CORPORATE STRATEGY

 

IP confirms more machine closures

International Paper Co. (IP) has announced the closure of two paper machines and a market pulp dryer. The company will end production of uncoated bristols on PM No. 2 at its mill in Franklin, Va., which it acquired when it purchased Union Camp Corp. (UCC) earlier this year. The 30,000 tpy PM was the only UCC machine producing that grade and is scheduled to be permanently shut down by Sept. 30. Production will be shifted to other existing IP operations.

The company will also permanently end production on PM No. 4, which was idled in October 1998, at its Hudson River mill in Corinth, N. Y. The 141-in. trim PM had a capacity of approximately 60,000 tpy of coated groundwood papers.

At its Riverdale mill in Selma, Ala., IP shut down the kraft pulp dryers at the end of June, ending market pulp production. The company said the mill’s two PMs consume so much of the mill's pulp that it is unprofitable to run the dryers and market what little pulp remains. The mill had been producing 100,000 mtpy for the market. A new No. 5 sheeter for cut-size reprographic papers at the Selma mill is scheduled to be installed in October.

IP has also postponed plans to build a new $110 million recovery boiler at its 400,000 mtpy Natchez, Miss., dissolving and hardwood kraft market pulp mill. The current market doesn’t warrant the additional spending, and the change of plans is part of a far-reaching and broad-based cost reduction effort, said a general manager at the mill. The decision follows a $42 million quality improvement investment.

IP will also shut two small recovery boilers in September or October rather than invest to bring the mill into compliance for the Environmental Protection Agency’s Cluster Rules regulations. The mill will end production of paper grade bleached hardwood kraft pulp at Natchez and focus on growing its hardwood high-alpha (94-98) specialty dissolving pulp business and to look at investing at a more appropriate time.

 

 

SALES & EARNINGS   Companies report improved 2Q earnings Most U.S. paper and forestry companies reported gains in second-quarter profits as pulp, paper and paperboard prices began to move up. The cyclical upswing in prices is expected to continue into the second half of the year reflecting improved market conditions. Prices of market pulp, uncoated free-sheet papers, linerboard, corrugating medium, and bleached paperboard have all moved up this year, although some prices remain below year-ago levels. Meanwhile, demand for lumber and building materials soared during the first half of 1999 as housing and commercial construction demand outstripped available supplies. A tally of 30 paper and forest products companies shows a total increase of 33% in net income and a 4% gain in net sales. Consolidated net income was $1.36 billion for the second quarter of 1999 compared with $1.03 billion a year ago. These results reflect normal operating earnings before special charges or gains on asset sales and other corporate activities. Net sales were $30.8 billion, up $1.0 billion from 1998. The industry was hurt last year by the Asian economic turmoil and increased global competition, but market conditions are generally better than a year ago. However, some paper markets such as coated printing papers and newsprint continue to be affected by lower priced imports and global overcapacity.
U.S. PAPER INDUSTRY 2Q SALES AND EARNINGS ’99 ($ 000 )
Company	2Q sales 1999	% change 1999/98	2Q net 1999	2Q net 1998	% chg. 1999/98
Boise Cascade*	$1,678,000	9.1%	$34,400	$1,200	2,766.7%
Bowater*	527,400	33.3	(16,500)	28,500	n.m.
Caraustar	212,456	12.0	10,316	13,331	–22.6
Champion Intl.*	1,301,200	–11.7	39,000	25,000	56.0
Chesapeake	327,500	38.2	8,400	10,600	–20.8
Consolidated	435,119	–14.4	10,080	31,703	–68.2
Crown Vantage	204,882	–4.9	(18,692)	(12,302)	n.m.
FiberMark	75,982	–3.3	4,210	3,751	12.2
Fort James	1,718,500	–0.7	135,200	137,900	–2.0
Gaylord Container**	229,000	8.0	(8,000)	(12,700)	n.m.
Georgia-Pacific	3,807,000	16.2	212,000	29,000	631.0
P.H. Glatfelter	167,234	–9.0	12,543	13,791	–9.0
International Paper*	6,000,000	3.4	99,000	107,000	–7.5
Kimberly-Clark	3,148,600	3.5	391,100	324,553	20.5
Longview Fibre**	186,425	0.3	5,230	(4,589)	n.m.
Mead*	1,004,800	–4.4	54,177	40,200	34.8
Plainwell	54,100	–1.6	5,901	6,737	–12.4
Pope & Talbot	120,255	12.9	2,921	(7,126)	n.m.
Potlatch	413,043	3.1	9,366	10,049	–6.8
Rayonier	258,000	1.6	17,100	18,400	–7.1
Rock-Tenn**	329,629	3.0	11,600	11,800	–1.7
St. Laurent	218,600	7.4	6,800	(279)	n.m.
Schweitzer-Mauduit*	119,700	–16.9	7,100	7,731	–8.2
Smurfit-Stone*	1,730,000	–15.4	(24,000)	11,000	n.m.
Sonoco Products*	609,994	1.2	47,400	47,400	0.0
Temple-Inland	1,006,000	6.9	41,300	34,600	19.4
Wausau-Mosinee	234,257	–3.8	9,727	20,804	–53.2
Westvaco**	679,481	–6.2	27,295	34,606	–21.1
Weyerhaeuser	3,044,000	13.8	164,000	69,000	137.7
Willamette	1,007,369	6.4	63,314	24,014	163.7
Totals	$30,848,526	3.6%	$1,362,288	$1,025,674	32.8%
Note: Earnings represent net income after taxes from continuing operations, before nonrecurring and extraordinary items. ( ) = loss. n.m. = not meaningful due to loss.

