update

PULP MILLS UPDATE

MAY 2007

Andritz Receives Major Orders for Pulp Mill Equipment From Spain and Portugal

Akzo Nobel Investing EUR 50 million in Brazil

GL&V Wins Asian Pulp Mill Contract Worth Over $20 million

Moscow to Impose Tariffs on Wood Exports

Canadian Pulp Mills Could Benefit From Chinese Shipping Deal

Weyerhaeuser Selling OSB Plant in Miramichi, NB

Mohawk Partner in EPA Climate Leaders Program; Offers Carbon Neutral Products

Red Shield Restarts Georgia Pacific Mill

Albany International Reduces Operations in Europe

Andritz Receives Major Orders for Pulp Mill Equipment From Spain and Portugal

International Andritz Group received major orders for chemical, recovery, and pulp drying systems from renowned pulp producers in Spain and Portugal totaling approximately 200 million Euros.

For Celulosas de Asturias S.A. (CEASA), a pulp mill located in Navia, Asturias, Spain Andritz will supply major recovery and market pulp drying systems for a mill upgrade program which will increase the production capacity and improve the performance of most departments of the mill. CEASA is owned by ENCE, Spain’s largest market pulp producer.

The recovery segment encompasses a new recovery boiler with a black liquor combustion capacity of 1,800 tons of dry solids per day and a new Bubbling Fluidized Bed (BFB) biomass boiler producing 120 t/h of steam from eucalyptus bark, fines and biomass residue. The pulp drying systems are based on the Andritz Twin Wire Forming Technology for high production capacities and low operating costs, successfully proven in more than ten reference plants worldwide. The production rate of 400 t/d per meter of working width represents a new world record. Start-up is scheduled for late 2008.

Celulose Beira Industrial (Celbi), SA ordered major market pulp drying systems and a lime kiln plant for the modernization and capacity increase of its Figueira da Foz pulp mill, Portugal. Celbi is owned by the Altri Group, one of Portugal’s largest market pulp producers.

The pulp drying systems will also be based on the successful Andritz Twin Wire Forming Technology and have a design capacity of 1,815 t/d with a working width of 4.8 m. Start-up is scheduled for October 2008. The chemical system includes a newly designed LMD lime kiln plant offering even better environmental results. The capacity of the plant is 450 t/d. Start-up is scheduled at the end of January 2009.

Akzo Nobel Investing EUR 50 million in Brazil

Akzo Nobel's pulp and paper chemicals business, Eka Chemicals, has signed an agreement to supply, store and handle all chemicals for a greenfield pulp mill being built in Três Lagoas, Brazil. The new mill - known as the Horizonte Project - will have an annual production capacity of 1,250,000 tons of pulp, and was recently transferred to Votorantim Celulose e Papel (VCP) as part of an asset exchange.

Under the terms of the agreement, Eka Chemicals will establish a chemical island at the new site, mainly for the production of chlorine dioxide. In addition, Akzo Nobel's pulp and paper chemicals business will also expand its existing site at Jundiaí (São Paulo) where a new production line will produce 30,000 tons of sodium chlorate a year, most of which will be destined for the same Três Lagoas mill. The total investment for Akzo Nobel amounts to around EUR 50 million.

The new investment shall significantly expand Akzo Nobel's well established pulp and paper chemicals operations in Brazil, where the business already operates chemical islands at several mills. Eka Chemicals has also built up a strong business partnership with VCP, having successfully operated a chlorine dioxide plant at its pulp mill in Jacareí for the last five years.

Start up of the new mill - which will use wood exclusively from high yield eucalyptus plantations - is expected in 2009, with work on the company's new facility due to start immediately.

GL&V Wins Asian Pulp Mill Contract Worth Over $20 million

Groupe Laperriere & Verreault Inc. (TSX:GLV.A) has announced a $20-million sale of pulp-mill fibre processing to an unnamed major Chinese pulp producer. The equipment is to be delivered by May 2008 for installation in two new mills, one in China and the other in Vietnam. The order involves 14 wash presses and other screening and bleaching equipment.

GL&V chief operating officer Richard Verreault said the order confirms the company’s pulp and paper group, after two active years of expansion and acquisitions, as a world-class provider of state-of-the-art solutions for the industry.

