NEWS
COATED PAPERS
Fletcher to possibly sell Blandin mill
Speculation that Blandin Paper Co. would be acquired by another coated paper company, thus furthering the consolidation of the North American industry, flowed in the wake of the announcement that parent Fletcher Challenge Canada Ltd. was considering "strategic alternatives" for the business. Blandin is a Grand Rapids, Minn.-based maker of lightweight coated (LWC) printing papers. A decision is expected this summer.
Among those named by analysts as potential buyers for the 475,000 tpy mill were Weyerhaeuser Co., Bowater Inc., Consolidated Papers Inc., Champion International Corp., and Mead Corp., who all have coated groundwood operations. In the case of Weyerhaeuser, analysts said Fletcher might be considering a swap of Blandin assets for Weyco's North Pacific Paper Corp. (Norpac) newsprint mill in Longview, Wash. A Fletcher spokesman declined to comment on the rumors, as did a Weyerhaeuser spokesman.
Among the alternatives Fletcher is considering in addition to a sale is a joint venture, merger, acquisition, or expansion. In a prepared statement, Fletcher Canada president Doug Whitehead said the company is "committed to growing its newsprint and specialty paper business." Fletcher Canada is flush with cash, having just sold its TimberWest Forest Ltd. subsidiary for C$348 million. Fletcher Canada is 51% owned by Fletcher Challenge Ltd. of New Zealand.
CAPITAL EXPENDITURES
Westvaco to invest at Covington, Va., mill
Westvaco Corp. announced a major investment at its Covington, Va., mill. The $117 million capital project includes $70 million for a second lime kiln and $47 million for woodyard improvements. The two projects will increase operating efficiency at the mill and will provide essential support for future production increases in pulp and paper capacity, said the company. Chairman and CEO John A. Luke Jr. and Virginia Gov. George Allen participated in announcement ceremonies June 6. Westvaco produces its premium Printkote grade of bleached board at Covington as well as corrugating medium. Current capacity for bleached board is approximately 950,000 tpy on four paper machines. Corrugating medium capacity is about 115,000 tpy on one paper machine.
The lime kiln project will increase the mill's ability to recover and reuse chemicals and will include additional environmental controls to further reduce atmospheric emissions. The woodyard expansion features new systems to significantly improve the consistency and quality of the woodchips used as the mill's primary raw material for papermaking. Both projects are scheduled to be completed by the fall of 1998.
DEINKED PULP
Cascades raises stake in Desencrage
Cascades Inc. said recently that it had acquired all of the shares held by Donohue Inc. in Desencrage CMD Inc., a joint venture that operates a 300 mtpd deinked pulp mill in Cap-de-Madeleine, Que. Cascades said it raised its holdings from 50% to 75% by purchasing 3,500 Class B shares from Donohue. The purchase price was not disclosed. The remaining 25% interest is controlled by James Maclaren Industries Inc., a subsidiary of Noranda Forest Inc.
SPECIALTY PAPERS
Mosinee announces machine upgrade
Mosinee Paper Corp. in June announced a $7 million investment at its Sorg Paper Co. mill in Middletown, Ohio. The project includes equipment modifications on the No. 1 paper machine that will lead to improved sheet formation and drying and will increase capacity on the 114 in. wide unit by 25%. A new winder will also be installed.
In 1995, a new headbox was installed, which included a closed loop, cross-direction control system, a second color laboratory for color control, as well as other machine enhancements.
The No. 1 paper machine is one of two fourdrinier machines at Middletown that produce a wide variety of specialty papers, ranging from decorative laminate papers and playing card stock to technical grades such as fire retardant papers. A third fourdrinier machine equipped with a Yankee dryer concentrates on tissue products. The combined production on three machines is approximately 85 tons per day. The new expansion of the No. 1 machine is expected to be completed by early summer of next year.
UPM-Kymmene to get release paper division
UPM-Kymmene Corp. of Finland confirmed that it is negotiating the purchase of the release paper and consumer products division of Daubert Coated Products Inc. Westchester, Ill.-based Daubert operates three paper coating and converting facilities in the U.S. and is the U.S. sales agent for Lohjan Paperi Oy-UPM-Kymmene's wholly owned silicon coated paper subsidiary.
