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Fortress Paper announces cost reductions, loan deferral


November 12, 2014
By Pulp & Paper Canada

The Fortress Speciality Cellulose mill in Thurso, Que., has implemented several cost reduction measures in 2014, bringing its average cost to $757 per air dried metric tonne (ADMT) of dissolving pulp produced, according to a company update…

The Fortress Speciality Cellulose mill in Thurso, Que., has implemented several cost reduction measures in 2014, bringing its average cost to $757 per air dried metric tonne (ADMT) of dissolving pulp produced, according to a company update published in late October. As the cogeneration facility is optimized and other initiatives are implemented, management expects the mill to achieve run-rate production costs of $725 per ADMT of dissolving pulp produced by the end of 2015. Although the FSC mill has the capability to produce both hardwood and dissolving pulp, the company is targeting 100% dissolving pulp production for 2015.

Fortress Paper continues to be granted a temporary deferral on its principal and interest payments under its $102.4 million project financing loan with Investissement Québec.

The viscose staple fibre and rayon filament markets, which are key drivers in dissolving pulp demand, reached a bottom in the second quarter of 2014, according to Fortress, and since then capacity utilization has improved. The third quarter of 2014 saw dissolving pulp reach its lowest prices since May 2009. Company management believes dissolving pulp prices will improve in 2015 because a large proportion of dissolving pulp producers are currently operating at a loss. Fortress forecasta capacity utilization in the dissolving pulp industry will reach 94% in 2015 and continue to increase in subsequent years as global growth in demand for dissolving pulp outpaces growth in supply.

Key elements of the FSC mill’s plan to reduce cash flow included inventory levels, capital spending and production costs. By the end of October 2014, management expects the FSC Mill will have decreased its pulp inventory levels from 40,000 ADMT to 15,000 ADMT. The facility has implemented previously planned strategic capital projects, achieving a 16% savings compared to the initially approved costs of $8.8 million. The capital projects related to a dissolving pulp gas collector system to reduce atmospheric emissions, a new drum washer, a power generation project and a new dry sodium sulphate project to reduce chemical costs.