Wood-based feedstocks are expected to play a key role in the production of advanced biofuels over the next five to 10 years in North America and Europe. Competing for the fiber available for wood pulp, biofuels present both a threat to and an opportunity for the pulp and paper industry, according to a new study released by RISI.

“Because the biofuels industry uses many of the same sources of fiber as conventional forest products, the cost of that fiber could increase. This could create a threat to pulp and paper companies who must compete with biofuels companies that are subsidized through tax incentives in Europe and North America,” says Seth Walker, Associate Economist, Bioenergy, at RISI.

“At the same time, this also creates an opportunity for product development and diversification for pulp and paper producers, who have well established woodfiber supply chains. Forest and timber plantation landowners who can supply this emerging market also stand to benefit.” continues Walker.

Outlook for Wood-Based Biofuels provides an overview of emerging wood-to-liquid biofuels technologies. The study will help understand the emerging woodbased biofuels market and the policy that is driving it in the US, Canada and the European Union. Included in the Outlook for Wood-Based Biofuels:

• Outlook and price forecast for wood-based biofuels through 2022

• In-depth description of the policies driving the markets

• Overview of the technologies used to produce wood-based biofuels and which show the most promise financially

• Examination of the main players in the woodbased biofuels market and their business plans

• Detailed financial investment models of biofuel sample facilities

• Projections of biofuel capacity development

• Analysis of how woodfiber markets in North America and Europe will be impacted by wood based biofuels.

For more information, www.risi.com/woodbiofuels

COMPANY NEWS

APP China Starts Up Six Tissue Machines

APP China has stayed on course with its plans for tissue paper expansion, bringing six tissue machines online at its Haikou mill on the Chinese island of Hainan. The new units have a combined capacity of 200,000 tonnes/yr.

These units include two 60,000-tonne/yr A Celli machines, PMs 23 and 24, which each having a width of 5.6 m and a design speed of 2,400 m/min, and four 2.8-m wide machines assembled by APP China’s subsidiary, Jinshun Machinery. Each has an individual capacity of 20,000 tonnes/yr. The smaller Jinshun units feature headboxes, 16-ft Yankee dryers and hoods imported from Europe, while the remaining parts of the machine were sourced in China to keep costs down.

Wausau Paper Starts Up New Voith 70,000-ton/yr Tissue Machine

Wausau Paper has begun operating its new Voith tissue machine to meet demand in the conventional and premium away-from-home products segment. The equipment was installed at the company’s plant located in Harrodsburg, Ky.

The new machine is designed to operate in conventional Crescent Former mode and in ATMOS mode and will enable Wausau to increase its installed tissue production capacity. The main highlight of this double-width (5,600 mm) machine supplied by Voith is the use of ATMOS technology, which was developed in Voith’s Innovation Center in São Paulo, Brazil. This technology enables the production of premium and ultra-premium tissue papers using up to 100% recycled fiber, and consumes up to 60% less energy when compared to similar existing technologies.

Fly Ash from Kruger Mill Used As Cement Alternative

Kruger Inc. was presented with the 2013 Green Innovation Award at the 23rd gala of the Association pour le développement de la recherche et de l'innovation du Québec (Québec association for research and innovation development - ADRIQ) held in Montréal on November 21. The award was given to Kruger's Publication Papers Division in recognition of a project that reuses fly ash produced by the cogeneration plant at its newsprint mill in Brompton, Que.

To date, the Brompton facility is the first and only facility in Canada that has had cogeneration fly ash certified as a cement substitute.

The Brompton Mill has been producing electricity and steam from paper residue and other biomass sources at its cogeneration plant since 2007. This green process significantly reduces the mill's GHG emissions.

Managers at Kruger's cogeneration plant worked on a research project for three years in order to find an option for reusing cogeneration fly ash. The research was performed in partnership with the University of Sherbrooke's Civil Engineering Department.

