NATURAL DISASTERS

 

IP, Weyco mills hardest hit by hurricane

Hurricane Floyd, which plowed into North Carolina before dawn on Sept. 16, resulted in a number of mills throughout the Southeast being forced to shut, with most mills closed for no more than two to three days. Mandatory evacuations, the largest in U.S. history, forced the closures of many pulp and paper mills along the Atlantic coast from Florida through Virginia in anticipation of possible devastating winds and flooding.

Two mills most affected by the storm were International Paper Co.’s (IP) uncoated free-sheet mill in Franklin, Va., and the bleached softwood kraft pulp mill operated by Weyerhaeuser Co. in New Bern, N.C. IPexpected to do a “slow, methodical” restart of the 1,900 tpd Franklin mill beginning October 8, ramping up one machine at a time.

IP said employees had returned to the facility in late September to assist in a cleanup and safety check. The company could not provide an estimate on equipment damage but said inventories of paper were not affected by the flooding. The company was able to supply customers without major disruption. Touring the flooded mill and town of Franklin, IP CEO John Dillon said some of the mill's machinery was heavily damaged by flooding of the Blackwater River. Dillon also noted IP's donation of $250,000 toward helping the town of 8,000 recover from the floods.

IP also closed down its mills in Riegelwood, N.C., Savannah, Ga., and Georgetown, S.C., with those mills shut down for no more than three days. The company’s Ticonderoga mill in upstate New York was also shut for several days due to minor flooding from the heavy rains as the storm passed through New England.

Weyerhaeuser reported that its New Bern and Plymouth, N.C., mills shut down as Hurricane Floyd hit the area, and that the Plymouth mill came back online within a few days. The New Bern mill, however, did not restart until the last week of September. A company spokesperson reported that there was no significant damage at the mill. However, operational problems included railroad and truck transportation disruptions in the area and timberland access.

Rayonier Inc. said its specialty pulp mill in Jesup, Ga., was idled Tuesday night Sept. 14, but was back in operation the next day. One of its three pulp lines was shut for just two hours. The company's pulp mill in Fernandina Beach, Fla., was also closed Sept. 14 and was back online by Sept. 17. Smurfit-Stone Container Corp. reported mill closures in Jacksonville and Fernandina Beach, Fla., and Florence, S.C. that were back online Sept. 16. The company reported no major damage to its facilities.

Westvaco Corp. said its bleached paperboard mill in North Charleston, S.C., was also idled for over two days. Georgia-Pacific Corp. also reported that its Brunswick, Ga., fluff pulp and paperboard mill was down for several days. Other companies reporting hurricane-related shutdowns were St. Laurent Paperboard Inc., Sonoco Products, and Interstate Resources Inc.

 

CAPITAL EXPANSION

 

Kruger to double DIP, boost newsprint

Kruger Inc. will spend C$51 million on improvements at its Bromptonville, Que., mill to double capacity of the deinking facility to 140,000 mtpy. The additional deinked pulp (DIP) will be used in increased newsprint production at Bromptonville, and will be shipped to a sister paper mill in Trois-Rivieres, Que.

The project—which should be completed by the end of 2000—is designed to improve newsprint quality, reduce production costs, and increase productivity. Bromptonville has capacity to produce 235,000 mtpy of newsprint, which will increase by about 10% as a result of the project. A plan to add a coated groundwood machine at Bromptonville is "on hold," a company source said.

The recycled newsprint made at Bromptonville contains 20% to 40% recycled fiber. About 76% of the recovered paper mix is old newspapers and 24% old magazines.

A portion of the increased deinking capacity—about 160 mtpd—will go to Trois-Rivieres, which has no deinking plant and relies on DIP from Bromptonville and bought from other sources. Papermaking capacity at Trois-Rivieres is 920 mtpd of newsprint and about 745 mtpd of groundwood specialties and coated groundwood. No paper production capacity increases are planned.

