Expansion
/Modernization

High percentages of prime quality eucalyptus fine paper are being sold
in North America, especially the U.S., with more being planned

Bahia Sul Shifts Uncoated Free-sheet Production to High Gear at Brazil Mill

BY KEN L. PATRICK,
Senior Editorial Consultant

Bahia Sul Celulose SA started up in 1992 as a 500,000 mtpy bleached eucalyptus kraft (BEK) market pulp mill in the southeastern section of the Brazilian state of Bahia, approximately 30 miles upstream from the town of Mucuri and 750 miles northeast of São Paulo.

One year later, the company started up a large new paper machine that, during the next three years, would steadily capture tonnages between one-third and one-half of the mill's pulp output in the production of a high quality uncoated free-sheet, targeted heavily toward North American export markets.

In 1996, about 60% of the mill's paper production from BS-1 machine was exported, with the largest portion being sold into North America-almost exclusively in the U.S. Some 80% of the mill's market pulp output was exported, 28% of this coming to North America. The remainder feeds a limited but growing domestic market.

The percentage of Bahia Sul's fine paper export sales increased in the first half of 1997, while market pulp exports remained fairly steady compared with the same period last year. The company now plans to expand the mill and to install a second fine paper machine in the near future.

Production from BS-1, which has a capacity of 250,000 mtpy at 80 g/m2, has slowly increased from 106,200 metric tons in 1993 to more than 160,000 metric tons in 1996. Through the first half of 1997, export paper sales were on track to exceed 200,000 metric tons by the end of this year.

Bahia Sul's BEK pulp is produced from genetically cloned eucalyptus fiber, which sets the stage for the mill's high product quality and production consistency. The mill is environmentally progressive with state-of-the-art pulping and bleaching systems. In 1994, it was the first pulp and paper company in the world to obtain the BS (British Standard) 7750 environmental certificate adopted by the European Union.

In early 1996, the mill was also the first in the world to receive the ISO/DIS 14001 certificate for environmental control norms-while this certification was still in the DIS (Draft International Standard) stage. Then, in September 1996, it was again the world's first to receive the definitive ISO 14000 certification. On the quality side, the mill received its ISO 9002 certification in mid-1996, and has also been applying B88800 safety and occupational health guidelines. It is a signer of the Letter for Sustainable Development.

Bahia Sul is a joint venture between the CSPC (Cia. Suzano de Papel e Celulose), or "Suzano Group," a major Brazilian forestry and pulp production company, and CVRD (Cia. Vale do Rio Doce), Brazil's largest metals and mining company, which has extensive interests in transportation and forestry. Financing was provided by the Brazilian government's national development bank, BNDES (Banco Nacional de Desenvolvimento e Social), and the International Finance Corp. (IFC).

At the start of 1996, the project's completed costs had totaled some $1.32 billion. This figure did not include capital expenditures for Bahia Sul's timberlands, which reached about $167 million. In addition, substantial investments were made in the local infrastructure, including roadways and schooling, health, and recreation and housing facilities for employees (see sidebar on page 54). The company project, as a whole, was completed in 33 months.

OWNERSHIP, COSTS, WORKFORCE. Figure 1 breaks down the current capital structure of the Bahia Sul venture. Suzano has the largest "slice of pie" with 37%, followed by CVRD at 28% and the two financial institutions (Class A stock) at 24% (BNDES) and 2% (IFC). Public ownership in the form of Class A stock is approximately 9%.

CVRD, through its subsidiary FRD (Florestas Rio Doce SA), provided most of Bahia Sul's land. The initial contribution consisted of approximately 97,000 hectares that formed the core of the mill's forestry resources. In addition to capital, Suzano contributed pulp and paper processing technology and managerial personnel. All of the company's common stock (voting rights) is owned by Suzano (55%) and CVRD (together with FRD).

The venture takes maximum advantage of tax exemption programs designed to encourage investment in relatively underdeveloped areas of Brazil, such as Bahia. Figure 2 depicts Bahia Sul's basic investment picture, with equipment costs being, by far, the major collective expense item at $1.103 billion. The paper mill cost approximately $350 million.

As a whole, Bahia Sul has a total workforce of 2,095 full-time employees. Of these, 935 work in the mill, 980 are involved in the plantations operations, and the remaining 180 are administrative and sales personnel. The mill operates in three shifts around the clock. It generally has two scheduled maintenance shutdowns of 10 and 5 days, usually in April and October, respectively. Employees commute to the mill from four nearby towns where Bahia Sul has invested heavily in infrastructure improvements.

