Boxes: Packaging & Packing

INDUSTRIAL CODES

NAICS: 32-2211 Corrugated and Solid Fiber Box Manufacturing, 32-2212 Folding Paperboard Box Manufacturing, 32-2213 Setup Paperboard Box Manufacturing, 32-2214 Fiber Can, Tube, Drum, and Similar Products Manufacturing, 32-2215 Nonfolding Sanitary Food Container Manufacturing

SIC: 2652 Setup Paperboard Boxes, 2653 Corrugated and Solid Fiber Boxes, 2655 Fiber Cans, Drums & Similar Products, 2656 Sanitary Food Containers, 2657 Folding Paperboard Boxes

NAICS-Based Product Codes: 32-221101, 32-221102, 32-221103, 32-221104, 32-221105, 32-221106, 32-22110Y, 32-221201, 32-221202, 32-221203, 32-221204, 32-221205, 32-221206, 32-22120Y, 32-221301, 32-22130Y, 33-22141, 32-22143, 32-2214W, 32-22131, 32-22133, 32-22135, and 32-2213W

PRODUCT OVERVIEW

Most products, excepting only large equipment and durable goods of substantial size, reach customers packaged in boxes. Boxes also hold goods temporarily when people or institutions move. Boxes are so overwhelmingly present in every area of life—the home, office, warehouse, retail store, hospital, school, and factory—that we tend no longer to see them. In a manner of speaking we look through them and see the products they hold. We acknowledge their utility by saving them in attics and basements for shipping a package or storing goods we do not immediately need. Boxes are made of natural and predominantly softwood fibers. They enjoy high rates of recycling; some categories of boxes are made predominantly of fibers recovered from old newspapers obtained by municipalities in separate waste collections.

As outer containers used in transporting goods in bulk, boxes function as packing. When boxes hold a single object or quantity of product, they function as packaging. We know packing containers as those brown boxes known as corrugated or kraft containers. Packaging boxes come in three categories of which a cereal box, a milk carton, and a small jewelry box holding a valuable ring are representative. The first is called a folding box. The cereal box itself is made of so-called food-grade paper, but its brethren used for textiles, tissue, shoes, toys, and a myriad of others are in the same category and use coarser grades of board. The milk carton belongs to the sanitary food container category under tighter regulatory control. The jewelry case is part of a category called the setup box—a type of stiff, highly decorated, and often expensive container. In addition to these objects, all of which have the requisite rectangular shape to merit the name box, we must add a category called fiber cans, tubes, and drums. Although cylindrical in form, they function the same way as their right-angled cousins.

Packaging, in a way, is a game of boxes within boxes—and the final item may be another kind of container yet. A plastic or glass bottle of aspirin may come in a folding box. Fifty or more of them will be packed in a corrugated box. The corrugated box itself will be mounted on a pallet with a number of others all sitting on a corrugated tray. The pallet itself, furthermore, may be turned into a single unit using metal or plastic strapping. Outer containers have a single function—to hold product and to carry minimal identification. Packages typically have a much more elaborate display and communication function. Some are also intended to store the product. Milk cartons are a good example as are software packages. Both sell themselves on store shelves. Milk containers store the product in the refrigerator. The software package ends up on a shelf in the office to hold disks and manuals after the software has been installed and is running on the user's personal computer.

Wood Fiber Basics

Between 40 and 50 percent of wood consists of cellulosic fibers, strong crystalline sugar polymers with no free water content and therefore not very reactive chemically. The rest of wood is hemicellulose and lignin. Both are polymers but have different structure. Chemists refer to them as diverse and amorphous polymers. They mean that these substances, unlike cellulose, cannot be collectively defined by predictable and uniform shape. When the wood comes from conifers, or evergreens, it will also have a high resin content. The paper maker must remove all three of these substances to get at the useful fiber. Cellulose is desirable because it is strong and chemically stable. Freed of binders, the fibers will align to form sheets that resist tearing or bursting, and will have fold-endurance and uniform optical properties. Fold-endurance means that a sheet, once folded, will not tend to spring back. Good optical properties means uniform coloration and ready acceptance of inks.

