Paper mills
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This section applies to industrial plants used to convert raw materials, primarily waste paper and wood into various paper and board products.
List Description: Paper Mill and Premises IF1
SCAT Code 207.
The suffix should be S (valued by Unit Valuers )
Responsibility for the valuation and referencing of this class of property is with valuers within the Non Domestic Rating Business Units.
The Class Co-ordination Team and the Industrial Valuation Panel have responsibility for this class ensuring effective co-ordination across the business units. The team are responsible for the approach to and accuracy and consistency of paper mill valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating list. Caseworkers have a responsibility to:
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follow the advice given at all times
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not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team
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seek advice from the co-ordination team before starting any new work.
There are no separate legal considerations for this class.
6.1 The basis of measurement for paper mills is GIA
6.2 Health and Safety
All paper mills contain serious safety hazards and extreme care is required when carrying out inspections.
Members of the Valuation Office Agency visiting this type of property for inspection or other reasons should wear the appropriate Personal Safety Equipment (PSE) and ensure they are aware of the VOA guidelines on health and safety.
Individuals should comply with all safety rules and precautions prescribed by the site operator.
It is important to maintain a high level of awareness and be alert for the risk of trips and falls, exposed pipes and other elements of production equipment and avoid contact with any liquids or solids encountered in operational areas of the paper mill.
6.3 Background
Nearly all paper in the United Kingdom is made from wood fibre. The paper industry obtains less than 10% of its pulp from timber grown in the UK. Most pulp is imported or comes from recycled waste paper.
Waste paper or wood is delivered to a storage area within the plant by road, rail or water transport in varying degrees of preparation.
A range of chemicals are also required for pulping depending on the processes being used. In papermaking fillers and additives are used to create a product with the required physical characteristics. Biocides, bleaches, sizes, barriers, coatings and dyes are also used to produce the desired brightness, finish and colour.
The wood chips are then converted into wood pulp by either mechanical or chemical processes
Recycled Fibre Production begins with waste paper or packaging being screened to remove large impurities. It is then repulped in a pulper machine and cleaned by centrifugal cleaning and fine screening to remove smaller impurities such as metals, plastics and adhesives.
De-inking is carried out when high quality white paper or newsprint is produced.
All paper then requires bleaching to remove any residual lignin (a main constituent of wood that gives it strength) before paper making commences.
After bleaching the pulp is washed and thickened.
The manufacturing of paper starts by turning the pulp into a slurry to allow the fibres to be dispersed. The paper is then treated by mechanical refining, coating the fibres and filling the pores of the paper (sizing). Fillers, dyes and other additives are then added to improve the strength and quality of the paper.
The pulp then moves onto a paper making machine where it is distributed under pressure on to a moving fine mesh screen and the fibres form a sheet whilst water is removed by gravity and suction.
The surface of the paper may be sprayed with glue like substances such as rosin and wax emulsions. The sheet is then passed through a number of presses to remove excess water, and to force the fibres closer together.
There is then a drying section to the paper making machine where it passes through a series of steam heated cylinders to remove residual moisture and give further fibre bonding.
It may then be coated, further dried and pressed (calendered) to reduce the thickness and smooth the surface before being removed from the machine and transferred to a large reel.
Final products such as paper, paperboard, cartons, boxes and bags are then stored in a warehouse before dispatch.
6.4 Ancillary activities
The paper industry uses huge volumes of water. In many cases incoming water has to be treated to reduce impurities to a level that will not impede the manufacturing process. Treatment processes may include settling, sedimentation, filtering and coagulation. These treatments are also applied to recycled water.
Mills will have their own heat generation systems. These are usually oil or gas fired.
The electrical power used at a paper mill is likely to be a combination of purchased power from the grid and site generated power (from steam).
In addition to organic material from wood waste water may also contain chemicals used in the process such as bleaching agents and biocides. It is therefore treated by primary and secondary treatment before disposal to rivers and sewers.
Solid waste or sludge tend to go to land fill if they are not toxic.
Survey details for paper mills are held in RSA and EDRM but there are files retained by some valuers rating teams for the larger hereditaments
The preferred method of valuation for paper mills in England and Wales is by the rentals approach based upon industrial tone with separately valued plant and machinery assessed on a contractor’s basis in accordance with the VO Cost Guide.
Where it is contended that the premises are so specialised that a valuation on the comparative rentals basis is inappropriate, and the contractor’s basis method has been adopted for the whole hereditament for the purposes of an earlier List, then the matter should be referred for advice initially to Technical Advisors.
Valuation details are to be held on the Rating Support Application (RSA).
1. Market appraisal
1.1 Paper-making can be categorised into 3 broad sectors:
- packaging papers
- tissue and hygiene products
- graphical and publication papers
1.2 Paper production in the UK operates in a challenging environment and the closure of major sites serving newsprint (graphic papers) reflects the fall in demand for products within sectors of the industry. Products within the packaging and tissue sectors have shown growth, for example packaging board materials and tissue parent reels. Packaging is now the UK’s largest sector, having overtaken annual graphics demand.
