PULP MILLS
UPDATE
July/August 2006
McIlvaine Company
CANADA
Government Assists Pulp Mills
The New Brunswick government is distributing money in an effort to support struggling pulp and paper mills in the province.
Premier Bernard Lord has announced a $5 million assistance package to help UPM Miramichi Inc.
The package includes tax savings, reduced stumpage fees, employee training programs, and a $1.5 million forgivable loan to assist with efforts to make the mill more competitive and cost-efficient.
The mill was restarted in June after 450 locked-out workers accepted a 5.5 percent pay cut, ending a labor dispute that idled the plant for three months.
In June, the government approved $4.5 million in training funds for mills in Miramichi, Edmundston and Nackawic.
The assistance is part of the government’s $250-million action plan for the forestry industry.
Sale Possible for Pulp Mill
Weyerhaeuser is considering selling its white-paper business, and the Kamloops, British Columbia pulp mill might be included in the sale. Industry analyst Kevin Mason does not think that the plant will shut down. He states that the mill is better than most other mills, but it does need some upgrades to improve its efficiency. Mason suspects that if the mill is sold, it will be to Domtar Inc or Boise Cascade, or possibly a combination of the two.
The management is considering putting in gasification technology to decrease the mills dependency on natural gas. This change does not reflect Weyerhaeuser’s decision for the mill, however. According to the local management, the move would be beneficial to the plant, and that is why they are planning to make the change.
As Brazil becomes more active in the pulp industry, more and more Canadian mills are closing, but the Kamloops mill is geographically in the right place. Mason states that the pulp mills in western Canada can produce pulp at lower costs than central and eastern Canada, and are therefore less likely to be shut down.
Summary of August 4 Kamloops Weekly article by Markus Ermisch
Norbord Remains Confident during Industry’s Downturn
The Norbord management is still confident despite current and projected industry decline and difficulties. Norbord is the world’s largest producer of oriented strandboard (OSB), and despite decreased demand and increased competition, they will continue to concentrate on their manufacturing of OSB.
Norbord distributes 5 percent of the annual cash flow to its employees which provides an incentive for running the mills at peak efficiency.
Although Norbord is not above the industry’s downturn, they are working to cut costs at the mill level in order to continue making a profit. They are changing four of their mills to run on biogas instead of natural gas which will save money in the long term.
Summary of Globe and Mail article by Scott Deveau
No Interest Expressed in Abitibi-Consolidated Mill in Stephenville, Newfoundland
More than 20 companies have refused to buy the Abitibi-Consolidated paper mill in Stephenville, N.L. since its closure eight months ago, the Newfoundland government announced.
The lack of interest is symptomatic of the abysmal pulp and paper industry and the bleak future that lies ahead for single-industry towns, Newfoundland's natural resources minister said. "Unfortunately, it doesn't seem to be very bright," Kathy Dunderdale said in an interview.
"We haven't done a really good job in Newfoundland and Labrador in the past of diversifying our economy."
Abitibi-Consolidated shut down the mill in December, laying off 300 workers and delivering a severe economic blow to the west coast town of 7,000. The province approached various companies in the lumber industry with hopes of resurrecting the plant, but none of them wanted to purchase the facility.
The news also came as no surprise to some former workers, who were convinced the mill would never reopen when the company began issuing severance packages.
Over the past year, Abitibi-Consolidated also closed mills in Kenora, Ont., and Champneuf, Que., because of soaring energy costs, the rising Canadian dollar and a gradual drop in newsprint consumption throughout North America.
The province announced the creation of a committee to find ways of luring more investment to Stephenville after its largest employer shut down. Some of the ideas to generate more employment focus on the agriculture and aquaculture industries.
But it remains uncertain whether such spinoffs will be able to make up for the losses incurred since the plant's closure, Dunderdale said.
Some of the laid-off employees have either retired or moved to the mainland for other opportunities, O'Brien said.
Two weeks ago, Abitibi-Consolidated reported second-quarter earnings of $157 million, contrasting with a loss of $43 million in the same period a year earlier.
