image map of in every issue


next previous home back issues table of contents

January 1998 · Volume72, Issue 1







Cluster Rule final; EPA backs industry wish to cut air/water toxins using ECF

The U.S. Environmental Protection Agency (EPA) in November signed off on the long-awaited pulp and paper "Cluster Rule," giving its final stamp of approval to tough new regulations designed to "virtually eliminate" dioxin discharges to waterways and slash hazardous air emissions from U.S. pulp and paper mills. EPA's action endorsed the industry-backed proposal to cut pollution using elemental chlorine-free (ECF) bleaching technologies, which rely on chlorine dioxide rather than pure chlorine (Option A), but dropped the requirement for additional methods to further reduce pollution.

The Cluster Rule-the first multimedia, industrywide regulation coordinated under both the Clean Air Act and the Clean Water Act-is expected to cost industry at least $2 billion in capital spending costs and several million dollars a year in operating costs. With the signing by EPA Administrator Carol Browner, compliance dates are set in motion. In accord with federal law, the rule takes effect 60 days from its publication in the Federal Register, which occurs 60 days after its signing or in mid-January, according to the EPA.

The EPA said the air portion of the Cluster Rule will cut 160,000 tons of hazardous air pollutants or 59% of current levels; reduce smelly sulfur levels by 47%; cut volatile organic compounds by 49%; and reduce particulate by 37% of current levels. On the water side, the EPA said the rule will reduce chloroform discharges by 99% of proposed levels and reduce wastewater discharge and sludge loading of dioxins and furans by 96% of proposed levels. This phase of the Cluster Rule will regulate air pollution from 155 of the 565 pulp, paper and paperboard mills in the U.S., while regulating toxic waste discharges from 96 of those 155 mills. In the end, the rule will expedite cleanup of 73 rivers and waterways and lower dioxin-related health risks for populations that rely heavily on a diet of fish, the EPA said.

Click here for more information on the Cluster Rule.



K-C announces global restructuring

The recent announcement by Kimberly-Clark Corp. of a massive restructuring of its tissue operations could cut total tissue capacity by 1.5% in both the U.S. and Europe, according to some predictions. It has indicated that up to 240,000 tons of tissue capacity will be sold or shut down. Just under two-thirds of this will be in the U.S., and the remainder in Europe. K-C has already marked the Winslow, Maine, mill for closure, and will cut production at the nonintegrated Marinette, Wis., plant. The company is also expected to retire a number of older diaper and femcare lines in North America and Europe as faster machines are installed in the U.K. and the U.S.

K-C announced plans to cut around 7% of its workforce and close or downsize 18 of its 150 worldwide manufacturing facilities as it attempts to meet its financial target to double earnings per share between 1995 and the year 2000. In a statement, the company said it expects this round of restructuring to cut pretax operating costs by $100 million in 1998, rising to $200 million in the year 2000. About 70% of the $810 million pretax restructuring charge will be related to K-C's tissue operations, and the remainder to its personal care business. Just over half the rationalization cost will be in North America.

"Progress towards our long-term financial goals has been hampered this year by transitional issues in our away-from-home business, heightened competition in Europe, and continued low selling prices for our products around the world," the company said in a press release. K-C was forced to cut tissue prices in Europe earlier this year to match similar cuts by private label producers in the region, and the company warned that lower worldwide selling prices could dent its full-year 1997 operating profit by up to $250 million compared with 1996.

The company expects to reduce its global workforce by 5,000, or 7%, and cut what it describes "high-cost" excess tissue capacity by 180,000 tons, or 7% of worldwide capacity.

