Pulp Update

Pulpwood costs in the first quarter of this year went up in most of the 17 world regions covered by the Market Report Wood Resource Quarterly. Tight residual supply, higher fuel costs, and unfavorable weather were all factors that pushed wood costs for the world’s pulp industry to new record levels.

One country that bucked the upward price trend was Russia, where higher log supply reduced wood costs by more than 15 percent in the first quarter. Prices also fell in France where competition for smaller logs from sawmills and wood-based panel manufacturers eased early in the year, resulting in more than 10 percent lower conifer fiber prices compared with the fourth quarter of 2007.

The biggest price increases for softwood fiber came in the western U.S., Spain, Chile, Finland, and Japan as tighter supply forced many pulp mills to go outside their normal wood basket. These events resulted in the average global conifer wood price reaching a new all-time-high of $109.67/oven dry metric ton (odmt), which was 2 percent higher than the previous quarter and 7.8 percent higher than a year ago.

The Global Average Wood Fiber Price is a weighted average of delivered wood fiber prices for the pulp industry in all 17 regions tracked by the publication. These regions together account for 85-90 percent of the world’s wood-based pulp production capacity. The price is based on current quarter average prices and country/regional wood fiber consumption data. The global average for softwood and hardwood is calculated in nominal U.S.$ per odmt of wood fiber. As wood cost accounts for 40-50 percent of the total pulp production costs, it is often the predominant factor determining a company’s or a region's competitiveness.

The average non-conifer wood fiber costs were also up in the quarter, reaching a record-high of $106.11/odmt, which was 16 percent higher than a year ago. The biggest prices increases occurred in Spain, Finland, Chile, Australia, and Indonesia, while prices were lower in Russia and the U.S. South.

More information is available at www.woodprices.com

AMERICAS

DOE Approves Grant to Support Flambeau River Biorefinery

Flambeau River BioFuels, Park Falls, Wis., USA, reported that it has received approval of its $30 million grant request from the U.S. Department of Energy (DOE) to construct and operate a biorefinery at the existing Flambeau River Papers mill. The final award value is subject to negotiation with the DOE.

When in full operation (startup expected in 2010), the biorefinery will produce at least 6 million gal/yr of renewable sulfur-free diesel biofuel. It will not be dependent on any food-based feedstock materials, Flambeau says, but rather on by-products or residuals from forest and agricultural sources. The biorefinery will also generate at least 1 trillion BTUs per year of process heat that will be sold to Flambeau River Papers, which will make it the first integrated pulp and paper mill in North America to be fossil fuel free.

The Flambeau River BioFuels biorefinery will employ two commercially proven technologies to produce clean renewable energy and biofuels. It will gasify biomass resources, such as forest residuals and agricultural wastes, into a high-quality synthesis gas, which will then be catalyzed by the Fischer-Tropsch (F-T) process to generate renewable transportation fuels (sulfur-free biodiesel).

Verenium Receives DOE Grant to Fund Jennings Biorefinery Project

Verenium Corp., Cambridge, Mass., USA, has been awarded a grant from the U.S. Department of Energy (DOE) under a $40 million program to support the development of small-scale cellulosic ethanol biorefinery plants. The company says it will now begin discussions with the DOE to determine the amount of the award.

According to Verenium, demonstration-scale facilities are a critical development step to scaling and validating cellulosic technology as the industry advances toward the commercialization of next-generation ethanol. Verenium is one of two companies that were selected for this round of DOE grants and will utilize the funds to support ongoing activities at its 1.4 million gal/yr demonstration-scale facility in Jennings, LA.

Cellulosic ethanol is a renewable fuel source produced from natural, plant waste products such as rice straw, sugarcane waste (bagasse), switchgrass, and wood chips. Cellulose, a long-chain polysaccharide found in nearly all plant life, is the most abundant molecule on earth. The U.S. EPA says cellulosic ethanol's high-oxygen content reduces carbon monoxide better than other oxygenates.

