Paper360 - March/April 2016 - (Page 56)
the bottom line | CONSOLIDATION WATCH
Conventional wisdom says that the pulp and paper industry is consolidating, which is necessary to its longterm health. In this and future issues of Paper360°, this column, provided by Fisher International, will analyze
consolidation within different grades of pulp and paper.
Folding Boxboard in Asia Pacific
Asia Pacific dominates global production of FBB, while North America
dominates global production of SBS.
Global growth of FBB/SBS capacity is driven largely by Asia Pacific's
new world-class machine installations.
Assuming a delivered price of €820/FMT ($897/FMT) to London, Asia
Pacific machines can still compete, albeit at much lower margins.
The global FBB/SBS market is unconsolidated, with no clear leader
and many competitors.
Folding Boxboard (FBB) is a low-density material with high stiffness
usually made from mechanical pulp layered between a top and back sheet made
from chemical pulp. The top layer is typically bleached and often is pigment
coated. The major end uses of FBB are health and beauty products; frozen,
chilled and other foods; confectionaries; pharmaceuticals; graphic packaging;
and cigarette packaging. FBB has seen rapid growth in Asia Pacific, which is
the dominant producing region in the global market.
There is an alternative grade, Solid Bleached Sulphate (SBS), which is used
for similar applications as FBB, but almost entirely in North America and
Japan. Uses include luxury packaging, cosmetics, pharmaceuticals and high
value product packaging. It is also used widely for greeting cards, paperback
covers, and high quality graphic printing applications. For the purposes of this
analysis, we will consider FBB and SBS to be interchangeable because the end
uses overlap to a large degree.
There has been rapid growth in global FBB/SBS production, mainly in Asia
Pacific, in the form of new world-class FBB machines that were added only a
couple of years ago in China. The gross capacity increase has been tempered by
shutdowns of smaller machines. However, overall capacity in Asia Pacific now
exceeds regional demand. Owners now have a strong incentive to export FBB
in order to fill their machines. The question remains as to whether the market
can absorb the excess production and whether or not Chinese producers can
be competitive in North American or European markets.
Exporting has become easier for Chinese owners, given the weakening
Chinese currency and low fuel oil costs, which make transoceanic shipping
more feasible. Such conditions make the market more global in nature. So,
who is at risk and what does it suggest regarding consolidation?
Considering each region separately, and assuming that FBB and SBS are
interchangeable, consolidation so far has been minimal in each of the three
major regions: Asia Pacific, Europe and North America. APP has brought on
their mega-machines to produce FBB. Regionally, APP holds significant market
share (more than 30 percent), but globally the company holds only a 15 percent
share, not enough to initiate market-leader behavior.
No single company has global market leadership, so the trend toward being
more global probably makes the segment more competitive. Enough producers
can effectively compete for the global business so that the market is considered
largely unconsolidated. However, globalization could bring some disruption
to North American and European markets - at least so long as big Chinese
machines don't run full for their domestic market and that their exports can
change market dynamics. This is especially true in North America, which
relies heavily on SBS.
This analysis was compiled by Jon Kerr, senior consultant, Fisher International, using
FisherSolve™, a data and analytics resource for paper industry producers, suppliers,
investors and buyers making important capital and
operating decisions. FisherSolve accurately describes the
assets, capacity and costs of every pulp and paper mill in
the world making 50 tons/day or more. To learn more, please visit www.fisheri.com.
Table of Contents for the Digital Edition of Paper360 - March/April 2016
Over the Wire
Engineering: A Continuing Evolution
RISI’s European CEO of the Year
Sappi Europe: Serious About the Future of Paper
Reliability and Maintenance Beliefs – Part IV
Discovering Hidden Causes of Converting Problems
Barrier Technologies: The New Revolution in Food Packaging
Standard Bleaching Sequences Including an Ozone Stage – Part I
TAPPI Journal Summaries
SWM Gets Faster ERP Financial Data
Battling Rejection Burnout
Index of Advertisers
Paper360 - March/April 2016