Procter & Gamble Co. has acquired further shares in South Korean paper products manufacturer Ssangyong Paper Co., making it the first foreign investor to gain control of a Korean company. After buying an initial 24.99% in October, P&G had increased its stake to 84.39% by the end of November. The company already controls around 40% of the South Korean sanitary napkin market, according to estimates. With the femcare and diaper manufacturing capacity of Ssangyong, P&G now challenges the absorbent products market dominance of Yuhan-Kimberly, a local subsidiary of Kimberly-Clark Corp.n


Harmac postpones
K-C pulp mill offering

Harmac Pacific Inc. of Vancouver, B.C., has postponed its $540 million equity offering associated with the purchase of two of Kimberly Clark Corp.'s (K-C) Canadian pulp mills along with related woodlands operations. The company blamed weak equity markets in the paper and forest products sector. Harmac had planned to use the proceeds to pay for part of the properties. The acquisitions would take Harmac's market pulp capacity to 1.07 million metric tons and make the company the largest Canadian producer and one of the top five market pulp producers in North America. The deal also included pulp supply contracts for declining levels of pulp-five years for K-C's mill in Terrace Bay, Ont., and seven years for its mill in New Glasgow, Pictou County, N.S., with about half of the mill's production going to K-C in 1998 and volumes decreasing to minimal levels in ensuing years.

George Weston Ltd. has indefinitely postponed a C$750 million IPO for its E.B. Eddy Forest Products Ltd. subsidiary. The offering was planned for last November, but Weston said recent stock market turmoil would not produce the shareholder value the company required. n


Noranda to exit forest products

Canadian natural resources conglomerate Noranda Inc. said it will pay out to shareholders as a dividend its 66% stake in Noranda Forest Inc. and focus on its mining and metallurgical businesses. Noranda Forest said there will be significantly increased liquidity along with wider distribution of its shares, although EdperBrascan Corp. emerges as the largest shareholder with 26% of common shares outstanding. EBC controls Noranda Inc.

Although analysts applauded the move and said it would make Noranda Forest more attractive, the company's shares slipped in November amidst investor concerns that EBC, now with a direct stake in Noranda Forest, may sell its control. Noranda Forest officials said the name of the company will change to reflect its new structure.



3Q profits decline for Canadian producers

Most Canadian pulp, paper, and forest products companies reported lower profits in the third quarter from a year earlier mainly due to lower paper prices and further reductions in logging and sawmill operations. Net profits for 20 companies surveyed by Pulp & Paper Week showed a decline of 78% from a year ago and a drop of 16% from the second quarter. Sales were up about 5% from a year ago, but down about 7% from the second quarter.

Despite the weaker third-quarter results posted by all but two companies, industry executives remain optimistic. "Things look promising for the coming months," said Michel Desbiens, president and CEO of Donohue Inc. He said increases in prices for market pulp and newsprint, the industry's major exports, are expected during the fourth quarter. These increases, coupled with continued manufacturing cost reductions, will lead to improved financial results by the end of the year.



Restructuring planned for Great Lakes Pulp

Market deinked pulp (MDIP) producer Great Lakes Pulp & Fibre is planning a financial restructuring and recapitalization involving a prenegotiated bankruptcy, the company announced. The plan would clean up Great Lakes' balance sheet and allow the company to operate comfortably. The agreement with its large debt holders includes a $100 million reduction in bond and other debt, as well as interest rate reductions, along with $14 million in cash equity and a working capital loan facility. Two investment funds that are already among the company's largest bondholders-Cerberus Partners L.P. in New York and Oaktree Capital Management L.L.C. in Los Angeles, Calif.-will be the controlling stockholders and equity capital investors. The prenegotiated bankruptcy was filed in U.S. Bankruptcy Court in Grand Rapids, Mich., and is expected to be completed during first-quarter 1998. There will be no layoffs and suppliers are to be paid full, in cash.

The 520 tpd mill in Menominee, Mich., has been working toward a restructuring virtually since its July 1996 startup in the midst of the pulp market downcycle. It is the only fully operational air-dried MDIP mill in the U.S., having had one of the better startups of the new generation of air-dried MDIP mills. Its pulp quality has a good reputation among buyers and, for the most part, it has been running at full capacity. It is still rebuilding its wastewater treatment plant, which caused an eight-day shutdown and limited operations to about 75% capacity until mid-September.


Fitchburg assets sold; Beloit to operate mill

Beloit Corp. will operate the now-shuttered Fitchburg, Mass., air-dried 440 tpd market deinked pulp (MDIP) mill when it reopens at an as yet unspecified date, producing a still-to-be-determined product. The assets of the facility were sold to the newly formed Massachusetts Paper Co. in early November following an August bankruptcy filing. The mill shut down in September 1996-following a January 1996 startup-amid operational and financial disputes between turnkey contractor Beloit and parent International Recycling Corp. (an entity of Intercontinental Energy Group). At the time, the mill was known as Northeast Recycling Assn. Corp. or Massachusetts Recycling Assn. Corp.