Graphic Packaging to Sell Two Mills to Sun Capital

Graphic Packaging International, Marietta, GA, USA, will sell two coated-recycled board (CRB) mills to an affiliate of Sun Capital Partners, as required by the U.S. Department of Justice pursuant to the Consent Decree governing the combination of Graphic Packaging and Altivity Packaging this past March. The mills being sold are in Philadelphia, PA, and Wabash, IN. After the divestitures, Graphic Packaging,will have an annual production capacity of some 855,000 tons of coated-recycled board and 1.3 million tons of CUK (coated unbleached kraft ) paperboard.

Sun Capital Partners is a private investment firm focused on leveraged buyouts, equity, debt, and other investments in market-leading companies. Sun Capital affiliates have invested in and managed more than 195 companies worldwide with combined sales in excess of $40.0 billion since Sun Capital's inception in 1995.

KapStone Completes Acquisition of MeadWestvaco's Charleston Kraft Division

KapStone Paper and Packaging Corp., Northbrook, IL, USA, has completed the acquisition of the Charleston Kraft Division (CKD) of MeadWestvaco (MWV). Under the terms of the sale, KapStone acquired MWV's kraft paper mill in North Charleston, a lumber mill in Summerville, SC, and chip mills in Elgin, Hampton, Andrews, and Kinards, SC, as well as 100 percent of Cogen South, the mill's on-site cogeneration facility.

In 2007, the North Charleston mill produced 833,000 tons of saturating kraft, linerboard, and kraft folding carton board. MWV will continue to provide wood fiber for the North Charleston mill through a fiber supply agreement.

The $485 million base purchase price was adjusted to reflect estimated working capital and capital expenditure adjustments. As a result, KapStone paid MWV approximately $475 million in cash, subject to certain post-closing adjustments. Funding for the acquisition came from borrowing under a new $515 million senior secured credit facility announced on June 12, 2008

Wausau to Invest $15 Million for Process Improvement at Brokaw Mill

Wausau Paper, Mosinee, WI, USA, will invest $15 million to optimize fiber handling and stock blending systems at its Brokaw, WI mill. An automated pulp bale handling system is expected to be operational by the end of 2008 with the balance of the system scheduled for startup in the second quarter of 2009.

“We are pleased to announce the next step of our Printing & Writing segment’s three part profit recovery plan initially outlined in the fourth quarter of last year. The first phase of our recovery plan, system capacity reduction, is complete while the second phase of our plan, initiatives to drive growth in higher margin markets, is well underway,” said Thomas Howatt, Wausau Paper president and CEO. “Today’s announcement represents the first of several potential investments intended to significantly improve the cost structure of the business. Project economics significantly exceed our target 17 percent internal rate of return and will substantially improve the capabilities and cost competitiveness of our Brokaw mill.”

Daniel Trettin, Wausau Paper’s senior VP-Printing & Writing, noted that, “this capital investment, which is part of the third phase of our profit recovery plan, will significantly improve stock preparation and blending at our Brokaw facility. The technology we plan to use with this project is proven and will significantly improve the operational stability of our paper machines and reduce labor costs. The operating performance improvement to be achieved from this investment is critical to returning this facility and our Printing & Writing business to acceptable levels of profitability.”

Wausau Paper produces uncoated printing and writing papers, technical specialty papers, and away-from-home towel and tissue products at its mills in Brokaw and Brainerd, Minn. The company makes more than 2,000 different stock items from more than 400 different types of papers ranging in weight from 20 lb. writing to 100 lb. cover.

MeadWestvaco to Sell Potsdam Specialty Papers Mill

MeadWestvaco Corp. (MWV) , Richmond, VA, USA, recently announced plans to sell its Specialty Papers Cedar mill in Potsdam, N.Y., to Potsdam Specialty Paper Inc. (PSPI). MWV Specialty Papers will continue to own and operate its Willow mill in South Lee, Mass. The sale is expected to close in the third quarter. Terms of the agreement were not disclosed.

The Cedar mill has one 124-in.-trim fourdrinier paper machine the produces overlay papers for laminates used in furniture, flooring, countertops, and cabinets. It also produces some tape base papers for pressure sensitive tapes. The mill was acquired by Mead Specialty paper Division from Little Rapids Corp. in 1998.