 

PAPERBOARD

 

Newark plans board mill investment

The Newark Group, headquartered in Cranford, N.J., has approved a multi- million dollar investment to convert one of its existing paperboard mills to manufacture laminated paperboard products inline on a paper machine. The equipment plans are being finalized and various mill sites are being considered for their manufacturing capabilities and market location, said Fred von Zuben, Newark’s president and CEO.

Newark is a leading producer of laminated board for the book publishing, stationery and office products markets. The company’s BCI Book Covers division will manufacture the Graph X medium density grade of laminated board on the new equipment. This enhanced manufacturing capacity will partially replace existing laminating capacity and stimulate new products and markets, said von Zuben.

The initiative to begin in-line production began with Newark’s recent acquisition of a producer in Europe, where most laminated or graphic board is manufactured inline on a paper machine. This will facilitate the transfer of the technology to one of Newark’s U.S. manufacturing sites.

 

LABOR

 

Weyerhaeuser strike at Dryden ends

Unionized workers at Weyerhaeuser Co.’s Dryden, Ont., pulp and paper mill have ratified a new six-year labor agreement following a three-week strike. The 1,300 members of three locals of the Communications, Energy and Paperworkers Union of Canada voted 89% in favor of the agreement, which follows the pattern for eastern Canada reached last year at Abitibi-Consolidated Inc.

The mill, which produces uncoated free-sheet and northern bleached softwood kraft market pulp, was restarted Aug. 3. The strike was the first at the mill in more than 20 years. Issues in the negotiations included voluntary vs mandatory scheduling on statutory holidays, an extension of the papermakers’ wage scale, and job security.

 

GROUNDWOOD PAPERS

 

Bowater plans coated newsprint

Bowater Inc. said it plans to introduce a coated newsprint product for use in printing inserts, coupons, and supplements distributed by retail outlets. To that end, on July 12 the company purchased the assets of Nuway Paper LLC of Benton Harbor, Mich., for $15 million. Nuway, founded in 1998, has developed a process for coating various grades of paper including newsprint. The Benton Harbor facility houses a coating kitchen and a 105-in. wide coating line with capacity of 60,000 tpy. Sources said Bowater most likely would ship newsprint to Michigan as a way to get into the machine finish coated market, but might have the option to build a coating line at a paper mill in the future. Bowater said its strategy is to increase production to 200,000 tons using mostly newsprint as its base stock.