 

SUPPLIER NEWS

 

Beloit closes plants; union buyout possible

Beloit Corp., a subsidiary of Harnischfeger Industries Inc. of St. Francis, Wis., announced that it will close its manufacturing operations in Rockton, Ill., and its namesake city, Beloit, Wis. Harnischfeger filed for Chapter 11 bankruptcy protection in June. The closures are scheduled to be completed by Jan. 31, 2000, and approximately 350 employees will lose their jobs as a result. Employees will continue to report to work until current orders are filled, but new orders will be shifted to other Beloit facilities, according to a company spokesman.

Beloit currently employs 1,100 people at the two locations. During the past few years, the company has laid off between 500 and 600 employees in Wisconsin and Illinois, including 150 workers this past February. “This decision follows nearly four years of depressed paper and pulp prices worldwide,” said Mark Readinger, Beloit President and Chief Operating Officer. “As a result, the demand for the type of large capital equipment produced at the Blackhawk facility in Rockton is not expected to return for at least 18 to 24 months. Beloit must become profitable and cash flow positive in the very near term, so the company is taking this action to reduce excess capacity and the costs associated with it as quickly as possible.”

While manufacturing will no longer take place in Beloit, the company's global engineering and sales division, field service workers, purchasing department and other corporate offices will remain in town. The research and development center in Rockton will also remain open.

The majority of the 350 workers to be laid off are represented by the International Assn. of Machinists and Aerospace Workers (IAMAW). Including previous layoffs at the two facilities, the union has had approximately 600 members lose their jobs. The union is working with KPS Special Situations Fund LP, a N.Y.-based venture capital fund that was instrumental in the employee buyout of the former Champion International Inc. liquid packaging operations.

Harnischfeger has agreed to KPS’s request to review financial information about Beloit Corp. as a first step to submitting an offer to buy Beloit. After this review, which KPS hoped to complete in early October, the union is optimistic that there is an opportunity to pursue a purchase.

 

Kvaerner, Ahlstrom table merger plans

Scandinavian suppliers Kvaerner ASA and Ahlstrom Corp. have tabled the proposed merger of their pulping units. In a statement, Kvaerner said the companies needed more time to meet European Union (EU) requirements. The EU Commission said the proposed operation raised serious competition concerns related to the engineering and supply of equipment for chemical pulping mills, according to Dow Jones.

Meanwhile Kvaerner has signed a letter of intent for the sale of its German-based fiberboard equipment manufacturer to Sunds Defibrator Industries AB. The company said that the deal to sell Kvaerner Panel Systems GmbH and its Belgian subsidiary, De Mets NV, was expected to result in an accounting loss for Kvaerner. The deal was expected to be completed by Oct. 1.

LABOR

 

Woodlands strike over at Corner Brook

Woodlands workers who were on strike since June 29 at Kruger Inc.’s Corner Brook Pulp & Paper Ltd. in Newfoundland on Aug. 31 ratified a new, five-year labor agreement. The 750 members of Local 60N of the Communications, Energy and Paperworkers Union of Canada (CEP) approved the contract by a 60% margin, according to The Western Star newspaper. The agreement calls for wage increases of 11% over the life of the contract as well as provisions for early retirement, easier advancement into mechanical jobs, and a longer work season, The Western Star reported.

The idled newsprint mill returned to full production by Sept. 1. The 385,000 mtpy mill was shut Aug. 5 due to wood supply shortages resulting from the strike.

 

NEWSPRINT

 

Southeast to buy newsprint mill

Southeast Paper Mfg. Co. has leapfrogged across the country to purchase the 370,000 mtpy Newberg, Ore., newsprint mill from Smurfit-Stone Container Corp. Southeast Paper of Dublin, Ga., would pay about $220 million for the mill, which is operated by Smurfit-Stone subsidiary Smurfit Newsprint Corp. The companies expect the deal to close in the fourth quarter, subject to certain conditions and regulatory approval.

Southeast Paper, a leading producer of 100% recycled newsprint at its 500,000 mtpy mill in Dublin, would gain a key share in the West Coast market and a second manufacturing facility. With Newberg, it would have capacity to produce 870,000 mtpy, making it the fifth-largest newsprint maker in North America.