Moscow to Impose Tariffs on Wood Exports

Russia will not back away from plans to impose tariffs on its exports of wood, but will continue talks on the issue with the European Union, Russian Prime Minister Mikhail Fradkov said.

Fradkov made the remarks on a visit to Finland, whose economy would be among the worst affected by the tariffs. Finland, home to major paper and pulp producers UPM-Kymmene Corp. and Stora Enso Oyj, imports about 20 percent of its raw wood from Russia.

Russia intends to use the tariffs to encourage more investment at home in processing wood rather than exporting the raw material.

"That export tariffs on wood will be adopted is sure; that's certain," Fradkov told reporters, but he did not say when. "Talks on this subject will continue."

Fradkov, who spoke after meeting Finnish Prime Minister Matti Vanhanen, said Moscow welcomes more investment from abroad to develop Russia's wood processing industry as well as foreign pulp and paper mills in the country.

Fradkov said Russia had improved conditions for foreign business, including adopting new legislation on investments from abroad. "The aim is to move from raw material exports to wood processing on Russian territory," he said.

Fradkov also hinted that in talks with the EU, Moscow could offer to cut import tariffs on high-tech goods from the 27-nation bloc.

Vanhanen said Finland is "very concerned" about Russian plans to impose tariffs on its exports of raw wood.

"The decision would have a negative impact on the Finnish economy and would harm our bilateral cooperation in the forest industry," he said. Vanhanen also said such a decision would be "in conflict with commitments made by Russia" for joining the World Trade Organization.

Russia is Finland's largest source of imports, mostly raw materials, and its third-largest export partner. Total Finnish-Russian trade reached $19 billion last year. Finnish investments in Russia reached $3 billion.

Canadian Pulp Mills Could Benefit From Chinese Shipping Deal

A deal has been reached with a Beijing-based steamship company to ship goods between Asia and the Port of Prince Rupert, CN Rail announced. COSCO Container Lines Americas, Inc., will start service starting in the fourth quarter of 2007, CN Rail said in a press release.

Prince George will stand to benefit directly, Initiatives Prince George president Gerry Offet said, particularly on the pulp side. "We know that our pulp mills have significant markets in China and those will probably be the primary ports of call for COSCO, so it presents some real back haul opportunities," he said. "We see that as an immediate benefit and a further benefit is that we will no be able to focus our marketing on other manufacturers that ship products to China."

COSCO Container Lines Americas, Inc., is part of China Ocean Shipping (Group) Company, headquartered in Beijing. It was described by CN as a $17-billion giant, specializing in shipping and modern logistics.

“CN is delighted to have COSCO as its first customer to call on the Prince Rupert container terminal, a new North American gateway for Asian trade," James M. Foote, CN’s executive vice-president of sales and marketing, said in the press release.

“Our partnership with COSCO, and Prince Rupert container terminal operator Maher Terminals of Canada Corp., is clear recognition of the competitive advantages of the new port facility and CN’s rail network reach and superior service offering.

"The Rupert-CN-Maher combination will inject meaningful port-rail-terminal capacity into the global supply chain, and will offer shippers the fastest, most efficient and most cost-effective routing for Asian traffic destined to and from the interior of North America.”

Phase one of the Prince Rupert terminal project will have initial throughput capacity of 500,000 TEUs (20-foot equivalent containers) annually and is part of a broader plan to build a facility capable of handling two million TEUs per year.

Weyerhaeuser Selling OSB Plant in Miramichi, NB

According to a recent report by Forestweb, the mill, which has a capacity of 430 million ft2, has been closed since February. A statement issued on May 4 related to the company’s first quarter financial performance confirmed the first quarter of 2007 included a pre-tax item of $56 million for impairment charges associated with the intended sales of the Canadian distribution business and Miramichi, oriented strand board (OSB) mill.

Forestweb further reported from an SEC filing dated May 10 that read, “Management has continued to evaluate its strategic options for the [Miramichi OSB] facility and on April 30, 2007, the company announced that the facility would not be part of its long-term operations.”

The report additionally confirmed that due to a struggling OSB market situation, management decided on the requirement of a $26 million impairment charge.