 

SPECIALTY PAPER

 

Simpson to close Gilman, Vt., mill

Simpson Paper Co. said it will close its Gilman, Vt., mill this fall after being unable to sell it. The Centennial mill has the capacity to produce approximately 45,000 tpy of security document and blueprint paper on one machine. The company also plans to close a converting plant in Burlington, Iowa.

The operations employ 50 salaried and 120 hourly employees; union workers are represented by the Paper, Allied Industrial, Chemical and Energy Local 41. Closures are set for Oct. 1.

Mill manager Bill Ernst said while the specialty paper market was stable, the mill was unable to compete with newer, larger machines. Plans are underway to sell the mill’s hydroelectric generators and dam.

 

Mead to acquire U.K. specialty mill

The Mead Corp. said it has signed an agreement to purchase Devon Valley Industries, a specialty paper mill located in southwest England, from Barlow Paper Ltd., a wholly owned subsidiary of Barlow International plc, for an undisclosed cash sum. The mill manufactures saturating papers for decorative laminates, absorbent packaging papers and filter papers for automotive and industrial engines and vacuum cleaner dust bags. The mill has three paper machines with annual production capacity of 20,000 tpy of specialty papers.

Following completion of the acquisition, Mead’s specialty paper division will include four specialty paper mills operating seven paper machines with 70,000 tpy of production capacity. The division currently operates two industrial specialty paper mills in South Lee, Mass., and one mill in Potsdam, N.Y. The acquisition of Devon Valley Industries is expected to be completed by mid-August.

 

ENVIRONMENTAL

 

K-C plans pulp mill improvements

Kimberly-Clark Corp. will invest C$33 million at its bleached kraft market pulp mill in Pictou, N. S. The company will rebuild the mill’s recovery boiler, upgrade the electrical turbine generator, and complete other projects for improved environmental performance, especially emissions. The work is scheduled to be completed this fall.

 

>CORPORATE STRATEGY

 

Pope & Talbot bids for all of Harmac

Pope & Talbot Inc. (P&T) of Portland, Ore. has signed a binding agreement with Harmac Pacific Inc. calling for P&T to acquire all of the outstanding shares of Harmac that it does not already own.

The transaction would increase P&T’s pulp capacity share in Harmac by an additional 152,000 mtons for approximately $400/mton. P&T acquired controlling interest of the 380,000 mtpy Harmac mill in Nanaimo, B.C., in February 1998. By December it owned about 60% of Harmac. The transaction is expected to close this fall.

 

FCC to buy paper holdings for C$3.6 billion

Fletcher Challenge Canada Ltd. (FCC) is poised to become the biggest producer of groundwood papers in the Pacific Rim with the planned acquisition of the paper division of its parent Fletcher Challenge Ltd. of New Zealand. FCC announced it had reached an agreement to acquire Fletcher Challenge Paper (FCP), which includes mills in Australia, New Zealand, Malaysia, Brazil, and Chile. On an equity basis, the FCP mills have capacity to produce 1.24 million mtpy of newsprint and groundwood paper and 250,000 mtpy of market pulp, bringing FCC’s total capacity to 2.2 million mtpy of groundwood papers and 1.1 million mtpy of pulp and containerboard. FCC will be renamed and remain headquartered in Vancouver, B.C.

The C$3.6 billion transaction is expected to close in October pending shareholder and regulatory approval, creating a Pacific Rim powerhouse with assets of C$5 billion. Under the proposed deal, FCC would acquire the operating assets of FCP. New Zealand-based parent company Fletcher Challenge Ltd. would no longer hold a majority (50.8%) share in FCC.

NEWSPRINT

 

Bronx newsprint mill plans progressing

The developers of a proposed $630 million South Bronx, N.Y., newsprint mill say they are moving toward their goal of obtaining financing by December after several companies, including three major daily newspaper publishers, "expressed interest" in investing in the project. Among the financing being sought is $50 million in equity from publishers.

The proposed mill would have capacity to produce 330,000 mtpy of 100% recycled-content newsprint. Though Kruger Inc. previously signed on to operate the mill, the developers are looking to draw from the industry to create a new operating entity to run the mill.

