When is a paper machine obsolete?

Paper machine obsolescence is frequently discussed and debated. One of the most popular ways to define obsolescence is by calculating a machine's "technological age." In this exercise, a formula relates chronological age and the record of major rebuilds (as measured by their capital costs) on a given machine to produce a comparison among machines producing a given grade. This method can work to some extent, but can also provide foolish answers if the machine rebuilds were not valid, i.e., piles of money were indeed spent but on the wrong things, or were not done economically and with fiscal discipline. I suggest other methods of determining if a paper machine is obsolete:

1. Trim widths: If the machine no longer matches trim widths with 30% or more of the grade's printing or converting lines, it has an unfixable problem and will be shoved around in the marketplace as an ever declining number of customers can use its full production. Watch the history of sideroll production. If it is increasing year-over-year, there is a problem.

2. Speed. If a machine's speed drops below 85% of the average speed for the grade, there is a problem. Speed, unlike trim, can be fixed, but this can require a major expenditure. The costs start with upgrading stock prep processing capacity on through improving mechanical speed capability (often limited by wet end capabilities, rotating member balance speeds, drying capacity, etc.). Some machines are economical to modernize, some are not.

3. Obsolete technology. If, for instance, everyone moves to through-air-drying (TAD) technology for tissue manufacture and it becomes the de facto minimum standard product in the marketplace, a machine without it is dead.

4. Ancillary issues. Energy costs are a good example. The most modern paper machine in the world tied to the most expensive energy generation system in its grade is obsolete. This may be remedied by changing power generation systems.

5. Raw material issues. Soaring raw material costs may pose an insurmountable problem.

6. Obsolete grade. There world is full of older machines that once made a grade now produced on wide, high-speed machines. The older machines are now relegated to manufacturing another grade--falling down the food chain, as I call it. This is essentially a "going out of business" strategy since it is a matter of time before the mill is forced to close. However, this situation is not all bad--some machines have kept the cutting torch at bay for 30 or 40 years with this strategy.

In general, if a mill can get the process and mechanical things right (1, 2 and 3 above) and is not locked into insurmountable ancillary issues (4, 5) or marketing issues (6), a given machine probably has a bright future for some time to come. Even problems like dryers not meeting test pressure codes or other similar safety or regulatory issues are relatively economical to fix as compared to the above Big Six.

MORE THAN OLD IRON

So, "old iron" is not the whole story, any more than spending piles of money at a given location is an accurate assessment of technological age. One must look a bit deeper. For example, one machine I know of is less than 100 inches wide but has such a modern control system that it can be completely operated from any location with a secure Internet connection. Another machine, also less than 100 inches wide, will probably be one of the last machines left operating in its grade. These machines earn a more consistent and higher return on investment than machines four to six times their capacity on a raw tonnage basis.

The decision to permanently shut and remove a machine is difficult and often made incorrectly. Some mills prefer to throw money at an old machine than shut it. This is folly based on flawed ideas. Just because a machine is fully paid for and depreciated today, it will not necessarily be economical to operate tomorrow. If it cannot pass the Big Six test above, shut it down, call in the cutting torches, and have a nice funeral.

ABOUT THE AUTHOR

Thompson is CEO of Talo Analytic International, Inc. (www.taii.com), a member of the Solutions! editorial board and executive editor of PaperMoney (www.globalpapermoney.org), which is published by TAPPI and TAII. Contact him at [e-mail].

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JIM THOMPSON, SOLUTIONS! EDITORIAL BOARD