Sources in the industry said the Newberg mill runs two world-class machines, including the 330-in., 4,000-fpm PM No. 6, but has spent little capital on machine upgrades in recent years. Sources at Southeast Paper said the company, if the mill sale goes through, would spend up to $75 million immediately on improving the quality of the newsprint made on the two machines. The plan would include producing a sheet with more brightness, and better appearance and runability.

Southeast also looked at the two other Smurfit-Stone newsprint mills for sale on the West Coast, but passed on the Oregon City, Ore., and Pomona, Calif., mills, the company source said. The Smurfit-Stone official said they were still evaluating the possibilities for selling the Oregon City and Pomona mills. Smurfit-Stone wants to sell the newsprint mills because they are not core to the company focus, which is containerboard and corrugated packaging.

 

SPECIALTY PAPERS

 

FiberMark acquires German company

FiberMark Inc. recently announced the purchase of Papierfabrik Lahnstein GmbH, a leading European manufacturer of specialty papers headquartered near Frankfurt, Germany, for $22 million. The acquired company is a wholly owned subsidiary of Sihl AG of Zurich, Switzerland, with annual revenues of approximately $36 million.

Papierfabrik Lahnstein operates a single paper manufacturing and converting facility that produces specialty papers and nonwoven materials from wood pulp, synthetic and specialty fibers, with value-added saturating, coating and converting capabilities. Key products include coated substrates for wallcoverings, security papers, self-adhesive labels, and flooring overlay. Printing substrates are used for tags and labels, tablecloths, disposable medical products and graphic arts applications. Annual production is approximately 50,000 mtpy.

The Lahnstein acquisition is the second in Germany for Vermont-based FiberMark, following the purchase of Steinbeis Gessner GmbH in January 1998.

 

Crane awarded currency contract

Crane & Co., the Dalton, Mass., maker of cotton papers, will produce paper for the U.S. Treasury Dept. into the next century. Crane, which had the previous currency paper contract, won the bid over one other company earlier this year. It covers Aug. 30, 1998 through Sept. 30, 2002 and is valued at approximately $262.6 million. A spokesman for the U.S. Bureau of Engraving and Printing said it is the largest currency paper contract ever awarded, and is for an estimated 31,000 tons.

The awarding of the contract was somewhat controversial due to grumblings from some members of Congress about lack of competition in currency paper contracts. Crane has produced every greenback for the Treasury for more than 100 years.

 

Spexel to enhance security papers mill

Spexel Inc. has received an investment of C$4.75 million for its fine and specialty paper mill in Beauharnois, Que. Investissement Desjardins, LBC Capital inc., a subsidiary of the Laurentian Bank, and Fondaction CSN will provide C$2.5 million of the investment. Spexel intends to invest the money to exercise its option to buy the trademark Byronix, to finance new fixed assets in order to modernize its production capabilities, and to increase the working capital of the company. The company also plans to invest in its denim pulp operations to enable the company to supply its international markets. Denim pulp is used in the production of high quality fine and specialty paper as well as security paper such as currency paper, passport paper, etc.

“This investment confirms the commitment and the confidence of the institutional investors, Investissement Desjardins, LBC Capital Inc. and Fondaction CSN, in the relaunch of Spexel, one of the Canadian leaders in the field of security paper,” said Mr. Denis Smits, chairman of the board of Spexel. He added, “Spexel has proven its expertise in the production of high value-added products in the field of fine specialty and security papers.”

Created in September 1997, Spexel acquired the Beauharnois paper mill from Domtar Inc. Built in 1912, and employing more than 125 people, Spexel is the only paper mill to supply currency paper to the Bank of Canada. Spexel manufactures a wide range of security papers, including passport paper, check paper, shares, and bond certificates, in addition to currency paper.

Mr. Manouk Djoukhadjian and Mr. Jean-Pierre Noé joined Spexel as President and Chief Executive Officer and Vice-President Finance, respectively at the beginning of 1999.

