Southern pine beetles wreak havoc on Southern pulp operations

Smaller than grains of uncooked rice, the southern pine beetle (SPB) is the most destructive insect killer of pines in the southeastern United States. The hard bodied, dark brown insects, both adult and larval, feed on the tissue under the bark, often resulting in tree death. The beetles also carry blue stain fungi on their bodies, which, when introduced into a tree, colonizes the sapwood and disrupts the flow of water to the tree crown. Once the blue stain fungi is established, trees cannot be saved, even if the beetle larvae are killed or die. This same blue fungi can wreak havoc on certain pulping processes, requiring the use of more bleach to reach desired brightness levels. Outbreaks commonly originate in poorly managed or overstocked stands. Once underway, an outbreak may last for several years and can spread rapidly into managed stands, including urban areas. Average annual tree mortality may exceed the equivalent of 100 million board ft of sawtimber and 20 million ft3 of growing stock. SPBs are found in the southern and southeastern United States, extending as far west as Arizona and as far south as Central America. The northern range extends from southern New Jersey and Pennsylvania west into southern Missouri. During one outbreak in the southern states from 1973 to 1977, SPBs killed the equivalent of about 4.5 billion board ft of pine timber. The most recent outbreak is one of the worst seen since then. According to Dr. Wayne Clatterbuck, associate professor of forestry at the University of Tennessee (Knoxville) and forest management specialist at the UT Agricultural Extension Service, northeastern Tennessee is one of the hardest hit areas. “We’re at epidemic proportions in Tennessee,” said Clatterbuck. “Our worst year was in 1975, when we had about $4.6 million in damaged timber, and we’re definitely exceeding that now. They build to these big populations about every 10 years. A lot of it has to do with the weather we’ve had.” Typically, SPB infestations begin in trees weakened by such stress factors as disease, lightning strikes, excessive age, or storm damage. Once an outbreak gets started, however, there is very little that can be done to stop it. Ed Smith Jr., area forester for Roane and Morgan Counties in the Tennessee Dept. of Agriculture, Forestry Div., states that the best method of control is good forest management. The Southern pine bark beetles. Top to bottom: Ips avulsus, Ips grandicollis, Ips calligraphus, Dendroctonus frontalis (southern pine beetle), and Dendroctonus terebrans (black turpentine beetle). Photo by Gerald Lenhard, LSU “From nature’s point of view, this is normal,” Smith stated. “The southern pine beetle is a native insect and it’s nature’s way of dealing with natural stands of pine that have become overaged, overmature, too densely crowded, or damaged by storms. When it grows into an epidemic, it can very easily overflow into managed stands of pine and there’s not a lot that can be done to control it.” The things that can be done must be done within a few weeks of discovery or the spot will continue to spread. Smith and Clatterbuck agreed that the biggest threat to the beetle is cold weather. “We need at least a week of cold weather,” said Clatterbuck. “At least three or four days where the temperature doesn’t get above freezing, and we just haven’t had that in the past couple of years here in Tennessee, so the beetle population has been building.” Short of a cold snap, other methods of controlling a pine beetle spot include: •Salvage removal—removing infested trees from the forest (along with a buffer strip of healthy trees) and using them. •Cut and leave—this technique involves felling infested trees and a buffer of uninfested trees and leaving them in the woods. The cut and leave method is best used for controlling small spots (10-50 trees). •Pile and burn—this technique involves felling infested trees, piling them in the center of the infested area, and burning the bark. •Cut and spray—this involves felling the infested trees in place and spraying the logs to the point of runoff with an approved chemical. This method is not practical in a forested setting and is generally used only on small numbers of trees. According to the Southern Research Station website, there are federally funded SPB suppression projects on the National Forests in North Carolina, Florida, Alabama, Mississippi, and Texas; and Oconee, Ga., and Kisatchie, La., National Forests. There are also cooperative projects in the states of Texas, Alabama, and North Carolina. For more information on the southern pine beetle, visit the following web sites: Bark Beetles @ Bugwood: www.barkbeetles.org Southern Research Station: www.fs.fed.us/research/4501/ The University of Georgia College of Agricultural & Environmental Sciences/Cooperative Extension Service: www.ces.uga.edu/pubcd/b1097-w.html U.S. Department of Agriculture, Forest Service:willow.ncfes.umn.edu/fidl-spb/so_pine.htm —Tina Roberson

 

MERGERS/ACQUISITIONS

Mergers continue to reshape industry

Georgia-Pacific Corp.said last month it is progressing with its $11 billion acquisition of tissue giant Fort James Corp. The deal is expected to close during the fourth quarter.

