Analyze Cost & Price Sensitivity of Mills and Machines
Fastmarkets RISI’s staff of experienced pulp and paper engineers can help you understand technical data and how it can be used to plan strategically.
- Identify and evaluate primary costs, such as:
- Consumables: fiber, energy, chemicals
- Delivery cost
- Materials: maintenance materials, operating supplies, machine clothing, contract maintenance, etc.
- Understand how restarts, rebuilds, closures, idles, and new capacity will impact the balance of supply and demand. In turn, you can evaluate how these changes will impact market prices.
Example: Analyze the consumption costs of European mills producing standard newsprint by creating a cost curve. In the cash cost curve below, each bar represents a mill’s operational costs in relation to their capacity. You can easily see how low-cost mills have lower fiber and energy costs. This puts them at a cost advantage when compared with high cost mills which have high energy and fiber costs. You can run cost curves like this for a variety of supply-side markets to quickly compare mill costs. Once you identify the areas in which market leaders are cost competitive, you can further analyze their processes to understand how they keep costs low.
- Optimize production planning by anticipating and measuring changes in market conditions.
- Determine when to swing between grades and products based on costs and market prices.
- Monitor project announcements and news to stay abreast of changes in supply.
- Run models to identify which products will maximize profit based on anticipated changes.
- Analyze mill and machine sensitivity to changes in market prices, consumables prices, tax rates, capacity and exchange rates.
Example: Analyze how rising energy costs would impact Russian mills producing standard newsprint compared with their European counterparts. Compare existing market conditions with a model of how things would change if the cost of energy increased significantly for Russian mills. Russian mills are currently very cost competitive. But if their energy costs increased, they would move to the third or fourth quartile. This would greatly increase their sensitivity to market prices and, ultimately, their risk of closure.