Enso strikes $80 million deal with AA and Oji Paper

Enso has signed a new deal with Thailand's Advance Agro (AA) and Japan's Oji Paper.

Under the agreement, Enso will buy a 19.9% stake in AA by subscribing to 100.6 million new shares at a cost of FIM 416 million ($80 million).

The agreement gives Enso exclusive rights to market AA's pulp and paper worldwide, excluding Thailand and Japan. In return, Enso will supply AA with softwood pulp and provide research and development skills and technical knowledge.

The Finnish group will appoint its president and CEO, Jukka Härmälä, and one other person to AA's board of directors.

Enso and AA have also signed a letter of intent with Oji Paper. If the transaction goes ahead as planned, Oji Paper will buy a 5.5% stake in AA by subscribing to 29.45 million new shares for $23.5 million. Under the deal, Oji Paper will gain exclusive rights to sell AA's products in Japan.

The Japanese company will appoint its president, Masahiko Ohkuni, to AA's board of directors.

Oji Paper and AA already work together closely as AA supplies base paper for Oji Paper Thailand's carbonless copy paper mill, which started commercial production in August this year.

The three-way alliance will inject much-needed capital into the Thai company, which has been dealt a severe blow by the region's economic problems. AA has struggled to meet the terms of its bank agreements, prompting the credit rating agency, Moody's, to downgrade its rating for the company.

The latest deal will improve AA's liquidity, paving the way for stronger relations with its banks. Enso said that the Thai banks, including the Exim bank of Thailand, are being "very cooperative" and have indicated that they will provide working capital.

Enso admitted that doing business in Asia carried "a certain risk" given the economic climate. But the Finnish group is confident that it will reap long-term benefits, by having a foothold in a region, traditionally known for high-growth potential and low-cost production.

Norske Skog upgrades

Norske Skog plans to rebuild a newsprint PM at its Follum mill in Honefoss. The upgrade will focus mainly on quality improvements, but PM 2's capacity will also increase by 10,000 tons/yr to 130,000 tons/yr.

Norske Skog expects the project to take four weeks to complete. The work is penciled in for the end of next year.

AssiDomän shuts down two UK packaging units

AssiDomän is to shut two of its corrugated packaging units in the UK. The Purfleet and Cumbernauld plants will stop their corrugated packaging lines by the end of 1998.

Corrugated packaging production is to be concentrated at the group's remaining UK sites in Northampton, Stalybridge and Yate. Combined capacity of the lines to be closed is approximately 50 million m, mainly used for food packaging. The specialist manufacturing operations at Purfleet and Cumbernauld will continue.

AssiDomän aims to increase profitability and cut costs with the closure. "We have had to adapt our operations as the market is not very strong at the moment," said Ulf Kilander, president of AssiDomän Packaging.

Shotton starts tests

Shotton Paper has started test runs on a new 425 ton/day deinking unit at its 470,000 ton/yr newsprint mill in North Wales, UK.

The upgrade cost 34 million ($55 million) and the new unit will double deinking capacity at the mill.

The expansion will allow the company to use deinked pulp for 65-75% of the total furnish, with virgin fiber making up the remainder.

Shotton Paper is part of UPM-Kymmene and sells its newsprint mainly in the UK.

BPB bails out of UK mill

BPB is closing its Radcliffe mill in the UK after the company failed to find a buyer for the plant. The board mill will shut at the end of this year.

Difficult market conditions and the strength of the UK currency made it impossible to sell the mill on acceptable terms, the company said. BPB will be hit with a 20 million ($34 million) charge on closure.

The shutdown is part of BPB's disposal strategy for facilities that do not support its plasterboard operations. The company sold off its De Eendracht cartonboard mill in the Netherlands to Gruber & Weber earlier this year.

More tissue in Trieste

Cartiera di Monfalcone has ordered a new tissue machine for its mill near Trieste in Italy. The PM will have a maximum capacity of 100 tons/day.

Valmet is the supplier of the 2.85 m wide crescent former PM. The Finnish company expects to deliver the PM at end of this year.

M-M sheds German waste

Mayr-Melnhof (M-M) has sold three of its recycling units in Germany. Rowe of Nürnberg, Weinbrecht in Karlsruhe and Reitner & Böhle of Essen have gone for an undisclosed price.

