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U.S. capacity growth remains ultra slowU.S. capacity to produce paper and paperboard will increase by an annual average of 0.7% over the next three years, according to the 40th annual Capacity Survey by the American Forest & Paper Assn. (AF&PA). Several factors were cited in the survey for what appears to be a period of "ultra slow" capacity growth, including a highly competitive trade environment for some grades, competing demands for the industry's capital, and mill and machine shutdowns.Shutdowns, in particular, had a strong impact. According to the survey, 577,000 tons of paper and paperboard capacity were removed from the capacity base in 1998 and 2.5 million tons for 1999, mostly in the containerboard grades. For paper grade chemical market pulp, removals due to closures were 276,000 tons in 1998 and 786,000 tons in 1999. However, capacity closed in 1999 that has not been dismantled was tabulated in the capacity data. Aggregate U.S. capacity to produce paper and paperboard increased only 0.6% in 1998, then declined 0.5% in 1999 to 101.3 million tons. This is the first decline in U.S. paper and paperboard capacity ever recorded in the 40-year history of the capacity survey. Total paper and paperboard capacity is expected to increase 1.1% in 2000, 0.7% in 2001, and 0.4% in 2002 for an average annual rate of just 0.7%. Paper grades. Newsprint capacity is expected to remain essentially unchanged, a sharp contrast to its 10-year average annual growth rate of 1.7%. This follows a 0.6% increase in newsprint capacity in 1998. Import competition caused printing-writing paper producers to scale back their capacity expansion plans. Producers are expected to increase 1999 printing-writing capacity by an average rate of 0.7% per year during the forecast period, compared with an average annual growth rate of 2.2% during the 1990s. Uncoated groundwood capacity is expected to increase at an average annual rate of 1.9% over the 2000-2002 period. Despite the gain, total uncoated groundwood capacity in 2002 will still be 4% under its 1996 peak of 2.3 million tons. Coated groundwood capacity is expected to stay flat through 2002. Coated free-sheet capacity is expected to increase by 1.9% per year, with most of the increase concentrated in just a few companies. This growth is less than half the annual rate of 4.6% that prevailed in the 1990s. Uncoated free-sheet capacity is anticipated to rise by 0.6% in 2000 and remain essentially unchanged through 2002. Tissue paper capacity grew 3.4% in 1999 to 7.1 million tons, thanks to the startup of several new machines and the ramping up of machines that came on line in 1998. Capacity is expected to grow an additional 2.8% in 2000, as more machines are brought on line. But growth will slow to 1.7% in 2001 and 0.2% in 2002. The projected average annual rate of 1.6% compared with 2.1% from 1990 through 1999. Facing continued competition from plastics, unbleached kraft paper capacity dropped 3.8% in 1999 to 2.1 million tons and is expected to drop another 1.1% in 2000. But capacity is expected to plateau in 2001 and 2002. Paperboard. Capacity for containerboard is slated to grow at an average annual rate of 0.5% during 2000-2002, compared with 2.7% annually during the prior 10 years. Both linerboard and medium capacities are expected to increase at a 0.5% average annual rate. Capacity for folding boxboard rose 2.1% in 1999, but growth is expected to ease to 1.2% in 2000, 0.6% in 2001, and 0.3% in 2002. Milk carton and food service board increased 2.5% in 1999 over 1998, to 2.5 million tons, and is expected to remain virtually unchanged during the 2000 to 2002 period. Market Pulp. At 8.4 million tons, chemical paper grade market pulp capacity is about 9% lower in this year's survey than had been anticipated last year. This reflects the closing of several pulp mills during the second half of 1998 that have now satisfied the one-year rule for removal from the survey. Most of this decline in capacity is in bleached hardwood kraft. However, additional market pulp capacity was closed during 1999, but remains in the survey because the one-year rule has not been met. Recovered Paper. Mills are expected to increase their use of recovered paper at an average annual rate of 1.8% in the 2000 to 2002 period. Recovered papers share of total fiber consumption is expected to grow from 36.1% in 1998 to 37.1% in 2002. Mixed papers are anticipated to show the strongest growth in the next three years, climbing at an average annual rate of 4.1% from 2000 through 2002. Consumption of old newspapers will expand at a 2.8% average annual growth rate during the forecast period, and account for about 25% of the total recovered paper tonnage gain.
