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COATING
The new PM 4 at the Finnish mill looks set to drive up the quality and speed targets for the grade sector as the startup phase continues
BY Jim Kenny,International Editor
UPM-Kymmene Starts Up Europe's Latest LWC Machine at Rauma
European paper producers involved in the magazine sector could be forgiven for heaving a collective sigh of relief when this year is over. Assuming nothing dramatic happens, the end of 1998 should see the last of the major capacity expansions in the sector up and running at (almost) full speed. With practically no new major paper machines in the pipeline for the foreseeable future, the supply/demand balance should settle down and the sector might be able to get down to making some money for a change, rather than just throwing cash at new equipment.
UPM-Kymmene's new lightweight-coated (LWC) paper machine at Rauma in Finland-and to a much lesser extent, Stora's new supercalendered (SC) paper machine at Port Hawkesbury, N.S.-should be the last machines for a while to make a major impression on the balance of the European magazine paper sector. As a result, UPM-Kymmene is hoping to be able to take advantage of what appears to be a fairly healthy pattern developing in the market at the moment: strong demand, rising prices (albeit slowly), and healthy advertising revenues among customers.
As Rauma vice president and general manager, Yrjo Olkinuora, explains, "I think the Rauma mill will be a good investment, but the major grades are not particularly profitable at current prices. Prices have stabilized, though. They could do with being a bit higher, but we don't expect any big rises this year, although we don't expect any big drops either."
This is a view echoed by Rauma's marketing manager, Tommi Nordberg. "Profitability is still our main concern. Even with a huge turnover, we're not making a vast profit."
Olkinuora adds, "Producers have been eating the profitability out of the business over the years by competing with the wrong tools. Over the long term, the real price of paper has been decreasing by about 10% every 10 years."
CORE BUSINESS. Now that the new 400,000 tpy PM 4 is in commercial production, the Rauma mill's capacity stands at 1.1 million tpy of LWC and SC paper. The mill now forms a major part of UPM-Kymmene's magazine paper division, alongside Jämsänkoski, Kaipola, Kajaani, Lappeenranta, and Voikkaa in Finland, Caledonian Paper in the U.K., and Blandin Paper in the U.S. Together, these mills account for 26% of the group's FIM 50,406 million turnover.
There were just three machines at Rauma when the prospect of a new paper machine first came up (Table 1). Rauma may have offered several advantages when company executives were considering the construction of a new LWC unit in the mid-1990s, but it was far from a foregone conclusion that the new machine would be located at the mill.
"There were many things that helped, such as the new steam plant and the fact that transportation costs are low," explains Olkinuora. "There was access to wood supplies around the site in a 150-km haul radius, which is very low when you consider that we are on the coast and this is really a semicircle. Also, UPM-Kymmene is supplying wood to the new Metsä-Rauma pulp mill and there is a good labor supply just 3 km away in the town. It was somehow waiting to happen."
The product strategy behind the design of PM 4 is based on the following targets:
• Excellent printing press runnability
• High bulk and good stiffness
• High printed gloss
• A good opacity/brightness ratio.
This last aim is an interesting point. The properties of the Rauma Exel brand the mill produces on the new machine will actually vary according to whether it is bound for the U.S. or the European market. Customer preference dictates that the European variety typically has a slightly higher brightness (one or two ISO brightness points), so the brightness/ opacity ratio will be slightly different.
This "quality" issue prompted Olkinuora to question exactly how far quality improvements can go for paper grades of the future. "I just don't know where this constant increase in so-called "quality" is expected to stop. I mean, there has been an almost constant rise in brightness, but where do you decide that is enough?" he asks.
Some 40,000 tons of the machine's estimated output of 230,000 tons this year is destined for the U.S., so the machine will be producing a significant amount of paper designed to the "alternative" specification-regardless of whether it is of a "higher" quality or not. But whether this will continue when the Blandin operation becomes fully integrated within the group's business strategy remains to be seen, as the group will doubtless wish to rationalize customer deliveries according to source and minimize transportation costs.