The project, funded by the Québec Ministry of Natural Resources and the Natural Sciences and Engineering Research Council of Canada, demonstrated that cogeneration fly ash could be used as a cement alternative for various industrial applications. The researchers showed that up to 20% of cement could be replaced with fly ash for making concrete, without compromising the finished product's quality or durability.

Not only does this discovery open the way to substantial savings for concrete manufacturers, but it has also helped to significantly reduce the amount of landfilled waste.

Kruger Inc. is a major producer of publication papers, tissue, lumber and other wood products, corrugated cartons from recycled fibres, green and renewable energy, and wines and spirits.

UPM and Canfor Pulp Enter Into Pulp Sales Cooperation

The Finland-based UPM-Kymmene Corporation (UPM) and the Canada-based Canfor Pulp Products Inc. (Canfor Pulp) have agreed on a strategic sales and marketing cooperation. Beginning 1 January, 2014, UPM’s Pulp Sales network will represent and co-market Canfor Pulp in Europe and China while Canfor Pulp’s sales network will represent and co-market UPM Pulp in North America and Japan. In the initial phase, the cooperation agreement will include six grades of market pulp and approximately one million tonnes of pulp sales from eight mills on three continents.

Both parties consider the agreement to be a significant strategic step. Customers will benefit from a broader product portfolio consisting of Premium Reinforcing Northern Bleached Softwood Kraft (PRP NBSK), Northern Bleached Softwood Kraft (NBSK), Northern Bleached Birch Kraft (NBBK), Bleached Eucalyptus Kraft (BEK), Unbleached Electrical Kraft Pulp (UBE), and Bleached Chemical Thermo Mechanical Pulp (BCTMP).

“We are pleased to enter into this sales and marketing cooperation with Canfor Pulp, a renowned pulp producer in the industry. The cooperation will provide our customers with the most versatile range of Northern Softwood, Birch, Eucalyptus and mechanical pulp available in the global market combined with world-class technical service,” said Tomas Wiklund, Vice President, Sales and Marketing, UPM Pulp Business.

“Canfor Pulp’s grades complement our current softwood and hardwood pulp range very well. The cooperation will also bring us access to new customers in new markets through Canfor’s established sales channels in North America and Japan,” said Wiklund.

“We are very excited to be entering into this direct-to-market sales cooperation with UPM. This agreement will bring two significant and reputable market pulp producers together to offer our customers a broader technical approach and an enhanced product offering for a total fibre solution,” said Sean Curran, Vice President, Sales and Marketing, Canfor Pulp Products Inc.

“Since 2009 when UPM started to operate as a market pulp supplier, we have consistently built our sales and customer service network in Europe and China. Today we sell over two million tonnes of our annual pulp production volume of 3.3 million tonnes to external customers mainly in the growing segments of tissue, packaging board and speciality papers in Europe and China,” said UPM’s Tomas Wiklund.

Stora Enso Acquires Fortum’s Power Plant, Invests In Renewable Energy at Enocell Mill

Stora Enso Biomaterials Division’s Enocell Pulp Mill’s power plant will be transferred from Fortum Power and Heat Oy to Stora Enso at approximately EUR 16 million in accordance with an existing finance lease agreement. Stora Enso has approximately EUR 16 million short term finance lease liability specific to this transaction in the September 2013 balance sheet. The Division will also invest approximately EUR 13.5 million to increase use of renewable energy at the mill.

The power plant at the mill site owned by Fortum Power and Heat Oy will be transferred to Stora Enso ownership on 31 December 2013. In 1990 Fortum Power and Heat Oy (then called Imatran Voima Oy) bought the old power plant at the mill site and built a new power plant there as part of a mill expansion project. The new power plant comprises a 100 MW solid fuel bubbling bed boiler and a 99 MW turbogenerator. The power plant uses bark from the pulp mill and residues from forestry operations as fuel. Its annual power production capacity is approximately 600 GWh, of which around 400 GWh is used by Stora Enso’s operations at the mill site.