RAW MATERIAL SUPPLY AND COSTS. Bahia Sul secures all of it its fiber needs from its vast timber holdings. Use of the company's lands is broken down in Figure 3, which shows that almost 60% (67,000 hectares, or 165,560 acres) is in eucalyptus plantation stands, and that some 41,000 hectares (101,313 acres) of indigenous species and native vegetation are classified as reserves and are not cultivated. This approximate 36% in reserves is considerably greater than the 20% that Brazilian federal law stipulates must be uncultivated or planted with indigenous species rather than eucalyptus. Last year, Bahia Sul planted nearly 700,000 seedlings of native species and is continuing at a similar pace this year.

Fiber costs represent about 33% of Bahia Sul's total production costs per ton, and pulp and chemicals account for some 10%, excluding depreciation. The low fiber cost reflects the rapid rotation of eucalyptus harvests in Brazil and the relatively low costs of transporting harvested trees to the mill. Hauling of logs from the forest is handled primarily by non-unionized independent contractors, with no single contractor having more than 20% of the mill's business.

Eucalyptus trees are typically harvested in six to seven years in northeastern Brazil, compared with 12 to 15 years for eucalyptus trees in Spain and Portugal and 20 to 30 years for hardwood trees in North America and Scandinavia. Unlike other hardwood species, eucalyptus can grow back from the stump after the first harvesting as many as two or three times, eliminating the cost of replanting.

Bahia Sul's eucalyptus plantations are located in the southern portion of Bahia and in the northern portion of the state of Espirito Santo. At their nearest point, these plantations are more than 1,800 miles from the Amazon rainforest in a region where the climate is particularly conducive to growing eucalyptus. The lands are mostly flat, reducing transportation costs.

The FRD lands that were contributed at the formation of the joint venture had been planted with eucalyptus beginning in the early 1970s. Bahia Sul began reforesting in 1988, using cloned seedlings that were asexually propagated in its own nurseries for maximum uniformity and disease resistance. Currently, about 13,000 hectares (32,123 acres) are in "old" eucalyptus trees and some 50,000+ hectares (more than 123,500 acres) are in "new" eucalyptus trees, planted in mosaic patterns. About 3,500 hectares (8,650 acres) are being replanted. Collectively, Bahia Sul's plantation volumes are approaching 100 million eucalyptus trees.

The old trees yield about 5 tons of pulp/hectare/year, compared with an estimated annual yield by the new trees of 10 tons/hectare. The old trees are being harvested (at about 15 years of age) only once before replanting, compared with three times for the new trees (at six to seven years of age). Beginning next year, the mill expects to switch to the exclusive use of the newer trees.

The average distance from the harvest zone to the mill is about 35 miles. Bahia Sul maintains a total of 11 remote woodyards. Forty days after they are harvested, the logs are trucked to the mill. During this 40-day period, the water content decreases as the logs dry out. This makes the logs lighter to transport, further reducing overall raw material transportation costs.

PAPER PRODUCTION. The BS-1 gapformer-type paper machine is a Voith Duoformer FM unit. It has a capacity of 1,000 mtpd, depending on the basis weight of grades being produced, which can vary between 56 g/m2 and 110 g/m2.

The machine is 8.5 meters (335 in.) wide and has a trim width of about 7.8 meters (307 in.), operating at speeds up to 1,200 m/min (almost 4,000 fpm). Supervisory controls were supplied by Measurex (Honeywell) and ABB provided the digital control system.

Ahead of the paper machine, the stock preparation system includes four Sunds Defibrator AB refiners and Andritz Sprout-Bauer Centri-Cleaners. Approximately 10% clay filler (60,000 mtpy) and some talc (310 mtpy) are added at the wet end.

Following the straight-through press section, the dryer section contains 50 standard drying cylinders arranged in a combined single-tier and conventional serpentine run. A Voith Speedsizer size press is located within the dryer section.

Measurex Isotherm scanner platforms are located before the Speedsizer and between the machine's calender and winder. The machine's quality monitoring includes infrared defect detection and Measurex Calcoil (caliper profile control) and Voith Profilmatic (headbox) equipment.

Fine paper grades produced at the company include offset, reprographic, laser, and coating base stock grades. Most of Bahia Sul's fine paper production is sold as rolls, from 19 cm (7.5 in.) to 2.2 m (86.5 in.) in width, and 1.0 to 1.4 m (approx. 40 to 55 in.) in dia, weighing 300 to 2,600 kg. Prior to shipping, the rolls are hermetically sealed in plastified kraft paper. Third-party converters are used to produce Bahia Sul cut stock, but the company is considering the addition of in-house sheeting capacity.

In the domestic fine paper arena, Bahia Sul competes with five dominant producers. Celpav (Companhia Votorantim de Celulose e Papel) has about 25% of the market, Suzano supplies some 20%, Ripasa SA Celulose controls approximately 15%, Champion Papel e Celulose SA has about 15%, and Riocell supplies roughly 5%. As seen in Figure 4, Bahia Sul accounted for about 6.3% in 1996.