PM PLUS. The new PM 4 has meant building more than a paper machine. The scope of the project covers wood handling, a new thermomechanical pulp (TMP) line, and one of the most sophisticated finishing operations in the business.
The raw materials used in the furnish of the paper produced on PM 4 comprise TMP (based on peroxide bleached spruce), chemical pulp (totally chlorine free pulp from Metsä-Rauma), and kaolin filler from the U.S. To scale up the wood handling facilities to meet the mill's new capacity, UPM-Kymmene renewed the debarking drum and chipper under contracts awarded to the suppliers, Rauma/ Sunds Defibrator and BMH Woodhandling. The debarking and chipping stages of the operation can handle up to 300 m3/hour of fresh spruce.
The scope of Sunds' participation in the project included key equipment such as a hydrostatically supported debarking drum that measured 30-m long and 5-m dia. The supplier also delivered a new generation Camura GS chipper. The design basis of the chipper was to aim for a high quality chip that would boost pulping efficiency and economy. As a result, the chipper geometry was designed to produce a very uniform chip that would enhance pulp strength.
Nordberg points out that the inventory volumes in the woodyard are actually relatively small since the mill has few problems getting its supplies even during bad winter weather. The only problem is that occasionally the logs get too dry in the summer.
TAKING STOCK. The mill requires around 400,000 m3/yr of wood as a result of the PM 4 project. The extra capacity requirement provided the basis of another Sunds Defibrator contract-supplying much of the new TMP plant. The new line is situated in the same factory hall as the paper machine and refines spruce chips using a multi-stage process. Sunds' contract covered practically the entire TMP line, starting at the chip silo and incorporating the chip washing equipment and screw feeders, pre-steaming, main refining lines, latency pulpers for each line, and reject refining, as well as the heat recovery system.
The multi-stage refining system utilizes four two-stage lines. In the reject system there are four high-consistency refiners and two low-consistency Conflo JC-04 refiners available. The motor size for first stage refiners is 12 MW, while the second stage units are rated at 8.5 MW. Pulp quality control is covered by three PQM (pulp quality monitoring) In Line systems, again from Sunds.
Ahlstrom was responsible for the pressure screening elements of the process, which has a capacity of some 650 tpd. Andritz delivered the 560 tpd capacity peroxide bleaching equipment which bleaches the pulp to a brightness of 82% ISO.
In the coating preparation area, the 650 tpd capacity unit takes clay in the form of suspended particles from two slurry plants at the nearby port of Rauma. Color preparation comprises two batch operation coating color mixing units, and the excess color is recovered and treated in ultra-filtration units. Standard brightness for the 60 g/m2 grade is 75% ISO.
Sunds delivered other key elements of the stock preparation system, including the paper machine pulpers, deflakers, and refining system. The slushing needs of PM 4 were met with a delivery of a couch pit, and Preflo pulpers were installed at the press section, calenders, coating station, reelers, winders, slitter, and broke handling areas. In total, 11 Preflo pulpers are used in the stock preparation area. Three Conflo JC-04 refiners are also used to treat the chemical pulp for PM 4, while the other main part of Sunds' contract is accounted for by the two Deflo deflaker units for the broke handling system.
MACHINE TOOL. The mill opted for a Valmet machine, and the bulk of the equipment that comprises PM 4 in the 450-m long machine hall is based on the Finnish supplier's technology. At the head of the 180-m long gap former paper machine, a SpeedFormer HS with a SymFlo headbox make up the business end of the unit, followed by a three-nip press section with an extended nip. Tamfelt is the main machine fabric supplier, and the SymPress II 3B is designed to promote bulk and a stiff, uniform sheet. At the same time, the SymBelt shoe press can deliver a maximum nip pressure of 1,000 kN/m, with a nip length of some 200 mm. "This is the first magazine papers mill to use such a design," says Nordberg.