The company is still weighing up its options for M-M's remaining recycling businesses. The group's businesses mainly comprise wastepaper trading, collecting and sorting in Germany, the UK and Austria.

The operations have proved unprofitable for several years and M-M is considering an outright sale or a link-up with a larger recycling group.

Negotiations continue and a decision is expected by the end of 1998.

SCA Packaging rebuilds

SCA Packaging has rebuilt a kraftliner machine at its Obbola mill in Sweden.

The upgrade by Valmet will boost capacity on PM 1 by 50,000 tons/yr to 420,000 tons/yr, as well as raising quality and cutting costs. The cost of the project was SEK 310 million ($40 million).

Good news for Sniace's out-of-action machine

Sniace is planning to restart the newsprint PM at its Torrelavega mill in Spain. No date has been set for the restart, but the company is confident the PM will be in action before the end of the year.

The 45,000 ton/yr PM was closed in middle of 1996 after operating for just two months. The PM produced improved newsprint with a brightness of 70 ISO.

The Spanish mill has suffered from stop-start production for a number of years due
to a series of financial and environmental
problems.

Sniace restarted a 70,000 ton/yr dissolving pulp line at the mill at the end of March 1997. The line had been closed since July 1996. Around 30,000 tons/yr of pulp was to be used for the company's own viscose production, with the remainder for sale in Europe and the Far East.

Kafus leads the way in Spain

Kafus Environmental is to pioneer the first European kenaf-based paper mill at a site in Spain. The company plans to spend $200 million on the kenaf-based newsprint mill and the groundbreaking project will have a capacity of 110,000 tons/yr.

Kafus expects construction work to take 20 months to complete and has penciled in a startup date for 2001. "We are working out the plant details and need to pass the financing for the project," said Michael McCabe, president of Kafus.

The Spanish climate favors kenaf growth and newsprint is a major import for the country, according to the company.

US updates: Kafus has boosted the proposed capacity of its kenaf-based newsprint mill in Lasara, Texas. Capacity will now be 110,000 tons/yr instead of the 85,000 tons/yr previously announced. The company expects to receive permits for the extra capacity by the end of the year.

The Lasara mill is due to come on stream early 2000 and will be the world's first kenaf-based newsprint production site. The company's plans for a second newsprint mill in the USA are also making progress. The company is close to making a final decision on a site in Arizona and the mill is scheduled to start up early in 2001.

Ukraine mill open to offers

Two companies are among those competing for a controlling stake in the Zhydachiv Pulp and Paper mill in the Ukraine. A Cyprus-based company and a German financial institution have been tempted by the 51% stake on offer from the State Property Fund. The shares will be sold through commercial tender.

Some 23% of the shares have already been transferred to the management and public shareholders. The remaining 26% stake will stay in the hands of the State Property Fund. Credit Commercial de France has been chosen as official agent for the privatization project.

Mill matters: The Zhydachiv mill produces packaging papers, corrugating materials, newsprint and boxes. Sales volumes have slumped since the breakup of the former Soviet Union, from Hryvnia 92 million ($22 million at today's exchange rate) in 1990 to just Hryvnia 52 million in 1997.

But sales picked up this year and the company is strengthening its marketing and sales efforts on newsprint and board.

The mill has three paper machines, a board machine and a converting line for boxes. PM 5's capacity is 80 tons/day of newsprint, PM 3 has a capacity of 25 tons/day of linerboard, base paper and offset papers. PM 2 is the smallest machine with a capacity of 19 tons/day of corrugating medium and wrapping paper. At present though, Zhydachiv is operating at just 35-40% of its full capacity.

The mill would greatly benefit from a boost in capital and the mill's managers hope the privatization process will help them to proceed with several investment plans.

The next step for Zhydachiv is a $3 million rebuild of its 60,000 ton/yr board machine. The upgrade would be aimed at lowering the grammage range from 300-500 g/m to 250 g/m. The company also hopes to modernize its mechanical pulping facilities.

The company has invested $35 million on revamping its newsprint and board operations since 1996.

SCA seals Svetogorsk deal

SCA has completed the purchase of Svetogorsk's tissue operations from Tetra Laval for SEK 200 million ($26 million).