 

Gallaher Thorold mill in Ontario for sale

A court-appointed receiver is studying several options to save the financially troubled Gallaher Thorold Paper Co., located in the Niagara region of southern Ontario. The Gallaher mill produces a variety of 100% recycled paper grades, including envelopes, forms bond, tablet, release liner and coated cover stock. Gallaher’s two largest creditors, Liberty Partners of New York and the Toronto-Dominion Bank, closed the mill on May 25 and a Toronto court subsequently approved a bankruptcy petition on June 16.

The receiver, Ernst & Young Inc., said it is reviewing a number of proposals, including a purchase bid from the Communications, Energy and Paperworkers Union of Canada, representing most the mill’s 310 employees. Gallaher is one of three paper mills operating in the Thorold community of 20,000, and has been a cornerstone of the local economy for 97 years.

David Stott, vice president of marketing at Gallaher, said the mill has a solid workforce and good markets for its products, produced mainly from old telephone directories. He said the main problems have stemmed from the costs of financing the paper machine upgrades and deinking facilities over the past two years.

 

TISSUE

 

Erving Paper plans new tissue machine

Family-owned Erving Paper Mills Inc. in Massachusetts said it plans to build a new tissue machine at its existing mill if a state highway is relocated to make room for the expansion. Otherwise the company plans to eventually build the new 28,000 tpy unit elsewhere.

Erving COO Morris Housen said a design contract had been awarded regarding the state's relocation of Highway 2 at the Erving, Mass., mill site. The machine would be built "within the next few years," he said. If the highway project is delayed, the company will choose a new site for the capacity expansion.

Erving Paper has existing capacity for about 40,000 tpy of mostly napkin stock on three machines. The mill currently has exited the market deinked pulp (DIP) business but retains some capacity for the product. An expansion of its DIP capacity would coincide with a machine expansion at the mill, Housen said.

Erving produces jumbo rolls of napkin grade tissue for the open market and operates its own converting plants in Green Bay, Wis., and Hialeah, Fla.

 

MERGERS & ACQUISITIONS

 

Weyerhaeuser-MB deal clears hurdles

Weyerhaeuser Co. and MacMillan Bloedel Ltd. (MB) recently announced that the mergers branch of the Canadian Competition Bureau has issued a letter stating that it plans to take no action regarding the proposed acquisition of MB by Weyerhaeuser. In addition, the transfer of MB’s softwood lumber quotas to Weyerhaeuser under terms of the 1996 Canada-U.S. Softwood Lumber Agreement was also approved in principle by the Canadian Minister of International Trade.

The two forest products companies are working towards a November deadline to complete the $2.45 billion (C$3.6 billion) merger, announced in June. The transaction has already been cleared by the U.S. Federal Trade Commission, but still requires further regulatory approvals in British Columbia, court approval in Canada and a favorable vote by MB shareholders. The board of directors of MB planned to vote Oct. 28 on the proposed transaction.

 

ENVIRONMENT

 

Fox River cleanup plan moves forward

The long-awaited resolution to the problem of polychlorinated biphenyl (PCB) contamination in the lower Fox River in Wisconsin came closer to completion this past summer when the U.S. Environmental Protection Agency’s (EPA) Region 5 and the Wisconsin Dept. of Natural Resources (DNR) submitted a preliminary cleanup recommendation to EPA’s national Remedy Review Board.

The next step will be for the RRB to issue its recommendations, which will be used to draft a proposed cleanup plan. That plan will be made public early in 2000, in conjunction with a 60-day comment period and a series of public meetings.

Meanwhile, Fort James Corp. this past summer pitched in an additional $2 million to ensure that a pilot cleanup project, previously in jeopardy of being halted short of completion, is finished as planned. The project, located at a 9-acre segment of the river known as Sediment Management Unit (SMU) 56/57, just downstream from the DePere Dam and about three miles from the river’s mouth, has some of the highest concentrations of PCBs. Dredging began in late August and should be done by Thanksgiving.

