The E-Commerce Era Is Breathing New Life Into Washington's Paper Industry

The demand for cardboard skyrockets as online shopping continues to grow in popularity
CONTAINER BOOST. The need for boxes has increased as e-commerce grows in popularity.

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he pulp and paper industry in Washington has become a shadow of its former self as economic trends and changing business practices have combined to shrink demand for paper products. As recently as 1990, paper manufacturing accounted for about 16,500 jobs. Today, it’s about 7,600, according to state employment figures.

There is one segment of the state’s pulp and paper industry, however, that is seeing millions of dollars invested in new plants and equipment. The inspiration for all that investment can be found as close at hand as the deliveries arriving on your front porch.

The surge in e-commerce led by the growth of online retailers, including Seattle-based, has created a huge need for containers to get goods to the consumers and businesses purchasing them. For most shippers, that means ensuring a ready supply of the lowly corrugated cardboard box.

“E-commerce and mail-order retail uses about seven times more corrugated [cardboard] per dollar of sales than traditional retail logistics,” says Derek Mahlburg, senior economist with forest-products market-analysis firm Fastmarkets RISI. “So, as e-commerce has grown at an average of 18% annually since 2000, it’s become a significant driver of corrugated demand growth in North America.”

The pulp and paper industry has been hobbled in recent years by trends such as the “paperless” office and the contraction of print newspapers. It also has been crimped by issues like a dwindling wood-chip supply — a key raw material for pulp and paper producers. That shortage has been caused by sawmill-production reductions sparked, in large measure, by the decline in new-home construction since the Great Recession.

In addition, the capital costs of replacing aging facilities has resulted in paper mills closing down across a wide swath of the state, including Port Angeles, Bellingham, Everett, Steilacoom and Hoquiam. Others, such as Georgia-Pacific’s mill in Camas, have been dramatically downsized.

The rise of e-commerce and the strength of shipping demand it has created, however, has helped to buoy an otherwise struggling industry. In fact, Fastmarkets reports that U.S. corrugated box shipments rose 1.9% per year between 2015 and 2018, “the best run of sustained growth for the sector since the 1990s.” As of 2018, the value of industry shipments by paper manufacturers in Washington stood at $5.6 billion, with the annual payroll for pulp and paper makers estimated at $711 million, according to an economic-impact assessment by the American Forest & Paper Association.

As evidence of the e-commerce swell, Longview-based North Pacific Paper Co. (Norpac) recently announced plans to convert one of its three machines to making kraft paper (a heavy brown paper most commonly seen in grocery bags), linerboard and corrugating medium — the fluted material that separates the inner and outer walls of boxes. Norpac hasn’t disclosed the size of the investment, but says it will help sustain the company’s current employment level of 400. Its mill also produces newsprint as well as office and copy paper.

Norpac’s announcement represents the third major conversion project for machines or entire mills to packaging papers. In 2017, Packaging Corp. of America announced a $150 million conversion of a machine making office and printing papers to production of linerboard at its Wallula mill in southeastern Washington.

McKinley Paper Co., meanwhile, has begun hiring for a planned restart of a Port Angeles mill that once produced telephone-directory paper. McKinley, a subsidiary of Bio-Pappel (a Mexican company), purchased the mill in 2017 from Nippon Paper Industries USA. It plans to produce containerboard using recycled paper.

Washington already has multiple mills producing the ingredients for paper-based boxes and shipping containers, including Port Townsend Paper Co. and WestRock’s manufacturing facilities in Tacoma and Longview.

Is there room in the market for all these producers? A recently issued report by Fastmarkets cautions that there could be some constraints to further growth.

PAPER PROFITS. Paper mills are taking advantage of online sales.

“The relatively intense usage of corrugated in e-commerce is a boon for the paper-packaging industry, but it also creates a strong incentive for online retailers to pursue alternatives to corrugated packaging,” the report’s summary says. “Efforts to reduce paper-packaging use, combined with other factors, suggest that growth in the ‘e-commerce boost’ for corrugated will weaken over the next five years.”

Corrugated and containerboard price increases also are driving retailers to reduce packaging costs. Measures being pursued include retail-store fulfillment of online orders and using plastic mailers, the Fastmarkets report notes.

Norpac says its future marketing niche will be packaging materials using 100 percent recycled fiber. The company hopes to take advantage of policy changes in China that started last year, limiting the importation of waste paper from the U.S. China says it will no longer accept shipments of such material because of concerns that those waste streams are contaminated with unwanted materials.

The move toward recycling paper products has been a growing market for some time — with 67% of all paper consumed in the U.S. recycled in 2011, double the rate in 1990, with the goal to increase the rate to 70% next year, according to the Northwest Pulp & Paper Association (NPPA).

“Paper fibers can be recycled five to eight times, making it one of the most useable recyclable materials produced today,” NPPA says. “Each day, U.S. papermakers recycle enough paper to fill a 15-mile long train.”

Norpac began producing packaging paper in 2018, but says it is shifting further, with the goal of producing 100 percent of its packaging paper from recycled materials. Norpac adds that it will recycle more than 400,000 metric tons per year of waste paper, “the equivalent of all available waste and mixed paper grades recovered in Washington, Oregon and Idaho.” 

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