Over the centuries, paper has been one of the "unsung" drivers of world development, providing the means for people to record and communicate ideas and news and works of art. Even with the advent of the modern world of plastic bags, electronic communication and paperless offices, paper remains an essential ingredient of homes, factories, offices and schools.

Although the price of pulp is highly cyclical, the long term trend is ever upwards (see graph) as demand continues to grow, cheap sources of raw materials diminish and the capital cost of mills increases.

In principle, the process of making paper is simple. Wood chips are converted to pulp which in turn is processed to create paper, cardboard and a range of other products. In reality, the processes are a complex mix of chemical and physical reactions which take place in both batch and continuous mode. The capital cost of the plant is high, skilled operators are required and the potential for environmental degradation throughout the value chain is huge.

According to the Jaakko Pöyry 1999 paper market study, the paper industry is today a 300 million-ton plus industry valued at over US$ one hundred billion per year. Industrial grades accounted for 171 million tons, or 58% of the world paper consumption in 1997.  Corrugating materials were the world’s largest paper grade group, accounting for 86 million tons (29%).  Consumption of graphical papers, such as newsprint, printing and writing papers, totalled 126 million tons in 1997, with uncoated woodfrees, at 44 million tons, the single largest grade group in this area. World demand for paper and paperboard is forecast to grow from the current 300 million tons to over 420 million tons by the year 2010 or an average growth rate of 2.8% per annum.

The world’s major pulp and paper producers are:

• North America (USA and Canada)

• South America (Brazil, Chile and Argentina)

• Europe (particularly Scandinavia)

• Asia and

• the CIS.

The combined share of North America and Western Europe of global paper and paperboard production has declined since 1980 from about 67% to 62% while the combined production of Latin America and Asia (excluding Japan) has increased from about 11% to 22%.  This trend is expected to continue, with the focus of production growth gradually shifting closer to the regions of faster paper consumption growth.

The economic turmoil in Asia had a strong negative impact on the growth of pulp and paper demand in that region, while the depreciated local currencies have translated into a significant cost advantage for Asian companies vis-à-vis their western competitors. Consequently, export-oriented Asian companies have been able and willing to increase their sales onto the Western markets through aggressive pricing.

The leading exporters are:

Paper remains the dominant and essential vehicle of modern communications. In addition, far from ushering in the paperless office, the advent of computers and other electronic equipment has fueled paper demand. By one estimate, personal computers alone account for 115 billion sheets of paper per year worldwide. Communications, however, makes up less than half of the world's paper use; a bigger share is now taken by the booming packaging industry.

In the developing world, paper consumption is growing quite rapidly - by more than 7% annually between 1980 and 1994 - but average per capita consumption remains low, at about 15 kilograms per year. This is well below the 30 to 40 kilograms of paper per capita per year considered the minimum level to meet basic needs for communication and literacy. In the industrialized countries, consumption is vastly greater – over 200 kilograms per capita per year in the United States and around 160 kilograms per capita per year in Western Europe.

Unlike consumption trends in other mature commodity sectors, paper consumption shows little sign of decoupling from economic growth. Paper consumption is projected to grow by about 50% by 2010 from its level in 2000. The biggest increase - over 80% - is expected to occur in developing countries in Asia, where demand is being driven by rapid growth of both incomes and population. Asia, however, despite having the world's fastest increases in local wood production, is likely to experience shortfalls in the supply of all wood products, but especially pulp and paper, soon after the turn of the century. The critical questions concern how, and from where, the future demand for paper will be met.