The Fitchberg property was transferred subject to existing liabilities, with Beloit reportedly relinquishing its claims for operations and maintenance fees; no cash was paid into Massachusetts Recycling, according to a source. Beloit was expected to take over operations in November 1997. Beloit senior counsel Jack Fishman, listing a wide range of possible pulp and paper industry products, said there has been no decision yet; he did say the latest discussions have focused on tissue and some MDIP. Fishman said Beloit will start staffing the facility soon, but he did not know when a decision would be made regarding the startup.

Domtar Inc.'s proposed 772 tpd recycled bleached corrugated (RBC) pulp project in Everett, Wash., should be considered canceled, since the likelihood of its reaching fruition is now "one chance out of 10 or 20," said a company executive. Domtar has been evaluating the proposal for some time. An MDIP-proposed project at the same site-Snohomish River Pulp Co., which would have involved some common infrastructure with Domtar-was shelved in 1997.



Abitibi takes down Kenogami machine

Abitibi-Consolidated Inc. closed down a 38,500 tpy machine-finish roto-newsprint paper machine in late November at the Kenogami paper mill in Jonquiere, Que., and was considering the mothballing of a second machine at the mill, the company said.

The No. 5 Walmsley fourdrinier, first installed at the mill in 1920, was set for permanent shutdown on Nov. 16, the company said. The machine was stopped because of "increasingly demanding quality requirements of the specialty paper market (more particularly with regard to circular paper and advertising inserts) and a drop in product sales in this area," the company said.

The company said it might also permanently shut the mill's 34,000 tpy No. 1 machine that produces soft-nip calendered papers. The machine will be shut down within 15 months based on market demand for the machine's product. The No. 1, a Black Clawson fourdrinier, was installed in 1962.

Without the machines that produce soft-nip and roto-news papers, the mill will focus exclusively on producing supercalendered (SC) papers. The mill's other two machines, Nos. 6 and 7, already produce SC papers, but the company is considering capital expenditures to upgrade quality. With the shutdown of the No. 5 machine, the mill's annual capacity drops to about 230,000 tpy of uncoated groundwood papers for the catalog, flyer, advertising insert, and magazine markets.


Haindl to design N.Y. ONP newsprint mill

Haindl Papier GmbH, the sixth-largest newsprint maker in the world, has agreed to propose the design for the planned Evergreen Paper Co. recycled newsprint mill in Poughkeepsie, N.Y.

Under the agreement, Haindl will be paid an undisclosed sum for providing "operational, deinking technology, marketing, engineering procurement, and construction expertise" for the project. Haindl has no equity or financing share in the Poughkeepsie proposal. The Haindl-Evergreen deal hinges on Evergreen completing the financing for the mill within first-half 1998.

Evergreen has proposed a 276,000 mtpy mill at a cost of $440 million in Poughkeepsie on the Hudson River. The state of New York allocated $175 million in tax-free bonds for the project. The bonds expire in 1998.



Glatfelter buys specialty papermaker

P.H. Glatfelter Co. of Spring Grove, Pa., said it will acquire German specialty paper company Schoeller & Hoesch Gruppe, a wholly owned subsidiary of Deutsche Beteiligungs AG, for approximately $158 million. Schoeller makes cigarette papers and long fiber specialty papers. The company, which had sales of $173 million in 1996, has its headquarters and only paper mill in Gernsbach, Germany, where it was founded in 1881. It has a small converting facility in Odet, France, with other production facilities in Wisches, France, the Philippines, and Summerville, S.C.

The acquisition will strengthen Glatfelter's position as the second-largest worldwide producer of cigarette papers with a 10% market share. Schweitzer-Mauduit International Inc., a 1995 spinoff from Kimberly-Clark Corp., is the leading producer of cigarette papers in the world. Glatfelter said it will retain Schoeller & Hoesch's current management.