Upon announcing the planned buy, G-P said it would divest 250,000 tpy of tissue assets but did not identify which mills would be targeted.

On the pulp side, reliable sources said the company plans to sell three of its mills with a combined capacity of about 1.6 million tpy and representing substantially all of G-P’s market pulp business.

Sources said they also expect Atlanta-based G-P to divest its chemicals business and some assets—such as sawmills—within its building products division. G-P’s chemicals business focuses on building products, papermaking, and industrial/specialty applications.

The market pulp mills reportedly going up for sale are Brunswick, Ga.; New Augusta, Miss. (Leaf River); and Woodland, Maine. Sources also speculated on G-P’s potential sale of its Bellingham, Wash., sulfite market pulp and tissue mill, which would fit into a strategy of exiting pulp and divesting some tissue capacity.

In other news, G-P acquired a 30% ownership interest in Honeycomb Products Corp. of Dolton, Ill., in a venture aimed at expanding Honeycomb’s sales throughout the U.S. Under the new ownership structure, Honeycomb Products will keep its current name and will work with G-P on increasing its market reach, with the help of G-P assets such as CeCorr Inc. and Unisource.

Honeycomb Products makes kraft paper honeycomb—a specialty product used for packaging, pallets, dunnage, furniture innerstructure, wall partitions, and other applications.

 

UPM-Kymmene announced in August it is in negotiations to buy Canada’s Repap for 120 million euros ($108.1 million). UPM said it was considering its options with respect to Repap's debt, which it put at around 900 million euros. The company said the deal still needed the approval of two-thirds of Repap shareholders, with a meeting expected by mid-October, but it said both boards of directors and Repap's two largest owners supported the bid. Repap has one facility in New Brunswick, Canada and net sales of 425 million euros.

 

Stora Enso announced it will form a new North American division following the anticipated acquisition of Consolidated Papers Inc. The new division will include Stora Enso’s existing papermaking facility in Port Hawkesbury, N.S., and the company’s North American sales offices. Also included in the organization will be the pulp and papermaking facilities of Consolidated Papers, in Wisconsin and Minnesota, and the Consolidated Papers sales offices throughout North America.

Within its 12 manufacturing and converting operations and 25 sales offices, the North American division will employ approximately 7,600 people, and will consist of two primary business units: magazine papers, which will include lightweight coated and supercalendered papers, and newsprint; and fine papers, which will include fine papers, specialty papers, and paperboard.

 

Republic Group Inc., a U.S. recycled paperboard producer, said it has agreed to be acquired by San Francisco-based investment firm Integrated Capital Assocs. Inc., in a deal valued at $410 million, including debt assumption. Under terms of the purchase agreement shareholders of the Hutchinson, Kan.-based paperboard and gypsum wallboard manufacturer will receive about $224.7 million in cash and assume about $185.3 million of Republic debt.

Republic Group has paperboard capacity of 364,000 tpy at three mills in the U.S. and annual revenues of $190 million. The group and its operating subsidiaries—Republic Paperboard Co., Republic Fiber Co. and Republic Gypsum Co.—are manufacturers and marketers of 100% recycled paperboard, recovered paper fiber and gypsum wallboard, servicing markets nationwide.

 

American Tissue Inc., through an affiliate, has signed a definitive agrrement to purchase American Pad & Paper Co.’s Ampad and Forms divisions for $67.1 million. The sale is subject to various conditions including bankruptcy court approval.

AP&P, the inventor of the legal pad in 1888, said its Ampad division is one of North America’s largest suppliers of writing pads, filing supplies, and retail envelopes. The company’s forms division is one of the four largest suppliers in the forms industry. American Tissue plans to use the AP&P division as part of a vertical integration strategy for its printing and writing papers business.

 

International Paper Co. said in August it is in exclusive negotiations with Finland’s Metsa-Serla Oyj to sell its 72% majority shareholding in Zanders Feinpapiere AG of Germany. Zanders is one of Europe’s leading manufacturers and distributors of high-value coated fine papers. It has total production capacity of about 450,000 mtpy at two paper mills located in Bergisch Gladbach and Duren near Cologne, Germany.

IP will also move its global headquarters, and its 120 employees, from Purchase, N.Y., to Stamford, Conn. Before the IP acquisition, Champion had 375 employees in Stamford. About 265 have been told that their jobs will be eliminated, according to local newspaper reports, and about 50 more have been offered jobs at other IP locations.