The release paper and consumer products division has annual sales of about $70 million. It is the third-largest U.S. producer of silicon coated paper products after Rexam Inc. of Charlotte, N.C., and the Akrosil division of International Paper Co. UPM-Kymmene, IP, and Wausau Paper Mills Co. are the three largest producers of uncoated release base papers. Last month, Wausau completed the purchase of Otis Specialty Papers from Rexam for $58 million.
CONTAINERBOARD
Visy to acquire Bell Packaging
Visy Industries Inc. and Bell Packaging Corp. reportedly have reached a definitive agreement for Visy to acquire Bell, including its 450 tpd linerboard and corrugating medium mill in Menominee, Mich. (Menominee Paper Div.) and box plants located in Illinois, Indiana, and Michigan. The price is undisclosed.
Bell CEO and chairman John Bell apparently announced the proposed partnership to employees in June, telling associates that the Bell-Visy combination is an unusually complementary fit that will enhance the value-added, niche market capabilities of both companies, according to a written statement to employees. Visy, the U.S. subsidiary of Australian-based Pratt Industries, Inc. and Bell are expected to participate in the usual due diligence, with an eye toward closing the deal in August.
AssiDomän buys corrugated company
AssiDomän AB of Sweden said it acquired the French paper and corrugated packaging group Lecoursonnois from the family shareholders. Lecoursonnois consists of three wholly owned corrugated packaging plants, including a sheet plant, and a wholly owned paper mill. The total output of the three box plants is approximately 100 million m2/year. The paper mill has capacity of 85,000 mtpy of recycled linerboard and corrugating medium. All of these facilities are located in the Paris region. The group's revenue for 1997 will be about SEK500 million ($64.5 million) with a total workforce of 450 people.
Also included in the acquisition is a 49.9% stake in Giepac Bourgogne, consisting of five corrugated packaging plants, of which three are sheet plants. Giepac Bourgogne, based in the Dijon area, produces a total of 75 million m2 of corrugated packaging and has annual revenue of about SEK400 million ($51.6 million). Also part of the deal is a 34% stake in a sheet plant in Grenoble, Cartonnages de Dauphine, and a 20% stake in France-Flexo, a preprint facility in the Paris area.
AssiDomän now controls a network of nearly 60 plants in 12 European countries following a string of acquisitions. Total volume amounts to 1.5 billion m2, or 810,000 mtpy. Total paper mill capacity is 1,180,000 metric tons from six paper mills in Sweden, France, Italy, the Czech Republic, and Slovakia.
MARKET PULP
Pulp industry must run more efficiently
"Common sense" and "dramatic changes" are needed in the pulp and paper industry and the players who survive will be the well-managed, market-savvy, and adaptable companies that can earn the cost of capital. That was the message delivered by Carl W. Geist Jr., vice president and general manager of pulp for Weyerhaeuser Co., at the 4th International Market Pulp Conference in Charleston, S.C., in June. Geist said that in the U.S., average returns have not exceeded the cost of capital. Naming a number of now-merged and moribund companies, he assured his audience that there would be more to come.
While acknowledging that world economies and new pulp competitors play their part, he said change is inevitable and that in today's global economy, regional advantages are short lived. Those who both survive and prosper, he said, will not only earn the cost of capital, but also further reduce capital spending per unit of production and increase average margins.
Geist said one way to leverage the business is to manage capital expenditures wisely, particularly environmental dollars in the design phase and by working with government officials cooperatively. He said common sense dictates that the pulp and paper industry develop and live by common environmental standards in order to be competitive with other industries according to the "green scale." He said the foundation should be sustainable forestry, minimum impact manufacturing, and recycling.
Domtar Inc. has completed a three-phase, C$33.5 million investment at its bleach plant at the Windsor, Que., pulp mill. The improvements included an additional bleach tower and replacing elemental chlorine with chlorine dioxide and are to increase pulp production by 30%. Most of the hardwood kraft pulp is used internally but 53,000 metric tons were sold outside last year. The paper mill in Windsor makes uncoated free-sheet.