Source: Canadian Press, TARA BRAUTIGAM
Catalyst Paper Inks Landmark Deal with Sliammon First Nation, City of Powell River
Catalyst Paper, the Tla’Amin (Sliammon) First Nation, and the City of Powell River have officially established a unique limited partnership that will help to secure the region’s economic future and strengthen community bonds.
Catalyst has agreed to sell 805 acres (325 hectares) of land not required for local mill operations to the limited partnership which has assumed a secured five-year mortgage of $4.5 million. The limited partnership will subdivide and sell parts of the property and redevelop other parcels. Preliminary plans envision a marine business park, a light industrial park, a residential subdivision and a community green space. Any profits will be distributed equally to the three partners.
“This is a unique venture and a first for us,” said Catalyst president and chief executive officer Russell J. Horner. “Not only are we divesting surplus real estate at a fair price, we are proceeding with a new approach to local economic revitalization that makes business sense for industry, municipalities, and First Nations.”
Chief Councillor Walter Paul said the venture gives Sliammon a direct stake in the region’s economy and allows it to benefit from future development and capacity building.
“This deal provides our Nation with a great many benefits,” he said. “Not only do we now have a community accord with the City of Powell River, but also new protocol agreements that create meaningful relationships with both Catalyst Paper and the city.”
The joint initiative builds on two cooperation protocols the Sliammon First Nation reached in 2004 with Catalyst and the City of Powell River. The protocols set out the partners’ commitment to a relationship based on mutual regard for culture, history, interests and operations, and a shared desire to develop opportunities together.
“We have been working on this endeavor for two and half years and we are excited to finally have completed it,” said Powell River Mayor Stewart Alsgard. “I believe the partners have set a standard for the rest of the province in how industry, municipalities and First Nations can work together to achieve their respective goals.”
Sale of the surplus mill land will reduce Catalyst’s municipal property tax burden, which is important to the company’s ability to reinvest and compete globally. Developing a marine business park acts as a magnet to attract new industry to the region. This, in turn, helps to diversify the municipal tax base and reduce community reliance on a single corporate taxpayer.
Catalyst is a leading producer of mechanical printing papers in North America. The company also produces market kraft pulp and owns Western Canada’s largest paper recycling facility. With five mills employing 3,800 people at sites within a 160-kilometre radius on the south coast of British Columbia, Catalyst has a combined annual capacity of 2.4 million tonnes of product. Catalyst Paper Corporation common shares trade on the Toronto Stock Exchange under the symbol CTL. The company is headquartered in Vancouver, B.C.
LP Announces Indefinite Shutdown at St-Michel-des-Saints, Quebec OSB and Sawmill Facilities
Louisiana-Pacific Corporation has announced that it will shut down operations at its St-Michel-des-Saints, Quebec, oriented strand board (OSB) mill for an indefinite period of time, as of August 8.
"This shutdown is a difficult, but necessary economic decision," said LP's executive vice president of OSB, Jeff Wagner. "LP's St-Michel-des-Saints OSB mill is losing money due to an unfortunate combination of factors: high wood costs, high transportation costs, unprecedented increases in fuel prices, and the strong Canadian dollar. These costs, combined with the recent steep decline in OSB prices, made this decision necessary."
The OSB mill has an annual production capacity of 500 million square feet and employs 218 people. St-Michel-des-Saints OSB customers will be served by LP's other two Quebec mills in Chambord and Maniwaki during the shutdown.
LP's adjacent St-Michel-des-Saints sawmill, which shares wood resources and energy with the OSB mill and employs 104 people, will also be shut down for an indefinite period of time, effective immediately. The sawmill, whose operations are tied to operation of the OSB mill, has not been profitable for several months.
Wagner continued, "We regret the hardship these curtailments cause employees, vendors and the community. We have excellent, skilled employees at these mills. Unfortunately, we cannot operate the mills under current conditions. We will continue to monitor the economic situation and try to change the factors affecting the current high cost of operations. We will explore every opportunity to reduce costs and to return the mills to a competitive position. Though at this time we do not know when mill operations will resume, we have committed to provide an update to our employees and the community within 60 days as we continue to evaluate our situation at St-Michel-des-Saints."
