Global BHK Pulp Mill Risk

A detailed risk assessment of potential BHKP mill closures over a two year time span with mill level competitive cost analysis.


Global BHK Pulp Mill Risk

Included in the study

  • Assessment of all market BHK pulp lines in current operation.
  • Identification of specific BHK pulp lines and mills at risk of closure.
  • Which companies regions have the highest risk of closure.
  • Prices at which these mills will be likely to close down.
  • How company strategies affect shutdown risk.

 

From late 2012 to late 2013 the Bleached Hardwood Kraft Pulp (BHKP) market is experiencing a large wave of capacity coming on stream. Continuing into early 2014, new market BHK pulp capacity will likely reach 5.0 tonnes, making up about 15% of the existing market. With demand growth of BHK pulp slowing, prices are facing considerable downward pressure as new capacity enters the market. As this trend continues, lower BHK pulp prices will trigger a number of adjustments in the industry. It is expected that small, high-cost market BHK pulp mills will close, and some companies that make their own BHK pulp internally will shut down existing pulp lines to buy cheap market BHKP.

Global BHK Pulp Mill Risk provides a comprehensive overview of the current BHK pulp landscape, identifying all market BHK pulp mills at risk of closure over the next two years. This in-depth assessment uses at least seven data elements for each mill to determine and rank its relative risk of closure or conversion to another grade (such as dissolving pulp).

The 15 Mkt. BHK lines with highest risk of closure

Methodology

Global BHK Pulp Mill Risk examines virtually every BHK pulp line in the world that makes market pulp or pulp for use at affiliated operations. BHKP lines that produce for on-site paper production, but which also produce dried or wet lap pulp, are included in the study, as are pure market pulp lines. Decisions regarding pulp mill closures remain primarily a question of costs versus product price. To provide an accurate risk assessment, Global BHK Pulp Mill Risk primarily analyzes production costs and technical efficiency of individual pulp lines using the following process:

  • Analysis of Cash Cost Curves:
    • Cash Cost Curves are generated with RISI’s Mill Intelligence Service. These use a scale to rank competitiveness based on a pulp line’s weighted cash manufacturing cost per unit of production. Cash manufacturing cost includes all of the direct costs involved in production of a finished product, including a summation of fiber, energy, chemicals, labor, material and maintenance costs. Regional differences in these costs are also factored into the calculation. Cash costs in US dollars were used to determine which pulp lines would be most at risk if costs remain about where they have been recently.
  • Analysis of Technical Risks:
    • Because large swings in exchange rates are occurring and can be expected to continue, there can be limits to assessing closure risk over time by using today’s exchange rates. Key technical characteristics of individual pulp lines that do not change with exchange rates include capacity, technical age, dryer speed, and access to international shipping.
  • Assessment of the “corporate significance” of each pulp line
    • How important is the pulp line in terms of the overall size of the company and in terms of the company’s longer-term strategies.

Who will benefit from this study?

  • BHKP Buyers
    • Determine viability of suppliers or potential suppliers in a changing competitive landscape
    • Analyze the cost competitiveness of current and potential suppliers
    • Negotiate potential contracts from an informed position
  • BHKP Producers
    • Determine which of your competitors is most at risk of closure
  • Companies at risk
    • Determine where you stand relative to your competition
  • Industry Suppliers
    • Identify sales risks and opportunities among the high-risk market BHK mill
  • Financial Community
    • Understand how changes in the competitive landscape, in this market, might affect companies of interest
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