PSPI is part of an investment holding company with offices in New York, Hong Kong, and Toronto. It will be part of a portfolio of global businesses that focus on niche products and markets in the value added paper and coatings distribution business.

Conifex wins Pope & Talbot Bid

Conifex Wins Pope & Talbot Bid

Conifex successfully bid on Pope & Talbot's Fort St. James sawmill. Conifex, an alliance of former industry players with access to capital pools, overtook Asia Pulp & Paper's bid on the bankrupt facility.

According to a report by the Vancouver Sun, Conifex paid $12.8 million for the mill, one of three facilities being sold via a BC Supreme Court receivership. The two remaining facilities, the Harmac and Mackenzie pulp mills, have not been sold.

Cascades to Install New Tissue Conversion Line at Lachute

Cascades, Kingsey Falls, Que., Canada, reports that it will invest $15 million toward the acquisition of a high-tech conversion line for its Lachute, Que., tissue paper plant, including a $3.1 million loan from Investissement Quebec. In addition to installing the new converting line and auxiliary equipment, the project includes the acquisition of adjacent land, as well as the expansion and modifications to the existing building. The project will help preserve the facility’s 160 existing jobs as well as lend added value to it. Construction will start in the fall and should be completed before the end of this year.

Cascades Tissue Group serves commercial and institutional commercial markets as well as the giant paper-roll market. It operates 14 North American plants. The company acquired the Lachute plant from Perkins in 1995. The mill’s paper machine has a capacity of 38,000 short tons per year, and nearly 85 percent of the production is converted internally. The plant also converts 5,000 tons of sanitary tissue each year from other Cascades Tissue Group plants.

Cascades' notes that in-line with its commitment to sustainable development principles, the new building will be LEED certified. Leadership in Energy and Environmental Design certification recognizes buildings that are of high environmental quality and meet stringent performance standards, notably in terms of energy, water consumption, and use of local materials.

Northern Pulp Nova Scotia Completes Neenah Mill Acquisition

Northern Pulp Nova Scotia Corp., an affiliate of Atlas Holdings LLC and Blue Wolf Capital Management LLC, announced recently it has completed its acquisition of Neenah Paper Co. of Canada’s kraft pulp mill at Abercrombie Point, Pictou County, Nova Scotia. An agreement to sell the mill was announced in mid–May and terms of the sale remain as announced at that time.

The Pictou County mill is now a stand alone business, incorporated in Nova Scotia, with affiliates of Atlas Holdings LLC and Blue Wolf Capital Management LLC as well as local management as equity owners.

Although Neenah Paper’s forest land holdings were not part of the sale, Northern Pulp will manage the Neenah lands under a long term agreement and will continue to harvest wood fiber as in the past, from its Crown licensed lands and under contract from privately held forest land.

EUROPE

Cascades to Play Key Role in Savoie Bioenergy Power Project in France

Cascades S.A., Division La Rochette, the European division of Canada-based Cascades Inc., announced recently that it will host a major biomass-fueled electric power generation project. Under the management of Cofathec, a Gaz de France subsidiary, the Cegaz project will enable a 7,500-ton reduction in the coated boxboard mill's carbon dioxide emissions and generate 40 million kWh of electricity that will be returned to France's transmission grid. The cogeneration power plant will be operational by 2010.

The Cegaz project, according to Cascades, will promote an innovation that represents a first for France: wood gasification technology, the EUR 30-million implementation cost of which will be covered by Gaz de France. This initiative is part of the second call for tenders, pertaining to cogeneration power plants, that the Commission de Regulation de l'Energie (CRE) has issued in France to meet the country's renewable energy production objectives.

The Cegaz project was announced concomitantly with another environment-saving measure introduced by Cascades La Rochette: the start-up of a new turbine-driven alternator, also fueled by biomass. This cogeneration project, which required investments totaling EUR 2 million, will produce 5.4 MWh of electricity.

