Papermaking in Europe: no status quo

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Papermaking in Europe: no status quo

August 29, 2010 - 18:08
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Brussels, Aug. 30, 2010 (RISI) -

Byron Smith, (right) who leads the Eka Chemicals' AkzoNobel business unit in Europe, was recently joined by team members Per Lundgren (left), regional manager, Nordic countries and Jay Hunsberger (center), marketing director, Europe, for an exclusive interview with RISI.

Smith previously led Eka's business units in North and South America, and before that, directed Eka's global paper chemicals business. Lundgren has seen his focus broaden to include papermaking chemicals, as well as pulp bleaching. Hunsberger was a regional sales manager in the U.S., and was brought to Europe to support expanded partnering efforts with strategic customers, and to bring alternative perspectives.

In Part I of the interview, Smith, Lundgren and Hunsberger, their vision for the coming years, concerning approaches to helping European producers adapt to changing market conditions, and be more profitable.

RISI: What's different about the pulp and paper business in Europe today ?

Smith :Over the past several years Europe has cut production on a widespread basis, especially in coated fine paper and newsprint. The good news is that board looks promising, and tissue continues to grow. Because several major producers had the guts to reduce capacity, especially in magazine and coated fine papers, the supply and demand ratio is better.

Lundgren :Even after a period of decline, Europe's pulp and paper producers business still adds up to about a 100 billion euro annually. Of course, it's dissapointing for everyone that losses are the common denominator. This is especially tough when when you consider the huge amount of capital invested in the forest products sector. As a leading supplier of chemicals, we are exploring many avenues to help our customers improve their bottom lines. The answer is by no means firesale prices for our products, because that only weakens our ability to provide the R & D and partnership potential to make a long term différence.

How do you see Europe in relation to the rest of the world?

Smith:Eka is shifting to meet the new market landscape in Europe, applying R&D strengths and applications know-how in board, recycled content grades, and tissue. While we are strong in meeting the needs of fine paper producers, and even newsprint, we are expanding and adding depth where the business has the greatest potential.

There is a decreasing difference between the Nordic region and the rest of Europe. Many major producers with head offices in the Nordic region are really pan-European companies, or actually global companies. This means that the rest of the world often has a European touch, based upon traditions and thinking which now spans the globe.

From a commercial viewpoint, Finland was a big market for our paper chemicals, but with the downturn in coated paper, naturally, we must shift to other markets.

Nordic producers playing a key role in Asia go back many years, and their presence has become even stronger. Nordic developments in South America in the pulp arena are likewise a major factor. Because of our own strategy to be strong globally, we have been able to balance a flat market in Europe with growth in developing regions.

Hunsberger:Even with the downturn, Europe remains important in pulp and paper production. The mix of grades is rebalancing itself, and what goes into the sheet is changing, too. Look at all the smaller mills investing in stock preparation equipment to better harvest recycled fiber. Much is happening in southern Europe in this regard, and not so far away, the Gulf States are becoming a promising new market.

Smith:When I look back and consider how my home country of the UK has declined as a papermaking center, I still see good niche development in grades such as newsprint and tissue. Just ride on the underground in London, and you notice everyone reading a newspaper! For us, this means further development in deinking chemistries, evolution of our products to remove stickies, and our compact chlorine dioxide generators to enhance water purity-and therefore runnability and productivity continue to be or major importance.

Recently, an Eka Purate chlorine dioxide system was installed at one of our long time sizing and retention customers to good effect.

Describe alternative paths for success in Europe.

Smith:We must orient ourselves to the new market conditions, and be open minded about new products and concepts. Sizing is important to many European producers, because paper properties are more complex and the approach to it is more demanding. We are part of the shift toward surface sizes, and maximizing the efficiencies of internal sizes. We are actively pursuing strategies to better retain sizing, so dosages can be lowered. Because of our legacy in leading micro and nanoparticle retention systems, we can see ways to further enhance sheet properties, while applying more sophisticated chemistry.

Further applying new industrial IT solutions is a developing and exciting future path to speed the response to customer developments, stream line supply chains, and offer real-time problem solving.

Where does Eka stand with respect to cost cutting and value generation?

Hunsberger:One necessary change in mindset is to eliminate the constant price reduction mentality. Benefits are the way out of difficulty. The old saying that you can't save your way to prosperity rings true for papermakers in Europe. Perhaps we haven't been so good at demonstrating the full value of what we do. So, you will see more calculations of real value from Eka - not just short term benefits from price cuts.

Smith:There appears to be a continuous change in the methodology of purchasing, as well. In the past 10 years a chemical supplier could be penalized for not offering a range of products of every color and dimension. This trend of supply consolidation or supply chain management has its pluses, but it also took away the creativity that many paper mills and their applications innovators had concerning problem solving-or grade evolution, in conjunction with leading chemical suppliers who had the chemistry know-how.

Increasingly these days, individuals at mills and R&D centers are working together to leap forward with entirely new chemical concepts, as well as steps forward through creative application of existing technologies.

Lundgren:Pressure is constantly on suppliers to lower prices as a means to lower costs. However, the real issue is the need to find some bright signs out there in the marketplace. If all we do is lower prices, we will never find the true answers we need. High tonnage alone is not the solution. But, because of poor returns, producers are in a tough position to satisfy their owners. So, people tend to drive costs down, and push tonnage up to be the low cost producer. That's only one part of the equation to really progress.

Eka should deliver products that lower their costs, not simply cost less. We must add value in product development, too. It's important to balance cost savings with value creation. Perhaps value creation is the highest priority. In addition, we understand the grades that will survive in the future.

We all have to ask ourselves, do we have the right products and the right competencies? We must eliminate the poor performers and develop the winners. However, when you grab the winners, you must be vigilant to keep that business, and continuously evolve.

It's important, as well, that we continue to improve our own processes, such as optimizing peroxide and chlorate to increase profitability for our customers and ourselves.

What about papermaking in central Europe?

Hunsberger:Germany, and all of central Europe, has a business dynamic all its own. Competition is strong, and it requires the commitment and organization, that fits a range of niche markets. In fact, we have a lot of opportunities for retention in Germany, because of entirely new Compozil systems. The big, fast machines in Asia, have proven new approaches to retention and dewatering, allowing for formulations, which run more smoothly, and more cost effectively. Because Germany is very challenging, our Eka NP 2180, fourth generation nanoparticle silica sol, has potential for taking off. The product doesn't need a lot of babysitting. My point is that sometimes advanced skills allow for technical advances to happen quite easily,

Lundgren:We have renewed our efforts to apply new technologies, even where customers were quite happy with what we were doing. I don't mean to imply that we were complacent, but humans do get comfortable. We are doing more strategizing, more goal setting with respect to trials. Eka would like to be the company that challenges our customers to change, solving problems in a new way, and bringing innovative solutions before asked to do so.

Part II of this interview, "Reduce Risks by Taking Risks" can be viewedhere

Eka Chemicals' offering spans a wide range of performance chemicals from bleaching through papermaking. The group has earned a reputation for innovation because of its development of chemical islands, as well as the Compozil retention/drainage system, continuously advanced since the original breakthrough in the 80's. Most recently, its fourth generation nanoparticle systems, developments in surface sizing and wet strength, are winning the company business, especially in white top board, liner and tissue.

Headquartered in Gothenburg, Sweden, the business is divided into Europe, the Americas and Asia Pacific.