Led by a downturn in manufacturing activity, the United States entered a period of slow growth in mid-2000. Reasons for the slowdown included sharp retrenchments in high-tech and internet-related investing, a sharp downturn in the stock market, the strong dollar and the attendant widening of the trade deficit.
The GDP has grown at annual rates of less than 2 percent since the third quarter of 2000. However, there has been just one quarter of negative growth - the third quarter of 2001 - which took place in the aftermath of the 11 September attacks when confidence was badly shaken. Consumer spending has recovered since then, and combined with continued strength in new home construction, has been one of the main reasons why the 2001 recession appears has been relatively mild and brief.
The manufacturing sector has suffered greater exposure to the strong dollar and the expanding United States trade deficit than the services and construction sectors of the economy. Hence, manufacturing production declined almost steadily since mid-2000 and now stands some 8 percent below its peak.
The Federal Reserve Bank reduced the inter-bank lending rate from 6.5 percent to 1.75 percent during the course of 2001 and this has helped set the stage for an economic rebound. Moreover, business inventories have been sharply reduced, which has helped pave the way for a rebound in manufacturing production. Most economists expect the United States economy to enter a recovery phase early this year.
The United States economy expanded at a faster than expected annual rate of 1.7 percent in the fourth quarter of 2001, and is estimated to grow 2-3 percent in the first quarter of 2002. The 2002 annual growth is expected to range from 2 to 3 percent.
Responding to the strong dollar and the weakened United States economy, paper and paperboard production declined 5.8 percent in 2001 to 80.8 million tonnes, following a 2.5 percent decline in 2000. These back-to-back setbacks constituted the sharpest reductions in paper and paperboard production since the mid-1970s. Most United States paper companies managed to remain profitable in 2001, but industry earnings fell to about half of their 2000 levels.
Net imports of paper and paperboard rose from 2.3 million tonnes in 1997, the year of the Asian financial crisis and the start of the dollar's sharp climb, to 5.8 million tonnes in 2000. The widening of the paper and paperboard trade deficit reflected a rapid increase in imports coupled with a decline in exports. The paper and paperboard trade deficit subsequently widened further in 2001 to 6.1 million tonnes.
United States newsprint production declined 12.2 percent in 2001 to 5.8 million tonnes following a 0.8 percent increase the year before. The sharp reduction was largely the result of recession-related cutbacks in advertising expenditures. Total shipments of newsprint from all sources to the United States market declined 11.6 percent.
United States purchases (apparent consumption) of printing-writing papers declined 7.3 percent in 2001 to 26.3 million tonnes. The decline reflected a number of factors including the recession, weak advertising markets, the anthrax-related scare and higher postal rates.
United States shipments of printing-writing papers declined by 8.4 percent last year, reflecting further deterioration in the United States printing-writing trade balance.
Domestic shipments were off for all the major grades, with the declines ranging from 1.3 percent for coated groundwood to 8.1 percent for uncoated free sheet, 11.8 percent for coated free sheet and 19.2 percent for uncoated groundwood. United States uncoated groundwood purchases were off only about 5 percent last year, but higher imports from Canada caused United States shipments to plunge.
United States shipments of packaging and special industrial papers declined 5.2 percent in 2001 to 3.8 million tonnes. The declines in these papers extend back many years and largely reflect inroads by plastic bags and sacks.
Tissue paper production, one of the few grades to maintain a positive trend during the recession, posted a 1.5 percent increase in 2001 to 6.4 million tonnes. This rate of growth was slightly below the 1.9 percent rate that prevailed during the 1990s.
United States containerboard production declined 4.9 percent in 2001 to 29.4 million tonnes, following a 3.6 percent reduction in 2000. The declines were rooted in weak domestic and export markets. Domestic corrugated box shipments, hurt by contracting manufacturing production, expanding imports of packaged goods from abroad, and plastic competition in certain produce markets, declined 0.9 percent in 2000 and 5.4 percent in 2001. United States linerboard exports declined 11.7 percent in 2001 to 2.7 million tonnes, beset by the strong dollar and capacity expansions in Europe and Asia.
Boxboard production - including folding, set up, and milk and food service board - declined 3.3 percent in 2001 to 13.1 million tonnes. All of the weakness traced to the domestic market, with export-related production of these grades actually rising 2.0 percent. The weakening of manufacturing production and emerging competition from plastic pouches in the food area were among the factors responsible for the decline.
United States shipments of chemical grade market pulp declined 2.6 percent in 2001 to 6.8 million tonnes. Excluding "tied" shipments from Canada, the United States has historically been and remains a net exporter of chemical grade pulp. In 2001, imports declined by 12.5 percent to 3.9 million tonnes, while exports fell only 1.4 percent to 4.6 million tonnes. The leading export destinations for United States market pulp in 2001 were Asia (52 percent of exports), Western Europe (41 percent), and Latin America.
United States recycling levels have remained high in the face of sharp declines in domestic paper consumption. In particular, total recovery of paper and paperboard for domestic use and export rose 1.1 percent in 2000 and then held approximately level in 2001 at 42.9 million tonnes. This stable performance has been achieved even though United States apparent consumption of paper and paperboard declined by 2.2 percent in 2000, and 5.1 percent in 2001.
The paper recovery rate for 2000 has been revised down to 45.8 percent from the previously reported rate 48.0 percent. This revision reflects updated data regarding mill consumption of recovered paper as reported in the December 2001 AF&PA Capacity Survey. The recovery rate is estimated to have rebounded to 48.3 percent in 2001 as recovery levels managed to hold stable, while apparent consumption of paper and paperboard contracted by 5.1 percent.