In addition, IP is in discussions with Premdor Inc. of Mississauga, Ont., regarding the sale of Masonite Corp., a wholly owned subsidiary headquartered in Chicago, Ill. Masonite is a leading international manufacturer and distributor of hardboard siding, panels, roofing and molded door facings. Masonite sales were $512 million in 1999.

 

Westvaco Corp.’s wholly owned subsidiary, Rigesa Ltda., has reached a definitive agreement to acquire all assets of Agaprint Embalagens, a leading supplier of consumer packaging in Brazil. Under terms of the agreement, Rigesa will assume Agaprint’s supply contracts and purchase its manufacturing equipment.

Agaprint is a subsidiary of Nemofeffer, a paper and envelope supplier based in Brazil. Agaprint produces consumer packaging, mainly folding cartons, at a plant in Sao Paulo that Agaprint shares with other Nemofeffer operations.

 

EXPANSIONS

Willamette receives Kingsport permits

Willamette Industries Inc. has received approval on two parts of a six-part state air pollution permit for its $475 million expansion program at its Kingsport, Tenn., uncoated free-sheet mill. In April, the company announced plans to replace two older paper machines and its pulp line with a single new 430,000 tpy paper machine and pulp line.

The components just issued cover the installation of the new paper machine and relocation of the woodyard.

On the pulp side, a new 925 air-dried tpd continuous digester system will replace the current 350 tpd batch line, with production startup scheduled for late 2003. Both the current pulp line and the replacement line manufacture chlorine-free bleached hardwood pulp, utilizing a sulfur-free soda process.

The new paper machine, which will increase production from 550 tpd to an initial 800 tpd, is to be started in mid-2002. The fates of the old paper machines at Kingsport have yet to be determined.

Until the Kingsport pulp line is up and running, hardwood pulp requirements at the mill will be supplemented by Willamette’s newly acquired Port Wentworth, Ga., mill. Hardwood fiber is purchased as 100% sawmill residual chips at Kingsport. Willamette will continue to purchase softwood pulp on the open market for the mill.

 

MARKET PULP

Mobile Energy to restart pulp mill

Mobile Energy Services Co. LLC jointly filed a proposed plan of reorganization in U.S. Bankruptcy Court that would, upon approval, restructure the company’s debt and allow for the development of a new pulp mill on the site idled by Kimberly-Clark last year. Negotiations with a potential third-party owner and operator of the new pulp mill have begun, the company said.

MESC said it obtained the right to purchase the pulp mill equipment in return for market-priced steam and electricity as part of a settlement of claims the company and K-C filed against each other. Under the proposed plan, MESC would transfer the rights to the pulp mill property and equipment to the new owners. MESC sued K-C over the pulp mill closure as it was a key energy customer. K-C produces tissue at the site and began installation of a recycled pulp line there last year.

MESC’s proposed restructuring plan would transfer it from Southern Co. and its affiliates to bondholders. MESC would continue to provide energy services to the K-C tissue mill and Sappi Ltd. paper operations in Mobile, as well as to the new pulp mill.

The new plan also furthers the construction of a new cogeneration facility, which would use natural gas to manufacture additional steam for the site and electricity for sale to the wholesale power market.

•Crown Vantage Inc. Crown Vantage Inc., which is operating under Chapter 11 bankruptcy court protection, said it will be closing its entire Parchment, Mich., specialty paper manufacturing facility by Nov. 3, resulting in the permanent layoff of 249 salaried and hourly employees. The mill’s production will be shifted to other company locations.

 

•Northampton Pulp LLC. Northampton Pulp LLC is gearing up to restart its idled 400-tpd market deinked pulp mill in Northampton, Pa., by next summer, when it expects to complete a $12-$15 million capital improvement program.

 

•The Industrial, Wood and Allied Workers of Canada (IWA). The IWA union released the final ratification results for the recently negotiated collective agreement for the Southern Interior region of the province’s forest sector. The agreement provides for wage increases of 2% in each year, pension and long-term disability improvements, an increase in life insurance, and an employer-paid education fund. The negotiations, settled in early July, cover over 30,000 unionized loggers, sawmill and plywood mill workers in British Columbia.

 

•Bowater Inc. Bowater Inc. has appealed a ruling by the Occupational Safety and Health Administration (OSHA) that held the company partially responsible for an explosion that killed two workers at its Catawba, S.C., mill earlier this year. OSHA ruled in July that Bowater and subcontractor SW&B Construction Corp. violated several safety procedures that could have prevented the accident. A representative for Bowater would not comment on the appeal but said that as of Aug. 15, Bowater had concluded discussions with OSHA.

