Global trade of wood chips has increased on average 4% per year from 2004 to 2008 reaching a record 32 million tons last year, according to Wood Resources International.

However, this upward trend was broken in 2009 with trade being down 26% during the first half of the year as compared to 2008. The drop in shipments was the direct result of the global financial crises and the reduced demand for paper products worldwide.

This year, only an estimated 25 million tons of wood chips will be shipped worldwide, which is the lowest volume since 2002, WRI said.

Japanese pulp mills are still the major destination for the world’s chips vessels; the country imported 53% of globally traded hardwood chips and 15% of softwood chips.

Other countries in Asia, including China, Taiwan and South Korea, accounted for 12% of global imports, while the Nordic Countries have imported 14% of traded chips this year.

The biggest plunge in shipments has been that of wood chips to Japan. During the first six months, the country imported 34% less chips than the same period last year, with the biggest decline being that of softwood chips. Practically all major importing countries have reduced their purchases this year. The only countries that have increased their reliance on imported wood fiber are Turkey (softwood), China (hardwood), Sweden (hardwood) and Portugal (hardwood), WRI said.

The countries that have reduced exports the most in 2009 are Australia, South Africa, Vietnam and Uruguay. Australia, the world’s largest exporter, has reduced shipments from 3.1 million tons the first half of last year to 2.3 million tons during the same period this year. Uruguay has cut back exports 65% this year, while shipments from South Africa have declined 40%.

With pulp production slowly increasing this fall and energy companies in Europe searching for additional sources of woody biomass, it is likely that trade with wood chips will increase in 2010, WRI predicts.

China Produced 50.875 Million Tons of Paper & Paper Boards in 2009

From January to July in 2009, output of Chinese machine-made paper and paper board reached 50.875 million tons, growing by 6.2% YOY. Only output in January dropped sharply by 14.39% YOY, which was mainly affected by Chinese Spring Festival. The total output of January and February fell slightly. Outputs from March to June remained increasing steadily. Output in June rose by 15.65% YOY. The growth rate in July was a little lower but still exceeded 10% YOY.

As raw materials were sold at low prices and the paper prices tended to be stable, many closed factories restarted to operate, increasing the outputs of machine-made paper and paper board. With the implementation of various economy vitalizing measures, Chinese macro economy began to revive, raising the demands for paper and paper board. Newsprint was sold worse than the machine-made paper and paper board. 2.7161 million tons of newsprint was produced in total in China from January to July in 2009, dropping by 10% YOY. Newsprint output in July was decreased by 17.9% YOY. The newsprint market was under high pressures as a result of the attack the electronic media.

From January to June in 2009, the sales volume of paper and paper board was 42.52 million tons in China, growing by 5.2% YOY. The output-sales ratio was 99.1%, rising by 2.2% YOY. Sales volume in Q1 was 18.75 million tons, increasing by 1.6% YOY. Sales volume in Q2 reached 23.776 million tons, growing by 8.3% YOY. It increased by 26.8% in Q2 compared with Q1, reflecting the sales was much better.

According to some research institutions, prices indexes of duplex board, ivory board, halftone paper and two-side offset paper rose by 11.6%, 18.5%, 16.9%, 3.98% respectively compared with the beginning of 2009. Especially, main paper products (ivory board, halftone paper began to grow rapidly since May. From the beginning of May to the middle of August, growth rates of ivory board and halftone paper were 15.2% and 18.5% respectively, better than the growth rates in the previous 4 months. Prices of newsprint, case board and corrugated paper remained almost unchanged with small growth rates. In August, their quoted prices rose by 2.1%, -11.4% and 6.8% respectively compared with the beginning of 2009.

Main reasons for the price increase are as follows: (1) Cost stimulation. Recently, prices of wastepaper and imported pulp grew significantly, increasing cost pressures on manufacturers. (2) Demand stimulation. Storages in the downstream were all sold out, therefore, the demands in this link began to restore. Chinese economy restarted to develop steadily, promoting the demands of paper and paper products. Paper prices are expected to rise as the cost pressures still exist and demands are beginning to restore. Gross profit rate will improve in a small range. With the increase of pulp paper prices, revenues of enterprises are expected to rise significantly and the gross profit rate may improve in a small range. Therefore, the net profit rate has great opportunities to be raised.

