PULP MILLS UPDATE
MARCH 2010
McIlvaine Company
The Pulp Mills Industry Analysis and Forecast has been recently updated. A new Plant Database section has been added to the report—U.S. and European Plants. The database is searchable by Facility Name and Location, linked from the top banner of the report.
TABLE OF CONTENTS
International Paper Reports Fourth-Quarter and 2009 Earnings
Boise Cascade Holdings Reports Fourth Quarter 2009 Financial Results
Neenah Paper Reports 2009 Fourth Quarter and Full Year Results
China Becomes a Global Player in Forest Products Markets
Metso to Supply Containerboard Line to Chinese Zhejiang Ji'An
Rama Pulp & Papers to Set Up Thermal Power Project of 50 MW
India’s Ballarpur to offer RM685mil for Malaysia's GS Paper
Canadian Lumber Output Declined 21% in 2009
FPAC Study—Integrated Pulp and Paper Mills Plus Bio-Energy and Bio-Materials
Castlegar Pulp Mill Ready to Make Green Energy
Domtar, Stora Enso and Metso Collaborate on Future Pulp Mill Biorefinery Concept
Cascades Reopening Paper Mill, Again
Canfor Pulp Announces Project Submissions to NRCan
National Industrial Lumber Purchases North Pacific's Pennsylvania Location
Asian Giant Sinar Mas Looking at Mackenzie Pulp Mill, B.C.
Toscotec to Supply New Tissue Line for Mediterranean Paper Mills in Syria
Södra Builds Wind Turbines at Mönsterås Pulp Mill in Sweden
International Paper (NYSE: IP) reported preliminary full-year 2009 net earnings attributable to common shareholders totaling $663 million compared with a loss of $1.3 billion in 2008. In the fourth quarter of 2009, the company reported a net loss of $101 million compared with a net loss of $1.8 billion in the fourth quarter of 2008. Full-year 2008 results of operations include the acquisition of Weyerhaeuser Company’s packaging business since August 2008.
Full-year 2009 earnings from continuing operations and before special items were $378 million compared with $855 million in 2008. Earnings from continuing operations and before special items in the 2009 fourth quarter totaled $101 million.
Quarterly net sales were $6.0 billion compared with $6.5 billion in the fourth quarter of 2008. Annual sales totaled $23.4 billion compared with $24.8 billion in 2008.
Operating profits in the fourth quarter were a loss of $147 million, including special items, down from profits of $132 million in the fourth quarter of 2008. Full-year 2009 operating profits were $2.4 billion compared with $1.4 billion in 2008.
Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced net income of $33.6 million for the quarter ended December 31, 2009. Included in its net income was a $41.8 million gain on the sale of 17.6 million Boise Inc. shares held by the Company, as well as $18.2 million of noncash income associated with the Company’s remaining equity investment in Boise Inc.
In fourth quarter 2009, BC Holdings’ building products subsidiary, Boise Cascade, L.L.C., reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of negative $12.4 million. This compared to negative EBITDA of $31.5 million in fourth quarter 2008.
Building Materials Distribution segment sales were $368.9 million in the fourth quarter, down 10% from the same quarter a year ago. However, through improved gross margins, as well as cost reductions and operating improvements implemented over the past year, BMD was able to register a positive $1.0 million in EBITDA for the fourth quarter.
Wood Products segment sales in the fourth quarter were $136.8 million, down 12% from the same quarter a year ago. Segment EBITDA was negative $9.4 million in the fourth quarter of this year, compared with the negative $24.7 million reported in fourth quarter 2008. The reduction in the quarterly EBITDA loss from the same quarter a year ago occurred in the face of lower average prices for our key manufactured products. Plywood and EWP prices were down 5% and 4%, respectively, compared to fourth quarter 2008.
In February 2010, 13.1 million Boise Inc. shares were sold for expected net proceeds of approximately $61 million. All of the sales will be settled by March 3, 2010. At February 28, 2010, the company owned less than 10% of Boise Inc. and we will account for the remaining investment under the cost method. The remaining 5.2 million Boise Inc. shares are expected to be sold under the trading plan adopted in fourth quarter 2009.
