High-Margin Specialty Paper Markets Attract New Producers

High-Margin Specialty Paper Markets Attract New Producers

Machine conversions and new investment could crowd specialty industrial papers (SIP) segment

Boston, February 6, 2018 : As global use of graphic papers has declined, many paper producers are looking for other sources of growth. Demand for packaging is still increasing in most regions, including demand for labels and other specialty industrial papers (SIP) used for shipping. This has convinced many producers to expand their SIP business – but the companies that currently dominate specialty markets hold many advantages. The Release Liner and Label Papers Global Supply Study, a first-ever detailed analysis of the competitive outlook for producers of these papers, has just been published by RISI.

“Demand growth and relatively high margins are driving new investments in release liner and label papers,” said Sampsa Veijalainen, RISI Senior Product Manager for Mill Intelligence and author of the new study. “Graphic paper producers are pursuing machine conversions and lesser rebuilds, and even some completely new paper machine investments have been carried out or are in the pipeline.”

To evaluate the relative strength of new and existing producers, the new study incorporates data for the entire segment – 68 companies operating 95 mills with 135 machines worldwide. 80% of overall capacity is controlled by the 20 largest producers, highlighting the difficulties that face new entrants to the market.

Each mill and machine has been analyzed for its cost competitiveness using RISI’s proprietary cost benchmarking methodology. Each machine’s manufacturing or “cash costs” are then broken down by fiber, energy, chemicals, labor, and materials and maintenance costs, allowing assets to be compared on a regional or global level.

“Fiber costs are the largest single factor in determining a mill’s cost competitiveness,” said Veijalainen. “On average, fiber accounts 60% of the cash costs for producing release liner and label papers worldwide. The significance of other cost drivers varies greatly by region, however. That’s why the Release Liner and Label Papers Global Supply Study also considers external factors, like shipping costs to major markets from each plant. A global perspective is essential for a segment that, because of e-commerce, is so closely tied to world trade.” source: risi.com

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