Investment Risk Analysis Of Pulp & Paper Projects Based On Monte Carlo Simulation Methods

After the production capacity of pulp and paper industry rapid increased in the past decade,China's production and consumption of paper and paperboard have ranked first in the world.In front of the increasingly fierce market competition and growing pressure of resources,energy and environment,pulp and paper companies are getting smaller profit margins,and facing greater pressure to survive.In this case,from the pulp and paper project investors' view,it is significant to analyze and evaluate the macroscopic and microscopic risk combined with the characteristics of the industry itself.Firstly,this article reviews the theories and common methods of risk,construction project investment risk,investment risk analysis.Then,briefly describes the general situation and current issues of pulp and paper industry,analyses the engineering economic features from the view of profit zone,value transfer and investment and financing characteristics,discusses the necessity and probability of adding risk probability analysis to feasibility study report.Secondly,the article introduces the Monte Carlo simulation method,researches the process of using Monte Carlo simulation method for investment risk analysis in pulp and paper project,proposes the issue of Monte Carlo simulation method application from identifying risk variables,simulation times and how to properly deal with the simulation consequence.Finally,the article takes FX Paper Co.,Ltd.1.5 million t/d paperboard project for an example,apply Monte Carlo simulation method to calculate the feasible probability of the project and concludes that Monte Carlo simulation method is appropriate from the perspective of evaluating effectiveness and practicality.From the economical point of view,this article based on the theory and method of risk analysis for investment,combines with the features of pulp&paper projects and the current situation of investment risk analysis in its feasibility study report,uses literature research method,historical data estimating method and expert investigation to identify the investment risk in pulp and paper project,applies Monte Carlo simulation method to analysis the investment risk,draws the following conclusions:First of all,under the new normal of Chinese economy background,investors and financial institutions that provide financing for pulp and paper which is a capital-intensive industry put forward higher requirement for investment risk analysis in project feasibility study stage.Content of economic evaluation provided by engineering company or design institute which still only calculate financial evaluation index and do uncertainty analysis has been unable to meet the needs of owners.Too much emphasis on precision and accuracy of risk analyses is often hampered engineering consultants using proven methods in risk analysis of project investment,thus makes uncertainty analysis of financial evaluation index is often used instead of investment risk probability analysis part in project feasibility study report.Secondly,Monte Carlo simulation method is a multivariate analysis method,which can directly handle all uncertainty factors in the pulp and paper project investment and make them as probability parameters.Within this feature,the steps of pulp and paper project investment risk analysis could be simplified and engineers no longer need to struggle and analyze with each uncertainty of factor,the result of analysis is more usability since less interfere factor by engineers.Finally,financial evaluation index and uncertainty analysis calculated in feasibility study stage for pulp and paper project by engineering company or design institute is just a basis of investment risk analysis based on Monte Carlo simulation methods,so it is easier for engineers to apply investment risk analysis based on Monte Carlo simulation methods in pulp and paper project investment risk analysis for feasibility study stage.Engineers could directly use Monte Carlo simulation methods in feasibility study reports to provide practical processes and results for investors,without make up a lot of new information and data.