Paper360 - November/December 2017 - 14

press, and dilution control headboxes (Fig. 5).
Conversions are even more attractive if the
mill already uses recycled fiber and has good
access to such fiber in volume.
Integrated mills may enjoy competitive
power production even if paper production
costs are high. For them, conversion to packaging may be a viable option. A low-risk pulp
mill with high-risk paper machines also could
be a good candidate (Fig. 6).
There are other serious obstacles to conversion besides the machine's location and its
technology. Jumbo rolls of packaging need to be

converted and sold to end-user customers. For
containerboard in North America, the largest
potential market for conversions, most converting capacity is owned by the industry's current
liner and medium producers. By definition, they
are unlikely to buy the output of new entrants.
New entrants must fight for acceptance for the
remaining 15 percent or so of the industry's consumption that is served by independent converters. And worse, any given converted machine
has access to only a portion of that 15 percent,
since independent converters are located all
across the expansive North American landscape.

TSUNAMI OR TRICKLE?
We at Fisher conclude that a wave of conversions is neither an obvious, unavoidable
outcome nor a false promise. There are certainly cases where the stars align: an owner
has box plants to sell the paper through, finds
a machine with the right size and configuration in a good location with access to fiber and
other resources, and converts it at less cost
than building new. Alsip, Deridder, SPFT, SAS
Blue Paper and others all had drivers making
conversions feasible and attractive.
Clearly, each conversion case must be evaluated in two ways: there are so many individual
characteristics that it first must be evaluated
on its own merits. Also, there are enough market factors-such as how competitors and customers will respond-that conversions must
take into account the impact of the potential
investment on the market's own dynamics.
Powerful industry trends in the form of
diverging growth rates between communication papers and packaging grades motivate
conversions. Still, they require significant
investment and many factors must align before
that investment is justified.

Fig. 5

Marko Summanen is VP business development for Fisher International, a consulting
firm that supports the global pulp and paper
industry with business intelligence and datadriven strategy consulting. The information
and analyses for this article are drawn from
FisherSolve™, the industry's premier market
intelligence database and analytics resource.
Learn more at www.fisheri.com. Summanen
can be reached at msummanen@fisheri.com.

Fig. 6

14

Furthermore, a new machine will have a basis
weight preference, even further limiting the
independent volume for which it can compete.
So, a large conversion could require an extremely
high share of the truly available independent
market. It is a daunting task unless the machine
has a significant competitive advantage.
Another complicating consideration is that
introducing new capacity can itself affect the
market's supply-demand balance. A surfeit of
new conversion capacity could affect the attractiveness of the market, creating a feedback loop
that every investor must be aware of. We model
such interactions with System Dynamics mathematics to help us understand how much new
capacity each market can absorb. Our models
make it clear that there are strict limitations to
what markets can absorb without changing the
behavior of the market.

Paper360º

NOVEMBER/DECEMBER 2017

www.tappi.org


http://www.fisheri.com http://www.tappi.org

Table of Contents for the Digital Edition of Paper360 - November/December 2017

Setpoint
Over the Wire
Rebuilds and Conversions
Proud to be a Papermaker
The New Cascades
Operational Data Helps Mills Meet Challenges
Papermaking Best Practices with Vacuum-Dewatering Systems: Part 2
TAPPI Library is an Industry Resource
Managing the Decline of Graphic Paper Demand
TAPPI Journal Summaries
2017 PPI Awards Finalists
TAPPI News
ASPI News
Index of Advertisers
Paper360 - November/December 2017 - Intro
Paper360 - November/December 2017 - cover1
Paper360 - November/December 2017 - cover2
Paper360 - November/December 2017 - 3
Paper360 - November/December 2017 - 4
Paper360 - November/December 2017 - 5
Paper360 - November/December 2017 - Setpoint
Paper360 - November/December 2017 - 7
Paper360 - November/December 2017 - Over the Wire
Paper360 - November/December 2017 - 9
Paper360 - November/December 2017 - 10
Paper360 - November/December 2017 - 11
Paper360 - November/December 2017 - Rebuilds and Conversions
Paper360 - November/December 2017 - 13
Paper360 - November/December 2017 - 14
Paper360 - November/December 2017 - 15
Paper360 - November/December 2017 - 16
Paper360 - November/December 2017 - 17
Paper360 - November/December 2017 - 18
Paper360 - November/December 2017 - 19
Paper360 - November/December 2017 - 20
Paper360 - November/December 2017 - 21
Paper360 - November/December 2017 - 22
Paper360 - November/December 2017 - 23
Paper360 - November/December 2017 - Proud to be a Papermaker
Paper360 - November/December 2017 - 25
Paper360 - November/December 2017 - 26
Paper360 - November/December 2017 - 27
Paper360 - November/December 2017 - 28
Paper360 - November/December 2017 - 29
Paper360 - November/December 2017 - The New Cascades
Paper360 - November/December 2017 - 31
Paper360 - November/December 2017 - 32
Paper360 - November/December 2017 - 33
Paper360 - November/December 2017 - Operational Data Helps Mills Meet Challenges
Paper360 - November/December 2017 - 35
Paper360 - November/December 2017 - 36
Paper360 - November/December 2017 - 37
Paper360 - November/December 2017 - Papermaking Best Practices with Vacuum-Dewatering Systems: Part 2
Paper360 - November/December 2017 - 39
Paper360 - November/December 2017 - Managing the Decline of Graphic Paper Demand
Paper360 - November/December 2017 - 41
Paper360 - November/December 2017 - TAPPI Journal Summaries
Paper360 - November/December 2017 - 43
Paper360 - November/December 2017 - 44
Paper360 - November/December 2017 - 45
Paper360 - November/December 2017 - 2017 PPI Awards Finalists
Paper360 - November/December 2017 - 47
Paper360 - November/December 2017 - TAPPI News
Paper360 - November/December 2017 - ASPI News
Paper360 - November/December 2017 - Index of Advertisers
Paper360 - November/December 2017 - cover3
Paper360 - November/December 2017 - cover4
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