Mr. Dave Hillman

GLG News by Mr. Dave Hillman, Independent Consultant

GLG News is now G+ Insights

G+ is a community for professionals, academics and entrepreneurs to connect through online discussions and in-person meetings. You will continue to see G+ Insights (formerly GLG News) here as well as on the G+ website, where you can share and discuss the G+ Insights you read.

Moorim Will Become Biggest Fine Paper Producer in So.Korea

August 19, 2009

Analysis of:V OITH TO DELIVER FINE PAPER MACHINE TO SOUTH KOREA | www.paperage.com

This world-class size coated paper machine will be installed at the Ulsan pulp mill site making this the first integrated pulp and paper mill in South Korea. Korea has, for the past 15 years been exporting high quality CFS sheets and rolls to the US. Will this new capacity (450,000tons/year) mean they will be exporting even more? Can the South Korean economy absorb this additional tonnage or will Moorim be forced to export most of the tonnage?

Vietnam Paper Industry: flying under the radar

August 7, 2009

Analysis of:MORE INVESTMENT ON PULP & PAPER INDUSTRY NEEDED | www.shpmedia.com

Viet Nam is currently the fastest growing economy in SE Asia. Growth rate has exceeded 7% since 2002.They must import both pulp and paper to supply domestic needs of 84 million people. Demand & consumption are rising and could reach nearly 2 million mt/year by 2010.The country currently has 300 paper mills but all are small, using antiquated technology. Outside investment is needed to update existing equipment and to build both new pulp and paper mills.

Domtar's shrewd strategy-shutting a UFS machine to increase Fluff Pulp

August 7, 2009

Analysis of:DOMTAR TO SHUT UNCOATED FREESHEET MACHINE IN NORTH CAROLINA | www.paperage.com

Why would Domtar choose to shut down e a relatively newer machine at one of their larger fully integrated mills? Did Domtar feel it was necessary to significantly reduce its capacity in light of the fact that IP had previously closed its Bastrop, LA mill and shut down a UFS machine at Franklin, VA. The 7 UFS grades have seen their annual tonnage drop from slightly over 1 million tons/month a year ago to slightly under 900,000 st/month. At Plymouth UFS tonnage could be turned into Fluff Pulp.

Declining Demand + Decreasing Prices = 0 Profits

July 14, 2009

Analysis of:Tembec Plans Newsprint, Lumber Downtime In Kapuskasing | www.paperage.com

Many Canadian newsprint mills are nearing their "cash cost" levels but to fall below this number means to lose money on every ton shipped. No one is covering their fully allocated costs at this point.  How long can this continue?   Demand continues to fall and shows no signs of abating.  Magazines have reduced their circulation 27% in the past year and big city newspapers have seen sizeable declines in both circulation and advertizing.  Will newsprint ever recover?  Many observers believe the internet has had such an impact that no recovery can ever be envisioned. Boise's current price of $460/st for paper to locations near to their mill in Louisiana is proving a terrible deterrent to any price improvement from the current $510/st level.

Another casualty of coated papers' decline - Kruger Shuts 3 Papermachines at Trois-Riviere

July 13, 2009

Analysis of:Kruger To Indefinitely Stop Production Of Coated Paper At Trois-Rivieres Mill | www.paperage.com

Coated paper demand is closely tied to advertizing...Sunday suppliments, direct mail, catalogs and in-store giveaways.  As newspaper circulation declines and as direct mail advertizing budgets are trimmed it is only natural that supply must be adjusted if disastrous prices reductions are to be avoided.  But...how much is enough?  NewPage has shut Niagara and Kimberly, SAPPI shut a machine in Michigan and several Canadian companies have taken extensive downtime on their CGW machines.  What will it take to create greater demand?  Some say a full economic recovery while others say the internet has offered such an attractive alternative that it will be impossible to overcome.  Therefore, reducing supply appears to be the only alternative...which means shutting down the oldest, slowest, smallest, least cost effective machines.