Tembec Temporarily Shuts Down Sawmills in Quebec and Ontario
Tembec announced a series of short-term shutdowns at it’s sawmills located in Ontario and Quebec. The shutdowns will range from one to four weeks depending of the site.
“These shutdowns are being taken due to a combination of factors,” said Dennis Rounsville, Executive Vice President and President of Tembec’s Forest Products Group. “These include overall market conditions, product pricing and the annual two-week construction holiday in Quebec.”
While most of the outages will run in the two-week range, the Timmins site will suspend its operations for four weeks, and subject to review, possibly more. “The Timmins mill has some particular challenges to overcome. We have identified areas where improvements have to be made and we will be working with employees at all levels to endeavour to address these,” added Mr. Rounsville.
These temporary shutdowns will result in a combined capacity withdrawal of 33 million boardfeet and will affect approximately 1,500 employees. Management has already met or will meet with employees of all affected sites to inform them of the Company’s decision.
Tembec is a large, diversified and integrated forest products company. With operations principally located in North America and in France, the Company employs approximately 10,000 people.
UNITED STATES
Rayonier Reaches Agreement on More Than $2 Billion of Cellulose Specialties Contracts into 2011
With the signing yesterday of a major five-year contract with a Chinese company, Rayonier said its Performance Fibers unit now has historic long-term contracts with the world's largest manufacturers of acetate-based products and other key customers into 2011 for nearly 80 percent of the company's high value Cellulose Specialties production, representing almost 2 million metric tons and more than $2 billion in revenue at current pricing.
"These historic long-term contracts illustrate the confidence our global customers have in the quality, technical superiority and diversity of our specialty cellulose fibers and in our continuing commitment to this high value niche business," said Lee Nutter, Chairman, President, and CEO. "The worldwide breadth of this business and our long-held position as the leading supplier of high value specialty cellulose fibers provide us with stability of earnings and cash flow."
The most recent long-term agreement for Cellulose Specialties products is with fast-growing Nantong Cellulose Fibers Company (NCFC), a subsidiary of China National Tobacco - the world's largest manufacturer and marketer of tobacco products. Since 1994, Rayonier has been NCFC's sole supplier of specialty cellulose fibers used to produce cigarette filters and has seen sales grow dramatically with NCFC's rapid and continuing expansion. The new five-year contract is expected to generate sales revenues of nearly $500 million.
Rayonier's unique high purity Cellulose Specialties fibers are used by customers worldwide in the manufacture of LCD screens for televisions, computers, phones and digital cameras; photographic film; cigarette filters; textiles; automotive filtration media; industrial tire cord; impact resistant plastics; paints; food products; and pharmaceuticals.
"As markets for our Cellulose Specialties continue to grow, our focus remains on enhancing our competitive position through targeted capital investments and operational efficiencies that not only improve costs but further enhance the quality of these high value products," said Paul G. Boynton, Senior Vice President, Performance Fibers. "Cellulose Specialties sales have increased 40 percent since 2000 and now account for nearly 75 percent of Performance Fibers revenue."
Rayonier is the market leader in specialty cellulose fibers due to the worldwide reputation it has developed over 80 years for quality, technical excellence and product diversity, Boynton said. The company's 150,000 metric ton sulfite mill in Fernandina Beach, Florida, and 590,000 metric ton kraft mill in Jesup, Georgia, provide customers with the flexibility of choosing from more than 25 grades of specialized fibers, manufactured to their production requirements using either kraft or sulfite processing methods. No other supplier has that flexibility, he noted.
Approximately 50 percent of Rayonier's Cellulose Specialties sales are to customers in North America, 25 percent to Europe and 22 percent to Asia, primarily China and Japan, supported by offices in Shanghai, Tokyo and London.
Rayonier Closes on New Zealand Timber Deal
Rayonier said it closed June 30, 2006, on the previously announced agreement to reduce its investment in a New Zealand timber consortium from 49.7 percent to 40 percent. The transaction provides net cash proceeds to the company of approximately US$22 million and an after-tax gain of $6 million, or 8 cents per share, including $5 million of previously deferred gain. Rayonier will continue to manage the 354,000 acre forest estate, the third largest in New Zealand.