Fire knocks out Jari mill power supply
Jari Celulose SA, a major Brazilian exporter of market pulp, will be shut down for four to six months following an electrical fire May 31 in the generating plant at the Monte Dourado mill in Para state. Extensive damage was done to the electrical control panel and cables, according to a company statement in a Brazilian newspaper. The mill, located in the Amazon region, does not have an alternate power supply.
Monte Dourado has capacity to make 300,000 mtpy of mostly hardwood eucalyptus market pulp. The fire comes at a difficult time for Jari, which is looking for a strategic partner to take a financial stake.
TISSUE
Justice Dept. probes Fort James merger
James River Corp. announced in June that the U.S. Dept. of Justice issued a request for additional information relating to the proposed $5.8 billion merger between James River and Fort Howard Corp., announced May 5. The companies maintain that the merger is pro-competitive and say they are in the process of collecting the required information. It is not clear whether the probe will delay the merger. Pending Justice department and shareholder approval, James River expects the merger to be completed by the end of the summer.
"This action ... is not uncommon in mergers of this type," said Miles Marsh, chairman and CEO of James River. Analysts were equally calm about the news, pointing out that it is normal for a deal of this size to be scrutinized closely in such a competitive consumer market. Shares in the two companies were unaffected by the news. Shareholders are scheduled to meet Aug. 12 to discuss the proposed merger.
Kimberly-Clark sells Mexican assets
Kimberly-Clark de Mexico SA said in June it transferred its Regio and Shock trademarks and the licensing for 25 years of its Scotties brand to Copamex Industrias SA, a Monterrey-based pulp, paper, and tissue manufacturer. The transaction also includes the sale transfer of Kimberly-Clark Corp.'s (K-C) 67,000 mtpy tissue mill in Ecatepec, formerly operated by Compania Industrial de San Cristobal (Crisoba) before its merger with K-C. The total value of the transactions is $123 million Mexican pesos in cash. K-C said the brand transfer and mill sale were carried out as required by Mexico's federal competition commission in order to approve the merger of Crisoba.
NEWSPRINT
Canadian shipments up to Europe
Canadian newsprint shipments to Europe were up 8% or 30,000 metric tons through June 9 (compared with the year-to-date in 1996), according to the Canadian Pulp and Paper Assn. (CPPA). The producers in Canada had moved 385,000 metric tons or 2,406 mtpd to European Union (EU) countries through to the second week of June. That represents an estimated 10% of total Canadian newsprint shipments through early June, well above last year's export record pace of 8.8% through June. Since 1970, Canadian producers have moved 10% of their total annual shipments to Europe only twice before: in 1991 (10.7%) and 1992 (10.2%).
The active selling on the export market has helped North American producers get almost all of a $75/metric ton price increase on 30 lb newsprint. In Latin America and Asia this month, North American producers sold standard newsprint at prices (about $510-$530/ton) below the transaction price averages in North America: $565/metric ton on the East Coast and $570/metric ton on the West Coast.
India tariff plan. Canada's largest export region in 1996 was Asia, where 1.175 million metric tons were shipped. However, conditions in one country in Asia -India-could be affected by a proposed higher tariff on imported newsprint. The proposed tariff ranges from $30-$175/metric ton (based on current exchange rates) depending on the manufacturer and the country of origin. The CPPA said Canadian producers shipped 154,458 metric tons of newsprint to India in 1996.
In June in New Delhi, publishers with the Indian Newspaper Society met with Prime Minister I.K. Gujral to lobby against the higher tariff, saying it would increase their newsprint costs by 30% and lead to the closure of newspapers, The Hindu in Madras reported. A West Coast exporter said the proposal was discriminatory and would be detrimental to newsprint exporters. The India government's Financing Ministry was considering the tariff proposal, and Gujral assured the publishers' group that he would look into the matter, The Hindu said.