Outlook
The company expects 2010 end-product demand to remain weak when compared to normal historical demand levels; however, most economists and building products industry forecasters do expect 2010 demand for new residential construction to show modest improvement from the record low levels experienced in 2009.
BC Holdings is a privately held company headquartered in Boise, Idaho. Their wholly owned subsidiary, Boise Cascade, L.L.C., is a leading U.S. wholesale distributor of building products and one of the largest producers of engineered wood products and plywood in North America. BC Holdings is also a shareholder of Boise Inc., a publicly traded North American paper and packaging producer listed on the New York Stock Exchange.
Neenah Paper, Inc. (NYSE: NP) recently reported net sales of $155 million in the fourth quarter of 2009, an increase of five percent from a year ago. Operating income was $11 million in the fourth quarter of 2009 and compared to an adjusted loss of $9 million in the fourth quarter of 2008 and income of $10 million in the third quarter of 2009.
“Our businesses continued to gain momentum with a fourth sequential quarterly increase in sales, EBIT and margins. Cost reduction initiatives implemented in 2009, coupled with recent selling price increases and improving business conditions, put us on solid footing heading into 2010,” said Sean Erwin, Chairman and Chief Executive Officer. “In addition, our capital structure improved in the quarter as we again used available cash flow to reduce debt and successfully renewed and extended our revolving credit facility.”
Full Year 2009
Net sales of $573.9 million in 2009 compared with sales of $732.3 million in 2008. Adjusted operating income of $33.5 million in 2009 compared to adjusted income of $24.5 million in 2008.
Over the last ten years, China has moved from being a modest player in the world’s forest products markets, to becoming one of the leading exporters of manufactured forest products and a major trading partner of both Europe and North America. This is one of the main findings of the United Nations Economic Commission for Europe/Food and Agriculture Organization of the United Nations (UNECE/FAO) publication, “The Importance of China’s Forest products Markets to the UNECE Region” released recently.
China’s forest sector accounted for some 4.8% of total Gross Domestic Product (GDP) in 2008. Forest covered 195.5 million hectares, including 119.7 million hectares of natural forest, in 2008, making it the 5th largest forest area in the world. However, looking at the percentage of forest cover, this represents only 20.4% of the country’s land area, placing China at the 139th position in the world. Forests are unevenly distributed across the country, mostly in North-Eastern and South-Eastern China, leaving large areas with almost no forests.
The growth of China’s forest sector has mirrored the growth in the country’s GDP. However, despite intensive public programmes fostering the planting of new forests since 2001, the demand for raw material now far exceeds the capacity of China’s own forests to supply wood for its industry. China has thus become the world’s third largest importer of forest products with 9% of the world’s imports. Some 60% of its imports come from UNECE member States, with marked differences across sub-regions. In 2008, China imported mainly pulp and waste paper from the US; industrial roundwood from the CIS region, and paper and pulp from Europe.
China has also become the 5th lead exporter with some 8% of the world’s exports of forest products. But it is the world’s biggest exporter of furniture, having overtaken Italy in 2005. The UNECE region represents some 60% of China’s exports, heavily concentrated on Europe and North America. Furniture represents some 70% of Chinese exports to the region.
The emergence of China as a major player in the forest sector has provided important export opportunities for many countries in the UNECE region, but it has also meant accrued competition for UNECE forest product producers, especially furniture manufacturers.
The study finds that over the next years China is likely to expand production from its own forests, but that it will most likely remain heavily dependent on imported wood. Production in several sectors, notably furniture, continues to be oriented primarily towards the export market. As China’s wealth increases, its own consumption of wood products is likely to grow apace. China will continue to have a strong impact on forest products markets worldwide.
This UNECE/FAO Geneva Timber and Forest Discussion Paper is available at: http://timber.unece.org/fileadmin/DAM/publications/dp-57.pdf
Metso will supply a containerboard production line to the Chinese Zhejiang Ji'An Paper Packet Co., Ltd. for their mill in Haiyan county, Jiaxing city, Zhejiang province. The start-up of the production line is scheduled for the second quarter of 2011. The value of the order will not be disclosed. The value of these types of production lines ranges from EUR 80 to 100 million depending on the scope of delivery. The order is included in Paper and Fiber Technology and Energy and Environmental Technology's Q1 orders received.
