Some wood pulp producers have given notice of price increases in Europe and China in the hope of reversing a steep slide in the forest-products market since mid-2011.

Finland’s Stora Enso told customers recently that it plans to raise its price for northern bleached softwood kraft (NBSK) pulp by $30 a tonne to $850 in Europe and $670 in China. Chile’s Celulosa Arauco had also notified Chinese customers of a price increase, an analyst said.

The increases stem from confidence that demand in China is picking up and that European customers will restock after the Christmas break.

Even so, the moves come just three weeks after North American producers lowered the benchmark NBSK price from $920 to $890 a tonne, extending a slide that began last June when the price stood at a record $1,040.

Inventories are a little bit too high in softwood kraft right now, said Hank Ketcham, chief executive of West Fraser Timber, a Vancouver-based producer. US kraft paper shipments were 9.8 per cent lower in November than a year earlier, according to the American Forest and Paper Association.

Mr. Ketcham added that while domestic demand in China remained quite robust, China’s export markets, like ours, have weakened a little bit, so there’s an inventory correction going on there too.

Mills around the world have trimmed production in response to soft demand. Brazil’s Fibria, the world’s largest pulp producer by volume, said earlier this month that it would cut output at its Barra do Riacho mill by 31,000t this month. APP China plans a similar cutback at a mill in Qinzhou.

Among paper producers, Resolute Forest Products, formerly AbitibiBowater, has idled uncoated paper mills in Quebec and Ontario. The Montreal-based company launched a C$130m hostile bid last month for Fibrek, a struggling pulp producer.

Moody’s lowered its outlook for the sector recently from stable to negative, citing surplus supply in China as new paper and packaging machines come on stream, sliding demand in Europe and North America, and the continuing move away from printing paper as the popularity of electronic devices grows.

On the other hand, Daryl Swetlishoff, analyst at Raymond James, said that the emergence of the fast-growing Chinese market has brought more stability to the global forest-products industry than in the past.

Mr Swetlishoff expressed confidence that China’s recent moves to boost the domestic economy would benefit pulp and paper demand in 2012.

AMERICAS

Papermakers to Build $1.9bn Pulp Mill in Uruguay

Stora Enso of Finland and Arauco of Chile have agreed to invest in a $1.9bn pulp mill in Uruguay that would mark the country’s biggest foreign investment to date.

The project is the latest in a series of investments in South America by Nordic pulp and papermakers attracted by the region’s low costs and highly productive forests.

Highlighting the scale of the investment, the companies said that the mill is forecast to increase Uruguay’s gross domestic product by 2 per cent once it is fully operational.

UPM, another big Finnish papermaker, already has a large pulp mill in Uruguay, where fast-growing eucalyptus plantations produce much cheaper wood than the slow-growing forests of northern Europe.

However, the expansion of Uruguay’s forest products industry has created tensions with neighbouring Argentina, where environmentalists have long protested against the impact of pulp mills on rivers that are shared between the two countries.

The proposed mill is to be built in south-west Uruguay, on the banks of the Rio de la Plata River, which borders Argentina. It will be served by 254,000 hectares of forest already owned by the joint-venture between Stora Enso and Arauco, part of Chile’s Copec conglomerate.

In common with other Nordic papermakers, Stora Enso has been reducing capacity in its less efficient northern European mills over recent years in an effort to tackle the sector’s chronic oversupply.

However, the industry has shown signs of recovery over the past year because capacity cuts in Europe have reduced supply imbalances, while the global economic recovery has increased demand, particularly from China and other emerging markets.

Pulp prices neared record highs last year and paper prices have also picked up, in spite of pressure from the decline of the print media.

Jouko Karvinen, chief executive of Stora Enso, said the Uruguayan investment fitted the group’s strategy to focus on low-cost plantation pulp.

Each of the joint-venture partners will have a 50 per cent stake in the mill, which will have a capacity of 1.3m metric tonnes a year and is expected to be up and running by the first quarter of 2013. It will be financed 40 per cent by equity and 60 per cent by loans raised by the joint-venture, which is called Montes Del Plata.

