U.S. capacity growth to continue at record low rate in 2001-03

U.S. paper and paperboard capacity will increase by an annual average of only 0.7% over the next three years, according to the 41st annual Capacity Survey of the American Forest & Paper Assn. (AF&PA). This is significantly below the historical annual growth rate of approximately 2.1% witnessed during the 10 year period of 1991-2000. The AF&PA survey indicates that paper and paperboard capacity will rise annually by 0.8% in 2001, 0.9% in 2002, and 0.5% in 2003.

The projected growth rates almost certainly will be even lower because some paper machines and mills that have already been closed or about to be closed were not included in the survey.

Mills and machines must be dismantled at least one year before they are removed from the AF&PA survey. There are more than 2.3 million tons of planned capacity shutdowns in various paper grades announced in the 1999-2001 period, but still included in the current survey.

In key grades, printing/writing paper capacity is expected to rise by about 1.3 million tons in the 2001-03 period for an average annual increase of 1.4%. Linerboard capacity is expected to remain virtually flat during the next three years, with average annual growth of just 0.1%. Recovered paper consumption growth is expected to average 2.2% in the next three years.

North American output down in Oct.

U.S. production of paper and paperboard in October of 8.087 million tons was down 4.0% from a year earlier, according to the American Forest & Paper Assn. Paperboard output dropped 8.2% to 4.124 million tons. Paper output was relatively flat at 3.963 million tons.

Year-to-date through October, total U.S. paper and paperboard production was down 1.8% to 79.565 million tons compared to the same period in 1999. Paperboard output for the first 10 months was down 3.1% to 41.412 million tons, while paper output was off 0.3% to 38.153 million tons.

Total Canadian paper and paperboard production in October of 1.770 million mtons was off 0.6% from a year ago, partly reflecting a large drop in containerboard output, according to the Canadian Pulp and Paper Products Council (PPPC).

For the first 10 months of the year, Canada's paper/board output of 17.296 million mtons was up 2.7% from 1999. Total paper/board exports in October of 2.176 million mtons were down 2.1% from a year earlier. Canadian shipments to the U.S. rose 2.4% to 1.453 million mtons. Year-to-date total exports were up 4.3% to 22.359 million mtons.

Total paper/board inventories at Canadian mills of 890,000 mtons at the end of October were down 15.7% from a year earlier, PPPC reported.

Energy prices close Washington, California mills

Georgia-Pacific Corp. shut down its Bellingham, Wash., market pulp and tissue paper mill due to energy costs that have skyrocketed to nearly $6 million per month-an amount that represents over 50% of the mill's operating costs, the company said.

G-P "hasn't yet determined" how it will replace the mill's pulp and chemical output to meet customer and internal needs. The mill is likely to remain closed at least through the first quarter of 2001.

Currently the company supplies its four 135,000 mtpy tissue machines in Plattsburgh, N.Y., with bleached softwood from the Bellingham mill. A company spokesman said he did not yet know if G-P would use pulp from its own facilities, including those of newly-acquired Fort James Corp., or if it would have to buy pulp.

California's energy crisis has taken down at least three paper mills, with shutdowns revealed at Shasta Paper Co. in northern California and Fox River Paper Co. and Newark Sierra Paperboard Corp. in the Central Valley, according to sources. In addition, Inland Paperboard & Packaging Inc.'s recycled linerboard mill in Ontario went down due to high energy costs in December and was expected to shut for the rest of the month around mid-January.

The state's electric power agency repeated warnings of rolling blackouts as the power grid was impacted by maintenance related power plant closures, cold weather, and increased energy usage due to the holiday season. Gas prices, however, were the key behind the plant closures, contacts explained.

The Shasta Paper mill in Anderson, a division of Plainwell Inc., stopped operations Dec. 4, citing soaring natural gas prices as the reason for the closure. The mill has retained only 16 of its nearly 460 workers until company officials are able to negotiate a lower gas rate with its gas provider, a third-party energy provider who uses Pacific Gas & Electric Co. lines.

A Newark Sierra official in Stockton, Calif., said the 400 tpd recycled boxboard and gypsum wallboard mill shut down one machine on Dec. 7 and and another unit on Dec. 9. Contacts called the situation in California "unprecedented and ridiculous."

K-C acquires Taiwan Scott Paper Corp.

Kimberly-Clark Corp. announced it purchased the 33.3% interest in Taiwan Scott Paper Corp. held by Goldsun Development and Construction Co. Ltd. The transaction is valued at approximately $40 million. This is K-C's second major investment in Taiwan recently.

A company representative said the transaction will give K-C 100% ownership of Taiwan Scott. K-C plans to merge the company with S-K Corp. by mid-2001. S-K Corp. holds trademark and distribution rights in Taiwan for such K-C brands as Kleenex, Huggies, and Kotex.