To make paperboard, the producer first grinds pulp-wood into fine particles and then uses either mechanical, chemical, or a hybrid process to get the fiber out. All of the processes are wet, thus the fibers are turned into a liquid slurry. Once only fibers remain, they are formed into sheets in which the cellulose fibers are uniformly oriented, which helps with folding. Bleaching may be applied to turn the board white. Drying and compression under drums produces a board or a sheet of uniform color, fiber-orientation, and thickness. The simplest process is groundwood pulping used predominantly to make newsprint. Wood is ground, moistened, and agitated until fibers separate from binders. The process results in an inferior, coarse product with low strength and inferior optical characteristics. The three types of chemical pulping are sulfite, sulfate (or kraft), and semi-chemical pulping. Sulfites are ions made of a single sulfur and three oxygen atoms; sulfates have four oxygen atoms adhering to one sulfur atom. One or the other is used because incoming wood has different chemical characteristics. Semi-chemical pulping combines mild chemical treatment with mechanical agitation to get a reasonably clean fiber.

Sulfite Pulping

This process uses coniferous trees cooked in a solution of sodium sulfite. The pulp is next bleached. The process works well on woods low in resin like spruce, fir, or hemlock. The sulfite method makes good printing and tissue papers. Sulfite paper is also used to make inner and outer liner sheets for boxes.

Sulfate (Kraft) Pulping

The sulfate process is effective on trees with high resin content. Southern pines, the most widely used raw material in large containers, have such content. The resulting product is very strong, hence the name of the process, kraft, the German word for strength, introduced as a name for the method by the German chemist, C.F. Dahl. Dahl developed sulfate pulping in 1879. The kraft process is used for packing board and other grades of coarse paper. Bleached kraft is one type of board used in both containers and in some types of higher-strength folding boxes. The process is also employed to make printing grades of paper.

Semi-chemical Pulping

In this process wood fibers are pre-treated in a chemical bath rich in sodium sulfite to soften them. Producers then employ mechanical means to separate as much fiber as possible. The process has higher yields than kraft pulping (more of input comes out as board or sheet by weight), but the method produces a weaker fiber. It leaves more binder in the product, which accounts for binders weakening the structure but increasing the yield. Semi-chemical pulps are made from hardwoods, such as birch and waste paper. The corrugated sheet between two rigid outer sheets used in brown boxes is typically made by this process. The corrugated sheet is also called corrugated medium or simply medium.

Types of Boxes

Insider talk in the boxboard industry is sometimes confusing, so some definitions may be useful. Containerboard refers both to solid fiber materials and what might be called sandwiches of solid fiber and corrugated medium. In either case such board is intended as outer packing. The boxes may be brown or white. If they are white they are still kraft but have been bleached. Confusion arises because the industry also uses the term liner-board to mean the same thing, but when people talk about liner they mean thin sheets of white or colored paper used to laminate the outside or the inside of boxes—so that the cereal box may be decorated with the most recent cartoon character or baseball slugger.

>Packing Boxes

These come in four categories. Solid fiber containers have a single stiff board. Corrugated boxes (sandwiches) come in: (1) single-wall, (2) double face, and (3) double-wall varieties. Single wall consists of a solid fiber laminated to an internal corrugated sheet. That sheet, in turn, is protected inside by a thin liner. Double face is a true sandwich, with two stiff boards separated by a corrugating medium. Double-wall boxes, the strongest, are formed by joining one or more double-face boards into a single structure. While the corrugated medium is used as a filler and is not as strong as the kraft board, its shape gives the box the ability to compress under pressure—the corrugations act as buffers.

In contrast to containerboard, which is invariably kraft paper, the material used in folding and setup boxes is called boxboard. This is confusing to industry outsiders because boxboard may be kraft. Boxboard, however, is never containerboard. Finally, bleached virgin fiber board used in liquid food containment is referred to as sanitary board.

>Setup Boxes

These packages are delivered ready-made and ready-to-fill. They are stiff boxes usually in two pieces, the box and its lid, and are decorated by the maker to the user's specifications. The lid may or may not be affixed to the box. Setup boxes are made of joined pieces of thick boards, usually of coarse boxboard typically made of groundwood pulp containing waste paper. The box is lined inside and out and may feature internal padding or structure to hold product—jewelry or candy, for instance. In its report on the industry the U.S. Bureau of the Census always uses the word rigid in parentheses when referring to setup boxes. The industry is small. Boxes of this type always serve a purpose beyond containment. They present the product. The stiff box, attractively decorated, sends a message of quality. The largest users of such boxes are producers of high-end apparel and textiles, soap and cosmetics, and confectionery. Department stores and other retailers also use such boxes to package on site upscale goods that they have sold. Setup boxes should not be confused with light-gauge boxes used to hold textiles (like a blouse or sweater) easily folded from flat pieces into a boxy shape by retail clerks. Boxes of that type are folding boxes.

