There have been a great number of changes for paper mills in the names, product offerings, and even existence of suppliers in recent years. These changes seem to have been much more frequent and sizable in the last four years, for example, than at any time during the past 20 years.
Certainly many paper companies have been reorganized and merged, too, but not as many have changed in such a dramatic way as have the suppliers who serve these companies’ mills.
Let’s look at a few of the areas in which we’ve seen shifts: Starches, dyes, optical brightening agents, laboratory equipment providers, and entire paper machine manufacturers. What are the main forces driving these transitions? Let’s look at a few:
1) The paper industry is shrinking in Western countries and cultures;
2) There has been a rapid expansion of the paper industry in the growing cultures of those countries known as the BRIC* countries (Brazil, Russia, India, and China) plus in Africa;
*NOTE: It appears that in Brazil and China, the rapid build-up in pulp and paper mills is slowing rapidly. Perhaps it’s a temporary breather, but there is little doubt that the rate of expansion in both of these countries was not sustainable for long.
3) With the movement of the paper industry to the East (India, China, Taiwan, Thailand, Vietnam, etc.), suppliers are moving in that direction, as well. Many have moved their research and operations centers to China, for example. Or they may have, at least, opened large branch operations in China or an Asian country;
4) Much more growth is yet to come in India as there are many small paper machines and smaller paper company owners in that country. Plus, the population of India is still growing rapidly. It will soon be the most populous country in the world. Consolidation, economies of scale, and growth will all influence the paper industry in India (and Africa . . . perhaps later).
5) In this global economy, suppliers in many regions, who could once not consider exporting their products, are now doing so viably with favorable manufacturing costs, freight rates, etc. Also, suppliers in China, India, Brazil, Russia, and other areas are also vying for local (in country or in region) business.
So, what does this mean for paper companies anchored in North America and Europe, for example? It means that their suppliers are having to react quickly to rapidly changing conditions. In what ways are they responding to this tsunami of change in the paper industry?
Here are a few of the ways that suppliers have responded so far:
- Large companies have purchased smaller ones to flesh-out their portfolio of offerings to the paper industry. For example, ABB recently purchased Lorentzen & Wettre (L&W) to expand from the paper machine area to the mill laboratories.
- Some suppliers have altered their product lines. For instance, Kemira decided to exit the optical brightener business while staying in the paper industry with dyestuffs and other paper chemicals.
- Companies have merged: BASF bought and merged Ciba Specialty Chemicals into the now larger company.
- Others have decided to exit the paper business entirely: Clariant announced recently the sale of its paper chemicals business to an investment company which will reorganize the company unit into the new entity Archroma. Metso just announced its exit of the paper industry with the pending sale of the pulp, paper, and power units to the newly-formed company Valmet Corporation.
The industry is changing, and the signs of change are widespread. Supplier maneuvers are one sign of this change. In future articles, we will discuss the changes in groups of suppliers in additional detail.
Mark D. Crable is president of Crable Engineering LLC, a firm dealing in the measurement and control of shade and appearance of paper & paperboard as well as other materials. He can be reached by phone at +1-513-405-3167 or by email at Mark@CrableEngineering.com.
As a member of Paperitalo's Consultant Connection group, Mark has exercised his privilege to publish here. Paperitalo Publications is grateful for his contribution.
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