Looking at the components of paper recovery, United States mill consumption of recovered paper declined by 1.4 percent in 2001 to 31.7 million tonnes. However, the utilization rate (recovered paper consumption at United States mills as a percent of paper and paperboard production) jumped to an all-time high of 38.4 percent last year, as production of paper and paperboard declined significantly more sharply than United States mill consumption of recovered paper.
Exports of recovered paper at 9.5 million tonnes, were off slightly (-0.3 percent) in 2001 after leaping 21 percent in 2000. Exports to China surged almost 75 percent last year, making China the largest export market for United States recovered paper, displacing Canada. Exports to India also rose sharply. However, recovered paper exports to most other major customer markets including Canada, Mexico, and South Korea, declined last year.
Despite much slower economic growth, and the disrupting events of 11 September, the value of new construction put in place in the United States managed to increase 6 percent last year. Residential construction and the existing home sales market were boosted by home mortgage rates that were the lowest since 1998, averaging less than 7 percent. Housing starts during the year exceeded 1.6 million units with single-family homes accounting for 76 percent of the total. The average floor area for single-family units reached an all-time high of 214.8 m2. Housing starts during 2002 are projected to remain as strong as in 2001, or only slightly lower.
Markets for other major uses of wood products, including repair and remodelling, non-residential construction, and furniture manufacturing have followed a trend similar to the economy overall. United States consumption of conifer lumber totalled an estimated 127 million m3 in 2001, down about 2 percent compared with 2000. Total domestic demand for structural panels during 2001 was estimated at 31 million m3. United States imports of wood furniture and components have increased as a growing share of capacity for manufacturing furniture has moved offshore so United States consumption of non-coniferous sawnwood likely fell during 2001. Data on United States non-coniferous lumber production lags by at least a year. Shipments of particle board and MDF were down approximately 10 percent and 4 percent, respectively.
The paradox of strong demand but low realized values that was experienced in 2000 continued in 2001. A combination of factors has contributed to soft product markets including: excess capacity, lower exports due to a combination of a strong dollar and the Japanese recession, and higher imports. Imports of conifer sawnwood increased while United States conifer sawnwood production declined. An ongoing trade dispute with Canada over softwood lumber entered a new phase in 2001 when a five-year bilateral agreement expired and United States producers filed countervailing duty and anti-dumping cases. On 22 March 2002, the United States Commerce Department imposed final countervailing and anti-dumping duties averaging 29 percent on Canadian softwood lumber imports. These duties will come into force should the United States International Trade Commission make a final determination that Canadian imports injure the United States industry. In the meantime, the United States and Canadian governments have been engaged in discussions toward a new agreement.
The Sustainable Forestry InitiativeŽ (SFI) programme, AF&PA's sustainable forestry and certification programme, now encompasses nearly 43 million hectares in the United States and Canada. Participating companies account for about two-thirds of roundwood consumed in the United States To date, 32 companies have completed third-party certification on 21 million hectares; current commitments indicate that an additional 14 million hectares will be certified to the SFI Standard by the end of 2002. One of the hallmarks of the SFI programme is its recognition of other certification programmes, including the American Tree FarmŽ System, Pan European Forest Certification (PEFC) scheme and the Forest Stewardship Council (FSC).
The Sustainable Forestry Board (SFB) governs the SFI standard and guidelines. It became a fully independent organization in 2001 and has representatives from major conservation organizations as well as producers as participants. The SFB released the 2002-2004 SFI Standard and Verification Procedures enhancing the SFI programme on 1 December 2001. The SFB is also studying ways of identifying forested areas with high conservation value. One of the enduring commitments of the SFI programme is that it should continually evolve and improve itself over time in order to become more specific, verifiable, and widely accepted by a broader range of stakeholders.
In February 2002, the United States Government issued a new policy initiative addressing climate change. The main feature of the policy is a strategy to cut greenhouse gas (GHG) intensity of the United States economy by 18 percent over the next 10 years - by 2012. GHG intensity measures the ratio of GHG emissions per million dollars of GDP. The policy relies heavily on voluntary actions supported by incentives, including tax credits, funding for research into new technologies, and a plan to encourage companies to track and report their emissions so that they could gain credits for use in any future emissions trading programme.
For the forestry sector, the Administration policy recognizes that carbon sequestration in forests plays a vital role in the carbon balance and that forest management can be a helpful in preventing and mitigating carbon dioxide emissions. The Administration policy includes: (1) a Department of Energy (DOE) plan to develop a greenhouse gas registry with the potential of establishing transferable credits for emissions reductions; (2) a plan for DOE to develop accounting rules and guidelines for crediting sequestration projects including forest management practices; (3) encouraging emissions avoidance and preserving carbon sequestration through "Debt-for-Nature" tropical forest protection; and (4) broad acknowledgement that forests have multiple benefits, including carbon sequestration, and that ecological market valuation is a financial instrument to be traded.
The United States Forest Service recently issued its long-term outlook of fibre supply and demand. The study projects that United States demand for wood and paper products will increase by 40 percent over the next 50 years. United States forests will produce an increasing volume of fibre even as inventories continue to increase, although at slower rate than in the past. Plantations are expected to supply 60 percent of domestic coniferous fibre supply by 2050, up from less than 20 percent today. According to the analysis, if current economic trends continue, imports will also increase.
United States forest resources - both coniferous and non-coniferous - are sustainable. The United States industry, as its counterparts in other parts of the world, is becoming more globalized and meeting the challenges of a more sensitized public at the same time. The industry has invested billions of dollars to increase productivity of forestland and improve efficiencies and utilization in manufacturing. Huge investments have also been made to ensure that forests are sustainably managed for all of their uses and benefits.