>Folding Boxes

These boxes arrive at the buyer's facility as flat, pre-creased, shaped board ready to be folded into boxes on the user's machinery or, in retailing, by the retailer's employees. Measured in dollars, folding boxes are the largest packaging category whereas corrugated is the largest box category. Almost all folding boxes are laminated on the outside to sheets of printing grade paper. The boxboard may be made of virgin fibers or recycled paper depending on the end use. Food containers are invariably made of virgin fibers and conform to Food and Drug Administration (FDA) standards for food-grade paper; the fibers may or may not be bleached. Converters may print box blanks, die-cut them, and insert translucent windows into some to display the merchandise—common in the toy industry. The packager folds the flat blanks into the final shape and produces a closure by folding precut tabs or applying an adhesive. The top five consumers of folding boxes are: packagers of dry foods (e.g., cereals), canned sodas and beer (the six-pack container); frozen foods; cosmetics and medicines; paper products, including book mailers; and packagers of bakery products, butter, and ice cream. Virtually every production sector, however, makes use of folding boxes.

>Nonfolding Sanitary Boxes

These products are a relatively small portion of a larger industry called Non-folding Sanitary Food Containers. Milk cartons and identical containers holding other liquid dairy products such as juices, juice drinks, and tea, are in the box category. Other industry products—to think outside the box for just a moment—are paper cups, cylindrical food containers, paper plates, trays, and miscellaneous other paper products that come in contact with food, such as soda straws and table cloths made of paper. Shipping such containers ready-made is not economical. For this reason paper companies ship sanitary board in large rolls. The actual milk or juice container is made at or near the filling operation on packaging lines. Liquid containers are coated with hot melts, a specially formulated coating of plastic and wax. Manufacturers use virgin fibers and adhere to FDA regulations. FDA rules set the maximum levels of bacterial contamination permitted, levels usually defined in number of different colonies of bacteria.

>Round Boxes

Fiber cans, tubes, and drums are functionally identical to boxes used for bulk or final packaging. For this reason they are generally referred to as paperboard boxes. The cylindrical containers are typically composites. Their sides are made of kraft board or pressed fiberboard. The ends are made of wood, metal, or plastic. In effect, except for shape and their composite character, the materials used in cylindrical products match those of equivalent boxes. Mailing tubes are made of coarse groundwood fibers and waste paper; food-grade containers are made of virgin fiber. The largest markets for cans are frozen fruit juices and refrigerated dough products in the food category and motor oil in the non-food category. Fiber drums are widely used for bulk shipments, the three largest markets being dry chemicals, plastic compounds and resins, and dry food products shipped in bulk.

MARKET

The total market for fiber-based boxes, including cylindrical containers, was $44 billion in 2005 at the production level. These were shipments by the industry of finished products to the next level down, the final buyer or the wholesaler. Shipments in 1997 were $37.9 billion. In this eight-year period, sales increased 16 percent overall and advanced at the rate of 1.9 percent per year. The overall growth rate of the industry came in just over that of the population as a whole, which increased at the rate of 1.4 percent during this period. A visual presentation of sales performance is provided in Figure 35 by component industries.

Figure 35 shows that kraft container packaging is the dominant form that boxes take as measured in dollars and in tonnage. In 2005 corrugated shipments were $30.3 billion, folding boxes $8 billion, sanitary board $3 billion, fiber drums and related cylindricals $2 billion, and setup boxes $600 million. Of the sanitary board category, only 25 percent, approximately $750 million, were cartons for liquids; the rest of the shipments went into cups, plates, and trays. Figure 36 shows industry data in dollars for 1997 and 2005, together with annual rates of growth or decline.

The tabulation shows that only two of the industries participating in this sector had growth—corrugated and sanitary boxes. The others all experienced modest declines. Within the sanitary category, food cartons grew at a lower rate than the total industry of which they were a part.

Competition between materials on the one hand and shifts in international trade on the other explain the patterns we see displayed in the table. Corrugated boxes have only marginal competition from plastics. Plastic containers capable of delivering the same strength and durability cost much more than kraft-based products. Certain types of products can be effectively packed by putting them on cardboard trays and then shrink-wrapping the whole. Examples are canned foods. Such techniques do not work well with other more fragile products. The growth of corrugated boxes, however, has been held down by growing imports. Imported products reach our shores in corrugated boxes too, but those are made outside of the United States.