Tobacco papers will now account for approximately 22% of Glatfelter's annual sales and specialty papers will make up about 28% of sales. The remainder of the company's sales are mainly uncoated free-sheet printing papers. Glatfelter is the largest supplier of paper to the U.S. book publishing industry.

S.D. Warren to sell label papers business

S.D. Warren Co. said it has agreed to sell its pressure-sensitive label business located in Westbrook, Maine, to Spinnaker Industries Inc. of Dallas, Texas. The Westbrook unit has annual sales of approximately $70 million, while Spinnaker's annual sales are approximately $245 million.

The companies said they expect the sale to be completed in early 1998. For Spinnaker, the acquisition complements the capabilities of its Brown-Bridge Industries subsidiary located in Troy, Ohio. Brown-Bridge, acquired from Kimberly-Clark Corp. in 1994, produces adhesive-coated materials for a wide variety of products, including labels and adhesive tapes. In addition to label stock, Brown-Bridge is the leading supplier of coated basestock for pressure-sensitive U.S. postage stamps.


FiberMark buys German filter company

FiberMark Inc. of Brattleboro, Vt., the country's fastest-growing producer of technical and industrial specialty papers, said it has agreed to purchase Steinbeis Gessner GmbH, a leading producer of specialty papers in Europe with production facilities located in Germany. Steinbeis Gessner, with annual sales of approximately $85 million, manufactures filtration materials for air, oil, and gasoline filters and vacuum cleaner bags. It also manufactures substrate materials for adhesive tapes, wet-strength sandpaper, and abrasive discs.

These products are manufactured at two locations south of Munich in Feldkirchen and Bruckmühl. These production facilities are ISO 9001 certified and operate several specialty paper machines, saturation and coating lines, and advanced nonwoven technology for meltblown filter materials. FiberMark said it expects to finance the $43 million acquisition with a combination of bank debt and a public offering of 1.5 million shares of common stock.

In a separate announcement, FiberMark said that it will permanently close its specialty paper mill in Owensboro, Ky., by the first quarter of 1998. The closure of the 30 tpd mill is expected to generate annual net savings of $1.5 million and result in a one-time charge of approximately $10 million during the fourth quarter of 1997. The mill's production of decorative book cover stock, adhesive and saturating base materials, and technical specialty papers will be transferred to other mills in the company's technical specialties division. FiberMark acquired the mill when it purchased the Endura Products Div. of W.R. Grace & Co. in 1994.



Temple-Inland sells food service unit

Dopaco Inc., the leading supplier of paperboard packaging to the fast food industry, has agreed to purchase Temple-Inland Food Service Corp. (TIFSC), a wholly owned subsidiary of Temple-Inland Forest Products Inc. Terms of the transaction were not disclosed, but Temple-Inland will continue to supply bleached paperboard to TIFSC's five converting plants from its Evadale, Texas, paper mill, said a spokesman. During 1996, TIFSC converted 68,737 tons of paperboard and recorded revenues of $84.1 million.

TIFSC manufactures and distributes paper cups, plates, and containers at five facilities located in California, Ohio, Colorado, and Louisiana. The business was created by Temple-Inland through a combination of acquisitions in the early 1990s. Dopaco was created as a spinoff from Sonoco Products Co. in 1979 and has expanded primarily through internal growth up to now.

With the TIFSC acquisition, Dopaco will have sales of approximately $350 million. In May, Paperboard Industries International Inc. of Montreal, Que., acquired a 20% equity interest in Dopaco.



Smurfit to invest $120 million in Mexico

Ireland's Jefferson Smurfit Group plc said its wholly owned Mexican subsidiary, Smurfit Carton y Papel de Mexico (SCPM) plans to invest $120 million as part of a major expansion of its corrugated, folding carton, and paper mill facilities over the next two and a half years. Carlos Sacal, CEO of the Mexican subsidiary, said the investment program will be the largest in the company's history and will be financed internally by SCMP and Smurfit Group (Ireland).

Smurfit operates four mills in Mexico, which produce about 360,000 mtpy of containerboard and folding cartonboard. The mills are integrated with seven corrugated box plants and one folding carton plant. The company has enjoyed strong growth in Mexico, particularly from the maquiladora assembly plants located along the U.S. border. It has also enjoyed growth in Mexico's domestic market, supplying packaging for large multinational companies.