The SymRun HS dryer section provides good web support throughout the process, helping to reduce stretch and elongation characteristics. This initial dryer line is followed by pre-calendering using an OptiHard unit, again from Valmet. The pre-calender is designed to promote lower line pressures to boost bulk and smooth the web surface before the web reaches the first online coater. "We're aiming for a very smooth sheet," explains Nordberg, "but since we want to get the bulk, we do a little light calendering before coating."
The Optiblade blade coating system is used to apply between 6 g/m2 and 12 g/m2, and the idea is that the bulky base paper and the relatively thin coating will boost the stiffness of the final product. Gas infrared dryers are used throughout the process.
The reel system used on PM 4 is an OptiReel design, while the OptiLoad supercalenders represent an even more up-to-date papermaking technology. According to Valmet, the versatility that the system allows a papermaker in determining the temperature gradient and loading throughout the 12-stack calender process means that both bulk and gloss can be successfully optimized. Using the system, the paper is calendered at relatively high temperatures, since the roll covers are made from a polymer compound and pressures can be controlled to very low levels throughout the stack. The two supercalenders have a design speed of 1,500 m/min. The drives for the paper machine were supplied by ABB.
WIND-UP. The two high-speed Winroll winders offer good reel structure control possibilities during winding, which can enhance runnability during the printing process. Using this system, a moving support belt initially puts pressure on the reel to optimize tension and then as the reel grows, the belt slides around to provide support from underneath and reduce the stress on the core. The units have 14 rolling stations and a maximum speed of 2,500 m/min, as well as automatic threading and a splicer.
Quality and control on the paper machine is provided via Valmet's Damatic XDi control system with Paper IQ and XIS/PaperMap reporting, as well as a Roibox fault detection system. Honeywell-Measurex scanners have also been incorporated into the system which is run from two control rooms: one for the TMP line and one for the paper machine. Valmet's delivery also covered the automation for the debarking unit.
Moving into the packaging end of things at the finishing department, the entire mill's needs are now being met with two state-of-the-art wrapping lines that can handle up to 7,200 rolls each day. "At the moment, the packaging line from Valmet handles approximately 3,000 reels/day, depending on the sizes," explains Nordberg. In a move that eliminates an entire handling stage, the rolls are even put onto trucks in the loading bay using a computer-controlled automation system from Valmet once they have been wrapped in their polyethylene laminate covers.
"The packaging lines mean that we keep no stock in the mill at all. It all goes straight to the harbor," explains Nordberg. As a result of the expansion, the harbor is now one of the largest, if not the largest, for forest products handling in Finland. The location of the harbor means that while almost all the fiber arrives at the mill by truck (a proportion also comes in on rail), most of the output leaves via the sea.
ON THE MOVE. The machine startup appears to have gone remarkably smoothly, hitting a consistent speed of 1,430 m/min just three weeks after startup. "The speed is already much higher than we had planned, and the quality is quite good," according to the paper machine superintendent, Markku Iivonen. "Everyone here is really a trainee in the startup of a big paper machine, but it has gone better than planned. There are always some problems on a startup, but it has mostly been very small things that we've had to deal with."
Nordberg estimates that it might take two years before the machine reaches its 1,800 m/min design speed. It now looks as though the machine will top one-third of its production capacity during the first half of the year and reach two-thirds over the remainder of 1998. But from the mill's point of view, having the machine running means that both the operational team and the mill's marketing division can find out exactly what the new machine is capable of.
Olkinuora agrees. "That is certainly one of our strengths. The other is that we can now measure capacity, bulk, opacity, and quality, and that is a big benefit."
Rauma has been working with several of its customers-buyers and printers-in an attempt to optimize the target characteristics of products created on PM 4. Part of this task involved determining how the mill could achieve bulk and stiffness targets while still achieving the necessary gloss. At the moment, 51 g/m2 grade is arbitrarily the lower end of the basis weight range, but as Nordberg says, "Don't ask me exactly what comes after 51 g/m2, but we are definitely interested in seeing how low we can go."