Cascades S.A., Division La Rochette has also received confirmation of a two-year extension on the TaRTAM electricity rates system, which translates to yearly savings for this facility of EUR 4 million in 2009 and 2010.

Cascades produces, converts, and markets packaging and tissue products. The company has about 14,000 employees at some 100 production units in North America and Europe. Cascades S.A. owns two virgin boxboard mills (in France and Sweden) and provides a wide range of coated cartonboard for packaging in the food and non-food industries. Cascades also owns a 31percent equity investment in Reno de Medici S.p.A, the second largest boxboard producer in Europe.

Emerson to Digitally Automate Bulgarian Pulp Mill

Emerson Process Management was recently awarded a contract to digitally automate an expanded recovery boiler and fiberline at Svilosa pulp mill, which is located on the banks of the Danube, near the town of Svishtov in northern Bulgaria. Emerson will install its PlantWeb^® digital plant architecture for the project that will triple mill output, reduce the plant’s environmental impact and improve energy efficiency. Production will be increased from 50,000 tons/yr. to 150,000 tons/yr.

Södra Upgrading Värö, Mönsterås Pulp Mills in Sweden

Södra is installing a new evaporation plant for its Värö pulp mill and a new screening system for dryer No. 5 at its Mönsterås pulp mill, both in Sweden. The total value of the orders, placed with Group Andritz of Graz, Austria, is more than EUR 30 million. Startup of the new equipment is scheduled for autumn of 2009.

The new evaporation plant, a key part of the pulp mill’s recovery process, will be supplied by Andritz’s Finnish subsidiary, Andritz Oy. It will replace three existing evaporation lines and will further improve energy efficiency at Värö. Through this investment, bark with an energy content of 200 GWh/a will become available for sale, which corresponds to a reduction of fossil carbon dioxide emissions by 75,000 metric tpy. The evaporation plant will also produce very clean condensates that can be reused in other processes in the mill.

This is part of a total investment of approximately EUR 50 million at Värö to boost energy efficiency and to make the mill virtually independent of fossil energy. “At the same time, the investment strongly enhances the mill’s productivity,” says Södra purchasing manager Beatrice Kämpe-Nikolausson.

RUSSIA

Stora Enso Plans Pulp and Paper mill in Russia

Stora Enso is starting work on a feasibility study into building a €1 billion pulp and paper mill in the Nizhny Novgorod region in Russia. The study is due to be completed in April 2009, reports Thomson Financial News. The study will look at whether it is profitable to produce paper for a Russian market using wood from Russia.

Stora Enso will close three mills in Finland this year in Anjalankoski and Hamina in southeastern Finland and Kemijarvi in northern Finland.

ASIA

Orient Paper to Merge with Lingxian Taihua in China

Orient Paper Inc., based in the Hebei province of China, announced recently that it has agreed to merge with Lingxian Taihua Pulp & Paper Co., based in Shandong Province. Lingxian Taihua’s has a current pulp production capacity of 100,000 metric tpy and a papermaking capacity (book printing papers) of 150,000 metric tpy, which ranks sixth in the province.

Lingxian Taihua’s paper sales represent 80 percent of its annual sales and 65 percent of the raw paper sales is in the domestic market, while the remaining 35 percent of the sales is export. At the end of 2007, total assets of the company were $98 million with net assets of $67 million. Annual sales were $89 million and annual net income was $8.7 million. The gross profit margin was 15 percent and net profit margin was 10 percent.

Orient Paper to Build Large New Paper Mill in China

Orient Paper Inc., New York, NY, USA , and Hebei, China, one of China’s largest paper manufacturers, announced that it is planning to build a new paper mill in the second half of 2008, with annual production totaling 1.2 million metric tons. The facility will occupy approximately 2 million square meters and its main products will be corrugated paper, offset paper, writing paper, and Diazo paper.

The new mill is expected to startup with an initial capacity of 0.5 million metric tpy, increasing to the 1.2 million metric tpy design level by 2010. The company anticipates that by 2010, sales from the operation will be between $800 million and $1.3 billion, with net income in the range of $160 million to $230 million.