Metso's delivery will include a containerboard machine. The fully automated reel features unique one-level reeling technology. The Metso automation package will comprise process, machine and quality controls.
The containerboard machineZs daily production capacity will be approximately 1,900 tonnes of coated white top testliner out of bleached kraft pulp, deinked pulp, mixed waste and OCC (old corrugated containers).
Zhejiang Ji'An Paper Packet Co., Ltd. is a subsidiary of Shanghai Taison Pulp & Paper Group. Zhejiang Ji'An currently produces containerboard on two Metso-supplied machines. The company's annual production capacity is around 750,000 t/a.
Metso is a global supplier of sustainable technology and services for mining, construction, power generation, automation, recycling and the pulp and paper industries. We have about 27,000 employees in more than 50 countries. www.metso.com
Rama Pulp & Papers Ltd has announced that the Company is setting up a Power Plant of 50 MW in different phases by investing Rs. 200 Crores. It has been decided to raise funds to implement the Power Project by way of preferential allotment to Qualified Institutional Buyer and to other investors.
The Company has already started placing order for the necessary equipments. The Company is at present getting power from the power grid at Rs. 6.50 per unit. Upon completion of this project, the Company will be able to get power at around Rs. 3.00 per unit for its Captive consumption.
India’s largest manufacturer of writing and printing paper Ballarpur Industries Ltd (BILT), which counts Sabah Forest Industries Sdn Bhd as a subsidiary, is making a bid to buy GS Paper & Packaging Group (GSPP), according to The Economic Times of India.
GSPP has two paper mills at a 200-acre site in Kuala Langat, Selangor, which can produce 270,000 tonnes of paper a year and two box plants with installed annual capacity of 120,000 tonnes each.
On its website, GSPP claims to be the No.1 player in the containerboard segment and the largest integrated paper and packaging manufacturer in the country.
GSPP is currently owned by private equity firm CVC Capital Partners, which bought the paper miller in July 2007 from Genting Sanyen for a reported RM745mil.
The business daily said recently BILT would submit a final bid of close to US$200mil (RM685mil) for GSPP. Three other unnamed bidders were also said to be making a bid for GSPP, the report said, without saying where it obtained the information.
The Economic Times report said BILT had already tied up funds to pay for the acquisition and JP Morgan – BILT’s adviser for the deal – could also be involved in funding part of the bid.
In 2007, BILT and JP Morgan worked together to acquire a 97% stake in Sabah Forest for RM945mil cash from Lion Forest Industries Bhd.
The unnamed source told the daily that BILT was keen on GSPP as a deal could help it achieve forward integration in the Malaysian market.
In a recent interview with The Economic Times, Avantha Group chairman Gautam Thapar said the group was looking at acquisitions for BILT and would invest further in Malaysia.
BILT is the flagship company of Avantha.
Canadian lumber production in 2009 finished at 18.8 billion board feet (bbf), a 21% cut from 2008. Production declined 14% from November to December, as Random Lengths informed Lesprom Network.
However, at 1.4 bbf, December was just 1% behind the same month in 2008, with British Columbia up 14% compared to December 2008. B.C. finished 2009 at 9.7 bbf, down 19% from 2008, to account for 52% of Canadian output.
The B.C. Northern Interior declined 9%, to 4.4 bbf, but the Southern Interior declined 34%, to 1.8 bbf. Nova Scotia also declined 34%, to 228 million board feet (mmbf), and Ontario declined 36%, to 1.4 bbf. December output in Ontario, 79 mmbf, was 49% below the year-earlier level.
At 72 mmbf, New Brunswick was alone in reporting a gain from November to December, and it also was the only province besides B.C. with a gain compared to December 2008. For the year, cuts were lightest in Alberta, where output declined 10%, to 2.8 bbf
The Forest Products Association of Canada (FPAC) has released a comprehensive, first-of-its-kind study that examines a wide range of options for renewal of the Canadian forest products industry.