Folding boxes are most vulnerable to competition from plastics. For instance, Plastic strapping hold six-packs of canned beer or soft drinks together. Shrink-wrapping provides advantages in showing the product but it eliminates most of the board except for one sheet which is used to hold the plastic tight. A spot-check of the histories of participants in set-up box manufacturing shows that most companies began producing their boxes from paperboard, but along the way, in moves toward diversification, they have also introduced plastic boxes to sell alongside fiber boxes. In the fiber can, tube, and drum business, the market decline has been least noticeable. A market decline of 0.4 percent per year, especially in a period marked by a recession, amounts to saying that sales have been flat. Sanitary liquid cartons have held their own against plastics because they stack more tightly and take up less space overall in shipping.

KEY PRODUCERS/MANUFACTURERS

Given the dominant role corrugated boxes play in this sector, it is not surprising that leaders in the industry are principally engaged in kraft pulping. The industry is forward-integrated. Those who produce pulp and board typically also produce boxes in wholly-owned conversion plants. The top five companies have nearly two-thirds of the market. There is, however, no single dominant firm several horse-lengths ahead of the field. The leaders are shown here not in rank order of total sales—which often involve a wide array of activities—but in order of their shipments of corrugated containers in 2006. The leaders all participate in some aspect of folding box and sanitary board production.

Smurfit-Stone Container Corporation

This Chicago-based company was the result of a merger between Jefferson Smurfit Corporation and Stone Container Corporation in 1998. The company has grown by acquisition since that time—buying St. Laurent Paperboard Inc. and one of MeadWestvaco's container board plants—thus making Smurfit-Stone the leading producer in this industry with $7.2 billion in sales revenues in 2006. Like its competitors, the company operates a few mills to feed a large number of conversion plants. Smurfit-Stone reported operating four board mills and owning 39 consumer packaging establishments located near population centers.

International Paper Company

This company had sales in 2006 of $21.99 billion from producing printing papers (31.5% of total), industrial packaging (22.4%), consumer packaging (11.2%), distribution services (30.8%), forest products (3.5%), and specialty products (4.3%). Packaging was around one-third of International Paper's activity. The company operated 18 pulp mills and 94 conversion plants. Of the latter, 65 produced kraft containers. The company's combined sales in the industrial and consumer packaging categories were $7.3 billion. International Paper was founded in 1898 and is based in Memphis, Tennessee.

Weyerhaeuser Company

Founded in 1900 and based in the state of Washington, this company is also diversified with $21.9 billion in sales in 2006. Weyerhaeuser is engaged in paper production, timberlands management, wood products, and real estate. Twenty-two percent of Weyerhaeuser's revenues in 2006, $4.9 billion, came from paperboard production and box manufacturing. The company operated 13 container board plants and 100 box conversion facilities. Weyerhaeuser was also a leading supplier of liquid packaging board that it shipped to the food industry.

Temple-Inland Inc.

This is a relatively new company, but one that is built of components with deep roots. Temple Industries, founded as Southern Pine Lumber Company in Texas in 1893, and Inland Container Corporation, founded in 1925, were merged in 1983 to create Temple-Inland. The company also has a real estate and a financial component. In 2006 Temple-Inland had sales of $5.56 billion, $2.98 billion of which it earned in its corrugated operations. These consisted of five containerboard plants, a corrugated medium mill, and 67 converting plants making and selling boxes.

Georgia-Pacific Corporation

This company began in 1927 as a hardwood lumber wholesaler in Atlanta, Georgia. Georgia-Pacific became a public company in 1949 and remained public until 2005 when it was acquired, and taken private, by Koch Industries, Inc. For 2004, its last full year as a publicly-traded company, Georgia-Pacific reported sales revenues of $5.6 billion. The company operates four corrugated board mills and converts between 70 and 75 percent of the output of these mills into boxes in 25 conversion plants, selling the rest of its output to independents. The company is also a major producer of bleached boxboard for the frozen food market. Its sales in corrugated boxes in 2004 were just under $3.0 billion, and its sales in bleached board $2.2 billion.

