Paper manufacturing

The pre-screen cut this on capital, and a greenfield kraft mill is indeed beyond any ordinary entrant. But capital is not the honest reason, because the cut survives the capital being solved. What decides it is what a mill earns once you own it. Mercer International runs modern kraft mills in British Columbia, Alberta and Germany, sells into the same global price as everyone else, and in 2025 reported US$1,868.1M of revenue, a net loss of US$497.9M and Operating EBITDA of negative US$22.0M [A]. Inside that loss is a US$203.5M impairment of the Peace River, Alberta mill, taken, in the company's words, on the continued down-cycle in hardwood pulp; it realised US$743 a tonne for softwood kraft and US$549 for hardwood, and expects fibre costs to rise on supply constraints [A]. The mechanism is a squeeze from both sides that the owner controls neither of: the price is set in China and Europe, the wood cost is set by the same shrinking sawmill residual supply that the Sawmill & Wood-Preserving Plant and Value-Added Wood Manufacturing records describe — fewer sawmills running means fewer chips. The product set is not growing to compensate: newsprint and printing papers are in structural decline, and the growing grades, packaging board and tissue, are made by integrated companies that convert their own output. The size bands confirm there is no small end to start in — 67 of 138 establishments employ a hundred or more, and 14 employ over five hundred [A]. Solve the capital and the mill still loses money.

Converting is the healthy end of paper: boxes follow e-commerce and food, the work is regional because nobody ships empty boxes far, and the entry point is modest. A sheet plant buys corrugated sheet, then prints, die-cuts and glues it into boxes for local manufacturers — no corrugator, no mill. The pre-screen's 'converting plant with long payback' overstates the capital for that model. What the screen finds instead is that the entrant's supplier is its competitor. Containerboard and corrugated sheet come from integrated companies that run their own box plants in the same region. Cascades is the Canadian example: its Packaging Products segment — which since January 2025 has held the former Containerboard and Specialty Products activities, mills and converting plants together — had C$3,079M of sales and C$496M of EBITDA (A) in 2025, about 16% of sales [A]. That margin is earned across the chain; the integrated producer can take it at the mill and price boxes thinly, or the reverse, and in a tight board market it supplies its own plants first. An independent has the converting margin only, on sheet bought at a price its rival sets. The incumbents are not vulnerable in the way an entrant needs: they are consolidating (the group's size bands are heavy — 156 of 406 establishments employ fifty or more [A], and half the plants are in Ontario), and the accounts worth having run on multi-year supply agreements. Independents survive on short runs, fast turnaround and specialty work the integrated plants do not want; that niche is real and this screen does not size it — no figure for independent sheet-plant margins was found. Bags, stationery, tissue converting and the rest of the code were not examined.