Stora Enso and Arauco are both among the world’s biggest producers of pulp, which is used to make paper and packaging.

The Uruguayan government gave the green light for the project this month after an environmental assessment. Officials insisted the mill would not contravene any agreements with Argentina, which unsuccessfully sought to block a previous Uruguayan mill project on another shared river.

Arauco to Rebuild Fire-Ravaged Plant

Arauco recently announced the reconstruction of the Nueva Aldea panel mill at its current location in Ranquil, Nuble, Chile, in accordance with a project that is being studied.

“We know that the community, specially our workers and neighbors, expect us to rebuild these facilities, thus contributing to the development of the region and the commune, by recovering job positions that were lost in this regrettable event”, said Iván Chamorro, Arauco’s public affairs manager, regarding the fire that destroyed the Nueva Aldea panel mill.

It is estimated that the panel mill’s construction and future operation will take at least two years.

Arauco presented a labor plan to address the situation of workers and contract workers affected by the loss of the panel mill.

Akzonobel Invests €80 Million to Supply New Suzano Pulp Mill in Brazil

AkzoNobel is planning to invest €80 million in the construction of a new pulp Chemical Island facility in Brazil. The plant, operated by the company's Pulp and Paper Chemicals business, Eka Chemicals, will supply the Suzano Maranhão pulp mill. This is AkzoNobel's second largest investment in Brazil in the past 12 months and further expands Eka Chemicals' sustainability-focused Chemical Island concept.

"This 15-year agreement emphasizes the importance of high growth markets for AkzoNobel and will help drive the company's medium-term strategy of doubling revenue in Brazil to €1.5 billion," said Rob Frohn, AkzoNobel Executive Committee member responsible for Specialty Chemicals.

The investment will involve supplying, storing and handling all chemicals for the 1.5 million ton per year pulp mill, which is being constructed in Imperatriz, Maranhão, Brazil. The mill is expected to come on stream in the last quarter of 2013.

"We are very proud to have been awarded this project; it underlines the value our Chemical Island concept brings to our customers," said Pulp and Paper Chemicals General Manager Ruud Joosten. "The future demand for pulp and paper in Latin America and China is forecast to increase substantially over the next decade and these investments ensure that we are part of that growth."

Commenting on the agreement, Ernesto Pousada, COO at Suzano Papel e Celulose, said: "Eka Chemicals is a long and reliable partner to Suzano Papel e Celulose. Via this deal, we are ensuring our plant will use the latest and most sustainable chemicals available – something which has been key for us."

The new facility will expand AkzoNobel's well-established pulp and paper activities in Brazil. The business already successfully runs Chemical Islands, as well as other production units, on several customer sites. It also operates bleaching and paper chemical plants in Jacareí, Rio de Janeiro, Três Lagoas and Jundiaí.

Fabrica De Papel San Francisco to Install New Tissue Line in Mexico, Startup Q2 2013

Fabrica De Papel San Francisco S.A. de C.V., Mexicali, Mexico, has ordered a complete tissue production line from Metso, Finland, to startup in the second quarter of 2013. The value of the order has not been disclosed, but according to Metso, this kind of production line is typically valued at EUR 10 - 15 million, depending on capacity and scope of delivery.

Metso's scope of delivery will include a complete tissue machine equipped with a headbox, a yankee cylinder, a yankee hood, sheet control, tail threading equipment, a dust management system and a reel. The new tissue line will use 100% recycled fiber as raw material.

The delivery is a repeat order from Fabrica De Papel San Francisco. The company now successfully operates two Metso tissue machines at its Mexicali facility, one started up in 2006 and the other in 2009.

Fabrica De Papel San Francisco currently operates four tissue production lines and converting facilities, delivering tissue products for the Mexican market.

$17 Million in Funding for Arbec to Reopen Miramichi Mill in New Brunswick

The governments of New Brunswick and Canada are providing more than $17 million to Arbec Forest Products to restart the Miramichi OSB mill that was closed 5 years ago by Weyerhaeuser.