China's Shandong Chenming Seeks To Become #1

July 6, 2009

Analysis of:Metso To Supply Fine Paper Machine To China | www.paperage.com

Zhangiang Chenming is part of Shandong Chenming Paper Holdings Ltd. In 2008 their paper production capacity was over 3 million tons, turnover was EUR 2 billion and with 17,000 employees.  This huge new paper machine will greatly increase their overall capacity and could push them into a leadership position as far as UFS and CFS are concerned.  APP and APRIL are both also huge but their grades include packaging board, tissue and toweling.  Building a new paper machine with this huge capacity is a tangible expression of what their growing middle class is expected to consume in the next decade.  This machine is to be backed up by a greenfield pulp mill but it is questionable whether or not it can supply both long fiber and short fiber in the quantities required. It is not unreasonable to assume this machine will require many tens of thousands of tons of grades like acacia, eucalyptus and long fibered Radiata Pine and NBSK.

Will supply/demand dynamics eventually raise newsprint pricing?

July 2, 2009

Analysis of:North American Newsprint Consumption Continues Slide | www.paperage.com

Since 1999 newsprint production has fallen from an annualized rate of 12 milion st/year to the current 4+ tons/year.  Many entire mills have been closed....some remaining mills have shut one or more machines while other mills have taken 2 weeks to 2 months downtime.  With all this reduced supply it would seem only natural that prices have got to begin to stabilize.  FOEX reported a drop of $8/ton down to $532.30...a drop of nearly $200/st.   This in spite of extensive downtime. If demand continues to shrink will this not mean the permanent closure of a number of older, lower volume mills.....which often are located in rural areas where they are the only employer in the area?  This is a very sad situation for all the employees but it would seem little can be done. Several producers have announced price hikes for August lst but it remains to be seen whether buyers will go along since there is so much capacity overhang.

Is this "on again, off again" Tasmanian mill about to be built?

July 2, 2009

Analysis of:Gunns Picks JV Partner for Bell Bay Pulp Project | www.paperage.com

The demand for hardwood in Asia is expected to continue to grow significantly over the next 10-20 years - especially as India's paper industry develops to meet the needs of its huge middle class.  At least a half dozen new world-class mills will be needed.  The Gunn's mill in Tasmania is ideally located to supply the Indian sub-continent and all of SE Asia as well as China.  The Government has granted approval but a group of very aggressive environmentalists have said they will stop at nothing to prevent this mill from being built. There are a number of conflicting forces at work here....on the one hand there are the commercial considerations (i.e. to make money), plus the Australian governments desire to expand exports and improve their balance of trade, and then there is also the global need for high quality hardwood. Opposing these positive benefits are the "NIMBY" environmentalists.

What is fueling the turnaround in pulp prices?

June 17, 2009

Analysis of:NBSK Pricing Up Sharply in U.S. and Europe | paperage.com

A number of Canadian pulp mills have shut down this year and it is questionable whether or not they will restart.  Will this sudden about-face in pulp pricing keep any more mills from shutting down and will higher prices cause some or all of the shut mills to restart?  Price increases of $20-30/admt have been announced and are being accepted.  However, if they all restart and flood the market with increased supplies, will this torpedo the pricing recovery? And, is China's burst of buying solely responsible? Thru April their purchases were up 71% over last year.   May purchases of pulp were at  record breaking levels.  Can they keep it up?   Will India, Indonesia, Korea and perhaps other emerging countries all begin to do their share? Certainly the absence of mill inventories have contributed to this recovery.  Many pulp buyers were told they would have to wait and they then had to scramble.  This led to inventory rebuilding on their part.

Rayon for garments: another leading economic indicator?

June 17, 2009

Analysis of:Bahia Pup Restarts Specialty Pulp Line | www.paperage.com

Bahia's start up of their #1 pulp line adds 115,000mt/year to their production of high Alpha cellulose content dissolving pulp. This very sophisticated pulp is the basic raw material for rayon, man-made fibers, chemicals such as CMC, MEC and HEC, tire cord and cellophane.  Many of these applications - especially rayon for ladies' and mens' garments in China, Japan, Korea, Indonesia and India, are purchased by all classes of the population but especially the middle class.   Therefore, this welcome pick up in orders could imply both a growth of a nation's middle class as well as an increase in the GDP.  It is a leading indicator since dissolving pulp must be shipped (45-60 day transit time from Brazil), processed into thread, then into fabric and finally made into garments.  Those companies placing these large orders for pulp must foresee a increase in the GDP in the 4th quarter. Bahia Pulp is a division of RGM Holdings which also controls APRIL.