The Swedish group has sent a team to the Russian mill to familiarize itself with the tissue operations. The company's next step is to carry out a thorough investigation to decide on an effective investment plan.

Tetra Laval is also in the midst of negotiations to sell its 90% stake in the Svetogorsk mill to International Paper (IP). The transaction was due to be completed by the end of September but IP said the deal may not be finalized until the end of the year.

The economic situation in Russia has prompted IP to take longer than originally expected at the due diligence stage.

Despite the region's economic uncertainties, the American giant insisted that it would go ahead with the deal as the initial interest factors remained unchanged. The Svetogorsk mill is an excellent facility with good access to natural resources, plenty of opportunities to broaden the product range and long-term growth potential, IP said.

IP has not yet released its investment plans for the mill, but the company did say that it would fulfil the terms of Tetra Laval's existing business plan.

Fire at Bratsk pulp mill kills two workers

A blaze at Ilim Pulp's Bratsk pulp mill has claimed the lives of two workers. The fire on line two apparently smouldered for some time before taking hold. A burning smell was first noticed in the mill's bleaching plant on 21 September, but an inspection did not uncover the source of the problem.

The fire started to burn visibly when it eventually spread to electric cables on the evening of 22 September. When the blaze took hold, the two workers found themselves trapped inside a small room where they normally took their breaks, according to a spokeswoman for Ilim.

The control system was badly affected by the fire and the mill lost one week of pulp production, amounting to some 10,000 tons. According to Ilim, production has now returned to normal and the mill is running at 42,000 tons/month.

Court revives Segezha

The Russian sack producer, Segezhabumprom, has been given a new lease of life following a court decision that gives the company one year to restructure and boost profitability.

No details are yet available as to how the company will be restructured or who will finance the plan. An external manager has been appointed to oversee the project.

The Karelian government filed for bankruptcy in June, leaving the courts to decide whether to sell off the assets or restructure the company. As was widely expected, the court accepted the creditors' choice of a restructure option.

ZPK invests in Krapkowice

Polish producer, Zaklady Papiernicze Krapkowice (ZPK), has announced a capacity boost at its mill in Krapkowice. The plans involve a paper machine upgrade, a new deinking line and rewinder for the mill.

PM 6's tissue capacity will rise from 60 tons/day to 80 tons/day. The rebuild is scheduled to take place in the fourth quarter of 1999.

ZPK operates another tissue machine, PM 5, bringing total tissue capacity to 27,000 tons/yr. PM 5 was rebuilt in September 1996 with a new approach flow system and wet-end set-up.

ZPK also plans to install a new 115 ton/day deinking line at the plant. The unit will serve both PMs and replaces two separate lines. Lamort of France and Maule of Italy are the main suppliers for the deinking plant.

The third part of the project involves a new rewinder from the Italian supplier, Celli. The machine's operating speed is set to reach 1,600 m/min. The new equipment will be delivered in April next year.

Internal funds and loans from Polish banks will be used to finance the project.

ZPK operates three other PMs at the mill. PMs 2, 3 and 4 produce technical papers, sack kraft paper and roofing board. The largest is PM 3 with a 36,000 ton/yr capacity of sack kraft paper.

Pakenso goes Polish

Enso's subsidiary, Pakenso, is investing in a corrugated sheet plant in Poland. The unit will be located in Grudziadz and will have the capacity to convert 20 million m/yr of corrugated board.

Work on the facilities began in early October and startup is scheduled for the second quarter of 1999. The total investment cost will be FIM 20 million ($4 million).

Pakenso has not yet decided whether to install one or two converting lines at the site. Raw materials will be sourced from the domestic market. The company intends to sell the output in northern Poland.

Pakenso is also gearing up for the startup of its new corrugated board mill in Balabanovo, Russia. The 90 million m/yr plant will come on stream in November this year.

Intercell makes upgrades

Intercell has started up a new corrugator at its Scanbox mill in Lodz, raising total capacity from 85 million m/yr to 130-140 million m/yr.

The upgrade is part of a $20 million modernization program to improve Intercell's facilities in Poland.

The investment plan includes a $5 million upgrade of PM 1 to produce extensible sack kraft paper, due for completion in the first quarter 1999, and a $6 million upgrade of two recycled fiber lines at its Ostroleka plant. The company will also rebuild the corrugator at the Ostroleka plant, raising capacity from 90 million m/yr to 120-140 million m/yr.