Beloit makes cuts; soliciting bidsHarnischfeger Industries Inc. recently announced that its Beloit Corp. subsidiary will discontinue funding most of its paper equipment manufacturing operations in order to conserve cash. Funding of the paper machinery group’s aftermarket business and portions of the tissue business will continue, however, and standing machine orders--which number about five--will be completed, Beloit said. Tissue machine production will not be affected. The action affects operations in the United Kingdom, Italy, and Austria. In addition, Beloit is accelerating the previously announced closure of its plants in Beloit, Wis., and Rockton, Ill. The company originally planned to close the facilities by Jan. 31, but has moved the deadline to the end of December or earlier. The company was also reviewing the potential impact of the decision on its 750 non-union employees in the U.S. who hold mostly administrative and engineering positions. Paper machinery operations remain operational in Brazil and Poland, where tissue machine production is focused, as well as in Canada, Michigan, and Mississippi. Other business groups within Beloit—including Beloit Manhattan, pulping, woodyard, finishing, and OASIS—are not affected by the action. As part of parent Harnischfeger’s June bankruptcy protection filing, Beloit had been borrowing to finance the operations but recently decided the money was not likely to be recouped through a sale of Beloit. As of November, the sale was still being pursued and the company hoped to complete the transaction by year-end. One investor group submitted a letter of intent on Oct. 27 to purchase all of the Beloit assets. KPS Special Situations Fund LP of New York and Pegasus Capital and Advisors LP of Coscob, Conn., are working with the support of the International Assn. of Machinists and Aerospace Workers union which represents Beloit employees at a number of U.S. operations.
Oconto Falls tissue PM delayed to 2000The planned installation of a second tissue Crescent former by PCDI Oconto Falls Tissue Inc., Oconto Falls, Wis., has been pushed back until May 2000. The new machine was originally slated to begin production in October but the company said the state bonds needed to finance the project were not finalized until mid-November. With a trim width of 108 in., the new Voith Sulzer machine will have a capacity of 80 tpd of recycled tissue products. The mill will use double-lined kraft (DLK) and old corrugated containers (OCC) as some fiber furnish for tissue production, primarily for brown grades.
Plainwell to acquire Shelby TissuePlainwell Tissue is set to enter the away-from-home tissue market with its planned acquisition of Shelby Tissue Inc. of Memphis, Tenn. The tissue affiliate of Plainwell Inc. signed a purchase agreement in November to buy the assets of the stand-alone mill; the acquisition was expected to close in the fourth quarter. The Shelby mill has capacity to produce 120 tpd of tissue, which is converted into bathroom tissue and sold in both consumer and commercial & industrial (C&I) markets. The acquisition would raise Plainwell Tissue’s total tissue production capacity to 150,000 tpy; Plainwell Tissue was North America’s 10th-largest tissue maker concentrating solely on the consumer market. Adding Shelby would give the company the needed equipment, customers, and sales staff to enter the C&I market. Plainwell plans to add napkin and towel converting equipment to the Shelby operation, expanding it into C&I and consumer product production and allowing Plainwell to convert the entire mill output.
Gallaher mill sold, occupation endsA letter of intent from The Butler Group to purchase the idled Gallaher Thorold Paper Co. mill in Thorold, Ont., was signed in Toronto on Nov. 11, with the sale expected to close Dec. 17. The buying group includes three investors who collectively have more than 75 years of operating experience in the pulp and paper industry. Ernst & Young has been acting as receiver for the Toronto-Dominion Bank, the mill’s largest creditor. The buying group intends to negotiate a separate agreement with other secured creditors, including the city of Thorold, for the purchase of land and building. Gallaher owes creditors more than C$70 million. A group of former union workers occupied the mill on Oct. 18 after hearing that Toronto-Dominion was moving to liquidate the assets, rather than seek a buyer who would keep the mill operating. The sale is contingent on reaching an agreement with the Communication Energy and Paperworkers Union of Canada (CEP), which represents most of the recycled paper mill’s 300 workers.
SP Newsprint buys mill; plans upgradePublisher-owned Southeast Paper Manufacturing Co. of Dublin, Ga., completed its $220 million buy of Smurfit-Stone Container Corp.’s Newberg, Ore., newsprint mill in November. To reflect the addition of a West Coast presence, Southeast also announced a new name, SP Newsprint Co., and a new operating structure. SP Newsprint is now the fifth-largest newsprint producer in North America with capacity to produce 870,000 mtpy at the two mills in Dublin and Newberg. Corporate offices will be located in Atlanta and will include four operating groups. Manufacturing will operate as two regions: Southeast, headquartered at the Dublin mill; and Pacific, based out of the Portland, Ore., area. The company’s wholly owned subsidiary, SP Recycling Corp. (formerly Southeast Paper Recycling Corp.), is responsible for providing fiber to the two mills. The company said it plans to invest an estimated $75 million in the 370,000 mtpy Newberg mill to improve brightness and sheet cleanliness. The bulk of the investment is for a new, 800-900 tpd deinked pulp facility that will replace an existing deinked plant. The projects will take place over the next 20-24 months. Smurfit-Stone is still pursuing the sale of the Oregon City, Ore., and Pomona, Calif., newsprint mills as part of a plan to divest assets outside the company’s core focus of containerboard and corrugated packaging.
Consolidated details 2000 investmentsConsolidated Papers Inc. will rebuild a coated papers machine at its Wisconsin Rapids, Wis., mill, part of an estimated $106 million in capital expenditures slated to start in 2000. The rebuild will include a new pressing system and the dryer will also be improved. A spokesman said the improvements are "more focused on quality and cost savings and are not extensively capacity driven." In addition to the rebuild, Consolidated plans installation of a new stock screening system on PM No. 43 at the Niagara, Wis., mill and upgrading of two supercalenders there; a cooling system for PM No. 26 at the Biron, Wis., mill; improvements to the drying system for PM No. 97 at the Kimberly, Wis., mill; and new equipment for hardwood pulp washing to meet environmental standards at Wisconsin Rapids. Including projects started in previous years and completed in 2000, Consolidated will spend $185 million following estimated spending of $175 million in 1999.
