Note: Several of the buyouts/joint ventures shown above, including Ahlstrom-Warren Pumps and Valmet-KMW, involve only paper-and pulp-related businesses.

SOURCES:

Various U.S. Government and private contacts.

CHAPTER II

U.S. INDUSTRY PERFORMANCE

Shipments of Paper Machinery

Shipments from the paper machinery industry declined after 1982 under the impact of recession, but recovered to a new high in 1985. As indicated in Table 3, industry shipmentsl rose to nearly $1.4 billion and product shipments to nearly $1.2 billion during 1982, before declining to $1.15 billion and $1 billion respectively the following year. By the end of 1986, industry shipments advanced to nearly $1.5 billion and product shipments reached $1.3 billion. Demand for payer machinery is normally responsive to changes in demand for kraft paper, writing papers, newsprint, other paper grades, or for market pulp. Much of the equipment produced by this industry requires long lead times for production--lead times in excess of 1 year are not uncommon on large pieces of equipment.

Thus, cyclical changes in the economic health of the paper industries normally produce a lagging impact on paper machinery manufact rers. For example, when shipments by paperboard mills declined from 1974 to 1975 and again from 1981 to 1982, shipments from paper machinery manufacturers declined from 1976 to 1977 and, again, from 1982 to 1983. Similar lagging tendencies were also true with respect to shipments from pulp mills and paper mills, as illustrated in Figure 2.

In recent downturns, the paper machinery industry has generally experienced its most difficult economic period 6-18 months after broad economic indicators have signalled the onset of recession. Consequently, the steepest declines in shipments of paper machinery have occurred in years such as 1975 and 1983 when overall economic performance improved. The highly cyclical nature of the paper industry has also infused the executives of that industry with caution in approaching new capital expenditures. Recession will bring cancellation of existing orders for machine rebuilds and

1 The Bureau of the Census calculates value of shipments in two ways--by industry and by product. The total U.S. value of industry shipments includes all production from plants whose primary product is paper industries machinery and also includes shipments of non-paper industries machinery products, if any, from these plants. Product shipments include all paper industries machinery products regardless of whether they are primary or secondary products of manufacturing plants.

Source:

1972-1985, U.S. Industrial Outlook 1988, pp. 25-11/25-13. 1958-1967 = 1967 Census of Manufactures, Bound Volume, Vol. II, Section 35-D. 1986 1986 Annual Survey of Manufactures, Statistics for Industry Groups and Industries.

suspension of work on greenfield mill projects.2

After recovery sets

in, paper companies often have been slow to place orders for new or rebuilt paper machinery. As a consequence of the long lead times noted earlier, paper machinery shipments have only recently begun to reach pre-recessionary levels.

Valuable Bureau of Census Statistics

The principal sources of U.S. Government statistics on shipments and employment in the U.S. paper machinery sector are the Annual Survey of Manufactures and the every 5 year Census of Manufactures, both conducted by the Bureau of the Census. Though these data are valuable indicators of industry trends, several modifications that would make them more useful are recommended in the final chapter of this assessment.

2 For example, Champion International Corporation suspended work on its greenfield pulp mill at Quinnesec, Michigan during the 1982-83 recession, then restarted the project with mill startup in 1986.

Figure 2

Comparison of Paper Machinery Industry Shipments with 3 Types of Paper/Pulp Shipments, 1973-1986

NOTE: Analysis revealed the following linear correlation coefficients between (1) paper machinery industry shipments and (2) each of the 3 types of paper/pulp shipments: papermills: 0.90; paperboard mills: 0.93; pulp mills: 0.96.

Source: U.S. Department of Commerce, Bureau of Census, Census of Manufactures, 1982, 1977, 1972; Annual Survey of Manufactures, 1986 and previous years.

-23

85 86

Employment and Productivity

Employment in the U.S. paper machinery industry has trended downward throughout this decade, as illustrated in Table 4. From a high of 19,600 in 1980, total employment in the industry dropped by 28 percent to 14,100 in 1983. Production worker employment fell by nearly 30 percent in 1 year, from 10,000 in 1982 to 7,100 the next year. By 1985, partial recovery had brought the total of production workers to 8,900.

Many lost jobs were in foundries which were closed or consolidated by such industry leaders as Beloit and Black Clawson. In an industry characterized by fraternal, small town attitudes, many of these layoffs were wrenching, involving long-time employees. Few of these lost jobs are ever likely to return. New jobs are being created in expanded research and development (R&D) facilities and at foreign-owned firms expanding into the U.S. market. Industry employment stood at 15,400 in 1986. However, the recent spate of mergers is expected to bring a further reduction in industry employment.

Source:

Annual Survey of Manufactures and Census of Manufactures, various years, U.S. Bureau of the Census, U.S. Department of Commerce.