Assuming the deal closes by December, construction is scheduled to begin in January 2000 and is expected to take 24-27 months. Newsprint production would start in the first quarter of 2002. The mill would be the first greenfield newsprint mill built in North America since 1990.

 

NONWOVENS

 

Buckeye to acquire airlaid pulp business

Buckeye Technologies Inc. has signed a letter of intent to buy the airlaid non- wovens business Walkisoft from UPM-Kymmene Corp. for about $120 million. The deal will double Buckeye’s airlaid capacity and make it the largest global producer of the pulp-based fabric, which is being increasingly used in absorbent products such as diapers and sanitary napkins. The transaction is expected to close by fall.

Buckeye currently operates two airlaid lines in Canada and one in Ireland with a combined annual capacity of about 45,000 tons. Walkisoft has an airlaid capacity of just over 40,000 tons from two lines in Steinfurt, Germany, and one in Charlotte, N.C. Also part of the deal is research and engineering operation in Kotka, Finland, but not a small airlaid line at that site which is expected to be closed by UPM-Kymmene. Additionally, a dismantled Walkisoft airlaid line in Denmark will be included. Buckeye still plans to install a 50,000 tpy airlaid nonwovens machine by the end of next year.

 

INTERNATIONAL

 

APP starts new free-sheet coater

Asia Pulp & Paper Co. has begun trial production on a 600,000 mtpy off-machine coater at its Gold East Paper mill in Dagang, China. Earlier this year, the company began production on two 450,000 mtpy uncoated free-sheet PMs supplied by Voith Sulzer.

Valmet Corp. supplied the 9.77-m web width OptiCoater, reportedly the world’s largest coater. The OptiCoater includes four OptiCoat Jet coating heads, two OptiReel rereelers, one OptiReel reel, two OptiLoad multinip calenders, two JR 1000E winders, one WinBelt rewinder, reel carriages, and a broke handling system. Design speed of the coater is 2,000 m/min and design speed of the calenders is 1,300 m/min. The Valmet order was valued at $131 million.

 

’s Burgo orders LWC PM

Cartiere Burgo SpA has signed a letter of intent for a new 400,000 mtpy paper machine to produce lightweight coated (LWC) groundwood papers at its mill in Verzuolo, Italy. The $535 million project is scheduled to begin production in late 2001. Burgo produced about 2 million mtons of coated free-sheet and groundwood papers in 1998.

Valmet-Rauma Corp. will supply a paper machine with a wire width of 10.45 m and design speed of 2,000 m/min. The OptiConcept machine will include an OptiSizer film transfer press and OptiLoad calenders. The Valmet order also includes a pressurized groundwood pulp line and is valued at $268 million.

 

Nine Dragons orders second PM

Dong Guan Nine Dragons Paper Industries Co. Ltd. of Dong Guan, Guangdong, China, has ordered a 1,000 mtpd PM from Valmet Corp. to produce linerboard and white top linerboard. The main investor in the project is Chung Nam Inc. of Pomona, Calif., a recovered paper export company. The new PM will be the mill’s second and will reportedly be the largest linerboard machine in China. Start-up is scheduled for June 2000.

The Valmet order includes the stock preparation system, a complete linerboard machine equipped with a three-ply fourdrinier forming section with three hydraulic headboxes, a press section with long-nip press and SymBelt shoe press, a dryer section, an OptiSoft calender, and a ValReel. The PM will have a wire width of 5.95 m and design speed of 1,000 m/min. The stock preparation system includes a 400 mtpd line for bleached and unbleached fiber and a 1,100 mtpd line for old corrugated containers (OCC). The value of the order is $32 million.

 

Propapier building containerboard mill

Propapier, a subsidiary of Prowell, a German corrugated board producer, will build a new recycled fiber-based linerboard and corrugating medium mill in Magdeburg, Germany, to supply its corrugated sheet plants in Germany and France. Construction of the $138 million greenfield mill was expected to start in July, with startup scheduled in late 2000. The company has signed a letter of intent with Valmet Corp. to supply a 275,000 mtpy machine.