Is Vietnam the Pacific Rim's New "Tiger"?

May 28, 2009

Analysis of:PAPER PRODUCTION, CONSUMPTION RISING IN VIETNAM | www.paperage.com

Does the Vietnam government's reducing the VAT on paper by 50% herald a major change in their attitude about encouraging an expansion in this country's pulp and paper industry? Certainly the climate is very accomodating to the planting of fast growing eucalyptus and acacia trees - which can be harvested in 6 1/2-7 years.  With the country centrally located in southeast Asia could they become a major supplier to countries like Laos, Cambodia, Myanmar and even India?  The government has let it be known in the west that by 2011 they will be requiring 2 million mt/year of all kinds of papermaking fiber.   This article specifically lists commodity grades such as newsprint, printing & writing grades, packing (packaging?) paper and tissue as grades which increased by 10-23% since this time last year.

A new market pulp mill for Uruguay coming soon?

May 28, 2009

Analysis of:STORA ENSO AND ARAUCO BUY ENCE'S URUGUAY ASSETS | www.paperage.com

Arauco has already expanded in its own home country of Chile about as much as it can in light of limited tracts of land for new plantations.  Previously they purchased the Alto Parana mill in Argentina but expansion there may be limited by an uncooperative government. So....they entered into a joint venture with the Finnish conglomerate Stora Enso to acquire all of Ence's land in central and western Uruguay.  These 250,000 hectares (750,000+acres) are already planted in eucalyptus and pine trees.  It stands to reason that this land is ideally suited to supply a new (probably) 1.1-1.3 million mt/year market pulp mill.  Stora Enso has already announced it. Stora Enso, a decade ago, built the Veracel mill in Brazil through a joint venture with Ara Cruz. This mill was to be doubled in size this year.     S-E also had said years ago  they wanted to build a greenfield mill in the southern State of Rio Grande do Sul.  Now this mill may never be built.

Tembec's $16 million Fire Sale

April 23, 2009

Analysis of:Tembec Sells Idled Paper Mill in Louisiana | www.paperage.com

Demand for Coated Freesheet has been falling for the past 5 years and shows no signs of reversing this trend.  The three major players: NewPage, Verso and SAPPI have a national presence and many major contracts in place.   Can a stand alone mill in Louisiana hope to compete?  This mill's other product is southern bleached softwood and hardwood market pulp.  In each case these pulps are made up of varying blends of different species.  Other US producers of SBHK have found it extremely difficult to compete with single species pulps like eucalyptus, acacia, birch and aspen.  Will this mill be able to survive in this environment?

Corrugated Containers (Globally) Have A Bright Future

April 14, 2009

Analysis of:World Demand For Corrugated Boxes To Increase | www.paperage.com

The heavily industrialized nations are all experiencing a decline in manufacturing activity and with it a decline of about 13% in corrugated container demand.   How long will this picture remain so gloomy?  Some estimates are for a recovery in  4Q09 while others say it will be a year later than that.  The most pessimistic is for a return to normal in 2011 and not before.     However, globally, the emerging nations will experience enough of a growth to more than offset the malaise in the west.  Corrugated cartons are essential to protect and transport goods and these emerging countries expect to manufacture enormous quantities of merchandise for both domestic consumption as well as for export.  This will lead to increased demand for recovered fibers such as OCC, ONP and SOP (sorted office papers). 

TAX CREDITS: A REWARD, SUBSIDY OR FOOLISH GIVE-AWAY?

March 26, 2009

Analysis of:International Paper Receives Alternative Fuel Refund from IRS | www.paperage.com

Verso has already requested a tax credit of $30 million for just the 4Q for their Androscoggin mill.  This would seem to be inordinately high by our own calculations. They are asking for slightly more for the 1Q.  IP has just received $71 million in tax credits for the 4Q...which may or not be for all their pulp making facilities. The Gov't is offering a very generous $0.50 for every gallon of black liquor burned in a mill's recovery boiler.  A typical mill will burn 256 gallons for every ton produced.  The multiplier produces a hugh number in the tens of millions of dollars.   Did the Gov't have any idea what the size of the tax credit would be? The kraft pulp/paper industry has been burning its black liquor for at least 70 years if not longer.  Why has the Gov't just now decided to reward the industry for something they've been doing all along?