$15.3 million will be coming from the province of New Brunswick, including:

· $1.5 million payroll rebate

· $5.6 million term loan

· $1.2 million contribution for capital expenditures and start-up costs

· $7-million loan guarantee

The $2 million from the federal government will being called a “repayable contribution” for necessary upgrades.

Arbec Forest Products bought the Miramichi mill from Weyerhaeuser last month for $31 million. The company is undertaking a repair program, mill maintenance and equipment startup. Arbec plans to have the mill operational this fall, with a goal of reaching full operation by the spring of 2013. At least 100 jobs will return to the mill and the economically depressed region of the Miramichi in northern New Brunswick.

Under the Crown wood allocation agreement, Arbec Forest Products Inc. can annually harvest 277,802 cubic metres of mixed hardwood pulpwood and softwood pulpwood, which is more Crown wood than Weyerhaeuser had when the mill closed.

Once fully operational, at least half of the mill’s wood supply will come from private woodlots.

New Commercial NCC Plant in Quebec for Innovative Forest Products

The Forest Products Association of Canada (FPAC) says the opening of the world's first nano-crystalline cellulose (NCC) plant in Canada is clear evidence of the rapid transformation of the forest sector and its growing role in the emerging bio-economy.

Leading edge research by FPInnovations has led to the official opening today of the CelluForce plant in Windsor Quebec which will fabricate NCC for eventual use in such products as paints and coatings, films and barriers, textiles, and composites.

"This kind of development underscores the new business model that consolidates the economics of wood and pulp and paper production with the extraction of innovative new bio-energy, bio-chemicals and bio-materials," says the President and CEO of FPAC, Avrim Lazar. "Extracting more value from every tree harvested is going to have an extraordinary impact for Canada economically, environmentally and socially."

FPAC, with the collaboration of FPInnovations, had led a breakthrough study called the New Face of the Canadian Forest Industry: the Emerging Bio-Revolution that did exhaustive research on how to best position the next generation forest products industry. It concluded that the forest products industry in Canada was uniquely position to take advantage of the new bio-economy and exploit a potential global market of $200 billion for bio-products made from renewable wood fibre.

FPAC has also set up the Bio-Pathways Partnership Network to bring together sectors such as the chemical, energy, auto and aerospace industries to promote collaboration with forest products companies on the new innovative products.

Fortress Paper, Canada, Updates Status of Dissolving Pulp Production

Fortress Paper Ltd. (TSX:FTP) is pleased to announce that it has ramped up production of dissolving pulp at its Fortress Specialty Cellulose Mill, Thurso, Que. to approximately 60% of final targeted capacity since it announced production of dissolving pulp had commenced on December 5, 2011. The ramp up of production continues substantially as planned and we expect meaningful improvements in the short term followed by smaller productivity gains as we approach our targeted production capacity. Our dissolving pulp is meeting customer specifications and after aggregating inventory, customer shipments commenced in the final week of December.

Chad Wasilenkoff, Chief Executive Officer of Fortress Paper, commented: "We are extremely pleased with the speed at which the ramp up of dissolving production is proceeding at our Fortress Specialty Cellulose Mill and are focused on achieving our planned production capacity as soon as possible. With the shipment of our first orders, we have demonstrated our ability to successfully produce dissolving pulp that meets the stringent specifications of our customers."

Fortress Paper operates internationally in three distinct business segments: dissolving pulp, specialty papers and security paper products. The Company operates its dissolving pulp business at the Fortress Specialty Cellulose Mill located in Canada which is also in the process of expanding into the renewable energy generation sector with the construction of a cogeneration facility. The Company operates its specialty papers business at the Dresden Mill located in Germany, where it is a leading international producer of specialty non-woven wallpaper base products. The Company operates its security paper products business at the Landqart Mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers, and at its Fortress Optical Facility located in Canada, where it manufacturers optically variable thin film material.

Fortress Buys Lebel-sur-Quevillon Mill for Second Mill Conversion to Dissolving Pulp

Fortress Paper is planning a second pulp mill conversion to dissolving pulp, this time targeting the mothballed Lebel-sur-Quevillon mill in northern Quebec owned by Domtar.

