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Changing Trends in the Bulk Chemicals and Pulp and Paper Industries |
Compared with the experience of the 1990s, rising energy prices in recent years have led to questions about expectations of growth in industrial output, particularly in energy-intensive industries. Given the higher price trends, a review of expected growth trends in selected industries was undertaken as part of the production of AEO2005. In addition, projections for the industrial value of shipments, which were based on the Standard Industrial Classification (SIC) system in AEO2004, are based on the North American Industry Classification System (NAICS) in AEO2005. The change in industrial classification leads to lower historical growth rates for many industrial sectors. The impacts of these two changes are highlighted in this section for two of the largest energy-consuming industries in the U.S. industrial sector—bulk chemicals and pulp and paper. Output growth rates for the pulp and paper industry and the bulk chemical industry have been revised downward in AEO2005 to align better with historical trends. Models for both industries in NEMS have also been revised to reflect recent trends in their specific production processes. In combination, these changes have had an important impact on the AEO2005 forecast for industrial energy consumption. The scope of activities included in the industrial sector (which includes agriculture, mining, construction, and manufacturing) and how they are defined have changed with the move to NAICS. For example, publishing, logging, and manufacturers’ administrative and auxiliary services that are not co-located with manufacturing establishments are no longer covered in the manufacturing sector but are now included in the commercial sector. Under NAICS, the manufacturing sector is about 3 percent smaller in terms of value and 4 percent smaller in terms of employment than under SIC in 1997, the only year for which economic census data are available for both classification systems. The AEO2005 industrial forecast reflects both changes in economic conditions and changes in historical growth rates as a result of the move from SIC to NAICS. The projected growth rates for most energy-intensive industries are lower in AEO2005 than in AEO2004, in part because the historical growth rates have been revised downward. Figure 15 compares the growth rates projected for selected energy-intensive industries in AEO2005 and AEO2004. Pulp and Paper AEO2004 projected that paper final product would grow by an average of 1.9 percent annually from 2003 to 2025; however, the intermediate steps in the industry, and the energy use associated with them, were expected to grow at different rates as the mix of technologies changed and costs shifted. For example, between 2003 and 2025, kraft pulping was projected to grow by 2.1 percent per year while semi-chemical pulping grew by 0.9 percent per year. Mechanical pulping was projected to decline by 0.5 percent per year over the same period. From 1983 to 2000, paper and board production grew by 2.1 percent per year while total pulping grew by only 1.1 percent per year. Although long-term data for the individual pulping steps is limited, kraft pulping, because of its superior technology [80], is the primary pulping method, accounting for 86 percent of virgin pulping in 2002. Between 1996 and 2002, kraft pulping increased while semi-chemical pulping declined, and mechanical pulping dropped by more than 20 percent [81]. Growth in final paper and board production, coupled with slower growth or a decline in the intermediate pulping steps, is made possible by increases in recovered paper and imports of market pulp. Consumption of recovered paper at paper and board mills increased by 5 percent annually from 1983 to 2002, and the United States has gone from being a net exporter of market pulp in 1997 to a net importer in 2002, importing about 15 percent more than it exports [82]. The AEO2004 results were reviewed relative to the trends outlined above, and revisions were made as necessary. As a result of the changes made and a lower forecast of growth in final industrial production in AEO2005, waste pulping, which consists of recovered paper and market pulp, is projected to grow by 2.0 percent per year from 2003 to 2025; mechanical pulping is projected to decline by 0.8 percent per year; and semi-chemical and kraft pulping are projected to grow by 0.7 percent per year and 1.4 percent per year, respectively. Pulp and paper output is projected to grow by 1.5 percent per year. The most notable impact of these revisions and updates is that the projected growth of purchased electricity for the pulp and paper sector falls to only 0.1 percent per year in AEO2005, from 0.6 percent per year in AEO2004 (Figure 16). The use of all fuels in the pulp and paper industry is projected to grow more slowly (or decline faster) in AEO2005 than in AEO2004. Total energy consumption for the pulp and paper industry is projected to grow at an annual rate of 0.9 percent per year from 2003 to 2025 in AEO2005, compared with 1.4 percent per year in AEO2004. Bulk Chemicals The bulk chemical industry is dependent on natural gas and petroleum as material inputs (feedstocks) and as fuels for heat and power. The bulk chemical industry model used for AEO2005 was revised to address separately the four subsectors of the bulk chemical industry: inorganic, organic, resins, and agricultural chemicals [83]. Figure 17 compares the projected output growth rates for each component of the bulk chemical industry in AEO2004 and AEO2005. The growth rate for the total bulk chemical industry is projected to be 1.0 percent per year in AEO2005, compared with 1.7 percent per year in AEO2004. The largest changes are for the inorganic and agricultural chemicals components of the bulk chemical industry. The inorganic chemicals industry is a mature industry [84] that has grown slowly over the past several years. Its limited growth prospects are better represented in AEO2005, where the projected growth rate for inorganic chemicals is close to zero as compared with 1.4 percent per year in AEO2004. The agricultural chemicals subsector, which includes the production of nitrogenous fertilizers, has faced increased competition from foreign suppliers due to relatively high U.S. natural gas prices [85]. The AEO2005 forecast reflects the current competitive situation. This update reduced projected growth from 1.3 percent per year in AEO2004 to 0.6 percent per year in AEO2005. The organic and resins components have exhibited a tendency toward increasing use of imports of energy-intensive intermediate products in preference to domestically manufactured products [86], and that tendency is reflected in a lower assumed energy intensity for new or replacement plant. The combination of lower projected output growth and a shift to less energy-intensive production processes leads to lower projected growth in energy consumption for the bulk chemical industry in AEO2005 than was projected in AEO2004 (Figure 18). Despite these changes, however, the bulk chemical industry remains the largest energy-consuming industry in the industrial sector. In 2003, the bulk chemical industry consumed 6.3 quadrillion Btu of energy (including feedstocks), and that total is projected to grow to 7.5 quadrillion Btu in 2025, about 1 quadrillion Btu less than was projected in AEO2004. Feedstock consumption is projected to increase from 3.5 quadrillion Btu in 2003 to 4.3 quadrillion Btu in 2025 in the AEO2005 forecast, 0.4 quadrillion Btu less than was projected in AEO2004. In summary, the transition from SIC to NAICS, reduced rates of output growth, and revised modeling have reduced the AEO2005 projection of industrial energy consumption in 2025 by 2.6 quadrillion Btu (8 percent) from the AEO2004 projection. Lower natural gas consumption accounts for about two-thirds of the difference between the two projections.
Contact: Crawford Honeycutt |