And at the same time, the mill will be determining how high it can go in matching Rauma's bid to boost quality, output, and most importantly, profits.
| Moving in the right direction |
| Demand is strong, prices are creeping up, and advertising revenues are holding up. In fact, most market indicators appear to be moving in the right direction for the president of UPM-Kymmene’s magazine papers division, Ismo Lepola. But then, perhaps it is about time.
UPM-Kymmene’s magazine division saw its operating profit crash from FIM 2,072 million ($375 million) in 1996 to FIM 1,077 million last year on a slightly higher turnover of FIM 11,888 million, up from 1996’s FIM 11,172 million. Things went fairly well during 1997 in pure volume terms—UPM-Kymmene’s own calculations indicate a 25% jump in western European LWC demand last year. But as Lepola points out, "One of the main reasons that demand grew so much last year was that paper was so cheap.”
The first half of 1997 was very poor for both the company and Lepola’s division in terms of prices and operating rates, but things started to improve during the third quarter. Increases in Europe and the U.S. at the beginning of the year mean that prices are now somewhat healthier. And with many of the larger customers now tied in to deals that will last until the third quarter, or even the end of the year in some cases, it looks as though price stability could be one of the main features of the sector in 1998. "The big fear is how events in southeast Asia will affect the market, but so far it hasn’t made much of an impact really,” says Lepola.
PSYCHOLOGICAL TROUBLE. That is not to say UPM-Kymmene can simply sit back and enjoy the ride during 1998. Pulp prices saw significant erosion during the first quarter, and trends such as these can rapidly have an unhealthy impact on paper prices. Lepola remains optimistic that the "psychological effects” of the pulp price will be minimal. But even so, a couple of other recent events suggest Lepola will be kept pretty busy during the course of the year. "From the point of view of UPM-Kymmene’s magazines division, there are two major positive things that have happened,” he says. "We’ve made our long-term strategic move with the acquisition of Blandin Paper, so we’ve really fulfilled our goal in the U.S. market, getting into the area and supporting our exports. And the other thing is that we successfully finalized the Rauma PM 4 early in January.”
As Lepola explains, the Rauma PM came onstream delivering a good quality product ahead of its startup schedule and well under budget. As a result, the main task for the company’s managers now is to figure out how best to integrate PM 4’s output into the company’s overall product mix, while ensuring that the Blandin operation is fully integrated into the system.
"Blandin’s previous owner had decided on a rebuild of the No. 6 paper machine wet end to install a gap former and improve the quality and output,” Lepola explains. "That rebuild had already been ordered by the time we came in, but we thought it was the right move anyway, and we’ve already restarted and are fine-tuning. Now we have to look at our customer approach and the way we are going to use the synergy benefits of the product mix and the market mix to benefit the group.”
CRUCIAL SUPPLY. In the medium term, Lepola estimates that growth levels for his division’s grades will average an unremarkable, but fairly positive, 2% to 4%. The really crucial market figure for UPM-Kymmene is not consumption, however, but production capacity. PM 4 at Rauma represents the last of the big European startups for a year or two at least, and the company is hopeful that a more favorable supply/demand balance will translate into improved operating rates, better pricing, and higher profitability.
"We have spent a lot of money on our assets in recent years, so we have to look at getting a return,” says Lepola. "Creep capacity will obviously come in as smaller rebuilds are carried out and efficiency rises, but that is a good thing, if demand is growing, to keep our customers secure if they are planning an expansion.”
With few other major capacity expansions on the horizon, UPM-Kymmene is looking to make some money and has set itself an internal target of 15% for return on capital employed (ROCE). As has been noted, the only significant fly in the ointment is Stora’s new 350,000 tpy SC unit at Port Hawkesbury, which is now due onstream. But Lepola remains optimistic that the effects of the extra capacity will be marginal—for this year anyway.
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| UPM-Kymmene makes the most of its Asian play |
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Building business partnerships with potential competitors is often a tricky task at the best of times, but UPM-Kymmene at least seems to have the benefit of good luck and timing on its hands. The Asian currency crisis has hit its Indonesian fine paper partner, Asia Pacific Resources International (APRIL), at a time when it is trying to get three major fine paper machines off the ground. UPM-Kymmene has been able to do its alliance partner a good turn by pumping a much-needed $235 million cash injection into APRIL's coffers.
