Bigger machines, fewer players, and growth beyond local markets: global paper supply structure will change due to regional shifts of new production, consolidation and globalization of industry players, and larger paper machine scale.

North America and Western Europe will continue to dominate the global paper industry by accounting for more than 50% of the world production by 2015. However, the production growth is gradually shifting outside these traditional supply areas. The Western pulp and paper industry will continue

Outside the traditional supply regions, supply growth opportunities its lie in areas with good resource availability or areas with lane demand potential. Regions with growth opportunities based on resource availability are Southeast Asia and Latin America--specifically in hardwood pulp and woodfree papers. Russia's huge forest resources, with large latent demand, constitute the main elements for industry development. Although China's pulp and paper industry has a shortage of wood and recycled fiber, their market potential provides an attractive basis for future investments.

GROWTH DRIVERS

The search for growth, competitive advantage, arm the capability to serve customers are the main drivers for the concentration and globalization of the paper industry. The continued concentration of the paper industry is a global phenomenon. Despite rapid consolidation, the paper industry is still relatively fragmented compared with other industries. The top five firms control 25%-40% of regional capacity (see Figure 1). The concentration level for the paper industry is highest in North America and Western Europe. The Asian industry is still fairly fragmented. In recent years, the world paper industry has gradually adopted a global strategic orientation. The globalization trend should continue, with firms seeking growth through acquisitions and new investments in overseas markets.

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CAPACITY RATIONALIZATION

Huge differences in new paper machine sizes exist by region (see Figure 2). This reflects the types of paper and board grades produced, industry standards, and capabilities. Paper mills have sought increasing efficiency and lower unit costs through larger plant and machine size. New paper machines have larger capacities; older and smaller machines are shutting down. Consolidation is gradually driving this trend, too. In North America, for example, the frequency of new tissue paper machine start-ups was exceptional during the late 1990s and early 2000.