The Forest Products Industry

The Forest Products Industry contributes significantly to the Nation's economy and employment base and accounts for 7 percent of national manufacturing output.3 According to the American Forest and Paper Association (AFPA), its membership posted recent sales of about $230 billion per year4 at 550 mills employing 1.6 million  people  in  46 States.5 Major end-use markets of the Forest Products Industry include new construction (primarily residential housing), remodeling and repair, publishing and office products, and converted paper and paperboard (cartons, bags, boxes, and containers). The Industry exported $7 billion worth of wood products and $11 billion worth of paper products in 1994.6

The pulp and paper industry is a major subgroup of the Forest Products Industry. The North American pulp and paper industry is frequently referenced in a global business context. Newsprint and pulp are two very important commodities of both the U.S. and Canadian forest products industries. In general, the U.S. and Canadian forest product industries share many similar market and manufacturing characteristics. Both industries appear also to employ the manufacturing machinery of a key set of vendors and have a high degree of commonality in processes and procedures. Many of the largest forest product companies have important operations in both the United States and Canada, with a number of international headquarters located in Canada.

On closer inspection, however, these markets are not totally seamless. Dissimilarities in government policy, energy resources, and raw material availability, as well as other factors introduce distinctions between the industries in the two countries.

U.S. and Canadian mills combined supply about 36 percent of the world's paper.7 The Canadian pulp and paper industry registered recent annual sales of $29 billion, making it the country's largest trade contributor.8 The total primary energy demand of the Canadian pulp and paper industry was about 750 trillion Btu in 1994. By comparison, the total first-use energy (formerly referred to as primary consumption) by the U.S. pulp and paper industry measured by the Energy Information Administration (EIA) in 1994 was 2,665 trillion Btu.9 Company-wide sales of U.S. pulp and paper industry participants are estimated at $110 billion.10

Wood products account for approximately 47 percent of the industrial raw material manufactured in the United States. Like all forest products, they undergo the first stages of manufacturing as harvested lumber. From an energy perspective, initial operations center around four primary product categories-sawed lumber, primary engineered wood  products  (i.e., plywood and panels), pulpwood and fuelwood-followed by a key group of secondary products. Secondary products include flooring, siding, molding, and other products characterized by finish-milling. An extended group of secondary wood processors includes manufacturers of furniture, mobile homes, musical instruments, boats, cartons, pallets, transmission poles, etc. A common trait shared by these manufacturers is their use of the commodity wood products (provided by primary wood product or key secondary wood product suppliers) to make durable goods or value-added nondurable goods. Larger quantities of wood are handled by primary wood processors. Consequently, from an energy perspective, more wood fuel and wood residue/by-product fuel is utilized by these businesses than is the case with other processors, sometimes called secondary mills.

Primary wood processors directly access the fiber supply resource base, either from owned timberland or on a con tractual basis from a well-established network of timber owners and wood suppliers. The large volumes of wood involved in these transfers create a favorable cost basis for primary processors. The favorable cost basis extends to the use of roundwood for fuel and supply by vendors of hogged fuel.11

The Forest Products Industry uses wood waste as fuel for producing steam and electricity to support manufacturing. Although it is only the third-largest consumer of electricity, the Forest Products Industry self-generates more electricity than any other U.S. manufacturing group. The paper and allied products subgroup self-generates  the  largest  percentage  of  its  total elec-tricity requirement of any major industrial sector (Figure FE1).

The 2,665 trillion Btu consumed by the pulp, paper, and paperboard subgroup in 1994 represented 3 percent of total U.S. energy consumption. The majority of this energy  was  supplied by domestic fuel sources, with 56 percent supplied from within the industry.12 These factors are highly significant from an energy security standpoint. Canada's forest products industry has a comparable level of self-sufficiency.

Figure FE 1. The Largest U.S. Electricity-Consuming
Industries and Their Generation, 1994

Source: Energy Information Administration, Manufacturing Consumption
of Energy 1994, DOE/EIA-0512(94) (Washington, DC, December 1997).