New PM slated for Germany in 2002

Myllykoski Oy announced plans to install a new 250,000 mtpy newsprint machine at its Mochenwangen mill in Baden-Wurttemberg, Germany. The $190 million machine and deinking plant is scheduled to start-up in August 2002. Publishers have signed long-term contracts for the planned 250,000 mtpy newsprint machine, according to a press release from Myllykoski.

The Mochenwangen mill currently produces 110,000 mtpy of various mechanical printing paper qualities. The mill will begin producing 80,000 mtpy of wastepaper-based newsprint in order to serve publishers in Germany, France, and Italy.

IP to sell folding carton, bag plants

As part of its ongoing $3 billion divestment effort, International Paper Co. (IP) said it wants to sell its Retail Dept. and Hardware Stores business unit, consisting of folding carton and retail bag operations at Thomaston, Ga., and Mobile, Ala., as well as a national sales force. The company also announced the permanent closure of a folding carton facility in Cincinnati, Ohio. The Cincinnati plant, which IP has operated since shortly after it opened in 1960, will close by March 1, eliminating 220 jobs. IP also is closing the former Champion International Corp. administrative complex in Hamilton, Ohio, north of Cincinnati, eliminating 350 jobs.

Separately, IP announced it has sold the former headquarters office of Champion International Corp. in Stamford, Conn., for $105 million in cash to "a consortium of three groups," including River Oak Investment Corp., Allegiance Capital, and Landis Development Corp., said a company spokesman. IP also will move its global headquarters to the Stamford site. As part of the building's sale, IP negotiated a long-term deal to lease back the building's top four floors. The building will also retain the International Paper sign, and the company will move about 140 headquarter employees to the Stamford office.

Willamette votes to reject takeover offer

Willamette Industries Inc.'s board of directors voted unanimously to recommend to shareholders they reject Weyerhaeuser Co.'s unsolicited $48/share cash offer as inadequate and not in the best interests of Willamette, its shareholders or employees. Willamette's CEO Duane C. McDougall reiterated the board's position that Willamette is not for sale. As expected, Weyerhaeuser said it was "disappointed" that Willamette again rejected its $5.4 billion takeover bid. Weyerhaeuser also filed suit in Oregon circuit court forcing Willamette officials to release shareholder information to Weyerhaeuser.

Abitibi-Consolidated sells Chandler mill

Abitibi-Consolidated Inc. completed the sale of its Chandler, Que., mill to a company formed by investment group le Fonds de Solidarite des Travailleurs du Quebec (FTQ) and headed by businessman Clermont Levasseur, former president of Uniforet Inc. for $35 million. The consortium has agreed to convert the mill to high-quality coated free-sheet grades for high-gloss magazine production, according to a spokesman for the consortium. The sale meets Abitibi's pre-condition of manufacturing a product other than the company's core grades, including newsprint.

Investment costs for the consortium's project are expected to total approximately C$420 million. The consortium is currently searching for another strategic partner to invest in the mill.

Abitibi, Quebecor settle dispute

The dispute between Abitibi-Consolidated Inc. and its 11% majority shareholder Quebecor Inc. appears to have come to an end with the two companies agreeing that John Weaver will remain as Abitibi-Consolidated's president and CEO. In addition, the agreement calls for recommending Richard Drouin, currently serving as an Abitibi-Consolidated director, as board chairman, and that Pierre Karl Peladeau, president and CEO of Quebecor, be appointed vice chairman.

As a result of the agreement with Quebecor, the special committee that Abitibi-Consolidated convened will be disbanded after it has made its final report to the board.

Bowater, Canfor slate downtime

Vancouver-based Canfor Corp. reduced production by 20% at its four B.C. market pulp mills through the end of January, while Bowater Inc. announced it is curtailing production by 30,000 mtons through the first quarter.

Canfor shuttered its Northwood Inc. division to one machine in November and December. The curtailment had slashed the company's output by 26,000 mtons over two months.

Meanwhile, in the U.S., Bowater announced that it would also curtail production of market pulp by 30,000 mtons, or approximately 12% of its capacity, over the course of the first quarter to "adjust inventories."

IP to upgrade Ticonderoga PM

International Paper Co. (IP) said it plans to upgrade its Ticonderoga, N.Y., mill's No. 7 paper machine, which the company says will make the facility its "primary producer" of high performance printing/writing papers. The mill currently has two machines with a combined capacity to produce about 280,000 tpy of uncoated free-sheet.

At the time of the announcement, IP officials were unavailable to detail the cost of the investment or whether the project would increase the mill's capacity. IP employs 700 employees at the facility.