60% of Chinese wood pulp is imported, thus, its global price affects costs of Chinese wood pulp for paper obviously. From January to July in 2009, the aggregate imported wood pulp was 8.24 million tons, rising by 40.1% YOY. The average import price was 461 USD/ton, dropping by 35.9% YOY. With the rapid increase of the wood pulp prices in the international market, the prices of Chinese imported wood pulp will see a fast rise. The chain growth rates in June and July were 3.7% and 6.2% respectively. The growth rate in July was much higher than that in June.

Source: China Research and Intelligence

Brazilian Pulp Exports Up, WRQ Shows

The Brazilian pulp industry is starting to recover from weak global demand for paper products, according to the Wood Resource Quarterly (WRQ) report.

In April, pulp exports equaled 766,000 tonnes - up 43% from the previous month and 140% higher than shipments a year earlier.

Wood fibre costs remained unchanged in the local currency in the second quarter of the year, but increased by 8% in US dollars compared with the previous quarter.

According to the study, the Brazilian pulp industry has had a "record 2008", despite the economic downturn with production last year reaching 12.8m tonnes, up from 11.8m tonnes in 2007.

The WRQ report provides global wood prices and market information on all the major regions of the world.

AMERICAS

Fiber Concluded Contract Sale of Guaíba

Fiber, a company formed from the merger of Aracruz and Votorantim Celulose e Papel (VCP), recently announced the completion of the contract of sale of its Guaíba (RS) for the Chilean group CMPC. The value of the deal is U.S. $ 1.43 billion. Not included in this transaction $180 million related to equipment and contracts with suppliers that could be used by the fiber in their future expansion projects. The closing of the transaction is scheduled for December.

Negotiations around the Guaíba involve a pulp mill with a production capacity of approximately 450 thousand tons, a paper mill with a production capacity of about 60 tons per year and land with an approximate area of 212 hectares (the which 32 acres include leased areas in partnership or promotion). Payment of this transaction will be U.S. $ 1 billion on December 15, 2009 and U.S. $ 430 million by January 30, 2010.

Smurfit-Stone Improves Manufacturers' Productivity, Supply Chain Costs and Sustainability Performance

Smurfit-Stone Container Corporation recently announced productivity, supply chain and sustainability benefits for manufacturers at the 2009 Packaging Machinery Manufacturing Institute's Pack Expo in Las Vegas.

John Eaton, vice president of Smurfit-Stone's Automated Packaging Systems (APS) group, told Pack Expo attendees that, "Our Meta® machines increase manufacturing efficiencies while reducing product damage and waste, as well as labor and material costs. The Meta® cases are designed to use less fiber while maintaining structural strength, which allows manufacturers to reduce their supply chain costs and meet their sustainability goals."

The Meta® family of machines, including the Meta Wrap-8(TM) and Meta FS(TM) featured at Pack Expo, produce North America's only eight-sided cases. The Meta® cases feature mitered corners, which result in increased stacking strength and reduced fiber requirements. The cases' corner panels also allow additional high-impact graphics for on-the-shelf differentiation.

"Making a case with less fiber and less weight results in fewer shipments to deliver the same number of cases, which helps to reduce the use of fossil fuels and prevent pollution," said Eaton.

The Meta FS(TM) uses full servo or "smart technology" to form Meta®-8 cases around a fixed mandrel, allowing quick changeover to different heights for boxes that share the same footprint. The Meta®-8 case produced by the Meta FS(TM) machine uses 17 percent less fiber to provide the full compression strength of a regular slotted case (RSC), or it can provide 18 percent more stacking strength using 5.7 percent less fiber using a two-and-a-half inch miter.

The servo technology minimizes the number of moving parts, machine maintenance, and operating noise level.

Strathcona Paper Receives FSC Chain of Custody Certification

Strathcona Paper LP, has been granted Forest Stewardship Council (FSC) Chain of Custody certification. The certification validates that Strathcona Paper produces only 100% recycled paperboard from verified recycled sources. Strathcona Paper is dedicated exclusively to the manufacture and supply of medium- to heavy-weight paperboard.

“Since Strathcona began well over a century ago, our commitment to conducting business in an environmentally sensitive and responsible manner has been a driving force in our business model,” says Mark Sklar, president and COO. “Our FSC certification further attests to this ongoing commitment and firmly addresses our customers’ growing sustainability initiatives.”