Metsä-Serla raises its Lithuanian board stake

Metsä-Serla has increased its stake in Medienos Plausas, a Lithuanian corrugated board producer. The Finnish firm paid FIM 68.3 million ($13.7 million) to take its stakeholding to 90% of the company's shares.

Metsä-Serla bought a 63% stake in Medienos Plausas in March 1998.

Medienos Plausas produces 15,000 tons/yr of corrugated board and has a 40% share in the Lithuanian market. Medienos Plausas' turnover for 1997 was approximately FIM 60 million.

Metsä-Serla is considering further investments in the Baltic region.

IFC takes Romanian stake

The International Finance Corporation (IFC) has taken a 20% stake in Romania's Dunapack Rambox in return for a long-term loan to help finance investment at the plant.

Dunapack Rambox operates a 60 million m/yr corrugated box plant. The company plans to boost capacity and quality over the next five to six years. Most of the output is sold in Romania, but Hungary and Moldavia also feature in the company's sales books.

Dunapack Rambox is a subsidiary of the Hungarian paper and packaging company, Dunapack, which in turn is 100% owned by the Austrian group, Prinzhorn.

Mayr-Melnhof accepts Duran Ofset's offer

Duran Ofset is to acquire a 30% stake in Mayr-Melnhof's (M-M) 6,000 ton/yr folding carton operations in Ploiesti, Romania, where a new carton converting machine started up earlier this year.

M-M expects to benefit from Duran Ofset's long-term sales experience in the local market.

Hansol turns to Turkey

Hansol is to install a 200,000 ton/yr duplex board line at a mill in Turkey. The Korean company is the turnkey supplier for the line at a new plant being constructed by Turkey's Dogan Group.

Hansol will provide engineering services and purchase the equipment, while Daewoo provides the $85 million of financing needed for the project. The Dogan Group will be responsible for the mill's boiler and wastewater treatment plant. Korea's Tae Kwang is to build the board machine.

The Korean firms will become part-owners in the mill once the project is completed around June 2000.

Cheong Won acquired

Norske Skog has formally completed the acquisition of Shin Ho Paper's Cheong Won newsprint mill in Korea. The Cheong Won mill started up in 1996 and has 180,000 tons/yr of newsprint capacity.

Norske Skog previously took a controlling stake in Shin Ho's newsprint mill in Thailand and the two mills now form part of a new newsprint giant Norske Skog is creating through a joint venture with Canada's Abitibi-Consolidated and Hansol Paper of Korea. The three companies expect to finalize the joint venture deal by the end of the fourth quarter 1998.

Reficel puts back plans for its new DIP mill

Reficel has again been forced to delay the startup of its greenfield deinked market pulp mill in Portugal. The company originally expected an October 1998 startup, but October 1999 now looks more likely.

Banks have shown considerable reluctance to provide financing due to the uncertainty surrounding Portugal's pulp and paper industry. The pulp sector's privatization was a long drawn-out process, but the main issues have now been resolved. This has now cleared the way for Reficel to wrap up negotiations with the banks.

The Portuguese company also hopes that some new shareholders - "well-known figures" in the Portuguese paper industry - will improve the chances of bank approval.

The company will start work as soon as the loans are secured. Reficel has already finished preparatory site work and signed letters of intent with the main suppliers, Lamort and ABB.

The deinked pulp market is going through a difficult patch at the moment, but Reficel hopes to offset the problems by venturing into new, fast-growing markets, such as food contact papers.

Renova spends $17 million

Renova is to expand production facilities at its mill in Zibreira, Portugal. The company is investing Esc 3 billion ($17 million) in the project.

A major part of the investment will focus on PM 5. The PM will be rebuilt to increase tissue capacity at the mill by 40% to around 85,000 tons/yr.

The company is also installing a new recycled fiber line. Deinking capacity is set to double at the mill. The company already has one fiber line installed at the mill.

Portucel takes 5% stake in Ence amid merger speculation

Portucel has bought a 5% stake in the Spanish company, Ence, fueling speculation that a merger between the two companies is increasingly likely.