The companies listed account for the bulk of sales in corrugated containers and portions of folding and sanitary board as well. Packaging Corporation of America (PCA), with 2006 sales of $2.2 billion, is an important factor in folding boxes, operating one semi-chemical pulp mill, two linerboard mills, and 68 conversion operations making boxes. PCA also has around 5 percent of the corrugated market. Norampac Inc., a Canadian company with a substantial U.S. production presence, is an important participant with Can$1.3 billion revenues in 2006. The company has eight board mills and 26 conversion plants. Green Bay Packaging Inc., a privately held packaging company, describes itself as "Large enough to serve you, small enough to know you." Small enough, one assumes, refers to the company's estimated sales of around $790 million, based on data reported in Manufacturing and Distribution USA. Large enough perhaps refers to Green Bay's operations in 15 states through 30 divisions. The company is a leader in folding box production and also has a 2 percent share of corrugated boxes.

Setup box manufacturing is very much the domain of small, privately held operations. ThomasNet, the online presence of Thomas Register, the directory publisher, listed 120 manufacturers participating in the business in 2007. The first four companies in ThomasNet's listing provide a feel for the size and character of leading participants. Companies listed first by ThomasNet are advertisers and may be viewed as leaders, although no rankings are available. Brimar Packaging Inc., in Avon, Ohio, fell into the $5 to $9.9 million category and employed between 10 and 49 people. Boxit Corp. of Cleveland, Ohio, had 50 to 100 employees and had been operating since 1932. Capitol Box Corporation of North Bergen, New Jersey, had 10 to 49 employees and had been producing setup boxes since 1936. Jarrett Industries, Inc., a woman-owned corporation in Owings Mills, Maryland, had sales in the $10 to $24.9 million range, employed between 10 and 49 people, and exported products to Western Europe, Africa, the Middle East, Asia, Australia, Europe, Canada, and Mexico. These producers, and others like them, typically offer boxes made of paper and plastic; some offer metal and wood boxes as well and provide special box interiors of fabric and foam familiar to all of us as the insides of jewelry boxes.

According to the Census Bureau statistics, the total U.S. fiber-box industry had 1,585 participating companies in 2002. They operated 2,664 establishments, of which 1,841 employed twenty or more people.

MATERIALS & SUPPLY CHAIN LOGISTICS

In 2006 the U.S. forestry industry harvested 15 billion cubic feet of roundwood for all purposes. Roundwood is forestry's jargon for what is generally referred to as trees. Of that total 4.4 billion cubic feet went into pulping (29.3%), the pulpwood itself divided into softwood species (60% of total) and hardwood species (40%). Virtually all containerboard and boxboard mills in the United States rely on softwood. Nearly 85 percent of softwoods seek the sun and are harvested in the South Atlantic and the South Central states, thus the region bounded to the west by Texas, to the east by Florida, Georgia, the Carolinas, and Virginia, and to the north by Oklahoma, Arkansas, Kentucky, and West Virginia. To achieve the best economies, pulp mills must be where the pulpwood is. The industry is therefore concentrated in the southern states, although some plants are present in the Northeast and in the Pacific Northwest. The most common softwood species used in box making are loblolly, shortleaf, longleaf, and slash pine. Western operations predominantly use Douglas fir and ponderosa pine.

Conversion operations, by contrast, are located in or near major population centers. As already noted, converters are very often wholly-owned operations of the paper company, but independent converters also participate in the business and large packagers also own their own conversion facilities, purchasing board directly from mills.

Recycling plays an important role in this industry. Between one-quarter and one-third of kraft mill raw materials arrive as bales of spent corrugated boxes. Temple-Inland, for example, reported that 36 percent of its inputs in 2006 came from waste products. Georgia-Pacific reported recycling rates between 25 and 30 percent. Other producers are also dependent on waste products and discuss the availability and price trends of paperstock (the industry term for paper scrap) in their annual reports. High rates of recycling are facilitated by the fact that most waste cardboard occurs in centralized locations—at retail stores and in warehouses. Recycled corrugated cardboard has always commanded the highest prices in the wastepaper trade; flattened boxes are routinely bundled in large balers owned by the distribution sector, with converters or recyclers collecting bales and eventually returning them to the pulp mills.

The folding box industry is also a high-level user of waste paper, but the fiber it uses comes from old newspapers typically assembled by municipal waste collection systems. Shredded newspapers undergo de-inking and are then converted into the grey-colored board which forms the basic material of folding boxes used in non-food applications.