Leading the market with an industry first, the company’s GreenChoice 100 product is the only coated paperboard that is 100% recycled, 100% carbon neutral, and manufactured using 100% clean energy.

As well, Strathcona Paper is the only 100% recycled claycoated paperboard mill in North America with ISO 14001 certification.

Under FSC certification, recycled fibre from verified sources is tracked all the way to the consumer through the Chain of Custody (CoC) certification system. The FSC “check-tree” logo is the customer’s guarantee that the products they buy are responsibly sourced.

Strathcona Paper LP is based in Toronto, with a 200,000-sq.-ft. paper mill and 45,000-sq.-ft. warehouse located in Napanee, Ont.

Quebec Invests $5.8 Million with Fpinnovations for Forest Sector R&D

FPInnovations and the Quebec natural resources ministry have reached a new R&D agreement for the Quebec forest sector. Spread over two years, the Government of Quebec's $5.87 million investment will go essentially toward supporting forest sector companies, in order to enhance the value of forest sector assets, develop innovative solutions, and promote greater use of wood by the Québec construction industry.

FPInnovations has been involved in research and development for a number of years, with scientific and technical personnel at research laboratories in Quebec City, Montreal, and Vancouver.

According to Pierre Lapointe, president and CEO of FPInnovations, "The MRNF's investment in research and development and the support for innovation by all of our industry and government members contribute significantly to improving the Quebec forest sector's competitiveness."

An FPInnovations new release says the new R&D investment will enable support for wood product companies, to allow swift deployment of efforts to optimize products and boost companies' competitiveness, plus support for special projects to help revitalize the hardwood and new bioeconomy products processing industry.

As well, the funding will enable new measures to promote the use of wood by the Québec construction industry, including support of developers' efforts to create and obtain certification for structural and appearance wood products, and encouraging greater collaboration between university researchers and FPInnovations researchers.

Abitibibowater Cuts Paper Production at Canadian Mills, Closes Beaupre

AbitibiBowater will indefinitely idle paper machines at several Canadian and U.S. mills as part of its restructuring efforts and to adjust to falling demand for newsprint and printing papers, effective Oct. 31.

According to a report from Canadian Press on Aug. 18, the company will completely shut down operations at its Beaupre, Que., mill which produces digital printing paper. The move will leave 340 workers unemployed.

AbitibiBowater will also idle paper machine 4 at the Clermont, Que., mill, and will cut newsprint production by half at the Bowater Mersey mill in Brooklyn, N.S. PM 4 is one of two newsprint machines at the Clermont facility. Its shutdown puts 120 employees out of work.

In Fort Frances, Ont., a paper machine producing commercial printing paper will be shut down, putting 75 workers out of work. The Fort Frances facility also produces NBSK pulp.

AbitibiBowater is also idling one newsprint machine at Coosa Pines, Ala.

Chile's Masisa to Invest $96 Million in Paper

According to Reuters, Chilean wood products manufacturer Masisa will invest nearly $96 million in 2009, mainly on a plant in Brazil and in forestry, a newspaper in Chile quoted new CEO Roberto Salas as saying. Salas said Masisa, which has fired 1,500 workers in the face of global financial crisis, is seeking to reduce its debt and expand in Brazil. He said the company was also open to acquiring "interesting assets" if opportunities arise. Masisa's shareholders in December approved a $100 million capital increase to pay off short-term debt. Earlier this year the company placed $100 million worth of bonds on the local market, joining a cluster of local companies raising capital via corporate debt issues to avoid seeking financing on crisis-hit global markets. Masisa has operations in Chile, Argentina, Brazil, Venezuela and Mexico.

International Paper Acquires Weyerhauser Business Units

The International Paper Company (NYSE:IP), Memphis, TN, announced in early August that it had finalized the acquisition of Weyerhaeuser Company's (NYSE:WY) containerboard, packaging and recycling business unit for about $6 billion in cash. "Because the transaction is a purchase of assets rather than of stock, International Paper will realize a tax benefit that has an estimated net present value of approximately $1.4 billion," the company stated.

The acquisition is part of their ongoing transformation. International Paper's primary objective is to generate higher earnings before interest, taxes, depreciation and amortization (EBITDA), said Chairman and CEO John V. Faraci, speaking at the UBS (NYSE:UBS) (Zurich, Switzerland) Global Paper and Forest Products Conference on September 16 in New York.