Separately, IP said it completed the sale to Metsa Serla of its 72% shareholding in Zanders Feinpapiere AG. Regulatory approvals were granted in Europe and the U.S. in December.

Trade groups pledge higher recovery rates

Two trade groups are calling for European paper and paperboard producers to use an additional 10 million mtons of recovered paper in the next five years by 2005, increasing the region's recycled content in paper/board to 56%.The Confederation of European Paper Industries (CEPI) and the European Recovered Paper Assn. (ERPA) made the declaration for the new voluntary standard. The European recycling rate has steadily risen to 48.7% in 1999 from 38.8% in 1990.

A containerboard mill official in Europe said the added use of recovered paper should not disrupt market supply and demand because of expected annual growth in output.

A broker in the U.S. said the key to the effort rests with European mills. The source said the added demand for recovered paper must come from mills or there could be oversupply.

P&G to close Calif, Mexico diaper plants

As part of its previously announced global restructuring plan, Procter & Gamble Co. will close its California diaper plant in the first quarter of 2001, together with a baby-care and feminine-care plant in Mexico.

The closure of the 30-year-old Modesto, Calif., diaper plant will be completed in March, said a company official. The diaper lines will be moved to other P&G factories in North America and the factory will be sold.

The Estrella, Mexico, baby-care and feminine-care plant, located near Mexico City, will be replaced by a $200 million facility in the state of Hidalgo, according to the Mexican business newspaper El Financiero.

L-P closes lumber mills, panel plants

Louisiana-Pacific Corp. (LP) announced it would indefinitely shut two of its smaller lumber mills and permanently close two non-competitive panel plants. The decision to suspend production at LP's sawmills in Jasper, Texas, and Evergreen, Ala., with combined annual capacity of 75 million bd ft, was made to balance production with current and expected demand.

The company produced 1.03 billion bd ft overall in 1999 and sold five sawmills last year.

The two industrial panel plants scheduled for permanent closure are LP's Oroville, Calif., hardboard facility and Clayton, Ala., medium density fiberboard (MDF) plant.

LP indicated that falling demand for products produced at the lumber mills and increased competition from more modern facilities were the primary reasons for the closures. Both lumber mills will continue limited operations until all existing inventories are sold and the raw materials on site are converted.

Union coalition threatens to strike

Accusing Willamette Industries Inc. of "protracted anti-union behavior," a coalition of four labor unions calling itself the Willamette Council is offering financial support to Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE) union members if they decide to go on strike over 401(k) benefits. The Willamette Council-representing 6,000 employees of the company-are in contract negotiations at Willamette's mills in Campti, La., and Kingsport, Tenn.

Union workers at both Campti and Kingsport are asking the company to provide a supplemental 401(k) retirement plan.

Potlatch lays off 60 workers in Minnesota

Citing a rise in the cost of imported paper, Potlatch Corp. laid off about 60 hourly employees at its Cloquet and Brainerd, Minn., pulp and paper operations. The company will also eliminate another 80 hourly positions, as those employees who retired over the course of 2000 will not be replaced. The layoff announcement follows company-wide reductions of 300 employees since June. Of those, 126 salaried positions were eliminated in Minnesota. Union contracts stipulate an 18-month call back period with the laid-off employees.

Abitibi temporarily idles Quebec mill

Abitibi-Consolidated Inc. temporarily stopped production at its Wayagamack uncoated groundwood paper mill near Trois-Rivieres, Que., due to problems with its wastewater treatment equipment. The mill, which is in the process of being sold to Kruger Inc., was shut down for approximately 10 days. The mill's secondary water treatment system had to be shut down in order not to exceed environmental effluent limits. Workers tried for a week to head off the problem, according to a company spokesman.

G-P to shut down Kalamazoo machine

Georgia-Pacific Corp. is permanently closing its 133 year old Kalamazoo, Mich., printing papers mill and an already idled paper machine at its Nekoosa, Wis., location. Kalamazoo had capacity for 130,000 tpy of coated and uncoated recycled printing papers and included a deinking plant. The shutdown will eliminate 285 jobs. The company cited market conditions and the size and age of the Kalamazoo machines for the closure.

Fletcher Paper shuts Alpena, Mich., mill

Fletcher Paper Co. recently shut down its small, Alpena, Mich., mill indefinitely due to financial problems caused by a lack of business and market conditions, according to a company spokesman. All operations at the mill were shut down Dec. 16, and the mill's approximately 163 union workers represented by the Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE) will be laid off indefinitely.

The Alpena mill produces 30,000 tpy of lightweight printing papers such as Bible, offset, and carbonizing papers.

Durango-Georgia shuts paper machine

Durango-Georgia Paper Co. has closed the oldest and least efficient paper machine at its St. Marys, Ga., mill complex due to a significant reduction in demand for the machine's products.