The share purchase was not a necessary move in the merger negotiations, but it underlines Portucel's aim to participate actively in industry consolidation in the Iberian Peninsula.

Consultancy firm, McKinsey, has emphasized the strategic value and significant cost savings which could be achieved via a Portucel/Ence merger, in a study published at the end of September.

If the merger goes ahead, the new company would have a joint capacity of more than 1.2 million tons, making it the world's largest eucalyptus pulp producer. An alliance would allow the two companies to benefit from joint forest management, to cut costs through company synergies and make it easier to fund investment programs.

Earlier in the year Portucel and Ence signed a letter of intent to form an alliance, which has since been approved by shareholders. But no timetable has been fixed for the next stage of negotiations.

SCA and Portucel eye up assets: SCA and Portucel could be on course for an asset swap where SCA buys Portucel's packaging activities and Portucel buys SCA's fine paper division.

It looks unlikely that the proposals will be concluded in the near future as Portucel is in the midst of a complicated and drawn-out privatization process. But the companies have been in contact and such a deal would give SCA a foothold in the Portuguese packaging market through Portucel's linerboard and converting units.

SCA confirmed initial meetings had taken place, but said that the Portuguese privatization process must be sorted out before it can proceed with any possible purchase.

Portucel is also looking at SCA's fine paper division. It is unclear what form an alliance or divestment would take. Possibilities include an outright sale or a strategic marketing alliance between the two companies.

Daishowa rebuilds PM 10

Daishowa in Japan is to rebuild PM 10 at its Shiraoi mill on Hokkaido Island. The 550 ton/day capacity PM produces uncoated woodfree paper. The main aim of the upgrade is improve quality, but the PM's speed will also be increased by 10% to around 850 m/min. Daishowa will also replace the PM's conventional size press with a Valmet SymSizer.

The $15 million rebuild is scheduled for November.

Filipino mill starts up new 150,000 ton/yr PM

Trial runs have started on a new 150,000 ton/yr testliner and fluting PM at United Pulp & Paper's (UPP) Calumpit mill in the Philippines. The new PM is owned by Thailand's Siam Pulp and Paper in joint venture with the Filipino industrial company, Phinma, which also controls UPP.

The mill has already managed to sell a small amount of the output, but commercial production is not scheduled until November. Output will be sold in the domestic market, where demand is growing considerably.

The startup of the PM was originally scheduled for the first quarter of this year, but was postponed as a result of the region's currency crisis. Devaluation pushed up the project cost from Peso 3,200 million (US$73 million) to Peso 4,200 million.

Even though the new machine has now started up, the companies admit that the jv's financial problems are far from over. The group is still having difficulties finding working capital for the project, although the companies hope to secure new equity and loans shortly.

UPP's Calumpit mill already has one 40,000-45,000 ton/yr machine, which produces sack kraft and fluting.

Hengan starts up tissue PM

China's Hengan Holding has started up a new 100 ton/day tissue machine at its greenfield site in Changde, Hunan province. The 3.7 m wide PM runs at 1,600 m/min and the machine produces tissue in a basis weight range of 12-25 g/m2.

Although the machine is running well, there have reportedly been some problems with the converting facilities on site.

The Austrian supplier, Andritz, believes that the PM will be the largest tissue machine in China. The supplier also said that there is a possibility that further investment will be undertaken at the site.

New forestry JV for Australia

New forestry JV for Australia Oji Paper, Itochu, Kodansha and Electric Power Development (EPDC) are to set up a forestry joint venture in Australia. The jv will plant eucalyptus in agriculture and pastoral land some 150 km from Brisbane Port.

Work is set to begin in November and the group plans to plant 1,000 ha/yr to establish a 10,000 ha forest holding within 10 years. Harvesting will take place in 2008 and all wood chips produced will be sold to Oji.

The stakes will be held as follows: Oji (41%), Itochu (39%), Kodansha (10%) and EPDC (10%). Oji plans to establish 200,000 ha of forest plantations outside Japan by 2010.

Santher waits for cash

Santher (Fabrica Papel Santa Therezinha) awaits completion of a contract to finance a machine rebuild at its Guaiba plant in Rio Grande do Sul state, Brazil. The work will switch production from machine-glazed (MG) paper to tissue paper.