In the past seven years, International Paper eliminated almost 25,000 jobs, or about 40% of the company's work force. The company is also working toward limiting capital spending to about $1 billion over the next couple of years in order to further boost its free cash flow.

EUROPE

Horizon Pulp & Paper Receives €1.9m Order from Indonesian Firm

Estonia’s only packaging paper producer Horizon Pulp & Paper (Horizon) has obtained a lucrative order from Indonesia’s PT Semen Padang, signaling a business boost for Easterm Europe’s pulp & paper industry.

PT Semen Padang is a major state-owned Indonesian cement producer and the deal, worth around €1.9m, will see Horizon ship packaging paper to Indonesia in 2010.

It also highlights the increasing confidence in the East Europe pulp & paper industry, with orders emerging from various corners of the world. Gasworld had previously reported how Horizon was seeing increasing demand from Asia, Africa and North America.

Eastern European countries currently enjoy cost advantages for energy, fibre and labour and their local markets are growing, with Russia and the Commonwealth Independent States (CIS) seeing continued, but slower, growth in 2008. It’s an industrial gas growth driver that is also likely to witness growth in the coming years.

As a pre-cursor to the newly announced deal, Horizon hosted a delegation of senior managers of the Indonesian company - who were on annual visit to reputed paper mills in Europe to finalise buying contracts for 2010.

In past PT Semen Padang has always sourced its packaging paper requirement from mills located in Austria, Sweden, and Russia. However, it will now be sourcing its packaging paper needs from Estonia.

Honeywell to Automate Two Norwegian Pulp and Paper Mills

Honeywell will upgrade the production systems of two mills in Southern Norway: Hellefoss AS, a paper mill in Hokksund; and Vafos AS, a pulp mill in Kragerø. Honeywell will provide new process automation technology and services designed to boost safety, reliability and efficiency at both sites, Automation.com reported.

At Vafos, which turns out wood pulp that is used to create fibre boards, Honeywell will implement its Experion Process Knowledge System (PKS) and PMD Controllers. The Experion system is the first distributed control system to be installed at Vafos and will interface with the mill’s existing instrumentation and programmable logic controllers, enabling unprecedented control of the production process and improved decision making in the control room. Honeywell will also deliver a range of services including consultancy, installation, start-up and system training.

At the Hellefoss mill, which produces 50,000 tons of printing paper per year, Honeywell will install an Experion system. In the first phase of the project, Experion will be used to connect the mill’s panel-operated motors via Profibus to the existing Honeywell Alcont process control system. In the second phase the Alcont-based DCS configuration will be migrated to Experion. Honeywell will also provide consulting, installation and start-up services at Hellefoss.

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. 2007 Summary: Global Dynamics & Forecast

ASIA

ABB Deploys New Systems At Two Pulp & Paper Producers in China

ABB has won two orders to provide automation systems and related services for Chinese pulp and paper producers. Both are aimed at improving resource use and energy consumption, Control Engineering reports.

The first project provides Chemical and Pulping Ltd. (CPL) and its Rizhao Huatai mill with technology that supports production of pulp made out of fast growing wood. ABB will be supplying System 800xA as the platform for CPL's displacement digester system (DDS), designed to help the mill's fast growing wood production achieve a "4-high" - high optimization rate of energy and chemicals, high pulp conversion rate, and high production efficiency. ABB will also supply accompanying automation equipment, systems, and engineering services.

CPL is a U.S. company that provides technology and equipment for the pulp, paper, and chemical industry. The company's DDS solution employs sophisticated batch digester technology, which saves energy and chemicals and yields high quality pulp.

The second project is a contract to update Sun Paper's Shandong mill with System 800xA in a larger mill capacity expansion. ABB's System 800xA will be installed to control and improve the output the mill's new fine paper machine PM23, supplied by Metso. Once operational, the new line is expected to increase the mill's capacity by 300,000 tons of uncoated fine paper per year.

ABB says it has worked with Sun Paper on a number of successful projects at the Shandong mill over the years. For this project the scope of supply includes the System 800xA to control, monitor, and optimize operation of the new paper machine, while integrating other systems and devices in the plant. The system will include 11 operator workstations and over 5,000 I/O points. ABB will also provide related engineering and installation services.

McIlvaine Company

Northfield, IL 60093-2743

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

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