How Will Limited Resources Impact Your Business?

Written by Travis Mlakar, President, The Millcraft Paper Company

We are in a world of limited resources.  Limited time, limited capital and limited capacity.
Our industry is in the process of being turned on its head.  Gone are the days of good and plenty -  where there was enough capital, customers, resources, time, suppliers and tons to go around.  Now, we are in a world with limited choices on the supply side (count the number of domestic coated suppliers today versus 20 years ago).

In the last few months there have been three significant changes in the uncoated free sheet market (UFS) which will impact your business:
  • First, IP closed down their Cortland Alabama facility taking 750,000+ tons out of the market. 
  • Second, Boise was purchased by PCA and has announced capacity reductions of just over 100,000 tons. 
  • Third, Georgia Pacific has also made changes in their facilities and network which resulted in just under 100,000 tons being removed from the market.
What's the impact?  In 2014 the UFS capacity in North America will 10,500,000 tons to 9,578,000 tons.

If demand declines at just 3% (one of the more optimistic views) then it will fall to 9,091,000 tons in 2014.  That would put our industry, barring new capacity coming online or new entrants, at a 95% operating rate.

What does a 95% operating rate mean?  It means you will have a tough time getting paper.  It means allocation.  It means long lead times.  It means rising prices.  And, it means that those customers who over the years have shown the least loyalty (bouncing their tons between the lowest bidder) will be put to the “end of the line.”  They will find they don’t have the tons available and their prices will go up more than anyone else’s (it's logical in a time of price increases to bring the “bottom” up first).
So, as you look forward it's time to do so strategically.  Stop looking at the future as transactions you need to navigate through.  If you do, then you are bound to get caught in a world where tons, time and capital will be better treated elsewhere.

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