 

•Besicorp-Empire Development Co. LLC. A joint venture group planning to build a $680 million recycled newsprint mill along with a cogeneration plant has changed site plans for the third time and expects to build the facility in Rensselaer, N.Y., by 2004. The venture partners, Empire State Newsprint LLC and Besicorp Development Inc., have formed Besicorp-Empire Development Co. LLC to construct a 300,000 mtpy recycled newsprint mill and a 475 MW cogeneration facility in upstate N.Y.

 

•Inland Empire Paper Co. Installation of a new Beloit newsprint machine has been delayed at Inland Empire Paper Co.’s mill in eastern Washington. The paper machine, originally scheduled for startup by October, is now expected to start-up in six to seven months, according to company pres. Wayne Andresen. He said the bankruptcy of paper machine maker Beloit Corp. caused the delay.

 

•Consolidated Papers Inc. Consolidated Papers Inc. and Stora Enso Oyj said that Consolidated Papers has entered into an agreement to sell its one-third interest in Wisconsin River Power Co. to Wisconsin Public Service Corp. Wisconsin River Power is an electric utility jointly owned by Consolidated Water Power Co., a subsidiary of Consolidated Papers, Wisconsin Public Service, and Alliant Energy.

 

SALES AND EARNINGS

Market pulp and newsprint boost Canadian profits

Canadian paper and forestry companies reported improved earnings for the second quarter of the year, resulting mainly from higher selling prices for the industry’s primary products: kraft pulp, newsprint, and printing papers. While prices for pulp and paper were rising on strong demand in domestic and export markets, lumber prices were slumping, which hurt companies with heavy exposure to solid wood products.

Earnings for most of the companies showed improvement from the second quarter of 1999 and the first quarter of this year. Total consolidated net income for 17 public companies more than doubled to C$471 million from C$203 million a year ago and improved from $407 million in the first quarter. Merger activity played a role in the second quarter, as companies trimmed overhead and rationalized production capacity.

Total net sales decreased 11.6%, dropping to C$7.6 billion from C$8.7 billion for the same period a year ago. The sales volume decline was mainly due to lower pricing and shipments of softwood lumber, as well as annual maintenance shutdowns at several pulp mills in British Columbia.

 

CANADIAN PAPER & FOREST PRODUCTS SALES AND EARNINGS SECOND QUARTER 2000 (C$000)
	1Q Sales	%Change	1QEarnings		%Change
	2000	2000/99	2000	1999	2000/99
Abitibi-Consolidated*	C$1,481,000	-6.2%	C$61,000	C$35,000	74.3%
Alliance*	276,500	7.5	14,600	(11,400)	n.m.
Canfor	581,800	30.8	32,100	32,300	-0.6
Cascades*	717,000	12.9	24,000	16,000	50.0
Doman	245,068	20.2	667	(18,653)	n.m.
Domtar	832,000	10.3	61,000	32,000	90.6
Fletcher Challenge	351,400	51.1	57,400	(2,600)	n.m.
Nexfor*	556,000	-8.6	60,000	35,000	71.4
Norampac	297,033	20.7	26,852	7,809	243.9
Pacifica Papers	198,800	-88.9	1,400	400	250.0
Paperboard Industries	198,218	8.0	(1,472)	(2,648)	n.m.
Perkins Paper	77,558	3.0	1,613	6,352	-74.6
Repap	163,200	29.6	600	(13,500)	n.m.
Rolland	197,085	18.5	3,207	4,046	-20.7
Slocan	229,259	-25.5	20,620	35,250	-41.5
Tembec	612,900	36.8	64,500	10,200	532.4
West Fraser Timber	634,100	7.5	42,800	37,000	16
Totals	C$7,648,921	-11.6%	C$470,887	C$202,556	132.5%
Note: Earnings represent net income after taxes from continuing operations, before nonrecurring and extraordinary items. Special adjustments, gains or charges are listed below. ( )=loss. n.m.=not meaningful due to loss. Abitibi-Consolidated: Financial earnings prior to April 18, 2000, represent results of Donohue Inc. only. Pro forma net sales in 1999 and 2000 represent Abitibi-Consolidated and Donohue Inc.Alliance: Company reported a net loss of C$17.2 million for the second quarter of 2000 after special items, including an after-tax charge of C$62.8 million at the Coosa Pines, Ala., pulp mill. Cascades: The 1999 second quarter results are before a C$4 million charge for shutdown of Joliette, Que., felt mill. Nexfor: Second quarter 2000 results include a C$13 million gain from the sale of 10% of the Great Lakes Hydro Income Fund.