The day-to-day operations and maintenance of the plant are already undertaken by employees of Stora Enso and the mill maintenance company Efora Oy, so no personnel will be transferred in the change of ownership.

“Transferring the power plant to Stora Enso’s ownership will facilitate development of operations as a whole,” says Stora Enso’s Enocell Mill Manager Sauli Purho.

The investment in renewable energy will enable about 85% of the fuel oil used in its lime kiln to be replaced by sawdust. The investment is expected to reduce the mill’s annual fossil-based carbon dioxide emissions by 30 000 tonnes and energy costs by EUR 5 million. The changes required to the mill processes will be made during 2014.

“We want to make the mill’s energy balance more environmentally friendly. The pulp mill is more than self-sufficient in energy, but purchased fuel is still needed for the lime kiln. Through the investment Enocell Mill is taking a significant step towards being a mill free of fossil fuels,” says Mill Manager Sauli Purho. Most of the sawdust used will be supplied by Stora Enso’s nearby Uimaharju and Kitee sawmills.

Neenah Paper Reports Third Quarter 2013 Results

Neenah Paper, Inc. (NYSE:NP) recently reported net sales of $214.1 million in the third quarter of 2013 increased four percent compared with the third quarter of 2012. Operating income of $16.4 million was also ahead of the prior year period as mid-single digit growth in Fine Paper and Technical Products was partly offset by higher unallocated corporate expense. Net income of $11.4 million in 2013 grew from $9.1 million in the prior year as a result of higher operating income, lower interest expense and reduced tax expense after including the tax credit.

Technical Products net sales were $104.4 million in the third quarter of 2013 and increased six percent compared with $98.7 million in the prior year period. Gains were led by double-digit growth in filtration, as well as increases in tape and labels that combined were partly offset by lower sales of industrial and building products.

Operating income for Technical Products of $6.7 million in the third quarter of 2013 increased five percent compared with $6.4 million in the third quarter of 2012. The higher income in 2013 resulted from improved manufacturing efficiencies, higher volumes and lower input costs that were partly offset by lower selling prices.

Fine Paper net sales of $102.6 million in the third quarter of 2013 increased four percent compared with prior year sales of $99.1 million. Volumes decreased slightly in the quarter as growth in acquired brands and luxury packaging grades was offset by a decline in lower value non-branded business. Net sales increased overall in 2013 as benefits from an improved mix of products sold and higher selling prices more than offset the lower volume.

Operating income of $13.3 million in the third quarter of 2013 was up four percent compared to $12.8 million in 2012. The increased income in the current year resulted from improved manufacturing efficiencies, a higher value mix and increased selling prices that more than offset higher input prices and increased selling and distribution costs in support of acquired brands.

Year-to-date net sales of $639.6 million in 2013 increased four percent compared to $616.2 million in 2012. Operating income of $61.2 million in 2013 increased from $54.5 million in 2012.

Catalyst Paper Q3 Results Reflect Improved Operations

Catalyst Paper (TSX:CYT) posted improved results in the third quarter of 2013 with higher sales revenues and production volumes, less maintenance-related downtime, and the positive impact of a weaker Canadian dollar balancing the impact of underlying structural changes in the industry.

Net earnings for the third quarter were $5.2 million with a net loss before specific items of $3.5 million. This compares to a net loss of $28.0 million and $18.1 million in Q2 2013.

Adjusted EBITDA and adjusted EBITDA before restructuring costs were $16.4 million in Q3 compared to adjusted EBITDA of negative $0.6 million and adjusted EBITDA before restructuring costs of negative $0.5 million in the second quarter of 2013.

Sales in the quarter were $268.8 million, up 2% compared to $263.4 million in the second quarter and up 1.2% compared with Q3 2012.

“Machine productivity improved in the third quarter, led by pulp operations,” said Joe Nemeth, Catalyst president and chief executive officer who took office October 1st. “Operational excellence is our focus with safety, productivity and costs being the top priorities, now and looking to the year ahead.”