"The study, The Future Bio-pathways Project, focuses on the triple bottom line: clean energy, high employment, and economic recovery. The results are clear - integrating the production of bio-products and bio-energy into the existing industry is a winner on all fronts," says Avrim Lazar, president and CEO of FPAC.
The Future Bio-pathways Project is one of the first and most exhaustive studies in the world on this topic. The project involved more than 65 top Canadian experts in fields as diverse as bio-technology, investment banking, and carbon pricing.
"This study produced a blueprint for change that is both surprising and welcome," says Lazar. "It places traditional products, especially lumber and pulp, at the heart of a new, green business model that has the potential to make the forest products industry a pivotal force in Canada's effort to become a clean energy super-power. If we follow this new model we will be able to produce power on the scale of nine nuclear reactors, enough to meet the energy needs of 2.5 million homes, or one out of every five homes across Canada."
On the employment front the research shows that an integrated mill - one that produces wood, pulp or paper as well as bio-energy and bio-materials -- provides five times as many jobs as a stand-alone bio-operation. It also shows that the industry's 270,000 jobs will be best sustained by following this integrated road to recovery.
"Years of intensive research and development have produced technologies that open up a world of possibility for the forest products industry in Canada. We can now rapidly convert wood fibre into a wide variety of high-value products such as bio-fuels to heat homes or power vehicles as well as bio-chemicals to make cosmetics, solvents, food additives and renewable plastics," says Pierre Lapointe, president and CEO, FPInnovations.
FPAC notes that by integrating the production of bio-products into existing forestry operations, they will be subject to the same high and increasingly stringent environmental standards that have made Canada a world leader in sustainable forest management.
"This new integrated model will cause investors to take a fresh and more optimistic look at the economic potential of Canada's forest products industry. That is why governments should follow this study's roadmap as it best defines where investors will want to put their money," says Don Roberts, Managing Director, CIBC World Markets and leader of the FPAC study.
"Our research shows this new bio-pathway is the business model for the future of Canada's forest products industry. With 300 Canadian communities depending on the health of the forest products industry for their survival, we must embrace the opportunities it presents," says Lazar.
Castlegar's Celgar pulp mill, Canada, has received a $40-million federal grant for a green energy project that turns biomass into enough energy to supply 22,000 homes with power for a year, integrating the forest industry into the provincial initiative to become energy sufficient by 2016.
The Celgar project, the first to be funded under Ottawa's $1-billion Green Transformation Program, is expected to generate 48 megawatts of power when it comes online in September. Celgar intends to use 13 megawatts for the mill's energy needs and sell the rest, 35 megawatts, to BC Hydro.
"That's enough energy to power 21,636 households a year," said Susan Danard, manager of media relations at Hydro. "It guarantees a nice source of clean, reliable energy to BC Hydro and our customers."
The mill's green energy will replace imported energy from Alberta or the U.S. that is generally generated by burning fossil fuels.
Further, it will add a new source of revenue to the mill by adding a valuable bioenergy component to the pulp-making process. The extra revenue -- the exact amount is not being disclosed -- will enable the Celgar mill to be more competitive globally, said David Gandossi, vice-president at Mercer International, the Vancouver-based forest company that owns the Celgar mill. It is one of Canada's largest and most modern.
Gandossi said the Celgar mill is investing the $40 million primarily in a new condensing turbine and other steam-saving projects.
The steam is being generated by burning black liquor, a biofuel that is a byproduct of the pulp-making process. Pulp mills routinely use black liquor to generate their own heat and energy, but creating energy for the grid is a growing application in B.C.
Gandossi said European mills routinely generate power for electricity grids, enabling them to lower costs.
Mercer was one of four forest companies to sign electricity purchase agreements with BC Hydro in 2009 as part of the provincial policy to reach energy self-sufficiency by 2016. The Celgar project is the largest and will be the first to come online. Hydro already had agreements with two other forest companies, Tembec and Tolko Industries. All six contracts will provide Hydro with enough power for 85,000 homes.
The B.C. pulp and paper industry is generally considered to be on the verge of being replaced by lower-cost global competitors. Bioenergy production is giving the industry a new lease on life.
