by Chiara Italia
A commercial joint venture aiming at sharing the strengths and supplementing the resources available in the second-hand market: a mirror of the crisis and of market growth in developing countries.
The second-hand market is booming. It is a physiological consequence of the crisis of the West industry on the one hand, and the exponential growth of the other emerging markets in South America, Middle East, India, Indonesia, Russia, and Africa. A business which also arises from the changes we are witnessing to, not just closures, but also new openings for the need to increase production or to diversify the range of offered products, if the financial investment is not compatible with the purchase of a new line production. And good used items are an excellent opportunity to grow, change, innovate, while making tailor-made investments always with the quality in mind: therefore, without improvising, but relying on those who have engineering experience (a used car has however to be disassembled, transported, reassembled and adapted to different needs), together with good knowledge of the markets at the global level, so as to allow physically far away companies which do not know they have the answer to each other’s needs to, to mutually come into contact.
All these reasons led the two companies to work together to maximize the outcome of their business in the search for buyers and sellers of disused paper plants: Vantek, an American brokering company, and Papcel, a company known in Europe primarily as a manufacturer of machines, which also deals with used items and all the services related to sale, assembly, disassembly, changes, after sales service. The former is expert of the American market, the latter of the European one. The former knows and connects buyers and sellers, the latter is specialized in engineering. Not only is there synergy in the relationship but there is also geographical convenience in that Papcel is strategically located in the heart of Europe, whereas VanTek is strategically located on the West coast of USA which is convenient for travel to SE Asia.
We interviewed them to better understand what has led them to cooperate, and at the same to time learn more about this market segment which was born as an offshoot of the crisis.
Looking for buyers and sellers of used machines
The second-hand market has always existed and can be considered as parallel to the traditional one. In recent years, the demand for and supply of used machinery has significantly increased due to the economic crisis which spread throughout the world, and in this context the number of brokerage firms has grown significantly contributing to give further impetus to the development of second-hand market: there are now about forty intermediaries all over the world who have recognized the potential of this market in order to increase their business.
We asked Claudio Giannone, Papcel, how buyers and sellers are to be found, and what the responsibilities are for a company that operates in the second-hand market: «They can be anywhere,» he says, «though Europe, the United States of America and Canada mainly represent the formless receptacle which includes sellers of disused plants, while the countries with booming economy provide buying opportunities. «Papcel’s activity takes place in the sector of the second-hand market in a direct way, i.e. with the use of internal resources and through the cooperation of some intermediaries such as VanTek.
«Currently the Sellers are mostly in North America and Western Europe; the Buyers are mostly from SE Asia, and increasingly from the Middle East and Africa», says Shelina Nelson, VanTek, and adds: «The most significant factors in being successful in this industry is developing and maintaining current market knowledge of both the Buyers and the Sellers. VanTek has developed and maintained a large network of contacts all around the world with whom I stay in constant contact and get a large amount of industry information in this way. This can be achieved through various Websites, sales agents, equipment suppliers, engineering companies, and a network of contacts in all related industries with whom you should be in constant contact in order to get updated information and industry news. We also regularly read the industry magazines, attend trade shows, visit mills, and maintain an updated Website».
An analysis of the second-hand market, from Europe to America
Markets are obviously not all the same, and the knowledge of the economy of the different countries at the global level is a prerequisite to understand where consumptions are moving to, and thus production. «Europe for example,» says Giannone, «is characterized by an increasing overproduction of paper, that is, supply is greater than demand for almost all types with the exception of the tissue paper where the market still has significant growth perspectives both with regards to production and quality (from average quality paper to premium paper in terms of softness and strength). In this economic situation, most likely the sellers of used equipment will be European while buyers are identifiable in new investors and paper mills in expansion or diversification from countries with high growth rate (counties of Central and South America, Middle East, Russia, and Africa) whose per capita consumption of paper is expected to grow. «The scenario is not very different in America, where – says Shelina Nelson – there are several paper machines making fine paper or newsprint in Canada and USA that are shutting down over the next few years, and this will be a potential source of used equipment for Buyers from Mexico and certain countries in South America, as well as from SE Asia». In other words, the sellers are mostly in North America and Western Europe; the buyers are mostly from SE Asia, and increasingly from the Middle East and Africa: the second hand market is a picture of the financial markets at a global level. As Giannone states: «the trend we have witnessed for years has been the sale of machines from Europe, USA and Canada towards Central and South America, Middle East, India, Indonesia, Russia and South Africa, and we receive a significant amount of requests from India, Russia and Egypt».
The selection of customers
Selling used machines for paper mills is not just how selling a car, because, as Giannone explains, «fundamental competence in a market with few rules is the professionalism with which services are offered». A not very different selection process from that of companies seeking supply of new productionlines, which provides a feasibility analysis for a project: «The customer must be able to articulate their specific needs together with a definite timeline and budget», says Nelson. «They must be able to show a serious level of intent, planning, strategy, vision, specific needs with a specific budget. Experience has taught us how to differentiate the serious buyers from the others, and for them VanTek will go the extra mile to fulfill all their requirements.
Papcel a.s. is a manufacturer of machines for the production of paper, whose legal and administrative headquarters are based in the Czech Republic. The company has been working in the paper industry since 1950. Privatized in 1992, it employs a staff of about 260 employees and sells its machines worldwide through its sales force, a network of agents and a representative office in Russia. The core business of the company is represented by continuous machines and the preparation systems to packaging and wrapping papers, specialty papers and cards for hygiene and sanitary use. As part of a policy of continuous expansion, Papcel a.s. has recently bought a Czech company specializing in the design and construction of facilities for the preparation of adhesives and coatings and the know-how of the Spanish Gorostidi through which it intends to widen its range of products enabling the company to expand its presence in Spain and Latin America. In addition, Papcel a.s. has formed an internal department dedicated to the design of buildings used for paper mills and a division of which Claudio Giannone is responsible globally.
VanTek has been in operation since 1984 and specializes in the sales of idled/used paper machines, related components, complete pulp & paper mills, as well as power plants from North America and Europe to our clients all around the world. For buyers of used equipment, VanTek has developed a strong global network of sources for used pulp mill and paper equipment ranging from single components to complete idled pulp mills, paper mills, power plants, and is able to offer its clients a variety of pulp and paper machines, complete mills and related components, and a diverse range of specialized services. The VanTek team has experienced professionals who understand technical requirements, budget constraints, and who can provide a consultative approach to specific situations. VanTek often partners with other professionals in this industry and together, the extensive technical knowledge and ability to understand geographical and cultural circumstances, helps the group to source what buyers need. VanTek can also help to divest idled assets and liquidate complete idled mills. They will sell or liquidate idled assets or complete mill contents in a combination of one or more of the following steps: appraisal and inventory of assets, market and sell major equipment through private treaty and / or direct sales, auction the remaining assets, demolish the mill site, scrap or recycle remaining equipment, and leave the site «flat & clean». At every stage, their goal is to maximize the return to the seller.