With demand shrinking, what will future newsprint mills look like?

March 25, 2009

Analysis of:What if there is no more newsprint demand? | www.glgroup.com

Demand has shrunk in a decade from 12 million tons to currently 5 million/year and is expected to continue to shrink. Existing newsprint mills, especially in Canada, tend to be older, smaller/slower machines with high labor and wood costs. How can they exist if both demand and prices fall? If there will always be a demand for newsprint, what will the mill of the future look like?   Do any of Abibow's mills fit this model? Even getting a typical Abibow newsprint mill for only US$1, wouldn't the buyer still be left with high unionized labor contracts, high wood costs, high energy costs, high transportation costs and a Government that would impose higher and higher taxes and tougher environmental standards?  Wouldn't these high costs eliminate future profits?

What if there is no more newsprint demand?

March 23, 2009

Analysis of:What if AbitibiBowater Is Forced Into Bankruptcy? | www.nytimes.com

A bankruptcy would shut down many mills in small towns and put many out of work.  However, there are no options. Newsprint demand has gone from 12 million st/year in 2000 down to a current annualized level of only 4.9 million st.  Lessened demand means only the very low cost mills can continue to operate. A number of Abibow's mills have considerable value but are being dragged down by the older, smaller newsprint mills most of which are in Canada.   These viable mills would be better off by themselvs.

Is Emami the forerunner of many more paper mills to be built?

March 19, 2009

Analysis of:Emami Paper To Build Paper Mill In India | www.paperage.com

India's present paper industry is comprised, for the most part, of older, smaller, slower machines which had been scrapped by other industrialized nations.  This was adequate as long as the demand for paper wasn't too great, qualities required were minimal and, also, as long as such a wide variety of recyclced papers and rags would be used. However, all this is changing.  Demand for higher quality papers is growing as well as higher tonnage levels in all parts of the country.  Now, more than ever before, higher quality pulps are available - acacia from Indonesia, Eucalyptus from Brazil, Chile and Thailand and softwood from Chile. What's the missing link?  CAPITAL!  Who or what is going to finance the dozens of paper mills that will be needed in the next 2-5 years?  Each greenfield mill will require at least several hundred million US dollars.

THE ADVANTAGES OF PELLETS IS REFLECTED IN GLOBAL GROWTH

March 12, 2009

Analysis of:Wood Pellet Market Grows, Raw Materials In Demand | www.paperage.com

The global emphasis on developing biofuels has as its basis the desire to reduce dependency on oil.  While pellets would seem to be a logical solution (not completely of course) the question must be asked "where will all the wood come from?  Sawdust and scrap from sawmills is an easy answer but what if the sawmills are shut down for lack of demand for dimension lumber?  The EU offered a subsidy to anyone cutting trees for the purpose of burning them to reduce oil consumption. Does this not put the existing wood products industry at a distinct financial disadvantage?  Harvesting existing forests will, in many cases require logging roads, trained manpower, trucks to haul the cut trees to a pelltizing operation that is hopefully not too far away.

Is Indonesia's Pulp Industry About To Explode?

March 10, 2009

Analysis of:Korindo to Build 600,000-ton Pulp Mill In Indonesia | www.paperage.com

Indonesia's Ministry of Foresty has designated 564,000 hectares (almost 1,700,000 acres) for acacia and eucalyptus plantations.  This land can be leased from the gov't for 6 rotations or 42 years.  Korindo seems to have gotten the jump on the others (two other Koreans) as well as giant IP who had said they would build a 750,000mt/year acacia mill there....no doubt to support its joint venture in China with Sun Paper.  If these 3 So.Korea mills plus IP become a reality, this could signifcantly boost Indonesia into a leadership position as far as short fiber market pulp production....putting them on a par with Brazil. It's expected that Korindo will be shipping most (if not all) the production from this mill back to So.Korea to furnish the growing demand of the UFS and CFS mills there.  This mill in Indonesia could signal a growing intention of So. Korea's paper mills to be global high quality free sheet paper suppliers.

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