On April 27, 2006, Rayonier announced that the consortium, which includes RREEF Infrastructure, the global investing arm of Deutsche Asset Management, had agreed to sell a 35 percent interest, including 9.7 percent from Rayonier, to funds managed by AMP Capital Investors Limited, a subsidiary of AMP Limited, an Australian Corporation.
URUGUAY
Logister to Supply Logistics System for Botnia Pulp Mill in Uruguay
Logister Oy and Botnia S.A, Uruguay, have signed a contract for the delivery of logistic system to Botnia S.A.’s green field pulp mill located by the town of Fray Bentos in Western Uruguay. Logister’s share of the order value is approximately €1 million.
System includes logistics system both for wood yard and pulp bale applications.
The delivery to the site is on February 2007 and commissioning is scheduled for April 2007.
International Court of Justice Decides Not to Accept Argentina’s Claim Concerning the Provisional Measures for Suspension of Works of Mill Projects
The International Court of Justice in The Hague issued its decision on the demand brought by Argentina that work on the Botnia and Ence mill projects be suspended. The Court ruled that there are no grounds for imposing a suspension on the works of the pulp mill projects.
Construction work on Botnia’s pulp mill in the town of Fray Bentos in Uruguay is continuing as normal. The project is on schedule and is proceeding as planned. Botnia’s mill will employ the best available technology and according to the studies made by independent bodies the mill will not cause any damage to the environment.
Argentina, however, is worried about the mills’ effects on ecotourism in the area, as it is one of the major employers for that region. Another argument made by Argentina states that the building of the mills violates the 1975 treaty between the two countries regarding the use of the river.
Uruguay defended their proposed pulp mills arguing that the mills will create jobs for the area, rather than eliminate them. The project is Finland’s largest industrial private sector investment abroad with 1 billion USD investment and 1 million tonnes/year capacity.
This project will create 8,000 jobs and is expected to raise Uruguay’s GDP by 1.6 percent.
INDONESIA
Aker Kvaerner to Supply Cooking Plant to Indonesian Pulp and Paper Mill
Aker Kvaerner has received an order for delivery of a continuous cooking plant to a pulp and paper mill in Indonesia. The contract is worth approximately $10 million.
The new cooking plant is an important part of a modernization project at the mill. The new cooking plant will increase the pulp production by 1 650 tonnes per day, using acacia as raw material.
The addition of the new continuous cooking plant, using the patented Compact Cooking™ technology, was selected in preference to extending the existing cooking plant.
"In recent years we have further developed our proprietary cooking method, making it even more beneficial in terms of productivity and pulp quality, as well as environmental performance. This prestigious order from one of the world's leading pulp and paper companies confirms the strong confidence the market has for Compact Cooking™," says Per-Åke Färnstrand, President of Kvaerner Pulping.
Under the new contract, Kvaerner Pulping AB, part of the Aker Kvaerner group, will provide engineering, procurement and supervision services. The new cooking plant is scheduled to start up in the second quarter of 2007.
Global Pulp Mill Growth Threatens Forests, May Collapse
The rapidly expanding world pulp mill industry could be poised for collapse due to a failure by financial institutions to research how wood can be found to feed new mills
The report by the Indonesian-based Center for International Forestry Research (CIFOR) said that false assumptions about the origins and cost of wood used in emerging-market mills has led investors to channel billions of dollars into financially risky and environmentally destructive ventures.
The report, funded by the European Commission and the United Kingdom's Department for International Development, analyzed 67 pulp mill projects.
A lack of due diligence may lead to "a new wave of ill-advised projects, setting up investors, forest-dependent communities and the environment for a precipitous fall," a statement accompanying the report warned.
More than $40 billion has been poured into pulp mill projects over the last decade, with another $54 billion expected to be invested by 2015, the report said.
It said much of the investment was in Brazil, China, Indonesia, Uruguay and the Baltic States, with low wood costs the major factor driving expansion. "Financial institutions have shown a surprising lack of interest in understanding how the pulp companies requesting loans are going to get all this cheap wood," David Kaimowitz, director general of CIFOR, said in the statement.
"In reality, some of these mills have vastly overestimated what's legally available from timber plantations. So the only way they can meet production targets is through unsustainable logging of natural forests or by shipping in wood from distant sources at a much higher cost."