EXPANSIONS/ NEW PROJECTS

Shandong Chenming to Build BSK Pulp Line in Hubei, China, Add Capacity in Zhanjiang

Shandong Chenming Paper Holdings is planning to build a 300,000-tonne/ yr bleached softwood kraft (BSK) pulp line at a greenfield mill in Huanggang city, Hubei province. A total of 216,500 ha of plantations will be established in Huanggang to secure woodchip supply for the fiber line. Construction is projected to start in February, 2014.

Shandong Chenming established a wholly owned subsidiary called Huanggang Chenming Pulp and Paper in the region in 2008 and both the fiber line and plantation projects have been in the plan since then. The projects were greenlit in January 2012 by China’s Ministry of Environmental Protection. The firm decided to accelerate the pulp line and plantation projects recently when it officially announced an investment of RMB 4.78 billion ($780 million) in the schemes.

Shandong Chenming is also planning more paper and board capacity at its mill in Zhanjiang

city, Guangdong province with an investment that will total RMB 3 billion. The Board has agreed to the construction of a paper machine for paper cup production with a capacity of 180,000 tonnes/yr and a high-grade cultural printing and writing paper (P&W) project with production capacity of 190,000 tonnes/yr by Zhanjiang Chenming. The site currently houses a 650,000-tonne/ yr uncoated fine paper PM and a 700,000-tonne/yr bleached hardwood kraft (BHK) pulp line. The P&W paper unit will be the machine it bought from Yanbian Shixian Bailu Papermaking earlier this year.

Mato Grosso Do Sul State, Brazil to House New 1.5 Million-Tonne/Yr BEK Pulp Mill

The Brazilian state of Mato Grosso do Sul is going to house a new 1.5 million-tonne/yr pulp mill, according to the state’s governor André Puccinelli. Puccinelli said the Real 8 billion ($3.6 billion) project which is expected to start construction by mid-2014. Installed in the city of Ribas

do Rio Pardo, where 20,000 ha of planted forests are already in place to supply the new site, the mill will be run and controlled by a Brazilian company, which will have as partners Chinese entrepreneurs with up to 49% participation in the business.

According to Puccinelli, although the mill will begin operations with a pulp production capacity of 1.5 million tonnes/ yr, it will be expected to reach the 2 million-tonne/ yr level later on. This could take the state’s pulp production up to 7.3 million tonnes/yr by the end of the decade, assuming that Eldorado debottlenecks its Três Lagoas bleached eucalyptus kraft (BEK) pulp site, after the completion of the second BEK pulp line scheduled for 2017.

The production capacity expansion is also hovering over Fibria’s horizon, even though there is as no specific date for such procedures. The company, which operates a 1.3 million-tonne/yr BEK pulp mill in the region, is waiting for the right time to pull the trigger. “Fibria intends on pursuing a new capacity expansion in Três Lagoas, and we’re always observing the market. The project is viable, there are equated forests and there is already a technical project as well as approved licenses. It’s a matter of market opportunity, since we don’t want to oversupply the market,” Fibria’s CEO, Marcelo Castelli, affirmed.

Eco Brasil Florestas Looking for New Pulp Mill Investor in Brazil

Eco Brasil Florestas S.A. is looking for an investor to build a new eucalyptus pulp mill in the Brazilian Federal State of Tocantins.

Eco Brasil Florestas S.A. might build a new pulp plant in Brazil. The company said it was looking for an investor to establish a new plant for the production of 1.5 million tons of bleached eucalyptus pulp within the next four to five years.

Eco Brasil has nearly 300,000 acres of land in the north of Tocantins, one third of which consists of eucalyptus plantations. Those plantations are about 40 miles away from the projected factory site in Araguína.