A wholly-owned subsidiary, Fortress Global Cellulose Ltd., has signed an asset purchase agreement to acquire the buildings, equipment, and ancillary property for the nominal amount of $1. The company intends to spend $222 million to convert the Lebel-sur-Quevillon NBSK mill to a dissolving pulp operation with an associated co-gen facility.

The mill will have an annual production capacity of approximately 236,000 air dried metric tonnes (ADMT) and is expected to be completed in late 2013. The LSQ mill would significantly increase Fortress Paper's annual dissolving pulp production capacity, to more than 437,000 ADMT, initially targeting viscose fibre (rayon) products.

The company's other dissolving pulp conversion, at Thurso, Que., came on stream in December 2011. Chad Wasilenkoff, CEO of Fortress Paper, made the announcement in this small northern Quebec town, accompanied by Quebec Premier Jean Charest.

"This project demonstrates the insight and perseverance of the Quebec government and Fortress Paper in developing a unique opportunity which has been latent for several years, but when completed will revitalize the community of Lebel-sur-Quevillon and the surrounding areas of Northern Quebec," said Wasilenkoff.

The mill has been closed since 2005.

The closing of the deal is contingent on, among other things, Fortress Global achieving a collective agreement with the unionized employees of the mill, and a satisfactory fibre supply arrangements.

Investissement Quebec has agreed in principle to grant Fortress Global a loan of up to $132.4 million.

Harmac Pulp Mill in BC to Build Electrical Generation Plant

Nanaimo Forest Products, owner of the Harmac pulp mill in British Columbia, is building an electrical generation plant at the mill.

The company reached a 15 year deal with B.C. Hydro to produce 25 megawatts of power at the mill. That is enough electricity to light up 17,000 homes.

Wood biomass will be used to generate steam that will power the generator. The power generation plant is expected to cost $45 million and take 18 months to build.

Levi Sampson, president of Nanaimo Forest Products, said they plan to start construction of the new generation plant immediately. The company will cover all the costs of the project, and will use $27 million in federal funding they received under the federal Pulp and Paper Green Transformation Program that was intended for projects that improve energy efficiency and environmental performance.

ASIA

Successful Start-up of the Andritz Tissue Machine for Fushun Mining Group, China

International technology group Andritz has successfully started up the PrimeLine tissue machine supplied to Fushun Mining Group. With this tissue machine, whose components were manufactured in the Andritz production facilities in Europe and China, the Fushun Mining Group – so far active primarily in the mining and oil shale processing sectors – has now embarked on production of sanitary papers.

The order awarded to Andritz Pulp & Paper in May 2010 comprises the complete stock preparation system, the two-layer headbox with dilution water control, an 18-foot cast Yankee and a web stabilizing unit with wet dust removal system, as well as the automation system. The PrimeLine TM W8 tissue machine has a design speed of 2,000 m/min at a width of 5.6 m and is designed for production of 100% market pulp.

Andritz has received 18 orders for supply of tissue machines to China so far. With this start-up, the Andritz Pulp & Paper business area has strengthened its position as one of the leading suppliers of tissue machines and local services in China.

Metso to Rebuild Fiber Line for Daio Paper in Japan

Daio Paper Corp., Japan, has contracted Metso of Finland to rebuild the hardwood kraft fiber line at its Mishima mill on Shikuko Island, Japan. Startup of the rebuilt line wass scheduled for the end of 2011. The value of the order was not disclosed.

Metso will supply main equipment for the rebuild of the Mishima mill's fiber line. "Replacing old machinery of low availability and high maintenance costs with Metso's state-of-the-art machinery will boost production capacity of the fiber line to 1,700 air-dried metric tpd of bleached hardwood kraft pulp," said Håkan Öhlen, sales manager, Metso.

Metso's scope of delivery will include a new screening room, an oxygen delignification stage, and five latest-generation TwinRoll Evolution wash presses. Two of the presses will be installed as brown stock washers, two as post-oxygen washers, and one as a D-stage washer.

