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TABLE 34

SWISS PAPER MACHINERY TRADE:
1981-85
($ million)

Year 1981 1982 1983 1984 1985
Exports $176 $165 $19.1 $200 $248
Imports 62 50 52 56 50
Balance 104 115 139 142 198

Source: U.S. Department of Commerce, International Trade
Administration internal documents.

manufacturers of corrugated box-making equipment. A dozen firms account for nearly all of Switzerland's paper machinery production, valued at approximately $275 million in 1985. In the same year, Switzerland exported $248 million worth of paper machinery, approximately 90 percent of production. Of this total, $56 million constituted paper machinery and $192 million was converting machinery and equipment. Table 34 shows trends in Swiss production and exports of paper machinery.

Several Swiss producers of paper converting machinery maintain major operations in the United States. Bobst S.A., a major producer of corrugating equipment, has a U.S. facility at Roseland, New Jersey. The Lausanne-based firm also has a Canadian subsidiary and branch offices or affiliates in Italy, France, Japan, and Brazil. SulzerEscher Wyss AG, based in Zurich, was one of the first foreign companies to enter the U.S. market through the act of buying an existing domestic supplier. In 1978, Sulzer purchased the Manchester Machine Company, Middletown, Ohio from Diamond International, Inc. This transaction gave Sulzer-Escher Wyss a U.S. manufacturing base and access to Manchester's fiber box machinery technology. In 1986, Sulzer announced a joint venture to produce screening equipment with Bird Machine Company, of Walpole, Massachusetts, resulting in the formation of Bird-Escher Wyss. Sulzer-Escher Wyss is a multinational firm for which paper machinery represents only a fraction of overall business.

Approximately 12 percent or $28 million of Swiss paper machinery exports in 1985 were sold in the United States, over 90 percent of which was corrugating equipment or parts. In 1987, Switzerland exported $70 million of paper machinery to the United States, of which $42 million constituted box-making machinery and parts. U.S. exports to Switzerland have been modest and have remained virtually unchanged at $4.2 million in 1987 as compared to $4 million in 1981. The trade balance between the United States and Switzerland in paper machinery is likely to continue in a U.S. deficit over the near term. The Swiss are highly competitive and technologically advanced in their specialty; Switzerland should continue to be the

foremost foreign competitor for U.S. and third-country suppliers of corrugating machinery. Although the recent mergers presage greater ability of the few U.S. suppliers of corrugating machinery to compete internationally, they will remain a secondary factor to the Swiss outside the North American market.

Australia-New Zealand. Both Australia and New Zealand have been steady export markets for U.S. producers of paper machinery. U.S. exports of paper machinery to Australia have totaled about $10 million annually over the past 5-years while exports to New Zealand averaged about $3 million a year over the same period. Neither country is a major manufacturer of paper machinery. In Australia, the Boral Johns Perry Industries, of Adelaide, does produce a paper machinery line and is a licensee of Beloit Corporation. Other firms in both countries produce some specialty items such as showers and doctor blades. The needs of the paper and paper machinery industry are represented by a binational technical association, the Australia-New Zealand Pulp and Paper Technical Association which, like its counterparts in the United States, Canada, and Britain, holds a major industry conference and annual exhibit. The Australian Government provides research support to the industry through several mechanisms, including the widely known Commonwealth Scientific and Research Organization.

Australia has 18 paper and paperboard Mills and 19 pulp Mills. New Zealand has six paper and paperboard Mills, and seven pulpmills. Production in the two countries totals 2.3 mmtpy of paper and 2.1 mmtpy of pulp. Late in 1986, a number of Australian and New Zealand paper producers planned new mill projects or major rebuilds. To try to secure some of these projects for U.S. suppliers, the U.S. industry organized a private trade mission to Australia and New Zealand. During February 23–27, 1987, eight U.S. firms visited the two countries. Stops were made in Melbourne and Hobart, Australia, and Rotorua, New Zealand. Technical papers were delivered before an audience of mill personnel.