DISTRIBUTION CHANNEL

The general structure of distribution in this industry may have seven or more levels. The pulp mill sells to a converter directly or to a wholesaler/trading company then sells board-stock to a converter. Here we have two or three levels. The converter sells to a packager (level 4). The packager distributes goods to a wholesaler (level 5) who sells to a retailer (level 6). The final recipient, the retail consumer, is level 7. Packing containers are also used to deliver parts and components from one manufacturer to the other, introducing additional levels.

In practice only, a relatively small percentage of board production reaches independent converters through a wholesaler/trader; wholesalers serve smaller operations. In sanitary food packaging, the food producer is usually also the converter and buys directly from the pulp mill. In such cases the number of levels involved is smaller. Relations between converters and packagers are often very close. The converter functionally serves as an extension of the packager's manufacturing activity. The converter will, for instance, print the customers' images, messages, and codes on packages and packing materials as part of die-cutting and scoring the board into box blanks. Printing operations are a large component of conversion. Large packaging operations requiring a continuous flow of product will work under long-term contracts with the converter. The converter often maintains one or more dedicated lines to serve a client.

In the distribution of boxes, the packager is the ultimate buyer. Customers downstream from the level where the product is made do not buy boxes; they buy products. The final customer rarely sees the packing (as distinguished from the package) in which goods are delivered to the retail sector unless the goods arrive by mail or by a private carrier directly to the home. Sometimes people delivering appliances in large cardboard boxes leave them at the home; more frequently they unpack the product and leave the carton in the truck.

This industry also features a reverse-distribution system in which retailers, wholesalers, municipalities, and paperstock dealers participate to return corrugated board or to acquire used newsprint for repulping. About one-third of all kraft paper has a sort of homing instinct and returns to the mill that made it.

KEY USERS

The key user of boxes is the packager. It is the packager who needs the box to protect his or her goods in transportation or to sell the product on a shelf. Another important user category is represented by moving companies. They purchase corrugated boxes for packing households and offices. The U.S. Post Office buys boxes for resale to the public as shipping containers. Businesses also purchase storage boxes of every kind—corrugated, folding, and setup—used in archival applications. A small quantity of packaging board reaches the consumer directly for packaging gifts. Gift boxes are typically purchased during the holiday season.

ADJACENT MARKETS

Generally speaking, all other forms of packing and packaging are adjacent markets to paperboard boxes. Of these, pallets are most intimately associated with boxes as the platform on which the latter are assembled and strapped for easy handling by forklift trucks in transport and warehouse operations. Most pallets are made of rough wood planks, although more expensive composite or heavy plastic pallets are also found on the market.

Glass containers compete with sanitary board. Plastics do so as well but are principally in competition with folding and setup boxes. Woven baskets compete with setup boxes as attractive presentational packaging for goods. Textiles are used in sacking to carry produce. Metal and plastic strapping is an important adjacent market in that it is used to secure pallets and also to hold tight bales of recycled board. Gift markets—especially jewelry and fancy candy—are adjacent markets to setup boxes; the boxes are heavily used in the packaging of such goods and therefore perturbations of these industries affect setup boxes as well.

RESEARCH & DEVELOPMENT

Paperboard packaging and packing containers, boxes and cylindrical containers both, represent a mature business in which competitive forces have long ago produced an equilibrium so that competition between materials is minimal. R&D activity in the industry is focused on externalities to the product, thus on pollution control and protection of the silviculture that produces the raw material. Product research tends to focus on product improvements such as coatings and barriers to protect the product and its contents, on stiffening agents that promise stronger products at reduced fiber consumption, and on decoration of the product, thus on printing inks. Package producers, in attempts to improve sales, work on innovative features, such as easy closures, to differentiate themselves. Improving efficiencies in conversion are also a focus of research.

Pulping wood and turning it into fiber has always been and still remains a dirty industry, threatening air and water resources. In that both sulfite and sulfate mills use sulfur as a major process ingredient, these industries produce bad odors. Discharged sulfur contributes to sulfur oxides in the air and to acid rain formation. Bleaching of fibers using chlorine produces dioxin in effluents, a poisonous chemical that cumulates in fish. For best economic results, waste combustion for process heat is common in the industry and, if uncontrolled, produces nitrogen oxides implicated in smog and sulfur emissions. Pressures to control pollution emanate from the U.S. Environmental Protection Agency (EPA) which conducts considerable R&D for monitoring purposes. The high costs of pollution control continue to stimulate industry expenditures on process improvements and on devising improved and more efficient control devices.

