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Industry News (October 01, 2007)

NEW OWNERS

STORA ENSO SELLS PORT HAWKESBURY

HELSINKI, FINLAND — Stora Enso has signed a definitive agreement to sell its North American subsidiary to NewPage Holding Corporation of Ohio for approximately $2.5 billion. Under the terms of the agreement, Stora Enso will receive approximately $1.5 billion in cash, a $200 million note, and a 19.9% equity interest in the new company.

The operations being sold include its eight North American publication, fine paper and specialty paper mills, six in Wisconsin, one in Ohio, and one in Port Hawkesbury, NS. The transaction is expected to be finalized during the first quarter of 2008, subject to customary regulatory approvals.

The future is unknown for individual mills changing hands in this transaction, including the Port Hawkesbury newsprint and glossy paper mills in Nova Scotia, according to a CBC News story. The plant is a major employer in the region, and accounts for 30% of the county’s tax revenue.

NEW OWNER

NORAMPAC SELLS RED ROCK

ST.BRUNO, QC — Norampac announced the signing of a Letter of Intent for the sale of its Red Rock linerboard mill, located in northwest Ontario. Norampac has agreed to pay the purchaser, North American Logistic Services, $10 million in order to encourage the start-up of a new line of production at the facility.

The Red Rock mill was shutdown indefinitely on October 3, 2006, due to unfavourable economic factors.

ENERGY

ST. MARYS PAPER DOES CO-GEN

SAULT STE. MARIE, ON — After taking over the St. Marys mill, the new owners are planning further investment, according to a Northern Ontario Business report.

Since high energy prices had such a disastrous effect on the mill, the new company president Gord Acton has announced plans for a co-generation plant to produce electricity.

The mill is negotiating with neighbouring Algoma Steel which has already begun building a co-generation facility using off-gases from its coke ovens and blast furnace. While it was planned to use a fluctuating gas cycle, St. Marys plans to contribute wood waste into the mix in a dual-fuel boiler, says NOB.

LAW

NEWFOUNDLAND’S PULP AND PAPER ACT UNDER REVIEW

GRAND FALLS-WINDSOR, NL — Newfoundland’s 1905 pulp and paper act that exempts paper companies from paying municipal taxes will soon be reviewed, notes The Advertiser. This action was requested by the Grand Falls-Windsor town council after the town received notice from the local Abitibi-Consolidated mill that the company would be cutting the annual grant that it pays in lieu of taxes by 40% for the next four years, an annual reduction of approximately $325,000 for the town’s coffers.

CONFERENCE

PAPER ARABIA 2007 HELD IN DUBAI

DUBAI, UNITED ARAB EMIRATES — Paper Arabia 2007, the first conference of its kind in Middle East, was held September 13 in Dubai.

The event was conceived to highlight the growing importance of the paper and converting industry in the region, to give an opportunity for manufacturers and suppliers in the paper industry to meet and do business with each other, and to serve as a launching pad for new technologies targeted at the Middle East region.

UPTURN

PAPER INDUSTRY FORECAST

CHICAGO — Fitch Ratings points out, in a recent special report, that the paper industry is making a gradual comeback. They observed that second quarter operating results had improved over the first quarter of this year, with earnings generally better or losses smaller. But the upturn is moderate, Fitch notes, and the numbers have not risen to the pre-housing downturn levels of last year.

Fitch forecasts that modest improvements will continue into the third quarter in all paper grades except newsprint, and also in the packaging and containerboard segment.

FINANCES

CATALYST CONTINUES COST CUTTING

VANCOUVER, BC — Catalyst Paper is continuing its staffing reductions, mostly at the Crofton and Elk Falls mills in BC, and most will be accomplished through early retirement. Catalyst expects an annualized savings of $13 million from this move, with one-time severance costs of $16 million.

Another measure to improve profitability, as the company announced in May, was the indefinite curtailment of PM4 in Port Alberni.

Catalyst’s corporate overhaul program includes the downsizing of 565 positions, centralization of functions, and the relocation of the Vancouver office to Richmond.

CAPEX

TEMBEC ACQUIRES ASSETS OF CHAPLEAU COGENERATION

TEMISCAMING, QC — Tembec announced the acquisition of the assets of Chapleau Cogeneration, located in Chapleau, ON. These assets have a present value of approximately $1 million, and include a biomass-fired boiler and steam turbine with an installed capacity of 7.2 megawatts.

CLOSURE

KRUGER SHUTS DOWN WAYAGAMACK PAPER MACHINE

MONTREAL, QC — Kruger announced a production shutdown of its supercalendered paper machine at the Wayagamack Mill in Trois-Rivires, QC. The shutdown will last for an indefinite period of time.

“The company regrets having to make such a decision,” said Jean Majeau, VP, corporate affairs for Kruger Inc. “Unfortunately, the current market conditions, the high value of the Canadian dollar and the continuous increase in production costs, including labour, energy and fibre supplies, leave us no alternative.”

The shutdown will affect approximately 140 employees. Annual production for this paper machine is 65,000 tonnes.

AWARD

TEMBEC HONOURED

TEMISCAMING, QC — Forest Stewardship Council Canada has chosen Tembec as the recipient of the 2007 Winds of Change Award, recognizing the company’s contribution to safeguarding Canadian forests.