1.3 Energy costs continue to represent a significant factor and the installation of combined heat and power (CHP) units is an attempt to mitigate this component of production. Recycled fibres comprise over two-thirds of the raw material in UK paper production with the remainder coming from virgin wood fibre from trees grown in sustainably managed forests.
1.4 The impact of the Covid pandemic on industrial property values was marked by considerable variation between sectors. In the paper and paperboard manufacturing industry media comment around the Antecedent Valuation Date (AVD) reported weaker downstream demand from a range of key markets with resulting falling revenues in 2020-21. This exacerbated the declining trend seen before the pandemic. Whilst demand for paperboard from mills supplying the home delivery market has been buoyant there has been reduced demand for mills producing newsprint for newspapers and magazines.
2. Changes from the last practice note
2.1 There have been no changes since the 2017 Practice Note.
3. Ratepayer discussions
3.1 There have been no discussions with ratepayers.
4. Valuation scheme
4.1 There is no full scheme of valuation for this class. In the majority of cases valuation will be by direct comparison with other similar industrial properties. The method of valuation for this class is a rental approach based on the specialist/ local industrial tone dependent on size (specialist being over 20,000 sqm (GIA).
4.2 Where the premises are so specialised that a valuation on a comparative basis is inappropriate then consideration should be given to adopting The Contractor’s Basis (CB) for the entire hereditament.
4.3 When adopting a rentals approach care should be taken to ensure that values adopted reflect any areas of enhanced headroom and any additional structural or floor loading capability.
4.4 In general, car parking should be included in the rate per square metre adopted for the works, and consequently the reflected table should form part of all access paths. It is accepted that in certain circumstances it may be appropriate to deduct for ‘lack of adequate parking provision’ and there may be some cases where an addition could be appropriate - but these will be exceptions.
4.5 Land (as an ancillary to an Industrial hereditament)
4.5.1 The Valuation Support Application (VSA) standards definition requires that all land within a hereditament is identified and appropriately captured.
4.5.2 This will ensure that no “notional” allowances or deductions are made from the gross area of land actually used for and identified as open storage. Typically land area is reflected in the UAR.
4.6 Height adjustments
It is recommended however that the adjustments for height in all large Industrials should be checked in a reconciliation exercise to ensure that the intended result is achieved by the method of adjustment adopted and embedded in the survey data.
|
Eaves Height |
Below 3m |
Between 3m and 7.99m |
Between 8 and 9.99m |
Greater than 10m |
|
Adjustment |
0.95 |
1.00 |
1.05 |
10% for 10m plus 1% per additional metre of height |
4.7 Floor loading
For upper floor areas with heavy floor loading i.e. the paper-making building (machine hall) in a primary paper mill and heavy plant areas the following adjustments should be adopted.
|
Description |
Ground Floor |
1st Floor |
|
PRD |
1.000 |
1.150 |
|
PLT (Heavy) |
1.000 |
1.150 |
|
PLT (Std) |
1.000 |
1.000 |
4.8 Fire protection (sprinklers)
4.8.1 A ‘scheme’ value addition should continue to be applied through the line entry or survey unit adjustments - the FPT factor for this class should be 1.05. Where tanks and pumps are present in support of the system, these must be valued as additional plant and machinery in accordance with the VO Cost Guide.
4.8.2 If cost evidence for a specific installation is put in evidence, this may be used as a better indication of value once it has been adjusted and decapitalised at the statutory decapitalisation rate.
4.9 Heating
4.9.1 All Large Industrials should be assumed to be “heated” and priced accordingly. This will follow the approach used in the Units.
4.9.2 It is likely that heating will be a tenant’s addition. This will be taken into account in rental adjustment and analysis.
5 Plant and machinery
5.1 The common items of plant and machinery likely to be found include electrical items, tanks, concrete foundations and machine bases, supporting steelwork, pits, air items (receivers, compressors and lines) and security cameras. Combined Cycle Gas Turbine is a high value item at primary paper mills.
5.2 These should be captured and valued in accordance with the Plant and Machinery sections of the Rating Manual and the prevailing 2023 Cost Guide.
5.3 The 2023 prescribed rate of decapitalisation should be applied where appropriate.
1. Market Appraisal
This is an industry that has seen long term decline. In 1902 there were 289 paper mills in the UK. This had dropped to 90 mills by the year 2000 producing some 6.3 million tonnes and currently stands at 47 paper and board mills.
10 paper mills have closed since 2008. The industry still has an aggregate turnover of £4 billion a year and directly employs around 25,000 people. It is made up of wide range of companies from large multinational concerns to small single site firms.
The remaining mills face a tough operating environment through the loss of markets due to the recession, changes in the use of their products, threats from electronic media, electronic storage, use of alternative packaging materials and low cost imports.