Gandossi said the provincial government is beginning to realize that pulp mills can be integrated into the energy system in a much more efficient way than other forms of bioenergy, such as simply burning wood waste to create energy. When the new turbine comes online, the Celgar mill will be not only making pulp but also capturing and using more than 75 per cent of the energy within its wood waste feed stock.
"A pulp mill takes what is otherwise a waste product -- the residuals of a sawmill or the residuals in the forest that previously didn't have a value -and creates value-added pulp from it, employing 500 people to make a product you can sell and make money at," Gandossi said.
"The other half is the energy component that we refine. You can sell [it] as electricity or biofuels or whatever else you can make out of the black liquor."
Metso, Stora Enso and Domtar have established a project to develop a future pulp mill biorefinery based on new pulping technology. The target is to develop a new concept with better energy efficiency and cost effectiveness of the process, lower initial capital investment costs, and reduced fibre usage while maintaining or even improving fibre properties from a paper and board quality point of view. The project will take several years.
The three companies see promising opportunities for a breakthrough in sustainable chemical pulping technology, compared to current practices.
The new pulp biorefinery concept will further strengthen Metso's position as a supplier of sustainable technology to pulp and paper industry.
The project is in line with strategic targets set by Finnish, Swedish and North American forest clusters for their research and development work: to renew the industry, to efficiently utilize raw materials, to protect the environment, and to improve cost efficiency.
Domtar Corporation is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world.
Metso is a global supplier of sustainable technology and services for mining, construction, power generation, automation, recycling and the pulp and paper industries.
Stora Enso Oyj is a manufacturer of pulp, paper, board, bio-energy and other wood-based materials, chemicals and products.
Cascades mill in Thunder Bay, Ontario—which shut down in 2006—has reopened, again.
Formerly known as Thunder Bay Fine Papers, which reopened last year but failed, the mill has now reopened again under private ownership and will be known as Superior Fine Papers. A group of private investors—Jay, Andrew and Dan Sinclair— have worked, along with former shareholders of the mill, to get the mill opened.
The mill has been in receivership, according to a release, and faced being sold to a company reportedly planning to sell off the equipment. It cost up to $35 million to get the mill up and running, the release says. The mill has previous lives under the Provincial, Abitibi and Cascades banners.
Most of the former jobs have returned, but it remains unclear when the mill will officially open. The mill had invested in excess of $20 million dollars in upgrades under the Thunder Bay Fine papers banner.
“The market is always ready for great products at the right place and the right price”, Marc Goguen, vice president of sales and marketing, said in a release, “and we are in the process of talking to customers about this right now. The reaction has been overwhelming. In fact we have letters of commitment from our key customer base in excess of 90,000 tons, which is roughly half of the mill’s output; we are all overwhelmed by the support.”
John Hitchman, vice president of operations, added: “The machines are ready to roll and all we need is a few weeks to get the supercalendars ready and run some paper.
Superior Fine Papers will make known brands such as Jenson Plus, Thunder Gloss and Route 88 as well as several coated and non-coated postal reply card products. The mill also plans on introducing several niche grades that can respond to recent market demand.
Dan Walsh, vice president of catalog/publication papers at distributor Bradner Smith & Co., says he’s excited about the old mill reopening. “The Canadian dollar, hovering around 80 cents, combined with cheaper energy and fuel costs, will help this mill stay afloat this time,” he says.
Prince George, B.C. - Canfor Pulp Limited Partnership has completed the submission of two (2) projects to NRCan for funding under the Pulp and Paper Green Transformation Program. These projects will result in decreased odour emissions and improved energy efficiency at the company’s facilities in Prince George.
The highest priority project will reduce odour emissions at the PG Pulp Mill.
The second project will increase green power generation at PG Pulp Mill. The two projects will cost an estimated $15 million.
These two initial project submissions are part of a larger program of energy and environmental projects that Canfor Pulp plans to implement under the Green Transformation Program.
The company has been allocated credits of $122.2 million under this federal program.
Lesprom Network/. National Industrial Lumber Co. (NILCO) has completed its purchase of North Pacific's Landisville, Pennsylvania, location, as Random Lengths reported.