When Tembec sought third-party certification of all its forest operations in accordance with FSC’s forest management standards in 2001, it was the first large-scale forestry company in Canada to do so. To date, Tembec has certified over 90% of the 8.8 million hectares under its management, making it the largest producer of FSC products in the world.

REDEVELOPMENT

PRINCE ALBERT PULP MILL REBORN

MONTREAL, QC — Domtar has announced that it has signed a memorandum of understanding with the province of Saskatchewan for the redevelopment of the Prince Albert pulp mill. The plan could result in the reopening of the facility as a northern bleached softwood kraft (NBSK) pulp mill, producing 100% FSC certified softwood pulp for the North American and offshore markets, with an annual production of approximately 328,000 tonnes.

The plan includes provisions for a green energy expansion of the mill. There are no plans to restart the paper machine and related sheeters.

Although the redevelopment plan could create up to 425 jobs, the Saskatchewan government’s pledge of $100 million towards the mill reopening has sparked some controversy.

CUTBACK

POPE & TALBOT CUTS MORE OUTPUT, EARLIER

SAN FRANCISCO, CA — Although Pope & Talbot had announced that is would reduce daily production at its Harmac pulp mill in Nanaimo, BC, starting September 15, reductions began earlier, on September 10 instead, according to a report by Forestweb. In addition, instead of cutting output by 70,000 tonnes/year as planned, production is now down by about 100,000 tonnes per year, a company executive confirmed. This brings the northern bleached softwood kraft mill’s rate of operation to about 280,000 tonnes/year.

BLOCKADE

GREENPEACE BLOCKADES SHIPMENT

SAGUENAY, QC — Greenpeace activists climbed the mooring lines of the freighter Jaeger Arrow on S
eptember 14 in an attempt to block the export of wood pulp. The blockade was launched from the Greenpeace ship Artic Sunrise on the Saguenay River at the port of Saint-Fulgence, near Chicoutimi, QC. The Jaeger Arrow was carrying about 6,500 tonnes of pulp from the Saint-Felicien mill of SFK Pulp Fund to a Stora Enso plant in Germany. The environmental group was protesting what it claims are destructive logging practices in the Canadian boreal forest.

SFK does not have woodland operations but was targeted because it gets its supply from Abitibi-Consolidated and Bowater, which do have forest operations.

VERDICT

BOWATER MUST PAY WEYCO

GREENVILLE, SC — Bowater Canadian Forest Products has received a decision in an arbitration case between Bowater and Weyerhaeuser. In the case, relating to the 1998 sale to Weyerhaeuser of Bowater’s former pulp and paper facility in Dryden, ON, the two companies were arbitrating a claim regarding the cost of certain environmental matters. The arbitrators’ decision was returned September 7th stating that Bowater must pay Weyerhaeuser approximately $44 million in the case. The decision is binding and not subject to appeal.

ENERGY

PORT MELLON MILL BURNING COAL

SQUAMISH, BC — Canfor’s Howe Sound pulp and paper mill has been burning coal recently and, according to Steffanie Warriner, acting manager of environmental protection for the BC lower mainland, there is nothing in the mill’s permit (issued in 1978) that prohibits them from using coal, although she notes that this was an oversight and the permit “was not intended to allow a provision to burn coal. The newspaper contends that the Port Mellon mill power boiler has relied about 15% on coal since the end of May, as part of a nine-month trial period that the Ministry of Environment imposed on the mill after they requested to use coal.

Amendments to the mill’s permit which are being considered include increasing requirements to monitor air quality.

INTERNATIONAL

AUSTRALIA’S GREENS CHALLENGE STEPHEN HARPER

CANBERRA, AUSTRALIA — During Prime Minister Stephen Harper’s recent trip to Australia, he became the first Canadian prime minister to address the Australian parliament. Australia’s Green party leader Bob Brown used the occasion to challenge Harper to end the destruction of British Columbia’s ancient forests, and presented him with an eagle brooch, a symbol of the Australian campaign to save Tasmania’s forests from a new pulp mill project. Both Canada and Australia have agreed to aim to end forest destruction to help halt climate change.

PAPERCLIPS

FPAC WELCOMES DICAPRIO’S THE 11TH HOUR

OTTAWA — August 10, 2007 — The Forest Products Association of Canada (FPAC) expressed support for Leonardo DiCaprio’s documentary, The 11th Hour. Although not yet released in Canada, promotional materials and statements indicate that the film will highlight the importance of maintaining and enhancing the world’s forest cover in mitigating the impact of climate change.

“There is absolutely no question that the world’s forests are a precious resource that requires enormous care and management,” said Jean-Pierre Martel, senior V-P, Sustainability at FPAC. “Recent United Nations reports on the state of the world’s forests concluded that globally, deforestation accounts for about 20% of the world’s greenhouse gas emissions; and that Canada, one of the world’s largest and most successful forest products nations, has a deforestation rate of zero, primarily because Canada is committed to sustainable forest management, recycling, and sound environmental performance. If all countries of the world could eliminate or virtually eliminate deforestation as Canada has done, this would have an impact comparable to eliminating fossil emissions in the United States in terms of advancing GHG mitigation efforts.”