The 2013 production figure of 4.56 million tonnes is 90,000 tonnes above that of 2012 and appears to have been helped by improving economic conditions and increased consumer spending in the UK. There are 3 broad sectors to the paper making industry:-
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Packaging Papers
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Graphical and Publication Papers
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Tissue and Hygiene Products
21.1.1 Packaging Boards
This sector includes the production of paper or paperboard which is mainly used for wrapping and packaging purposes, carton boards, food packaging and packaging for other industries.
The production of corrugated case materials recently reached 1.4 million tonnes per annum which is the highest since 2007 and partly helped by the surge in internet shopping increasing the demand for packaging materials.
1.2 Graphical and Publication Papers
The graphics sector includes newsprint, uncoated mechanical, uncoated woodfree and coated paper. As a group it has been hit hard by the effects of electronic media and storage. They are thought to have lost over 1 million tonnes of demand since the start of the recession. In 2012 the Printings and Writings production had fallen by 2.6% to 3.56 million tonnes.
An example of the declining consumption of paper is in the printing of directories where by the end of 2012 there had been a 50% reduction in the amount of paper used compared to 2007. This is due to changes in directory sizing and more efficient manufacture.
The consumption of newsprint in the UK continued to fall in 2013 by over 100,000 tonnes to 1.67 million tonnes. However against this decline in demand, UK production actually increased by 4.2% to 1.23 million tonnes which is its highest ever level. This is likely to drop during 2015 with further closures announced.
1.3 Tissue and Hygiene Products
This includes the manufacture of a wide range of tissue and other hygienic papers for use in households or commercial and industrial premises. The tissue sector has been largely unaffected through the recession and consumption of bulk (parent) reels increased by 3.3% to 1.16 million tonnes in 2013. Of this 802,000 tonnes was produced in the UK which is 7,000 tonnes above 2012.
This is a sector that is expected to benefit from the growth in the UK’s population which is forecast to rise from 62 million to around 70 million by 2027.
1.4 Other Issues
Energy Availability and Cost and Climate Change
UK energy prices are amongst the highest in Europe and energy costs represent about 14% of the cost of paper production. The industry is inherently energy intensive and there is a limit to the energy efficiency improvements it can make. The industry trade body the Confederation of Paper Industries (CPI) has issues with renewable energy and climate change policies which it feels have an adverse effect on UK producers. These cover:-
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The EU Emissions Trading System (EU ETS)
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The UK’s Carbon Price Floor (CPF)
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The development of Energy from Waste Plants which are seen as a threat to supplies to recyclable fibres
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The development of large scale Energy Only Bio Mass Plants which they regard as inefficient and a threat to supplies of wood pulp
To secure a long term affordable energy supply some operators have taken energy generation into their own hands with investment in new gas or biomass CHP plants being built or planned.
Although some analysts argue that paper consumption will continue to fall for the above reasons it still remains a significant domestic industry. New investment has made paper production more efficient. Closing less efficient mills and reducing employee numbers through automation and improved production techniques have all improved the competitive position of the UK industry.
Overall UK paper makers posted a modest growth of 2.22% to 4.6 million tonnes in 2013. This compares with pre-recession production figures of 5.22 million tonnes in 2007 and 5.58 million tonnes in 2006.
In the 19 European countries in the Confederation of European Paper Industries (CEPI) as a whole production fell in 2011 by 1.2% to 91.13 million tonnes. Production has also stagnated in the United States and Japan compared to growth of over 3% in South Korea and Canada and modest growth of between 1.55 and 3% in South Korea, China, Canada, Brazil, Russia and India.
2. Changes from last Practice Note
No Practice Note (PN) was produced for the 2010 Revaluation.
3. Ratepayer Discussions
There have been no discussions with the paper making industry.
4. Valuation Scheme
There is no full scheme of valuation for this class. In the majority of cases valuation will be by direct comparison with other similar industrial properties. The method of valuation for this class will usually be a rental approach based on the local industrial tone.
Separately valued plant and machinery is to be assessed on a contractor’s basis in accordance with the VOA Cost Guide. This is likely to include high voltage electrical supply, standby power, supports and bases for machinery, walkways, hoists, bunds, tanks and fire protection.
Where the premises are so specialised that a valuation on a comparative basis is inappropriate then consideration should be given to adopting a contractors method for the entire hereditament.
When adopting a rentals approach care should be taken to ensure that values adopted reflect any areas of enhanced headroom and any additional floor loading capability in upper floor production areas.
Height Adjustments
| Eaves Height | Below 3m | Between 3m and 8m | 8m | 9m | Greater than 10m |
| Adjustment | 0.95 | 1.00 | 1.05 | 1.075 | 10% for 10m plus 1% per additional metre of height |
Floor Loading
For upper floor areas with heavy floor loading ie paper making area (the machine hall), Reel store warehousing and heavy plant areas the following adjustments should be adopted.
| Description | Gnd Floor | 1st Floor | 2nd Floor | 3rd Floor |
| PRD | 1.000 | 1.150 | 1.625 | 1.500 |
| PLT (Heavy) | 1.000 | 1.150 | 1.625 | 1.500 |
| PLT (Std) | 1.000 | 1.000 | 1.000 | 1.000 |