Mexico and Latin America. Mexico and several South American countries, including Chile, Colombia, and Venezuela, have long been considered principal export markets for U.S. manufactured paper machinery. However, weakness in the Mexican economy and failure of paper projects in Chile, Colombia, and Guatemala have combined to reduce U.S. exports and chill interest in new projects. In addition, the growing Brazilian industry appears to be making inroads into Latin American paper machinery markets. Despite the economic troubles noted above, Latin America in 1986 achieved the largest increases in paper and board output of any continent. Including Central America, paper and paperboard production in 1986 totaled 9.94 mmt, up 7.9 percent from the 1985 total of 9.21 mmt. Pulp production also rose over the same period from 6.58 mmt to 6.81 mmt, an increase of 3.5 percent. Table 35 shows pulp and paper production capacities for selected Latin American countries in 1987.

TABLE 35

PULP AND PAPER MILLS IN LATIN AMERICA: NUMBER, CAPACITY, AND PRODUCTION FOR SELECTED COUNTRIES, 1987 Country Number of Mills Capacity Production-1987 (1,000 tons) (1,000 tons) P & B Pulp P & B Pulp P & B Pulp Argentina 100 25 1,300 9 OO 1,064 725 Brazil 146 38 5, 364 4,474 4, 678 4,031 Chile 7 7 423 876 4.42 861 Colombia 24 5 560 264 488 2.47 Ecuador 5 l 65 35 67 6 Guatemala 4 l 50 O 35 O Mexico 64 15 3, 337 94.7 2,575 800 Peru 14 3 361 3.11 214 145 Uruguay 5 2 83 27 48 26 Venezuela 12 3 7.91 175 612 101 Total Latin America 405 104 12, 639 8,094 10,516 6, 988

P & B = Paper & Board
All tonnages are in metric tons

Source: Pulp & Paper, August, 1988, p. 55

Almost half of all Latin American paper and paperboard production, 4.7 mmt, came from Brazil, the 11th ranking country in worldwide production during 1987. Another 2.6 mmt come from Mexico. Other leading producers in 1987 were Argentina (1.1 mmt), Venezuela (0.7 mmt), and Colombia (0.5 mmt). Brazil also accounted for nearly 60 percent, or 4 mmt of the region's pulp production. Chile (0.9 mmt), Mexico (0.8 mmt), Argentina (0.7 mmt), and Colombia (0.2 mmt) were the only other sizable Latin American pulp producers in 1987.

The region as a whole had 405 paper and paperboard Mills and 104 pulp Mills in 1987. These Mills had a total capacity of 12.6 mmt of paper and paperboard and 8.1 mmt of pulp; Brazil and Mexico accounted for nearly two-thirds of paper, paperboard, and pulp capacity in the region, according to a report in the August 1988 issue of Pulp and Paper.

Mexico has customarily been the second largest export market for U.S.-made paper machinery. Recently, Japan has overtaken Mexico for the second position. Canada remains the largest. In 1982, U.S. paper machinery exports to Mexico stood at $54 million. In that year, the two adjacent markets accounted for $114 million in U.S. exports, or 36 percent of the $315 million in U.S. paper machinery exports of that year. The subsequent decline of the Mexican peso and the worldwide decline in demand for paper machinery sharply reduced U.S. exports to Mexico in the following years. Since

falling to just $12 million in 1983, U.S. paper machinery exports to Mexico slowly rebounded, reaching $23 million in 1986, and then Fell again to $14 million in 1987.

As shown in Table 36, other Latin American markets have also been steady, if somewhat declining, customers for U.S. paper machinery. The export decline seemed to be reversed in 1986, in line with world trends. However, as noted earlier, several Spanish-backed paper mill projects, some using U.S.-built machinery, have recently failed or have been severely troubled. These projects have involved Mills in Chile, Colombia, and Guatemala and their problems will likely reduce the enthusiasm of these governments for further such ventures.

