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September 2018: Light Green Machine Principles are not being followed
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There have been a number of announcements and rumors floating around the containerboard side of the business here in late summer. There are new mill announcements, rumors of startups of defunct mills (of various grade heritages) and so forth. Some of the announcements of numbers of personnel have been frighteningly large. Some of the sites have lots of equipment that, in my opinion need to be site-cleared.
My view on containerboard mills is this. Recycled liner and medium have become accepted products for almost all applications. Back in my early days in this industry, liner made from recycled fiber was called "jute liner." As processes became better, it was known as "test liner." Now it is simply called "recycled liner" or, in many cases, no distinguishing adjective is noted at all. This evolving history reflects improvements in technology and acceptance by the marketplace.
That being said, I look at any contemplated liner mill project in the recycled fiber configuration. With the acceptance of the product and the current thinking about OCC pricing (given the announcements out of China), this becomes the base case. This means, in cases where virgin fiber is used, the assets, personnel and wood harvesting and transportation costs associated with this process are "bolt on costs" that must be considered within the overall costs. These "bolt on costs" must be very compelling as the costs I am about to present to you here are for complete recycled liner mills: no other onsite costs required.
I put this data together less than two years ago. The mills compared range from 700 to 1,700 short tons per day (all tons are short tons here). Most are around 1,000 tons per day. All of these mills are operating at this point in time. Only Mill D is a rebuild, all others are greenfield projects. Costs are in 2016 US Dollars.
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Mill
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Cost/Daily Nameplate Ton
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Personnel/Daily Nameplate Ton
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A
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$248,000
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0.10
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B
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$290,000
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0.23
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C
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$301,000
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0.25
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D
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$308,000
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0.11
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E
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$315,000
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0.39
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F
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$349,000
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0.07
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Costs range from as low as $248,000 per daily nameplate ton to a high of $349,000 per daily nameplate ton. That is a 41% variance, quite a large number. The personnel required to operate varies even more--from 0.07 to 0.39 per daily ton--a whopping 457% difference from bottom to top. It is interesting to note that personnel deployment does not necessarily follow capital costs. Note that I was careful to use "Nameplate Ton"--most of these mills are exceeding their nameplate by a considerable number.
One final matter to consider is length of time from groundbreaking to paper on the reel. The standard today is between 15 and 18 months.
Keep in mind all these mills purportedly make the same products from nearly identical raw materials.
If you are involved in a project that is just getting under way, these are numbers you might want to consider. We can recommend folks who can help you achieve Light Green Machine status, if you so desire.
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As always, your comments will be appreciated.
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Think light!
Jim Thompson
Founder
Send us your comments by emailing Jim Thompson
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