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Strategic & Financial Arguments(TM)
for the pulp and paper industry worldwide

April 2014

Participating as industry experts in pulp and paper financing and M & A deals around the world  for over two decades, we continue to see the same mistakes made over and over.  This newsletter is designed to help you avoid costly mistakes we have seen others make.  We will be giving you one or two points each month to help improve your performance.
Are containerboard grades headed for rough times?

S & FA doesn't prognostic, but has some thoughts...


The operators in the linerboard and medium grades in the US are expressing some worry about the projected expansion of capacity that appears to be coming to market in the next few years.
S & FA does not prognostic--that is the job of those of you who read this newsletter.  However, we thought we would give you a few things to think about as you consider the future of this sector.
  1. ...Amazon.  It can fairly be said that as goes Amazon, so goes the containerboard business.  Those little boxes add up to lots of cut up in the industry.  Amazon is keeping many a corrugator busy.
  2. ...UPS and Fedex. Same logic as Amazon.
  3. ...the development of "drone" trucks.  This is the idea of an over-the-road eighteen wheeler without a driver following one with a driver.  Most expensive item in the trucking business is the driver (sometimes tied with fuel).  If the cost of drivers can be cut by 20 - 40% with this development, it may mean more small packages shipped regionally.
  4. ...the development of RPAs (Remotely Piloted Aircraft).  Amazon made a big splash with the Amazon Air demonstration.  Expect small retailers in this market first delivering flowers, pizza and hamburgers, all of which will need some sort of container.  This will be high value, low volume packaging that can add up to big volume when taken as a whole.
  5. ...the obsolescence of old mills.  Old conversions tucked in out of the way places with poor energy costs (burning coal and not close to a natural gas line) may die as new capacity with better logistics and energy costs come on line.
  6. ...voluntary obsolescence by large players.  International Paper was not afraid to pull the plug on Courtland when they saw those grades needing a capacity adjustment.  The large system players may do the same in linerboard or medium, as well.
Again, S & FA is a not a prophet.  At the same time, we don't see the picture being as clear as some who may be looking only at the announced capacity increases.  
If you have a casual question or a major deal, call me on my personal cell phone - 404-822-3412 or email me at [email protected]. We are here to help.




Jim Thompson, CEO
Talo Analytic International, Inc.
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