Orient Paper has engaged China BCEL International Engineering Co. to issue a feasibility report with regard to the new mill. The location will be in the Hebei Province Baoding City Xushui Town where Orient Paper is headquartered. Preliminary approval has been granted by the local government.

Sabah to Rebuild Pulp Mill in Malaysia

Sabah Forest Industries (SFI), a subsidiary of India’s largest paper company Ballarpur Industries, will conduct a major rebuild of its pulp mill in Sabah, Malaysia. The rebuild project will be started during the second half of 2009. The value of the order is approximately EUR 30 million.

The order, placed with Metso Corp., includes a new wood handling line, rebuild of the cooking plant and the fiber line, and an upgrade of the white liquor plant. The new wood handling line will include log feeding, debarking, chipper, and screen room. The cooking plant will be completely rebuilt. The rebuild of the fiber line includes installation of new wash presses, oxygen reactors, medium consistency pumps and mixers. The upgrade of the white liquor plant will include a rebuild of the recausticizing plant including pressure disc filter technology for white liquor separation and a number of main machinery including slaker and filter, as well as an upgrade of the lime kiln.

Ballarpur Industries is India’s largest manufacturer of writing and printing paper and part of the $3 billion Avantha Group, one of India’s leading business conglomerates. Sabah Forest Industries (SFI), a subsidiary of BILT, is Malaysia’s largest pulp and paper company.

INDIA

India’s Paper Industry Looking at Self Sufficiency

One of the oldest enterprises in the country, the Indian paper and newsprint industry, which currently employs around 1.3 million people, is up against a variety of problems, the Central Chronicle reports. These include regular increases in the price of wood pulp in the international market, escalating cost of petroleum products, which in turn has pushed up energy and transportation costs as well as dependence on obsolete technologies and outdated machineries and labor wage increases. Although there are over 500 paper and newsprint production units in India, not even 10 percent of these are big or dynamic enough to turn out quality paper products at a competitive price.

Though the highly segmented Indian paper industry uses a wide variety of technologies and feedstocks, the bulk of the production is concentrated in the hands of few large players.

The biggest stumbling block for production units keen on attaining self sufficiency in wood pulp is the prevailing environmental laws, which prevent the industrial plantations of private sector on degraded land stretches.

Not long back, bamboo was the most-favored raw material of the paper mills. But with its prices shooting up, the mills do not find bamboo as a cost-effective feedstock. Many of the paper production units are now using bagasse, rice and wheat straw. Though an estimated 55-million tonnes of bagasse is available, only eight per cent is currently put to use for paper production.

Many paper and newsprint production units are working towards becoming self-sufficient in wood pulp and other feedstocks used in paper manufacturing. Ballarpur Industries Ltd (BILT) has now drawn up a 20-million Euro plan for the modernization and augmentation of the facilities at Sabha Forest Industries (SFI) of Malaysia, acquired earlier. The SFI facilities are expected to start operations by 2009-end and renovations would include putting in place a new wood handling line, rebuilding the cooking plant and fibre line and upgradation of white liquor plant.

South India-based Seshasayee Paper and Board Ltd, is now close to commissioning its new pulp production mill designed for boosting the pulp production. Once the expanded pulp mill capacity is in place, the company will initiate work on boosting its paper manufacturing capacity with an additional investment of Rs 3,000-million. The modernization programme will see its in-house pulp production going up to 440-tonnes a day from 240-tonnes a day.

Currently, both the companies operate a 150-tonne day wood pulp mill and 90-tonne a day bagasse pulp mill.

To stay competitive both in the domestic and global markets, the Tamil Nadu government-owned enterprise TNPL has unveiled an ambitious action plan to invest Rs.10,000-million for expanding its production capacity to 4,00,000-tonnes a year from the present 2,45,000-tonnes. TNPL known for its range of products including printing and writing paper and copiers and newsprint, is also mulling to put up a cement production unit that would make use of waste lime sludge generated from its paper-making operations and fly ash generated in its power boilers.

The two plans are subject to the State Government approval and TNPL has yet to work out the strategy for raising funds for capacity expansion at its paper mill.

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