Daio Paper primarily produces newsprint, printing paper, paperboard, wrapping paper, linerboard, packaging, and sanitation products such as tissue paper, cardboard, and pulp. The company, formed in 1943, operates 38 consolidated subsidiaries and has an annual mill capacity of more than 3 million metric tons.

EUROPE

Sweden’s Sodra Textile Pulp Production in Progress

Production of textile pulp at Södra Cell Mörrum, Sweden has now begun. Under full operation, annual production is expected to amount to 170 000 tonnes, and the investment in Mörrum will give Södra competitive textile pulp production based on hardwood.

Södra made a decision to invest in the production of textile pulp back in December 2010. The Group is anticipating strong market development for textile pulp as it is renewable and timber-based, and it will replace oil-based and cotton fibres. Since this decision was made, implementation of the investment and development of a new market organisation for the new customer segment have been taking place in parallel.

"We are focusing on textile pulp as this is a growing market to which we can supply a certified, renewable forest raw material," says Gunilla Saltin, president of Södra Cell.

"For Södra Cell Mörrum, this is an important step in the reinforcement of the profitability and competitiveness of the mill," says Magnus Olsson, Site Manager for Södra Cell Mörrum.

Södra's executive committee has also made a decision in principle about an appropriation limit for production of textile pulp on a further pulp line at one of the company's pulp mills. A definitive decision on a second textile pulp line at Södra will be made in 2012.

Södra Decides In Principle On Record Investments of SEK 2 billion for 2012

Södra's executive committee has set an appropriation limit which will permit a number of offensive investments in 2012. The decision was taken at a meeting held on 7 December 2011.

"In addition to earlier decisions concerning our participation in the development of wind power in 2012, we have now decided on an appropriation limit of SEK 1,895 million," said Group President Leif Brodén.

"This will now permit a number of offensive investments to be made. We are intending to continue investing in product improvements, but first and foremost we now perceive opportunities for further investments in bioenergy. We are taking into account an investment in Lignoboost at Södra Cell Mörrum which will involve a potential investment in new biomaterials in future, as well as making the mill fossil fuel-free. We are envisaging an investment in a new lime kiln at Värö, and we envisage even more pellet production capacity."

"It is important for us to make the most of the business opportunities available to us in bioenergy when our traditional products are finding things considerably more difficult."

Our budget also allows for another investment in textile pulp. The plan is to convert another pulp line for production of textile pulp.

"Hopefully we will have time to identify which of our lines is most suitable prior to the fourth quarter of 2012. Textile pulp offers major benefits in terms of quality, sustainability and ecology, and we believe we will see good growth in years to come. Production of textile pulp will be commencing at Södra Cell Mörrum in December this year."

The forecast results for 2011 indicate an operating profit of almost SEK 1 billion and a return of 10 per cent on capital employed.

"We are seeing a similar result level in our budget for 2012, with uncertain environmental factors," concluded Leif Brodén.

UPM to Build New Heat and Power Plant at Shongau Mill in Germany

UPM, Helsinki, Finland, will build a new, combined heat and power plant at its Schongau mill in Germany. The goal is to significantly reduce energy costs as well as to secure the energy supply. The gas power plant will replace the old plant facility which has operated more than 40 years. The total investment will be EUR 85 million, with startup planned by the end of 2014

The new power plant will generate process heat as well as electricity for the mill. It will also provide sustainable and energy efficient district heating for roughly 750 households and public institutions such as local school and a hospital in Schongau. The renewed energy supply at the mill will be based on the highly efficient combined heat and power technology utilizing gas as a fuel.

"The new gas power plant will improve the security and self-sufficiency of energy supply to our mill," explains Winfried Schaur, GM at the Schongau mill. "Renewal of the energy generation ensures efficient production and will safeguard the competiveness of the mill. Furthermore, it guarantees a sustainable paper production loop based on innovative and low-emission technologies."

UPM says it aims to achieve improved energy efficiency and energy savings in all of its businesses. The company favors a wide range of low-emission energy sources. During the past decade, UPM has invested more than EUR 1 billion on carbon neutral power and heat generation at its mill sites.