Brazil's national development bank, BNDES, and the International Finance Corporation (IFC) have approved the loan in principle, but work on the rebuild will not start until the contract is finalized.

Project costs are estimated at $23 million. If Santher can secure the loan deal, the upgraded PM would come on stream early 2000.

PM 9 has a capacity of 5,000 tons/yr of MG (machine glazed) paper, which will rise to 28,000 tons/yr of tissue after the rebuild.

The Guaiba plant was acquired by Santher in 1997 from Votorantim (VCP).

Abitibi-Consolidated grabs Stone's Snowflake mill

Abitibi-Consolidated (A-C) has bought Stone Container's Snowflake newsprint mill in Arizona for $250 million. The sale is part of Stone's strategy of divesting non-core assets and spells the end of the company's direct involvement in the newsprint market.

Snowflake has a newsprint capacity of 287,000 tons/yr and A-C plans to boost the efficiency of the plant so that it becomes the lowest delivered cost mill in the company by next year. Newsprint production is currently 70% recycled, but is due to become 100% waste-based in 1999 as part of a $25 million conversion project.

The mill also has 124,000 tons/yr of corrugating medium capacity. This is owned directly by Stone and remains unaffected by the sale. Under the agreement though, A-C will operate the corrugating medium line on behalf of Stone.

A-C has 18 mills producing newsprint and uncoated groundwood papers throughout North America and the United Kingdom.

Stone retains a 25.2% stake in A-C through a Canadian subsidiary, but it intends to sell the stake when market conditions are favorable.

Garda/Condat come together in $319 million deal

CVC Capital Partners has snapped up Smurfit's Condat mill in France and will merge the operation with its Italian mill, Cartiere del Garda. The move by the UK investment fund creates a sizeable new player in the sector. The combined company will control 9% of the European coated woodfree market with a total capacity of 630,000 tons/yr.

Under the deal, CVC will pay $319 million for the French mill.

The investment surprised some in view of the overcapacity and low returns being witnessed in coated woodfree markets across Europe. But CVC said the move is aimed at consolidating the fine paper sector. As CVC's managing director, Hardy McLain, explained, "We are medium-term not short-term investors. We are willing to ride out the current turmoil in the sector. This is a classic 'buy and build' strategy in an attractive market sector."

CVC acquired the 280,000 ton/yr Garda mill in 1997 from the German media giant, Bertelsmann.

Smurfit's stake: Smurfit is set to make a net proceed of I100 million ($148 million) on the transaction, which it will use to reduce debt. But the Irish group is not abandoning the woodfree market completely, as it intends to pay I36 million for a 17% stake in the merged company. The investment is designed to "generate substantial additional benefits on returns", according to Smurfit.

Condat is in the middle of a FF 320 million ($53 million) investment project. But CVC said that it intends to finish off the work, which is aimed at taking total capacity to 420,000 tons/yr.

Smurfit acquired the loss-making mill in 1994 from St Gobain. Condat's financial returns improved dramatically under new management, Smurfit said.

CMPC approves new PM

La Compañia Manufacturera de Papeles y Cartones (CMPC) has given the go ahead for a new corrugating materials PM at its Puento Alto mill, Chile.

The company will install a new 150,000 ton/yr PM to replace older equipment at the mill. Startup is scheduled for the end of 2000.

Capacity is slightly higher than the original plan for an 80,000 ton/yr testliner, corrugating medium and white top liner PM. Investment costs will reach $80 million.

CMPC will more than double its recycled paper needs when the new equipment comes on stream.

Pulp progress: The company is also considering a 50,000 ton/yr expansion at its Celulosa del Pacifico pulp mill in southern Chile. CMPC expects to reach a decision on the additional bleached softwood pulp capacity by the end of 1998. CMPC owns a controlling stake in the pulp company, Celulosa del Pacifico, which runs the 350,000 ton/yr market pulp mill.

CMPC has also pushed back plans for a new 400,000-500,000 ton/yr bleached eucalyptus kraft pulp mill in southern Chile. Construction was due to start in 1998 to 1999, but the plans have now been delayed at least two years.

CMPC is also expanding capacity at its Santa Fe eucalyptus kraft pulp mill in Nacimiento. Capacity will rise from 280,000 tons/yr to 340,000 tons/yr by 2000.