TABLE 36
U. S. EXPORTS OF PAPER MACHINERY TO MEXICO

AND SELECTED LATIN AMERICAN COUNTRIES : 1982-87
($ million)

Countries 1982 1983 1984 1985 1986 1987
Argentina $5.1 $0.7 $1.3 $0.4 $1.4 $1.0
Chile 2.9 2.2 l. 1 1. 7 l. 4 2. 3
Colombia 10. 3 6. T 3. 8 4 - 1 4. 7 5. 1
Costa Rica 1... O ... 7 ... 5 ... 4 3. 7 1 - 1
Ecuador 2.2 ... 5 ... 6 ... 6 1.0 l. 1
Guatemala 1.4 ... 4 ... 3 ... 6 3. O 1. 1
Mexico 53 - 7 12. 3 15. 1 17. 9 23. 3 14.3
Panama 2.8 1.4 l. 6 1.5 1... O 1. 3
Peru 2.5 ... 6 ... 4 ... 5 ... 7 ... 7
Venezuela 8.4 3. 7 4. 9 7. 6 5. 6 7. 9

Source: U.S. Department of Commerce, International Trade Administration internal documents.

Brazil

The Brazilian pulp and paper industry has developed significantly over the past decade both in product output and in machine technology. Brazil has emerged as a major supplier of pulp and, hence, a competitor to established producers in the southern United States and in Canada. Simultaneously, Brazil has also emerged as a major exporter of pulp and papermaking machinery, primarily to North American markets.

Brazil has a sophisticated paper machinery industry, with approximately 13 primary producers capable of manufacturing major items of paper machinery including fourdrinier tables, top-wire formers, driers, refiners and refiner plates, calenders, and filled rolls. Production capacity is far in excess of domestic or regional

needs, and most out is exported to North America. Under the "Law of Similars" (Lofs) l Brazil has excluded most imports and placed high tariffs on the few allowed imports ($10.6 million in 1987). Imports of pulp and paper machinery are subject to customs duties of 45 to 55 percent as well as to other charges, including a 25 percent financial operations tax, a tax of 50 percent on ocean freight designed to finance port improvements, and a 3 percent merchant marine tax. These taxes and tariffs have proved an intolerable burden to most importers and have effectively forced suppliers to produce in Brazil. In comparison, U.S. tariffs on paper machinery imported from Brazil range from zero to 4.7 percent ad valorem.

The list of suppliers active in Brazil includes several of the world's leading producers. Beloit-Rauma in Campinas, Voith S/A in Sao Paulo, and C-E do Brasil, also of Sao Paulo, are among the leading producers. Other active producers include subsidiaries of Sunds and Kamyr and the Companhia Federal de Fundicao, now Brazilian-owned but originally established by Black Clawson. Oriented to exporting and meeting Brazilian internal demand, the Brazilian paper machinery industry has not sought to locate subsidiaries abroad. Similarly, the largely foreign-owned industry has conducted much of its R&D abroad although R&D facilities exist at several Brazilian facilities. A listing of Brazilian suppliers of paper machinery is given in Appendix A.

Brazil ranks as the world's 11th largest producer of paper and paperboard, with 1987 production of 4.7 mmtpy and is ranked 8th worldwide as a pulp producer with 4 mtpy. However, Brazil's per capita consumption of paper is fairly low at 68 pounds. Brazil has 146 paper and paperboard Mills and 38 pulp Mills, several of which have announced plans for capacity expansion.

The rapid expansion of Brazilian trade in paper machinery is readily apparent from the trade statistics. Based on Brazilian figures, Brazilian imports Fell by two-thirds between 1981 and 1985, dropping from $36 million to $12 million. Over the same period, Brazilian exports also Fell but this conceals a rapid rise from 1984 to 1985 following losses during the worldwide drop in paper machine demand after the 1982 recession. After falling from $69 million in 1981 to $27 million in 1984, Brazilian exports rebounded to $61 million in 1985 (Table 37). West Germany supplies 50 percent of the small Brazilian import market, the United States about 22 percent, the United Kingdom about 12 percent, and Italy, Sweden, Switzerland, and Finland together account for about 6 percent.

* The Lofs is an import substitution device designed to protect and encourage development of local industry. The law is a series of regulations that require a similarity test such that if it's made locally it cannot be imported.

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