Omega to install new German tissue PM

Omega Papier, a subsidiary of Werra Papier Wernshausen GmbH, will install a new tissue former from Beloit Corp. in Wernshausen, Germany. Beloit will supply the new PM on a turnkey basis. The machine will be 3.45m wide, with a maximum speed of 1,600 m/min. The new PM will manufacture hand towel products and tissue from 100 percent deinked fiber and have a capacity of approximately 115 mtpd. In addition, Beloit will supply the stock preparation equipment, broke system and all related utilities. The machine is scheduled for start up in March 2000.

 

Shinmoorim starts coated papers PM

Shinmoorim Paper Mfg. has started up its new 200,000 mtpy double-coated free-sheet PM at its Chinju, Korea, mill. The new PM No. 3 from Valmet Corp. was expected to reach full-scale production by August. The new PM has a wire width of 4.15 m, reel width of 3.68 m, and a design speed of 1,600 m/min. Japanese supplier IHI supplied the coating unit. The project was delayed from its original planned startup in late 1997 due to the Asian financial crisis, but the company was able to secure the necessary funds from several sources to complete the project.

 

doubling medium capacity

VPK Packaging will rebuild PM No. 7 at its Oudegem mill in Dendermonde, Belgium, nearly doubling the capacity to manufacture recycled corrugating medium. The $39 million rebuild will boost annual capacity by 100,000 mtons to reach 220,000 mtons and allow for the production of lighter basis weight medium. The rebuild is scheduled to be completed in 2001. The mill has a current capacity of 400,000 mtpy.

 

 

WOOD RESOURCES   IP top fiber consumer at U.S. mills in 1998 International Paper Co. (IP) again led all U.S. woodfiber consumers in 1998 with more than 48 million tons at 31 pulp mills and three oriented strand board (OSB) mills. Georgia-Pacific Corp. repeated second position, using about 33 million tons of chips and roundwood at 19 pulp mills and six OSB mills. IP’s pulpwood total jumped 22% due to its acquisition of Union Camp Corp. However, compared with 1997, wood receipts fell 9.5% for IP’s pulp mills and 5% for Union Camp’s facilities, down a total of 4.3 million tons and equal to about 175,000 truck loads of fiber. Individually, and accounting for numerous mergers and individual mill sales, most companies bought less wood last year. The exceptions were Willamette Industries Inc., which increased purchases 8%, due primarily to an expansion at its Hawesville, Ky., complex, and Fort James Corp. The 19 listed U.S. companies digested 80% of total pulpwood consumption in 1998, or 200 million tons, according to the report. Pulpwood purchases fell 1.8% to 247 million tons in 1998, 6.6% lower than 1994’s record level, according to a recent American Pulpwood Association (APA) report. Parsons & Whittemore, Inc.’s Alabama River pulp and paper complex in Perdue Hill, Ala., remained the single largest pulpwood consuming site in the U.S. at 4.0 million tons, followed closely by Champion International Corp.’s mill at Courtland, Ala., at 3.8 million tons.
Largest U.S. Woodfiber Consumers, 1998 (million tons)
Company	Total	OSB	Pulp	Pulp change vs 1997 (%)
International Paper 1	48.6	1.8	46.8	22%
Georgia-Pacific	32.7	3.8	28.9	–5
Weyerhaeuser	19.1	3.3	15.8	–1
Smurfit-Stone Container	18.6		18.6	29
Champion International	12.5		12.5	–20
Louisiana-Pacific	9.6	9.0	0.6	–25
Westvaco	8.3		8.3	0
Mead	8.3		8.3	26
Boise Cascade	7.8		7.8	–20
Willamette	7.6	0.7	6.9	8
Bowater	7.2		7.2	3
Temple Inland	7.1		7.1	–10
Fort James	6.6		6.6	5
Potlatch	6.6	2.6	4.0	0
Tenneco	5.3		5.3	–8
Alabama River	4.0		4.0	–5
Rayonier	3.9		3.9	–4
Kimberly-Clark	3.6		3.6	–37
Consolidated Papers	3.5		3.5	3
1. Includes Union Camp. Source: International Woodfiber Report.