“While the impairment charge will not result in future cash expenditures, the timing of a potential sale or closure of the facility may result in additional costs related to severance, maintenance and other activities,” the report said.

Mohawk Partner in EPA Climate Leaders Program; Offers Carbon Neutral

Mohawk Partner in EPA Climate Leaders Program; Offers Carbon Neutral Products

In March of 2007, Mohawk joined the U.S. EPA Climate Leaders program to further develop greenhouse gas reduction goals. As an extension of their voluntary commitments to reduce greenhouse gas emissions and to purchase renewable electric power, Mohawk will begin to offer products made carbon neutral within their production processes. Select grades, starting with Beckett Expression, Beckett Concept, Strathmore Writing, and Strathmore Script will be made carbon neutral within production processes by offsetting thermal manufacturing emissions with VERs and the emissions from purchased electricity with Green–e certified windpower RECs.

Mohawk is the fourth largest purchaser of wind–generated electricity among manufacturing companies in the U.S. On March 1, 2007, Mohawk Fine Papers increased its purchase of wind–generated electricity RECs from 45,000,000 kWh to 60,000,000 kWh annually. This is approximately 60% of the electric power required for all of Mohawk’s operations in its New York and Ohio facilities.

Carbon neutral is an emerging international trend that can describe products, operations and activities, which have had their emissions calculated and reduced where possible. The remaining carbon dioxide emissions are then "offset" through credits that fund renewable, emission–free energy projects such as wind farms and solar installations. The carbon offset market allows businesses to recognize and financially support the shift from fossil fuel to renewable energy.

As a partner in the EPA Climate Leaders program, Mohawk is completing an "emission inventory." The results of this rigorous process will provide the basis for emission reductions and carbon offsets. Mohawk purchases VERs which support renewable energy projects. These offsets are third–party verified to meet the standards of the Environmental Resources Trust’s GHG (Greenhouse Gas) Registry. The GHG Registry Standard is based on guidelines developed by the Intergovernmental Panel on Climate Change (IPCC), the international scientific body supporting the Kyoto Protocol.

For Mohawk's carbon neutral qualification, Mohawk offsets both the electricity and the thermal energy used to make paper. Beckett Expression, Beckett Concept and Strathmore Writing and Script are made carbon neutral within our production processes by offsetting thermal manufacturing emissions with VERs and emissions from purchased electricity with RECs from Green–e certified windpower projects.

Red Shield Restarts Georgia Pacific Mill

OLD TOWN, ME -- When Red Shield environmental took over the former Georgia Pacific mill, the company said it would not produce pulp or paper. But officials have changed their minds. They're now getting ready to restart the pulp operations. The company wants to produce 200,000 tons of hardwood kraft market pulp each year.

Red Shield says it will need about 100 workers to do that. The company currently has close to 80 people operating a biomass boiler. But that's still far short of the 400 people who were employed before the GP shut down last year.

"We're very anxious right from the top of the company with the partner with the people on the shop floor doing the actual labor work. We want to bring more people back into the facility. The sooner we can do that we better we'll feel about it," said Dan Bird from Red Shield.

Red Shield does not know when the pulp operation will start or when it will be ready to hire workers. It has secured insurance from the Finance Authority of Maine to back a $1.8 million dollar loan for the pulp production.

Albany International Reduces in Europe

Albany International Reduces Operations in Europe

Albany International Oy, an affiliate of Albany International Corp. announced its intention to discontinue operations at its press fabric finishing facility in Jarvenpaa, Finland. Over the last several years, similar steps have been taken to match capacity to the global demand for paper machine clothing, as the global paper industry has continued to consolidate and eliminate capacity, particularly in Europe.

The proposal would affect up to 43 employees and is subject to review under local law and would be implemented in accordance with such law and in consultation with the Works Councils and Trade Unions.

The planned action at Jarvenpaa in no way reflects on the performance of the affected employees. The company is calling it a business necessity, driven by the existing and anticipated market conditions.

McIlvaine Company

Northfield, IL 60093-2743

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

E-mail: editor@mcilvainecompany.com

Web site: www.mcilvainecompany.com