However, Suzano does not compete with Bahia Sul in fine paper sold as reels. Suzano's production includes coated and cut-size papers sold to domestic converters and directly to end users. Bahia Sul delivers to some 140 active customers in Brazil for a variety of end uses, including stationery, books and magazines, continuous paper, graphic paper, envelopes, and paper cups.

In the international marketplace, Bahia Sul has customers in more than 50 countries, maintaining a respectable 14% to 15% of the country's paper export business last year, as shown in Figure 4. In addition to the U.S., other major markets are in Europe, Asia (primarily Japan and South Korea), the Middle East, Latin America, and Africa.

The company's long-term plans are to balance fine paper and market pulp production at approximately 50/50, and also to sell 50% of its paper output into the domestic market and 50% to the export market.

Figure 5 shows the progress toward this balance, which should occur in several more years. The movement toward increased paper output is especially apparent when comparing first-half 1996 production with that of the first-half of 1997 in Figure 5 (27% paper in 1996 vs 35% in 1997).

PULPING PROCESS, PRODUCTION. The kraft pulp mill is basically a Kvaerner Pulping supplied facility. The IsoTher-mal Cooking (ITC) digester is equipped with MCC (modified continuous cooking) capability, and includes a high heat washing zone. The digester has an output capacity of 1,365 mtpd. Bahia Sul was the first mill in Brazil to use MCC technology.

The pulp mill also has a single-stage, medium consistency oxygen delignification operation ahead of the DoEOPDD or CDEOPDD bleaching sequences. It has moved almost totally away from the use of chlorine and is now approaching 100% ECF (elemental chlorine free) production, using the D100 sequence above. The Kvaerner Pulping bleach plant has diffusion washing in the top of each upflow bleaching tower. Final brightness out of the bleach plant is 90%+ ISO brightness.

ABB online kappa sensors are used before and after the oxygen delignification stage, and Valmet Kajanni online brightness sensors are located in the CD and D1 bleaching stages of the bleach plant. The entire fiberline is controlled by an ABB digital control system. The ClO2 generation system was supplied by Lurgi.

Water use in the pulping and bleaching operations is low at between 58 and 62 m3/a.d. metric ton, currently. The target is 53 m3/ton. Intensive laboratory testing is conducted for AOX and color in the bleach plant effluent.

Bahia Sul's AOX averages are around 0.1 kg/a.d. metric ton. COD is averaging 4 to 5 kg/a.d. metric ton, and BOD is about 0.2 kg/a.d. metric ton. Effluent color out of the bleach plant is around 13 kg/a.d. ton before waste treatment and some 8 kg/ton after waste treatment. The mill has an elaborate spill control system from the woodyard through the pulp mill.

According to Francisco Valerio, the company's industrial director, any future expansions at Bahia Sul will not include additional ClO2 generation capacity. The mill has been operating an ozone pilot plant for several years now, and will most likely move toward DZ (chlorine dioxide and ozone) bleaching sequences when new capacity is added.

Effluent treatment consists of primary and secondary treatment. The secondary lagoon is setup for nine days of residence, and has a capacity of 4,800 m3/hour. There are a total of 80 aeration flotation cells in the lagoon. Sludge from waste treatment is landfilled or used as soil fertilizer.

The pulp mill's chemical recovery island includes a Gotaverken (Kvaerner Pulping) recovery boiler rated at 1,750 metric tons of solids/day nominal and 2,100 tpd maximum continuous. It burns 72% solids black liquor, concentrated in a Rosenblad/Ahlstrom six-effect, falling film, free-flow evaporator system with a capacity of 503 metric tons/hour. The boiler produces 385 metric tons of superheated steam per hour at 85 kg/cm3 and 480C.

Causticizing is done using Goslin Birmingham technology; the system can handle 5,200 m3/day. The 400-mtpd lime kiln was supplied by Allis Mineral Systems, and electrostatic precipitators on the kiln (99.8% efficient) and recovery boiler (99.6% efficient) were supplied by Flakt. The odor control system, including methanol stripping and incineration, was provided by MoDo Chemetics. The mill's process water treatment technology came from Degremont, and Villares/DuPont supplied the reverse osmosis treatment process (280 m3/hour) for boiler water treatment.

Bahia Sul also operates a Foster Wheeler biomass boiler that burns "old" wood (wood that is too old and not suitable for the mill's fiberline) and bark together. The unit produces 165 metric tons/hour of superheated steam at 85 kg/cm3 and 480C, and is equipped with two Flakt (99% efficient) electrostatic precipitators. The mill's turbogenerators were supplied by Dedini/ Siemens and can produce a total of 115 MW of power. A Caterpillar/WEG diesel generator system is also used as needed by the mill.

The pulp dryer machine was provided by Voith and has a Flakt compact airborne dryer section and a Sunds Defibrator AB pulp sheeting system. It has a capacity of 1,250 mtpd at 850 g/m2, and operates up to 250 m/min (820 fpm). It is 6 m (236 in.) wide.