India's Commerce Ministry recommended the tariff hike after investigating a claim of newsprint dumping last year. The Indian Newsprint Manufacturers Assn. filed the claim in December 1996 with the government, alleging that the dumping was done by U.S., Canadian, and Russian producers.
PACKAGING
Fonda acquires Astro-Valcour assets
The Fonda Group Inc. of Valhalla, N.Y., has acquired most of the assets of the printed products division of Astro-Valcour Inc., a subsidiary of Tenneco Inc. Terms of the transaction were not disclosed. Tenneco acquired the Astro-Valcour business when it purchased the protective and flexible packaging divisions of KNP BT, the Dutch paper and packaging group. The printed products division is based in Glen Falls, N.Y., and is engaged in the production, sale, and distribution of paper and plastic table top disposable products. Fonda is a leading manufacturer and distributor of disposable paper food service products serving the institutional and consumer markets. Last year, it acquired the specialty operation business of James River Corp. to strengthen its market position.
BOXBOARD
Newark to acquire Yorktowne assets
The Newark Group Inc. said it has agreed to acquire two recycled paperboard mills from Yorktowne Paper Mills Inc. and Yorktowne's Mercer Paper Tube Corp. subsidiary. It is expected that the sales will take place by the third quarter of this year. The paper mills produce a broad range of uncoated chipboard grades for paper tubes, cores, and boxes. The York, Pa., mill has 100 tpd of capacity on two cylinderboard machines and the Gardiner, Maine, mill has 90 tpd of capacity on one cylinderboard machine.
The addition of the Yorktowne and Mercer assets will give the Newark Group a total of six tube and core manufacturing plants to serve customers in the Northeast. In addition, the combination of the new converting plants and the 15 existing Newark Paperboard Products Div. plants will provide enhanced service for national accounts, the company said. Newark is already the leading U.S. manufacturer of 100% recycled paperboard, with over 1.2 million tons of production capacity.
PRINTING/WRITING PAPERS
UPM-Kymmene to sell French LWC mill
UPM-Kymmene said in June it will sell its Saint-Etienne-du-Rouvray coated publication paper mill to French corrugating medium producer Otor SA. Otor plans to switch production to recycled linerboard and medium by February of next year.
The UPM mill has capacity to produce 220,000 mtpy of lightweight coated groundwood. Management said it was selling the mill because the two machines were no longer competitive; the withdrawal of this capacity also coincides with the startup of UPM-Kymmene's new 400,000 mtpy coated groundwood machine in Rauma, Finland, next year. The company will take a FIM800 million writeoff.
Otor plans to spend about $17 million to rebuild the two machines to each produce 80,000 mtpy of linerboard and restart a third machine to make 200,000 mtpy of medium in lightweight grades for total mill capacity of 360,000 mtpy. The investment will make Otor the largest French producer of recycled corrugating medium.
REGULATION
Maine passes bill to reduce dioxi
The Maine House of Representatives and Senate May 30 passed the final version of an industry supported bill that requires pulp and paper mills to have nondetectable dioxin levels at the bleach plant by 1998. The bill also requires that by the year 2002, fish found in flows below a mill must have no greater dioxin concentrations than fish found in flows above a mill.
The bill does not specify a bleaching process to achieve its goals, allowing mills to operate using any technology, including elemental chlorine-free (ECF) bleaching. In recent years, many mills in the U.S. have invested to convert to ECF, making it easy for industry to support the bill, despite the regulatory restrictions it imposes. In contrast, a competing bill defeated by the legislature would have mandated totally chlorine-free (TCF) technology, which almost all companies oppose because it will cost billions to introduce the new technology.
WOOD PRODUCTS
Panelboard plant closures continue
Voyageur Panels in May started up its new $100 million oriented strand board (OSB) plant in western Ontario, the second of five new projects to start up this year and the estimated 22nd new plant since 1993. Meanwhile, market-related OSB plant shutdowns are reported widespread in North America as the continuing onslaught of new capacity overwhelms relatively healthy demand and decimates pricing.