The CIFOR report said that when the required wood cannot be sourced from plantation forests, illegal logging and the clearing of natural forests occurs instead.
It also said financial institutions often conduct only minimal due diligence to assess the sources of wood for pulp projects and frequently rely on data provided by the pulp producers themselves.
"The study concludes that pulp mill projects often carry significantly higher degrees of financial risk than investors realize," the statement said.
CIFOR in particular singled out two Indonesian-based companies, Asia Pulp and Paper (APP) and Asia Pacific Resources International Ltd (APRIL), saying that financial institutions had failed to conduct proper due diligence.
Christopher Barr, CIFOR senior scientist and coordinator of the study, said the companies borrowed more than 15 billion dollars in the 1990s after telling investors they had sustainable supplies of low-cost wood.
"However, both companies continue to rely on the clearing of natural forests in Sumatra for 60-70 percent of their wood supply, and each is still years away from meeting its own plantation development targets," he said.
APRIL denied the report.
"CIFOR's statement is extremely misleading and is based on inaccurate data. There is absolutely nothing risky about APRIL's operations," said president A.J. Devanesan in a statement.
He said the company was "a fully sustainable operation" with sufficient acacia plantations and more planned to meet its requirements. "Each year, APRIL plants around 110 million trees. This provides an ongoing source of renewable fiber from which pulp and paper is made."
NORWAY
Moving TMP Plant to Norske Skog Follum
The board of Norske Skog resolved to relocate a thermo-mechanical pulp (TMP) plant from the discontinued Norske Skog Union mill to Norske Skog Follum north of Oslo.
Built in 1996, this facility will help to strengthen relatively poor profitability at Norske Skog Follum, enhance its efficiency and improve paper quality.
The investment required totals about NOK 190 million and will be made next year. Plans call for the TMP plant to be operational by the end of 2007.
One important measure for improving profitability at Norske Skog Follum is to streamline its output of paper pulp, which will be achieved by closing the old grinding mill.
This investment means that production at the mill will be based almost wholly on TMP. Like Norske Skog's other units, however, it will also need to take further cost-cutting steps.
Norske Skog Follum has 505 employees and currently produces some 410 000 tonnes of paper per year from three machines.
Over the past decade, Norske Skog has invested in developing this mill into a leading supplier of upgraded newsprint and other upgraded publication paper.
AUSTRIA
Andritz to Deliver Core Systems for Viscose Pulp Mill Expansion of Sappi Saiccor
International Technology Group Andritz, Austria received an order from Sappi Saiccor Ltd., the world’s largest manufacturer of viscose pulp (dissolving pulp) for the supply of the bleaching, evaporation and pulp drying equipment for its Saiccor mill in Umkomaas, near Durban, South Africa. With this investment, the capacity of the mill will be increased from 600,000 to approximately 800,000 tons/a of bleached viscose pulp which is used for a wide range of products (textiles, food, chemicals and plastics).
Andritz will provide the basic and detail engineering, supply of equipment, mechanical erection, supervision, start-up, and training. The start-up of the plant is scheduled for February 2008.
The order value for Andritz is approximately 100 MEUR.
The new bleach plant supplied by Andritz represents state-of-the-art process technology providing best washing efficiency while at the same time minimizing chemical consumption.
The pulp drying line (working width: 4 m) is based on the very successful high-capacity Andritz Twin Wire former concept which fulfils highest runability demands and has been successfully in operation in many pulp mills worldwide. In addition, Andritz Küsters, one of the world’s leading suppliers of roll and calender technologies for the paper industry, will supply a calender to secure best uniform pulp sheet properties which are important parameters for dissolving pulp.
The Andritz 6-effect 370 t/h evaporation plant is an advanced sulfite liquor evaporator, with special emphasis on the production of clean re-usable condensates. It is equipped with a stripper and a methanol recovery unit for the cleaning of condensates and other specific features required by the sulfite process.
McIlvaine Company,
Northfield, IL 60093-2743
Tel: 847-784-0012; Fax: 847-784-0061;
E-mail: editor@mcilvainecompany.com;
Web site: www.mcilvainecompany.com