North American and European Uncoated Woodfree/Freesheet Risk of Closure Study

Single Copy US$7,500

RISI's New Multi-Client Study - The North American and European Uncoated Woodfree Risk of Closure, will provide a timely and valuable assessment of the factors and risks associated with potential mill closures in North America and Europe. The market for uncoated woodfree papers has been in decline in North America since 1999. Although Europe eluded this downtrend until last year, there is an increasing risk that Europe will now be following the pattern already established in North America. Western Europe, in particular, is almost certain to see its demand decline in the future.

While domestic demand will decline in North America and western Europe, there are few opportunities to offset these declines by increasing exports. South American and Asian producers are expanding their uncoated freesheet capacity and becoming more self-sufficient. These low cost producers are also starting to become formidable competitors in markets that are demanding more imports such as the Middle East and Africa. Thus, there are few opportunities for North American and European producers to increase their net exports.

Uncoated Freesheet Mill Risk Assessment - North America

This study provides an assessment of North America and Europe uncoated woodfree mills, and will identify those most at risk for closure in the coming years. Mill and machine closures in the uncoated woodfree paper market have already been accelerating over the past year due to declining markets, spikes in costs for wood and energy as well as major swings in exchange rates. The financial crisis of 2008/2009 threatens to accelerate this trend and possibly extend it to previously unaffected regions of the world. Suppliers to these mills are at risk of losing customers.

RISI Can Rank Which Mills are Most at Risk for Closure
RISI is uniquely qualified to assess this Risk. Our global team of economists and engineers provides ongoing market and cost analysis of global graphic paper markets. We published a highly successful and accurate study "World Coated Paper Supply: A Risk Assessment of Capacity Closures" in late 2005 that accurately predicted many of the coated paper mill closures that have occurred since that time.

In order to prepare suppliers and other affected parties for possible closures, RISI has developed a system for quantifying and ranking the risk of a mill or machine closure. This system rates six major criteria used to assess the risk of mill closure, including cost position, market prospects, future regional wood supply, corporate significance of the mill, average paper machine size and average paper machine age. Each factor is given a different weight proportionate to the significance of its effect on mill viability.

Total Cash Costs of North American Mills

These risk ratings, along with demand projections and scenario analysis, will aid in the understanding of how the industry will cut its capacity to match supply to falling demand. These risk ratings identify mills that may be at the greatest risk of closure. The methodology RISI uses is to assemble certain market and operating cost data that it maintains, as well as certain other pertinent data, and run this data against an algorithm, which, over time, we have found to be predictive that a mill will be closed. Past experience has shown that mills identified in RISI's reports as "at risk" often are subsequently closed; however, by no means have all mills so identified in past studies been closed. In reality, many factors contribute to determining whether a mill should be closed and RISI's studies can only hope to capture and model some of these.

Methodology - Developing a Mill Ranking System
RISI's global team of economists and engineers has developed a methodology that involves a quantitative system for ranking closure risk, backed up by on-the-ground knowledge of the mills. The risk of closure for mills and machines is ranked through a system of weighted averages. The following six criteria are combined to create a five-point index of risk, with the weight of each criterion determined by its relative importance and the quality of available data.

• Cost Position of Mill Relative to Competitors
• Market Prospects for the Grades Produced at the Mill and Mill Flexibility to Make other Grades
• Future Regional Wood Supply
• Corporate Significance of the Mill
• Average Uncoated Freesheet Machine Size
• Average Uncoated Freesheet Machine Age

Project Team

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