NILCO has hired all employees at that location, and is looking forward to expanding into Eastern Pennsylvania and surrounding areas with lumber and building materials, according to Jim Smith and Mike Hoag, President and CEO, respectively, of NILCO.
Rising commodity prices are spurring new interest by Asian forestry giant Sinar Mas in the shuttered Mackenzie pulp mill, the Vancouver Sun recently reported.
Tanner Elton, who heads the Mackenzie Pulp Mill Development Corp., said recently that talks are taking place with Sinar Mas, the parent company of Asia Pulp & Paper, to purchase the pulp mill.
Elton said there is no deal at this point and that a number of obstacles have yet to be resolved, primarily long-term access to fibre, but that better prices for both pulp and lumber are attracting investor interest in the mill.
Lumber prices are now hovering around $290 US a thousand board feet, up $80 from a year ago when they averaged $210 US.
Pulp has also climbed, from $675 US a tonne last March to $870 US.
However, there is little optimism among workers that a deal is in the works for the mill, abandoned last year by its owner, Worthington Mackenzie, which purchased it out of bankruptcy from Pope & Talbot, then failed to restart it.
The mill has been shuttered since June 2008, a casualty of the Pope & Talbot bankruptcy.
The Syrian Company Mediterranean Paper Mills (MPM) has chosen Italian Toscotec for the supply of a new tissue line to be installed in place of the actual TM#1 in the Jableh, Lattakia mill, company said in a statement received by Lesprom Network.
The new Toscotec Modulo crescent former features a single layer headbox, single press configuration and Steel Yankee Dryer TT SYD 3200 MM. The scope of supply includes also approach flow system, upgrading of the existing stock preparation plant, steam heated hood, steam & condensate system as well as electrification and control system. Engineering and services (erection supervision, commissioning and start up assistance, training) complete the Toscotec package.
Machine speed will be up to 900 mpm with a trim width of 2250 mm, for a daily production of 40 tons. Thanks to its Crescent Former configuration and to the high level of technology (including the Toscotec Steel Yankee Dryer), the Modulo machine is extremely flexible and compact but capable of producing high quality tissue both from virgin pulp or waste paper. Its careful design allows to significantly reduce the civil works and the erection time as well as the energy consumption. The installation will be carried out within last quarter of this year.
MPM is one of the well recognized tissue producer in the Syrian market, with ambitious plans for expansion and growth. MPM is producing and converting around 3.500 tons per year of toilet, facial and napkins for the local market.
Södra has purchased six ENERCON E-82 wind turbines through its subsidiary Södra Vind AB. The turbines are to be constructed at Södra Cell’s Mönsterås pulp mill, company said in a statement received by Lesprom Network.
“This is the first wind power project that Södra is implementing. Naturally, Mönsterås municipality is also involved in the project. During the licence process, a project like this always has to follow set rules and is a balancing act between concern for local interests and industrial value creation,” said Gustav Tibblin, President of Södra Vind.
Preparations have been underway since autumn 2009 with startup of the six new turbines scheduled for November 2010.
“ENERCON has shown they want to be a long-term strategic partner to Södra and they share our emphasis on continuous productivity improvement and environmental friendliness. They deliver robust, proven and effective technical solutions at the best total cost,” said Beatrice Kämpe-Nikolausson, Södra’s director of procurement.
“With this contract, ENERCON and Södra take a joint step forward in the expansion of Swedish wind power, and we are looking forward to a continuing close relationship,” commented Claes Jeppsson, sales manager for Sweden for ENERCON GmbH.
In addition to the delivery of six wind turbines to Södra Cell Mönsterås, Södra and ENERCON have contracted an option on a further 50 wind turbines.
The project at Mönsterås mill is the first stage of a major wind power investment around the mill in conjunction with Norwegian energy company Statkraft. Licence approval has been granted to construct a further four wind turbines in Åserum, just north of the mill. Preliminary planning is fully underway.
The third stage of the wind power development is planned in a bow-shaped area running from Torp north of Mönsterås towards Kråkerum to the east.
The total scope of this wind power investment is sufficient to supply the entire municipality with locally produced, renewable household electricity.
Södra is a Swedish group with broad forestry operations and is a leading producer of pulp, wood products and bioenergy.
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