The southern pine forests, the principal source of fiber used by this industry, are subject to periodic attacks by the southern pine beetle, often rendered as SPB, Dendroctonus frontalis Zimmerman. Annual destruction can remove 0.2 percent of softwoods—not a very high number, to be sure, but major periodic outbreaks can be 30 to 40 times more destructive. Considerable research centered on SPB is taking place under U.S. Forest Service and private auspices aimed at improved early detection of outbreaks and effective management of forests to minimize beetle incursions.

CURRENT TRENDS

In this mature industry it is more apt to speak of concerns rather than of trends. Concerns—as noted in issues highlighted by industry associations and voiced by producers in their annual reports—include worries about the shrinking share of paper and paperboard in packaging; the cyclicality of the industry; rising costs for energy, raw materials, and chemicals; industry consolidation; disruptive events; and government regulation.

Shrinking market share is cited by many. Such contraction is substantiated indirectly by the fact that growth rates are lower in paper and board than in economic activity taken as a whole. To be sure, the erosion is taking place slowly. Furthermore growth may resume if plastics prices, which have been increasing sharply, continue on that trajectory because petroleum prices continue to spiral upward. The packaging industry has always been cyclical in that reduced consumption directly translates into reduced packing and package acquisitions. Cyclicality is visible in Figure 35, showing the significant downturn in cor-rugated shipments and smaller erosions in sales in all but the sanitary category from 2000 to 2001. The industry is highly dependent on fossil fuels for its pulping operations. Energy costs also effect the cost of its principal processing chemicals. Industry consolidation worries producers but, in comparison with other sectors, very little consolidation has taken place. Disruptive events, on the scale of the Katrina hurricane of 2005, worry the industry as do power failures, forest fires possibly due to climate change, and SPB infestations. Government regulations represent a perennial pressure on costs and therefore on profitability in a market participants view as very competitive; they see intermaterials competition driving down paperboard prices.

TARGET MARKETS & SEGMENTATION

Each major type of container is targeted at distinct segments, with packing boxes having the most universal use for containerization of goods for bulk shipment, folding boxes serving principally consumer goods in the food and textiles sectors, fiber drums serving bulk markets, and setup boxes claiming the luxury and gift market as principal outlets. With the exception of setup boxes, the other categories represent commodity markets where product quality must be—and essentially is—uniform. Converters, therefore, attempt to compete on services and minor innovations—better closures, more attractive printing—to differentiate themselves.

RELATED ASSOCIATIONS & ORGANIZATIONS

American Forest & Paper Association, http://www.afandpa.org

Association of Independent Corrugated Converters, http://www.aiccbox.org

Fibre Box Association, http://www.fibrebox.org

North American Packaging Association, http://www.paperbox.org

Paper Industry Association Council, http://www.paperrecycles.org/about_us/index.html

Paperboard Packaging Council, http://www.ppcnet.org/index.aspx

Reusable Industrial Packaging Association, http://www.re usablepackaging.org

Technical Association of the Pulp and Paper Industry (TAPPI), http://www.tappi.org/s_tappi/index.asp?pid&equals

BIBLIOGRAPHY

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Darnay, Arsen J. and William E. Franklin. "Salvage Markets." U.S. Environmental Protection Agency. 1972.

"EPA Cracks Down on Polluting Pulp Mills." U.S. Environmental Protection Agency. Press Release. 20 April 1999.

Lazich, Robert S. Market Share Reporter 2007. Thomson Gale. 2007.

"Product Summary: 2002." 2002 Economic Census. U.S. Department of Commerce, Bureau of the Census. March 2006.

"Setup Boxes." ThomasNet. Available from: 〈http://www.thomasnet.com/nsearch.html〉.

Thatcher, Robert C. and Patrick J. Barry. "Southern Pine Beetle." Forest Insect & Disease Leaflet 49. U.S. Department of Agriculture, Forest Service. Available from 〈http://www.na.fs.fed.us/spfo/pubs/fidls/so_pine_beetle/so_pine.htm〉.

"Two E.P.A. Studies Confirm Threat to Fish of Dioxin from Paper Plants." The New York Times. 27 August 2007.

"Value of Product Shipments: 2005." Annual Survey of Manufactures. U.S. Department of Commerce, Bureau of the Census. November 2006.

see also Cans