacity and capacity expansion plans, and for the periodic examination of medium- and long-term prospects for the industries, based on available information concerning demand and capacity trends. These, and other problems which subsequent discussions might reveal, required, in the Chairman's estimation, an intensification of FAO's work in pulp and paper.
The Chairman's views were unanimously endorsed by the participants, and the Consultation strongly recommended that the Director-General of FAO make appropriate provision for strengthening FAO activities in regard to pulp and paper in formulating future work programs. In developing its program, FAO should seek the help of national organizations and representatives of the industry, and participants had every confidence that this would be forthcoming. FAO's activities in pulp and paper should, as heretofore, be developed in full co-operation with other international agencies concerned to avoid duplication of effort. The representatives of UNESCO and OEEC had every confidence that their organizations would co-operate fully with FAO, affirming that such collaboration would prove of mutual advantage.
Many participants paid tribute to FAO's work in pulp and paper over the last decade as exemplified by the work of the Latin-American Advisory Group, and instances were cited of the valuable direct assistance which FAO had afforded Member Governments. The Consultation welcomed this evidence of the essential soundness of FAO's approach, noting that it had been found necessary restrain doubtful projects as well as to encourage viable projects.
The Consultation further recommended that FAO should establish an Advisory Group on Pulp and Paper, consisting of a small number of pulp and paper leaders, representing different regions of the world, to furnish guidance on the development of these activities. Participants believed that such an Advisory Group could be so constituted as not to require FAO to cover the cost of attendance of members.
The Assistant Director-General of FAO in charge of the Technical Department, undertaking to convey to the Director-General the views of participants, said that the importance of pulp and paper was fully recognized since pulp and paper, besides furnishing materials essential to cultural progress, were very relevant to the improvement of food production and distribution, and thus had a part to play in FAO's Free the World from Hunger campaign.
The Director of the Program and Budgetary Service explained the exigencies of FAO's budgetary procedures. He believed that pending the availability of regular program funds (which would be subject to Conference approval) a modest start might be effected by using any special resources that may be placed at FAO's disposition.
It was decided that the report of this Consultation be placed before the next session of the FAO Conference at Rome in November 1959, and participants undertook to see to it that representatives of their governments were properly briefed regarding their views in this matter and their desire for an expansion of FAO activity in pulp and paper in the budget for 1962/63, if not before.
ARGENTINA:
Umberto Pomilio, Director, Celulosa Argentina, Sindacato Celulosa Pamilio
AUSTRALIA:
Rodney Wilton Henry, General Manager, Australian Newsprint Mills Ltd.
BRAZIL:
Oscar Lorenzo-Fernandez, Co-ordinator, Pulp and Paper Study Group Development Council
CANADA:
Ian B. Chenoweth, Canadian Pulp and Paper Association
Robert M. Fowler, President, Canadian Pulp and Paper Association
FINLAND:
Johan Otto Söderhjelm, General Director, Central Association of Finnish Wood-working Industries
FRANCE:
P. Germain, Président, Union Syndicale des Fabricants Français de Pâte à Papier
GERMANY FEDERAL REPUBLIC OF:
Horst Miethammer, Director Aschaffenburger Zellstoffwerke
Ernest Robert Vogt, Representative of the German Pulp and Paper Association
INDIA:
Amar Nath Kapur, Development Wing, Commerce and Industry Ministry
Vishnu Prasad Podder, Works Manager, Dalmianagar
ITALY:
Vincenzo Amici, Technical Director, Ente Nazionale Cellulosa e Carta
Alfonso Froncillo, Conseiller, Direzione Generale Economia Montana e Foreste
Giorgio Schirillo, Ente Nazionale Cellulosa e Carta
JAPAN:
Ktasumi Ashina, Adviser, Japan Paper and Pulp Association; Liaison Manager, Jujo Paper Manufacturing Co.
Motoki Matsunaga, Executive Director, Japan Paper and Pulp Association
NORWAY:
Olav Trygve Jarlsby Managing Director, Saugbrugsföreningen
SWEDEN:
Ewert Landberg, Managing Director, Swedish Paper Mills Association
Lars Sjunnesson, Director, Swedish Cellulose Association
UNION OF SOUTH AFRICA:
Francis Seymour Laughton, Under-Secretary for Forestry
UNITED KINGDOM:
Sir Herbert Hutchinson, Director General, British Paper and Board Makers' Association
UNITED STATES OF AMERICA:
Robert O'Connor, Executive Secretary, American Paper and Pulp Association
James J. Ritchie, Executive Director, U.S. Pulp Producers Assoc. Inc.
Walter W. Sohl, Second Secretary of U.S. Embassy, Rome, Italy.
Gabriel J. Ticoulat, Senior Vice-President, Crown Zellerbach Corp., San Francisco, Calif., U.S.A.
P. Lawson Turcotte, President, Puget Sound Pulp and Timber Co., Bellingham, Wash., U.S.A.
URUGUAY:
Giorgio Diena, Ing. Pamer S.A., Montevideo, Uruguay
OEEC:
Ragnar Lagergren, Chairman, Pulp and Paper Committee, OEEC, Paris, France.
UNESCO:
Alfredo Picasso-Oyague, Division of Free Flow of Information, UNESCO, Place de Fontenoy, Paris, France
