Continuous upgrading of paper machines as a business strategy.

A recent issue of PaperMoney (a TAPPI electronic newsletter) caught my attention because of two announcements of recent orders for Metso Paper. One was for the rebuild of a 7.25 m (285 in) wide release papers machine at UPM's Tervasaari mill in Finland. The second was for a rebuild of Cartulinas CMPC's 5.4 m (213 in) wide packaging board machine at its Maule mill in Chile.

Orders for new paper machines or rebuilds are not unusual, at least in some parts of the world. So what was special about these two orders? Both these machines are almost brand new by traditional industry standards. The UPM machine was installed in 1996 and the CMPC machine in 1998. The order from the Tervasaari mill was for approximately US$ 35 million, so figure installed project cost of at least double the equipment cost. The Tervasaari project includes a stock prep rebuild, modernization of the press and dryer sections, upgraded calendering, and a large automation package.

For the CMPC machine, the project includes a new dilution control headbox for the filler ply, two shoe presses, a metering size press, a shoe nip calender, and a new winder. The cost of the project was not disclosed but you can bet it exceeds US$ 50 million. What are the returns on these investments? Let's look at CMPC's Maule mill project to answer that question.

For the Maule machine (BM 19) there are clearly some quality improvements that can be expected. The dilution control headbox will help CD weight and caliper profiles, and the metering size press will be capable of applying a better pre-coat. The new winder can build rolls up to two meters (6.6 ft) in diameter, just the thing for the export markets. There are only a few shoe-nip calenders (SNC) running on folding cartons, so CMPC has taken a step ahead of most of its competition. SNCs provide a better surface for printability with better bulk retention--which means reduced fiber at the same stiffness. The shoe presses will improve mechanical dewatering, one of the factors needed to speed the machine up, and at the same time reduce overall drying costs.

IMPROVING THE COST STRUCTURE

As a nice side benefit, production is expected to rise from 600 metric tons/day to 900 metric tons/day after the rebuild. For those of you familiar with the concept of "incremental tonnage," consider that this is a 50% increase in the production of a mill with only one machine. If the fixed costs were being carried by the first 600 metric tons/day, think of the improvement in mill profitability with an additional 300 metric tons/day carrying only variable costs.

Even variable costs will be improved. The shoe presses will reduce drying costs on a per ton basis, and you can be sure that it will not take a 50% increase in variable labor to produce the additional tons. So labor costs on a per ton basis will be reduced.

But wait, what about the marketing side? You must have a market for all this additional tonnage. Does Chile really need this much more folding carton capacity? The answer is "of course not." Remember that this is a mill located in a low cost region for labor, and that this machine makes a multi-ply sheet so fiber costs can be controlled better than someone with SBS furnish. Also remember that the paperboard being produced on this machine will likely be of very high quality. So where would you market the additional tons? CMPC says the increased production will be mainly targeted to North America, Europe, and Asia. In effect, CMPC believes that with a low cost structure and a high quality product, the world is an appropriate market place. Good idea!

Continuous upgrading of paper machines to stay on the leading edge in terms of quality and operating costs seems like a reasonable business strategy, albeit one that is not often practiced in North America. But there are some exceptions. Recently, SP Newsprint in Dublin, Georgia, USA set another record as the world's most productive newsprint machine. Although a good deal of the credit goes to the mill personnel, continuous improvements and rebuilds to the 1988 paper machine have been a major factor in keeping the machine efficient.

You may ask, how can you afford to spend capital for continuous upgrades in a market that is not growing--perhaps even declining? I see the question the other way: how can you not? The alternative is simply to "sit on your assets," and that is not going to work in a global economy.

Editor's Note: Subscriptions to PaperMoney, mentioned above, are available free Go to www.tappi.org, click on "Publications," and then on "Electronic Newsletters."

ABOUT THE AUTHOR:

Jim Atkins is president of Atkins Inc., a consultancy focused on paper machinery. He is also a member of the Solutions! Editorial Board. Contact him at + 1 908 806-8689 or [e-mail].

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