Smurfit Packaging Corp. (SPC), a wholly owned subsidiary of Jefferson Smurfit Group plc of Ireland, said it is selling its plastic drum division to Russell-Stanley Holdings Inc. of Red Bank, N.J., for approximately $70 million in cash. Net proceeds from the sale will be about $40 million. The plastic drum division consists of five manufacturing plants in the U.S. which produce a variety of sizes of blow molded plastic drums and containers. The division had sales of $65 million in 1996. Smurfit acquired the plastic drum business through the 1986 acquisition of Container Corp. of America (CCA). After the acquisition of Smurfit's plastic drum division, Russell-Stanley will have 16 plant locations in the U.S. and Canada and total annual sales of approximately $300 million.


CVRD to add pulp capacity in Brazil

Brazilian pulp mills connected with Companhia Vale do Rio Doce (CVRD) could see increased capacity, with CVRD acting on its plan to make pulp production one of its core businesses. The company intends to raise pulp capacity to 2.7 million mtpy by adding more output at the two existing mills and adding extra capacity at a planned mill.

As reported previously, Bahia Sul Celulose SA in Mucuri would more than double output. The mill's present capacity is 530,000 mtpy, with 330,000 mtpy for the market, and may increase to 1.2 million mtpy. Bahia Sul is controlled by Companhia Suzano de Papel (55%).

CVRD believes that debottlenecking could increase Cenibra Celulose Nipo-Brasileira SA's capacity to 900,000 mtpy. With the completion of a second pulp line in December 1995, Cenibra's previous capacity was doubled to 700,000 mtpy. Cenibra, in Belo Horizonte, is controlled by CVRD (51.5%) and a Japan paper consortium (48.5%). Capacity of the planned greenfield Celmar Industri Celulose e Papel market pulp mill in Maranhao state would be upped to 600,000 mtpy instead of 500,000 mtpy, with startup now moved back a year to 2002. CVRD and Ripasa SA Celulose e Papel each have a 42.5% interest in Celmar, with the remainder held by Nissho Iwai of Japan. CVRD was privatized at the beginning of May 1997, with a consortium headed by CSN Steel Group buying a 41% stake.



L-P selling gypsum plant to USG Corp.

Louisiana-Pacific Corp. (L-P) said it has reached an agreement in principle to sell its gypsum fiber panel plant in Port Hawkesbury, N.S., to USG Corp. The sale is subject to the negotiation of a final purchase agreement and due diligence and is expected to be completed before the end of this year. L-P announced that the facility was for sale as part of a major restructuring that will allow the company to focus on its core building materials business.

"As part of our strategic plan, we determined that this plant would be more appropriately operated by a company that specialized in the gypsum products business," said Mark A. Suwyn, L-P's chairman and CEO. USG, the country's largest producer of gypsum wallboard, ceiling tiles and panels, and joint compound, will complete the purchase through its wholly owned Canadian subsidiary, CGC Inc. No financial details of the transaction were disclosed.

Meanwhile, the U.S. District Court in San Francisco, Calif., has given preliminary approval to the settlement of a class action suit concerning L-P's oriented strand board (OSB) construction panels. Key to the settlement is a retroactive, 20-year warranty on all L-P construction panels sold since the product was introduced in 1984, and a similar warranty on all new OSB panels.



Mail-Well buys printer of Golden Books

Mail-Well Inc., a leading envelope maker and printer, will buy the printing operation of Golden Books Family Entertainment Inc. Terms were not disclosed. The printing operation for Golden Books, a major publisher of childrens' books, is located in Cambridge, Mass. Sales from the business were projected to be $33 million last year. Gerald F. Mahoney, chairman and CEO of Mail-Well, said the acquisition would enable the company to better serve bind-in catalog customers in the East.



next previous home back issues table of contents

Home Page

Discussion Area
Technical Calendar
Management Calendar
Industry Resources
Daily News
Stock Quotes
Price Indexes

Pulp & Paper
Reference Desk
Industry Resources

© 1998 MFI