Sappi Fine Paper Europe to Upgrade Gratkorn Mill

The investment at Sappi’s Gratkorn Mill will focus on upgrading pulp production facilities as well as improving papermaking capabilities to secure a significantly lower cost base for the mill. The new investment will facilitate the rebuilding and upgrading of critical parts of the liquor boiler and recovery plant, maintaining pulp production in the mill at current levels. The environmental impact will be positive with a decrease in noise pollution and in NOX/SO2 emissions to ensure long-term compliance with emission limits. The rebuild will be carried out following detailed engineering works scheduled for March 2015 with start-up approximately four months later.

The technology upgrade of Gratkorn’s PM 11 production line is part of the mill’s ‘Fit for the Future’ planning. The grammage range for coated paper will also be increased from 115g/m²-250g/m² to 115g/m²-350g/m². It is estimated that the conversion will start end of business year 2014 and will take just over a year.

ACQUISITIONS

Nippon Paper Industries Announces Acquisition of Equity in SCG Paper’s Fibrous Chain

Nippon Paper Industries Co., Ltd. (Head office: Chiyoda-ku, Tokyo, President: Yoshio Haga) announces that it concluded a joint venture agreement on December 13, 2013 with SCG Paper Public Company Limited (“SCG Paper”).

The Nippon Paper Group has been implementing initiatives to increase the earning power of its overseas businesses, while at the same time promoting the transformation of its business structure as a “comprehensive biomass company.” It promotes the development of overseas businesses by positioning the Pacific Rim as an area of strategic focus, including Asia, where increased demand is expected due to the population increase and economic growth.

In Thailand, to further strengthen its relationship with SCG Paper, Nippon Paper Industries signed a memorandum of understanding with SCG Paper for a comprehensive business alliance in February 2008 and established Siam Nippon Industrial Paper Co., Ltd. (“SNP”) in July 2012 as a joint venture for the production and sale of machine glazed paper (“MG paper”). In addition, Nippon Paper Industries and SCG Paper also discussed a new joint venture and reached an agreement in September this year regarding Nippon Paper Industries’ investment in SCG Paper’s Fibrous Chain. Under the joint venture agreement concluded on December 13, 2013, the two companies have reached an agreement regarding Nippon Paper Industries’ acquisition of equity in SCG Paper’s Fibrous Chain through the acquisition of shares issued through a private placement as a specific scheme of the investment.

Under this agreement, Nippon Paper Industries will acquire approx. 22% equity in the Fibrous Chain (equivalent to approx. 11.0 billion yen) by June 2014. In addition, Nippon Paper Industries will acquire additional equity in the business to increase its equity to approximately 30% by around 2016. Further, Nippon Paper Industries is planning to make SCG Paper’s Fibrous Chain its equity method affiliate and take the equity acquisition as an opportunity to accelerate the expansion of new businesses in the growing market of Southeast Asia by making use of the managerial resources of the two companies, aiming for the sustainable growth of the Nippon Paper Group.

Kadant to Acquire Carmanah Design and Manufacturing

Kadant announced that it has entered into a definitive agreement to acquire Carmanah Design and Manufacturing for $CDN 54 million ($US52 million). Carmanah is a global leader in the design and manufacture of stranders and related equipment used in the production of oriented strand board (OSB). It also supplies debarking and wood chipping equipment.

Carmanah is based in Surrey, British Columbia, just outside of Vancouver. The company has 73 employees and generated approximately CAD 7 million of EBITDA, including CAD 1 million of non-recurring expenses, on revenues of CAD 29 million for its fiscal year ended March 31, 2013.

Kadant Inc. is a leading supplier to the global pulp and paper industry. Kadant is based in Westford, Massachusetts, with revenues of $332 million in 2012 and 1,600 employees in 17 countries worldwide.

McIlvaine Company

Northfield, IL 60093-2743

Tel: 847-784-0012 Fax: 847-784-0061

E-mail: editor@mcilvainecompany.com

Web site: www.mcilvainecompany.com