Tembec buys BCTMP mill; mulls new PMTembec Inc. is bringing another pulp acquisition into its fold. In November the Canadian pulp, newsprint, and lumber producer announced it would acquire, for C$48.5 million, Donohue Matane Inc.’s 200,000 mtpy bleached softwood and hardwood chemithermomechanical pulp (BCTMP) mill in Matane, Que. The deal closed in early December. Tembec’s purchase price includes C$13.5 million plus an additional C$35 million that Tembec would not have to pay if it decides to build a paper machine, said Charles Gagnon, Tembec vice president of corporate relations, adding that the company would study the feasibility. The Quebec government has encouraged a paper mill in the economically troubled region for some three decades.
FCC nixes deal with parent companyFollowing the failure of its plan to sell its paper division assets to its Canadian subsidiary, Fletcher Challenge Ltd. of New Zealand said it will continue to pursue ways to sell the unit but will not renegotiate with Fletcher Challenge Canada Ltd. (FCC) minority shareholders. Following rejection of the deal on Nov. 2, the company announced the appointment of new executive leadership and operational changes aimed at improving FCC’s financial performance. The defeat came as no surprise since several key FCC minority shareholders already had publicly voiced their opposition to the acquisition. They complained that the acquisition price per mton was too high and that the purchase would leave cash-rich FCC shouldering a C$1.7 billion debt load. The company will move ahead with its goal to divest the paper assets and in the interim will undertake several initiatives to improve the performance of FCC. FCC will limit discretionary capital expenditures to projects with a 12-month payback period and will focus on the reduction of working capital in FCC.
Simpson’s Vt. mill to American TissueSimpson Paper Co. recently sold its 103-year-old Gilman, Vt., paper mill and its hydroelectric generating plants to American Paper Mills of Vermont Inc., a subsidiary of American Tissue Co. The mill, which has capacity to produce 60,000 tpy of uncoated free-sheet on one machine, closed in October. It was the last printing/writing paper mill owned by Simpson, which is concentrating on its linerboard, timber and forest products businesses. American Paper planned to restart the mill in January, hiring about 100 employees. He said initially the mill would initially make uncoated free-sheet and possibly some diazo paper. No capital improvements are planned as yet.
Simpson to retain Tacoma millSimpson Paper Co. will not sell its kraft linerboard, paper, and pulp mill in Tacoma, Wash., and will invest about $14 million in production upgrades and environmental improvements at the mill over the next 12 to 18 months. The environmental projects take the majority of the investment, and include rebuilding a precipitator on the No. 4 recovery boiler and installing an economizer that could help improve combustion in the boilers.
Edwards Paper sold; PM consideredEdwards Paper Co. of Miami, Fla., in November announced its sale to LaCour International, a privately held converter and marketer of recycled sanitary paper products based in Red Springs, N.C. Edwards Paper is a fully integrated producer of tissues, towels, wipes and dispensing systems with sales, manufacturing and distribution facilities in Miami and Tucson, Ariz. The Miami facility has capacity to produce 45 tpd of 100% recycled tissue, primarily for the away-from-home market. Edwards Paper had put money down on a new tissue machine to be installed in Tucson, and the new owner is considering moving ahead; however, no final decision has been made.
St. Laurent ECF project completedSt. Laurent Paperboard Inc. completed converting to an elemental chlorine free (ECF) bleaching process at its 463,000 tpy mill in La Tuque, Que. The conversion, completed in October, reduces the absorbable organic halides in the mill’s effluent. The mill needed to convert to ECF bleaching by 2001, under Quebec environmental regulations.
SC, newsprint PMs start in GermanyGebrueder Lang GmbH has begun production on its new supercalendered groundwood papers PM No. 5 in Ettringen, Germany (see photo). The company is owned by Myllykoski Paper Oy of Finland, which is also a principal partner of Madison Paper Industries in Madison, Maine. Voith Sulzer supplied the 250,000 mtpy machine with a design speed of 1,800 m/min. The new PM is equipped with a DuoFormer TQ, a Tandem NipcoFlex press, and an on-line Janus calender. Fiber furnish for the new PM is approximately 85% recovered paper. Project cost was $227 million.
Also in Germany, Papierfabrik Palm GmbH has begun production on its new 250,000 mtpy newsprint paper machine in October at its mill in Eltmann, slightly ahead of its original data of first-quarter 2000. Voith Sulzer supplier the 8.05 m wide PM with a design speed of 1,800 m/min. Voith also supplied a two-line deinking plant to supply the 100% recycled fiber furnish PM. Project cost was $274 million.
CorrectionIn P&P November, the company that authored “Integrated Contingency Planning Promotes Efficient Emergency Response at Mills,” Woodard & Curran, was misspelled. They can be reached at (207) 774-2112 or at asteinman@woodardcurran.com.
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