HardAssetsInvestor

Written by Tom Vulcan  |

May 06, 2008

Pulp Fact

Details

Could wood pulp be the next big thing for investors, or is the market still too young?

• Slow-but-steady demand
• Quiet futures market
• Opportunities in China

 

 

The last time you probably saw the word "pulp" and made note of it was when you bought that orange juice with "Loads o' Pulp" emblazoned on it and knew you'd have to face days of removing shreds of orange pith from between your teeth: very annoying.

Pulp is, however, as you will well know, also the stuff from which paper and paper products are made, with wood pulp being derived from trees once they have been stripped of bark and have been treated either chemically or mechanically (or both). Wood pulp is used to make a plethora of different products.

Primarily:

 

 

And, as there are for both plastics and orange juice, there are also wood pulp futures (and options).

Paper Facts

Paper was not, originally, made from wood. It was made from rags. The first U.S. paper mill was established around 1690, predated by mills in Spain (the first in 1120) and the first successful commercial mill in England in 1588.

Having been developed first in China in the second century, the process for making paper traveled to the Middle East and then, with the Moors, to Europe. Indeed, the first mention of the use of toilet paper reportedly dates back to sixth-century China!

Until mid-19^th century, cotton and linen rags were used to make paper. In both the 17^th and 18^th centuries, with the burgeoning of the printing industry, there were severe shortages of cotton rags, the "picking" of which provided a meager income to huge armies of the poor in Europe (and still does for some, in certain countries, today).

 

Detail of "The Ragpicker" (1869) by Edouard Manet

owned by the Norton Simon Foundation, Pasadena, Calif.

 

The mechanical and chemical processes (to separate the cellulose fibers in trees) developed in the mid- to late-19^th century to make wood pulp and, therefrom, cheap paper not only solved the rag problem, but also revolutionized the paper-making industry. Amongst the processes developed at this time, the sulfate (or kraft) process developed by Carl F Dahl in 1879 is now the leading process for making wood pulp.

Global wood pulp production, comprising a number of different types of pulp, now exceeds 175 million tonnes a year.

 

Different Types of Pulp[i]

Source: PÖYRY