Fort James is a member of the Fox River Group of paper mills listed as potentially responsible parties that allegedly dumped an estimated 125 tons of PCBs into a 39-mile section of the lower Fox River during 1954-71. The other companies involved are Appleton Papers Inc., P.H. Glatfelter Co., NCR Corp., Riverside Paper Corp., U.S. Paper Mills Corp., and Wisconsin Tissue Mills Inc.

 

PRINTING/WRITING

 

Boise upgrades free-sheet PM

Boise Cascade Corp. recently completed improvements to PM No. 2 at its mill in St. Helens, Ore., to increase production quality and runnability. The machine manufactures lightweight opaque printing papers used in financial printing and other commercial printing applications. The rebuild focused primarily on improvements in the drying section and included installation of a uni-run felt to minimize web breaks. The framework for the second press section was upgraded to support higher press loadings to increase sheet dryness entering the dryer section. The company also boosted dryer capacity and upgraded the condensate removal system. Winder improvements were also made. The capacity of the machine was also increased by 7,000 tpy as a result of the improvements.

 

CONVERTING

 

Caraustar buys puzzle manufacturer

Caraustar Industries Inc. has completed the acquisition of Carolina Converting Inc., the leading contract manufacturer of jigsaw puzzles and coin folders in the U.S., and also game boards, cards, rigid boxes, folding cartons and other packaging products at a 350,000 ft² facility in Fayetteville, N.C. For the year ended June 30, Carolina Converting had revenues of $18 million. Mikeal Adams, president, and John Allen, vice president of operations, will continue to manage the business, which will operate as a wholly owned subsidiary of Caraustar.

 

Pratt expanding corrugated ops

Pratt Industries USA will build a new corrugated sheet plant in Valparaiso, Ind., that is scheduled to begin production by February 2000. A 350,000 ft² plant will be located on the 65-acre site. Total employment is expect to be 260. As part of the $31 million project, Pratt received an incentive package including tax breaks, training funds, road improvements and a rail spur to serve the facility. The company is also installing a new corrugator at its facility in Springfield, Ohio.

 

Gulf States buys packaging company

Gulf States Paper Corp. has completed the purchase of Laird Packaging Inc. of Marion, N.C. Laird and Gulf State’s Amco Folding Cartons unit in Towaco, N.J., will now operate under one name—Resolution Packaging—under the direction Clyde Shaw, who was previously president of Laird Packaging.

 

ENVIRONMENT

 

IP, G-P apply for innovative EPA program

Nearly five years after President Clinton launched a federal program to encourage innovation in pollution control by granting some flexibility in meeting environmental requirements, only about a dozen companies have made it to full-fledged Project XL status. Yet, among this small group is a major papermaker, Weyerhaeuser Co., which is well along in the process at its bleached kraft market pulp mill in Oglethorpe, Ga. Now, two other paper giants, International Paper Co. (IP) and Georgia-Pacific Corp. (G-P), are applying.

Project XL, which stands for eXcellence and Leadership, encourages “real world” testing of innovative strategies that achieve cleaner and cheaper environmental results than from conventional regulatory approaches. Under the program, the U.S. Environmental Protection Agency (EPA) grants some regulatory flexibility from Cluster Rule compliance to the companies whose projects are accepted.

IP’s Androscoggin printing/writing paper mill in Jay, Maine, is proposing to develop, test and implement a computer model to estimate pollutant emissions on a continuous basis for the mill’s waste fuel incinerator, which burns paper mill waste products such as wood bark to generate steam. The company said that not only would the monitor help reduce emissions at the mill, but it would create a technology that could potentially be used with similar incinerators.

G-P is just in the preliminary stages of considering its Project XL. G-P proposes developing gasification technology for black liquor recovery at its Big Island, Va., containerboard mill. The company has been working with StoneChem Inc. to evaluate the PulseEnhancedJ Steam Reforming liquor recovery system, which converts black liquor organics to gas. Successful pilot tests have already been conducted both at Big Island and at other mills, and G-P hopes to have the equipment operational by mid-2002. The gasification benefits include increased efficiency in energy conversion and chemical recovery, elimination of the smelt-water explosion hazard, reduced maintenance costs, and significantly lower environmental emissions.