Tembec Inc.'s OSB plant in Timmins, Ont., which recently doubled capacity, will be idle for six to nine months following a fire June 3. Other recent market downtime includes plants operated by International Paper Co., Georgia-Pacific Corp., and Noranda Forest Ltd., industry sources reported. Louisiana-Pacific Corp. (L-P) announced in June it will close its Chilco, Idaho, OSB plant July 10.
Weyerhaeuser Co. said it plans to close a softwood plywood plant in Plymouth, N.C., resulting in the loss of 200 jobs, and take a second-quarter charge to pay for the move. The company said it is closing the plant because it would cost too much to upgrade. Capacity is estimated at about 110 million ft2 (mmsf, 3/8 in. basis) annually.
While seizing market share from softwood plywood, the continuing overcapacity of OSB will force producers into ever newer niches including export markets and flooring, sources said. Producers starting up new projects in the face of dismal markets emphasize low production costs as the key to how their projects will endure.
INTERNATIONAL
AssiDomän to invest in kraft sack mill
Sweden's AssiDomän Group said it would invest SEK485 million (US$63 million) at its kraft sack paper mill in Skärblacka and SEK240 million (US$31 million) at its kraft linerboard mill in Pitea in northern Sweden. At Skärblacka, the largest investment is for a new wood debarking and chipping unit. Assi has previously announced that it will rebuild other parts of the Skakrblacka mill, making the total investment more than SEK1.1 billion. At the Piteå mill, Assi will rebuild one board machine for SEK130 million and install a new pulp washer for SEK110 million. The current projects will not mean any additional capacity increase, the company said.
Assi also announced plans to build a new corrugated packaging plant in Poland. The plant, to be located between Warsaw and Poznan, will be a sheet plant that makes products from finished sheets of corrugated board. The total investment will be approximately SEK80 million and the plant is expected to be completed in the fall of 1998. It will be completed at the same time as the new corrugated plant in Zebrak in the Czech Republic and will get most of its corrugated sheets from the Czech plant. The volume of corrugated packaging will be about 30 million m2 per year.
Daishowa posts higher sales, profits
One of Japan's largest papermakers, Daishowa Paper Manufacturing Co., reported higher sales and earnings for the fiscal year ended Mar. 31. The company said it had pretax profits of 20.99 billion on sales of 380.99 billion, compared with pretax profits of 19.93 billion and sales of 368.94 billion. Net profit was 7.61 billion, up from a 2.69 billion loss last year.
The company attributed the better financial picture to cost-cutting efforts that prevailed despite a rise in costs of import materials due to the weaker yen. Daishowa imports 97% of its pulp, mainly from North America, and about 60% of its woodchip supplies are obtained from offshore. The company said in December its joint venture with Marubeni Corp. in Canada will undertake a feasibility study on whether to build a paper mill in Peace River, Alta.
Futures market for dissolving pulp close
Courtaulds plc is close to finalizing a deal with an unnamed major pulp producer on a futures pricing scheme for supplies of dissolving pulp, according to Chemical Marketing Reporter, which said the company has been a prominent advocate among chemicals manufacturers of futures pricing mechanisms. Courtaulds CEO Gordon Campbell told the publication that future pricing schemes tend to work better where there are large suppliers and large purchasers. "The dissolving pulp sector is suitable because it has only around five suppliers globally and around 20 purchasers," Campbell said.
The location for the 5,000 mtpy, $120 million Courtaulds-Akzo Nobel project to jointly produce the NewCell lyocell cellulosic filament yarn will be Elsterberg, eastern Germany, where it qualifies for subsidies that could amount to 40% of the investment, according to Chemical Week. The publication also said that Akzo Nobel Fibers is moving its labor-intensive textile rayon finishing operations to Poland and that a cost-cutting drive will eliminate about 1,000 jobs by the year 2000 at its Obernburg, Germany, site. Courtaulds denied a report that it is close to choosing Singapore as the location of its Asian Tencel fiber plant. The company said Singapore is among a number of options still under consideration and that an announcement will be made later this year, according to Reuters.