Three basic types of pulp are made on the dryer, depending on brightness, dirt count, and viscosity. Minimum brightness is ISO 88.5 and dirt count varies between 2 and 30 mm2/kg. Viscosity ranges between 500 and 700 dm3/kg, and moisture is between 8% and 12%.

Sheeted pulp (96 cm x 92 cm) is bound into 250 kg bales, with 8 bales per stack weighing 2,000 kg each. Most of the pulp and paper for export is sent by truck to the deep water port of Vitoria approximately 300 km (185 miles) south of the mill.

Bahia Sul competes with other major producers of BEK market pulp in Brazil, including Aracruz Celulose SA, at approximately 1.1 million mtpy; Celulose Nipo-Brasileira SA, or CENIBRA (in which CVRD also has an interest), at about 700,000 mtpy; and Riocell SA at about 350,000 mtpy. BEK market pulp is also produced in Portugal (more than 1 million mtpy) and Spain (some 870,000 mtpy).

As shown in Figure 6, Bahia Sul accounted for 13.3% of Brazil's exports of BEK market pulp last year, and 15% of the domestic market. Figure 5 shows that the mill's production represented 13% of the Brazilian total of 2,619 metric tons in 1996. As also can be seen in Figure 5, based on output in the first half of this year, the mill is on track to match 1996 production levels by the end of this year.

In 1996, 52.5% of Bahia Sul's market pulp was shipped to Asia (mainly Japan and South Korea), 28% to North America (mainly the U.S.), 18% to Europe, and the remainder to Latin America and the Middle East.

1997 PERFORMANCE AND OUTLOOK. During the second half of 1997, Bahia Sul's net average price for paper and pulp increased 5%. Net sales revenues increased 2% compared with the same period last year. Unit average costs for products sold declined 8% compared with 1996, due to the mill's continuing reduction of manufacturing costs and productivity gains. Administrative and commercial expenses were cut an additional 13%.

In the first half of 1997, total sales amounted to 260,000 metric tons, of which 173,700 tons were pulp and 86,300 tons were paper. Production for the first half is shown in Figure 5.

The combination of the price increase and the reduction in unit costs resulted in a 97% increase in gross profits for the first half of this year, compared with the same period last year. The gross margin, which was recorded as 11% for the first half of 1996, was 22% for the first half of 1997.

According to Valerio, Bahia Sul's "challenge" at this time is "to double the output of the mill." He adds that Bahia Sul "has the right costs and prices, the right people, and the right markets."

Pulp and Paper Industry's "Brazil Costs"
Help Rebuild a Country

Building the Bahia Sul mill involved much more than just equipment, facilities, land, and site construction costs. And the effects of the mill reach far beyond its shipping docks. As with many other large pulp and paper complexes that have gone up in Brazil in recent years, significant time and resources were also invested in nearby communities and local infrastructures. Known as the "Brazil Cost," these investments are literally reshaping, if not pioneering, a rural renaissance in the country. During the 1990s, its existence has increased tax collection revenues by $84.2 billion.

In Bahia Sul's case, for example, the mill created 3,000 direct new jobs from the start. This has been a significant "shot in the arm" for state and local governments struggling to develop and upgrade the quality of living in rural Brazil.

As part of the overall Bahia Sul project, the company built three residential complexes in southern Bahia, comprising 525 new homes. In northern Espirito Santa, it built another 16 homes. The company also constructed two recreation clubs open to the local communities, with courts, pools, sauna, and social/sports events facilities.

The company additionally installed two primary and secondary schools in Mucuri and Itabatan, and built an elementary school in Alcobaca. From 1991-94, it sponsored the training of 700 public school teachers, benefiting 28,000 students.

Bahia Sul constructed the Hospital Painerias and out-patient clinic in Mucuri and also built several health stations. The company assisted in building the Hospital São Jose, with 68 beds and an emergency out-patient clinic.

The company's investments in local infrastructures included construction of the new Mucuri airport, which now has two flights daily, linking the region with São Paulo and Minas Gerais. It installed two telephone exchanges, with a combined 700-terminal capacity, and implemented five new telephone offices. It built two public squares in nearby townships, and took on the maintenance and recuperation of secondary roads in these areas.

Bahia Sul's investment in sanitation facilities included the Itabatan sewage system, making the district of Mucuri the first in Brazil to have a fully treated sewage system. This was done in cooperation with BNDES and municipal and state governments. The project serves 3,950 homes and 12,000 inhabitants.

The company provides family and financial planning services for residents of nearby communities, and also provides nutritional education and adult literacy programs. It is also involved in several major environmental projects in the region and supports the projects of several community associations.

Altogether, Bahia Sul has built several hundred miles of roadways to service the mill and local communities.