North American Containerboard Conversion Study

A detailed analysis of the potential for North American graphic paper machine conversions and their impact on containerboard markets


North American Containerboard Conversion Study

The study examines:

  • Traits that make a machine a feasible conversion candidate
  • Ways in which these conversions might impact the virgin and recycled containerboard markets
  • The potential for the containerboard market to absorb this new capacity
  • Machines in the market that have already converted to containerboard and how these conversions have progressed
  • Alternative grades that graphic paper producers might consider

Watch a presentation about this study and the research behind it!

North American graphic paper producers have struggled with overcapacity as the graphic paper market remains in a state of secular decline. Graphic paper demand has dropped by 48% since the turn of the century, forcing producers to remove 1.8 million tons of capacity per year to keep pace. Consequently, producers in this market are now considering conversions to packaging and specialty papers to keep their machines productive.

North American Graphic Paper Overcapacity Trends

The containerboard market is an attractive option because of its positive demand growth and higher profitability. The grade is also seen as the most feasible conversion candidate by many producers, because of its similar basis weights and high volume commodity nature.

RISI’s new North American Containerboard Conversion Study examines the opportunities and challenges that North American producers will face as they convert their graphic paper machines. With forecasts to 2019, the study analyzes both graphic paper and containerboard markets and identifies the most feasible candidates for conversion. It provides cost comparisons on top conversion candidates based on RISI’s cost benchmarking service. In addition, the study provides an overview of alternative grades for graphic paper machines.

Methodology

In this study, RISI has analyzed the containerboard conversion potential of graphic paper machines. First, our economists have provided an outlook for both the graphic paper and containerboard markets, explaining the phenomena behind the current market situations and the near-term forecast, including the potential effect of conversions on the containerboard market.

Second, our engineers have gone through selected previous conversion cases, including their known technical details and investments. In the conversion potential analysis, our engineers first analyzed 166 currently operating or recently closed graphic paper machines located in North America. This analysis focuses on the key characteristics of each machine, like current trim width, technical age, capacity, containerboard expertise and infrastructure, fiber supply, fiber integration and energy assets. Based on this, the most feasible machines were screened in an analysis of cash and direct manufacturing costs, which included estimates for not only current graphic paper production, but also for potential post-conversion containerboard benchmark products (lightweight unbleached kraftliner and (ultra-) lightweight fluting/corrugating medium).

Costs were analyzed as a cost curve position and in comparison to both low and average cost producers. As the actual probability of a conversion case is a complex function which cannot be calculated on purely data alone, our expert team also provided its view on how likely it considered each case, including both probability (%) and discussion on issues behind the score. In summary, this timely study provides valuable answers to the important questions concerning conversions.

Who will benefit from this study?

  • Producers of Graphic Paper
    • Assess feasibility for converting machines
    • Evaluate success of previous conversions
    • Compare costs to your competitors
  • Producers of Containerboard
    • Determine potential competition from newly converted producers
    • Understand impact of new conversions on pricing and demand
  • Containerboard Buyers
    • Understand how market developments will impact prices
    • Determine potential market size and identify new sources of supply
  • Suppliers
    • Find opportunities for supplying conversion rebuilds
    • Analyze potential changes in demand
  • Financial Institutions
    • Analyze the risk associated with investments in these mills
    • Assess the current state of the market and forecast expectations

Table of Contents

I. Executive Summary

II. Outlook Summary of Selected North American Graphic Paper Markets

  • Demand and Trade Trends
  • Market Balance Outlook
  • Profitability Trends
  • Need for Capacity Rationalization and Role for Conversions

III. Outlook Summary of the North American Containerboard Market

  • Demand and Trade Trends
  • Market Balance Outlook
  • Profitability Trends
    • Attraction for Graphic Paper Producers
    • Demand and Trade Trends
    • Market Balance Outlook
    • Profitability Trends
    • Graphic Paper Conversions to Containerboard

IV. Existing Converted Graphic Paper Machines

  • Competitiveness of Existing Conversions
  • Selected Case Studies

V. Conversion Potential of North American Graphic Paper Machines to Containerboard

  • Characteristics of Feasible Conversion Candidates
  • Manufacturing Cost Estimates of the Most Feasible Conversion Candidates

VI. Detailed Discussion on the Most Likely Conversion Candidates

  • Kraftliner Containerboard Conversions
  • Recycled Containerboard Conversions

VII. Other Potential Conversion Grades

VIII. Appendix

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