PM No. 1, which makes a broad range of bleached and unbleached kraft bag and sack papers, was shut Dec. 13. The closure of the 214-in wide unit removes 70,000 tpy of kraft paper production at the mill and eliminates 70 jobs.

Paper industry rethinks strategy

Following a breakdown in negotiations to implement the 1997 Kyoto Protocol, the American Forest & Paper Assn. (AF&PA) recently began to consider a new strategy to convince other nations of the benefits of managed forests as carbon " sinks." The Sixth Conference of Parties (COP-6) to the Kyoto Protocol is expected to reconvene in mid-May in Bonn, Germany. In the next several months, the AF&PA hopes to launch a program that will gain support for what it calls "the proven concept that sustainable forest management offsets and mitigates carbon dioxide emissions." The U.S. trade association hopes to meet shortly with other paper industry groups representing Canada, Europe, Japan, and New Zealand to continue a cooperative effort begun months ago.

Federal court makes Superfund ruling

A federal appeals judge recently ruled that the recycling exemption for Superfund cleanups granted under the 1999 Superfund Recycling Equity Act (SREA) applies retroactively to private parties in third party cost recovery suits that began before the act became law. The bill's sponsor maintained that the law was retroactive and should apply to both private and federal actions. Commenting on the recent federal court decision, the Institute of Scrap Recycling Industries (ISRI) indicated that it was pleased and hoped that the issue was settled. While recyclers are not held accountable for Superfund contamination except in certain situations, they are still liable for pollution they cause at their own facilities or to which they contribute at disposal sites.

Volumes down in 4Q, mills took downtime

As most of the end uses for boxboard are in low-growth, mature markets, the slowing U.S. economy has doubly hurt demand for consumer packaging and converting materials. The U.S. folding carton industry, in particular, experienced tough times in 2000 as shipments of folding cartons declined about 2%, according to the Paperboard Packaging Council in Alexandria, Va. Boxboard volume for all substrates-bleached and unbleached kraft and recycled board-was weak in the fourth quarter. Weaker production and shipments not only reduced revenues and operating efficiencies at paper mills, but also forced mills to take downtime to maintain prices. International Paper Co. took about 50,000 tons of market related downtime in its bleached board system during the fourth quarter. Westvaco Corp. said it would reduce production by about 35,000 tons between November and January. In addition, Gulf States Paper Corp. said it lost about 6,000 tons of production after a difficult restart at its Demopolis, Ala., mill following a scheduled maintenance outage. Combined with downtime taken during the third quarter, annualized production of bleached board in 2000 will finish about even with 1999.

Weak dollar could improve outlook

After soaring the last few years, the U.S. dollar has recently dipped compared to major foreign currencies, which could benefit the global market pulp business. Meanwhile, economists and currency traders are predicting that the euro in particular could reach parity with the dollar. The euro fell to an all-time low of US$0.823 versus the dollar on Oct. 26 of 2000, but rebounded after the European Central Bank (ECB) intervened with the cooperation of the U.S. Federal Reserve and Bank of Japan. The euro has leveled off at $0.93-$0.95 per dollar. The dollar, which briefly rose after the Federal Reserve announced it had dropped interest rates by 50 points, again dipped to the pre-announcement level, indicating that a change in global currency markets is taking place.

A major U.S. pulp producer source noted that if the dollar stays near its current value, a large segment of his customers-paper producers in Europe-would benefit from lower net transaction prices while their counterparts in the U.S. could see less competition from inexpensive imports. Another North American pulp executive, whose company in November had forecast the euro's January price at $0.95 versus the dollar, said that European paper producers would likely take improved margins rather than pass over the lower costs by dropping their paper prices.

N.A. firms continue land certification

Several North American pulp and paper companies have earned third-party certification on all or part of their forestlands in the last several months as more than 4 million acres of U.S. timberland has been added or is in the process of being added to a growing land mass certified through the third-party audits under the American Forest & Paper Assn.'s Sustainable Forestry Initiative (SFI). Recently, Louisiana-Pacific Corp., Willamette Industries Inc., and Stora Enso North America Ltd., have all attained third-party certification on all or on major portions of their owned and managed U.S. forestland. L-P attained third-party certification on more than 880,000 acres of land in Texas and Louisiana. Willamette's 738,000 acres of forestland in Louisiana, Arkansas, and Texas recently passed similar audits. Stora Enso earned certification on approximately 330,400 acres in Wisconsin, Michigan, and Minnesota.

Pulp & Paper would like to correct an error made in the Nov. 2000 issue, pg. 96. The correct spelling for the comment column's contributor and his company is Mr. Wade Schuetzeberg of American Chung Nam (ACN). Mr. Schuetzeberg is currently marketing manager for ACN's European subsidiary, ACN (Europe).