APRIL, APP report financial results
Asia Pacific Resources International Holdings Ltd. (APRIL) said it expects to report a net loss of about $5 million for the first quarter of 1997, after reporting a net loss of $76.4 million in 1996. The Singapore-based holding company has two operating subsidiaries, PT Riau Andalan Pulp and Paper and PT Inti Indorayon Utama. The company said there were significant declines in pulp and rayon prices that more than offset increased production and sales volumes.
Paper pulp production at Riaupulp and Indorayon increased to approximately 192,000 metric tons in the first quarter of 1997, an increase of almost 20% from the first quarter of 1996 and an increase of almost 22% from the fourth quarter of 1996. Total pulp production for 1996 was 683,964 metric tons, including 507,500 metric tons from the Riaupulp mill, which is still ramping up and still expecting to produce 650,000 metric tons in 1997 and its rated 750,000 mtpy in 1998. Rayon production at Indorayon was 13,127 metric tons in the first quarter, about the same as the first and fourth quarters of 1996.
APRIL's realized average pulp prices declined to $418/metric ton in the first quarter of 1997 and slipped to $390/metric ton in April. Prices for bleached hardwood kraft pulp improved to $450/metric ton in May and June. The average pulp price in 1996 was $418/metric ton (down from $783/metric ton in 1995), while 1996 average cash production was $218/metric ton for paper pulp. The price of rayon fiber is expected to remain unchanged at about $1,687/metric ton due to continued pricing pressures from cotton and polyester.
CONTAINERBOARD
Smurfit eyes expansion in Argentina
Ireland's Jefferson Smurfit Group plc said it has purchased 80% of the stock in Celulosa de Coronel Suarez SA, a manufacturer of recycled containerboard with one production facility located south of Buenos Aires, Argentina. The deal also includes the acquisition of corrugated box manufacturer Asindus SA, which is supplied by Suarez. The two operations will be consolidated under the name Smurfit Argentina. Smurfit purchased the 35,000 mtpy mill and converting plant for IL17 million ($26 million).
The deal represents Smurfit's first entry into Argentina and continues the group's expansion in Latin America. The company already has operations in Colombia, Venezuela, Mexico, and Puerto Rico. In 1996, the group derived 14% of its revenues and 18% of its profits from Latin America. Jefferson Smurfit Corp., the group's U.S. arm, contributed 7% of consolidated revenues and 24% of group profits.
TISSUE
Tissue makers to add 55 PMs worldwide
A sizable number of tissue machines will be added over the next four years increasing world capacity more than 12% from 17.9 million metric tons in 1995 to 20.1 million metric tons through the year 2000. After machine shutdowns and conversions, the worldwide tissue market will see a net gain of 50 paper machines built during the 1996-2000 period, according to an update published in the May 28 issue of Pulp & Paper Project Report.
In the U. S., there will be a net gain of eight tissue machines contributing additional capacity of more than 450,000 tpy by the end of 2000. This includes new machines being installed by Kimberly-Clark Corp. (K-C), Procter & Gamble Co., Georgia-Pacific Corp., and Fort Howard Corp., who have installations scheduled of one or more machines with a rated capacity of at least 60,000 tpy each. This translates to an annual growth rate of slightly more than 2%. New machine installations and rebuilds in Canada and Mexico will add an additional 190,000 mtpy to North American capacity by the end of 2000.
While James River Corp. has not announced any new tissue machine stallations, the company has said it will be adding an additional 60,000 tpy of capacity through debottlenecking projects by the end of 1998. New tissue machines also are being considered by CityForest Corp., Ladysmith, Wis., and Papelera Kas de CV in Mexico that would further increase capacity.
Overseas, Asia Pulp & Paper Co. is installing four large machines with a total capacity of 270,000 mtpy in China and Indonesia, for the largest expansion by a non-U.S. company. European manufacturers will add 20 new tissue machines, increasing capacity by 660,000 mtpy.
Minority shareholders of Scott Paper Ltd., a publicly traded subsidiary of K-C, voted June 3 in favor of Kruger Inc.'s proposal to acquire 100% of Scott. The bid was approved by 89.4% of the shareholders who will receive C$23/share. K-C had held 50.1% of the shares and previously said it intended to vote in favor of the motion.
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