At the same time, UPM-Kymmene has done its shareholders what looks like a sizeable favor by providing the company with an excellent, short-term strategic position in the poten- tially huge market of China through its 49% stake in Changshu fine paper mill and the Suzhou stationery plant. And the longer term prospects could be even better if southeast Asian markets bounce back as many expect and UPM-Kymmene takes up its option of a 30% stake in APRIL's Riau pulp facility-now one of the lowest production-cost pulp mills in the world.
As a result, the company's president and CEO, Juha Niemelä, could be forgiven for being rather happier than most paper company executives at this point in the trading cycle. But he also recognizes that Asia's difficulties could still adversely affect his company's main markets.
"That has been the general fear, but we haven't really seen it yet," says Niemelä. "It is most likely that Asian producers will try to sell more into the U.S. and Europe, but it seems that the competition is not fully up to the mark yet. This is a shadow that is over prices at the moment though."
MOVING UP. Niemelä recently announced that UPM-Kymmene turned in a FIM 5.572 billion ($1.028 billion) profit before extraordinary items for the 1997 fiscal year on a turnover of FIM 50.4 billion. The return on capital employed rose to 12.6% from 10.1% the year earlier, while return on equity climbed from 10.4% to 16.6% last year.
While this is a step in the right direction, Niemelä recognizes that there is still some way to go before UPM-Kymmene-and other companies in the forest products sector-attract the kind of positive investor interest they would like to generate.
"I'm very positive for the future, but there are three things we have to do: improve efficiency, make sure that there are fewer capital investments, and release capital. We can do all of these things. Return on investment has been low on account of the market conditions for the past five years, but at least two of the three measures I've already mentioned-lighter investment and releasing capital-can improve our business. As an industry, if we don't spoil the supply balance ourselves, we can improve our return on investment."
This last point has been a major sticking point for the pulp and paper industry for some time now. Put simply, industry-generated overcapacity has depressed prices to the point where the self-inflicted wounds have bled the balance sheets dry. Profitability has been so poor over the course of the cycle that investors have been driven away from the sector's stocks in droves.
"I'm quite confident that things will be different, however, because now it's quite evident that in practically every major company the senior management has changed," Niemelä points out. "If you listen to these new people, they're singing the same melody everywhere. We've already seen a fundamental change in the marketplace, and there are now no new paper machines being released and there are now exceptionally few announcements of new machines either, so the supply/demand balance should continue to improve."
Assuming Niemelä is right and the industry does manage to keep to a self-imposed capacity discipline-and that is a big assumption-it would bring welcome relief to many shareholders who have seen forest industry shares underperform the world's major stock markets with monotonous regularity.
UP FRONT. For the future, UPM-Kymmene is faced with the prospect of trying to generate business growth in the mature and highly competitive markets of western Europe and the U.S., while dealing with the uncertainty of the Asian currency crisis. But the company does have some positives.
The reorganization of Blandin Paper in the U.S. following UPM-Kymmene's $650 million acquisition in September last year is "going very well." Niemelä also reports that the Blandin management is far happier being involved in a group that is committed to the LWC market, rather than being the magazine paper outpost they had been previously.
UPM-Kymmene is also at the forefront of the current industry fashion for rationalizing product lines in an effort to boost profitability. "I anticipate that paper companies will continue to concentrate in fewer grades for the simple reason that it gives them the resources to develop their business," he explains. "But of course, everyone must choose where they want to be."
From UPM-Kymmene's point of view, it makes sense to be in the printing/writing paper business, and the company also wants to make its presence felt in the global sense. For the moment, this means making the APRIL fine paper alliance work. But the company is also quietly developing other avenues. As Niemelä points out, "In Uruguay, for example, we have plantations, and in a couple of years we're going to have to decide what to do with them."
For the medium term, at least, it looks as though the comparatively radical changes being implemented throughout the group are set to continue.
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