UPM has 23 paper mills in Finland, Germany, the U.K., France, Austria, China, and the U.S. Many of them are large recycling centers and bioenergy producers, as well as paper manufacturers. In 2011, the business group's net sales amounted to EUR 7.2 billion.

The UPM Schongau mill produces newsprint and uncoated magazine papers. Its three production lines have a combined annual capacity of 770,000 metric tons. Founded in 1887 and located in Bavaria, South Germany, the mill employs 550 people.

First Recycled Paper Produced at SAICA’s £300m mill in UK

Spanish paper company SAICA has produced the first paper at its new £300 million recycled paper mill in Partington, Greater Manchester, UK.

The company said on January 23 that the milestone had been reached ahead of schedule following successful trials of the company’s Paper Machine 11 (PM11). Installation of the machine began in early 2011.

The production of sellable paper at Partington marks the return of the paper industry to Trafford, and what SAICA described as the start of a ‘new chapter in British papermaking’.

The £300 million state-of-the-art Partington mill - SAICA’s first in the UK and the first ‘new’ containerboard paper mill in the UK for decades - will produce 400,000tpa of 100% recycled containerboard each year.

A spokesman for SAICA told letsrecycle.com that it expected the plant to become fully operational in the next couple of months.

Over the last two years, SAICA has acquired the Stirling Fibre Group, Cutts Recycling and Futur Ltd in a bid to secure recycled paper feedstock for the Partington mill.

The mill uses recovered paper from households and businesses to produce containerboard, which is then sent to SAICA’s box plants to be made into cardboard boxes.

Mercer Announces Expansion at Stendal Mill, Germany to Increase Pulp Production and Saleable Renewable Energy

Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) recently announced Project Blue Mill to increase production and efficiency through debottlenecking initiatives including the installation of an additional 40 MW steam turbine at its Stendal mill. The debottlenecking which, among other things, requires the new turbine in order to enhance and efficiently utilize steam production, is designed to increase the mill's annual pulp production capacity by 30,000 ADMTs to approximately 675,000 ADMTs. The new turbine is also expected to initially produce an additional 109,000 MWh of surplus renewable energy for sale at premium pricing.

"We are very pleased with this project", said Jimmy Lee, President and CEO. "The project allows us to maximize the value from the wood that we process at Stendal, increase production and efficiency, provide a backup generator on the first turbine and reduce energy costs during maintenance periods and expand power generation. We currently expect the project, in addition to enhancing mill operating results, to deliver approximately €7.5 million (U.S. $9.8 million) of additional annual power revenues."

Mr. Lee concluded: "The project is in line with our group's overall focus on enhancing revenues from the production of green energy and other by-products at all of our mills. We believe that our generation and sale of surplus renewable energy and by-products give Mercer a competitive energy advantage over less efficient mills and provides us with a stable revenue source unrelated to pulp pricing. Based upon our overall 2011 production and sales, after giving effect to Project Blue Mill, on a consolidated basis, we currently expect Mercer will produce about 760,000 MWh of annual surplus renewable green energy and generate approximately €65.5 million (U.S. $84.5 million) of associated revenues there from. Since our energy production is a by-product of our pulp production process there are minimal incremental costs and our surplus energy sales are highly profitable."

Project Blue Mill will require approximately €40.0 million in capital expenditures over about 21 months. The project is eligible for €12.0 million of non-refundable German government grants and the Stendal mill has secured a new €17.0 million five year amortizing secured term debt facility, of which 80% will be government guaranteed. The facility is non-recourse to Mercer. The balance of the project will be funded through operating cash flow of the Stendal mill and up to an aggregate of €8.0 million in pro-rata shareholder loans from Mercer and its minority partner. Project Blue Mill is currently designed to be completed and start to generate power revenues in or about September, 2013.

The Stendal mill is a state-of-the-art, single-line NBSK pulp mill situated near the town of Stendal, Germany with a current annual pulp production capacity of approximately 645,000 ADMTs. Mercer International Inc. is a global pulp manufacturing company.

McIlvaine Company

Northfield, IL 60093-2743

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

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