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Industry News (February 01, 2011)


February 1, 2011
By Pulp & Paper Canada

Ontario will proceed with tenure reform

Ontario will proceed with tenure reform

THUNDER BAY, ONT. – The Government of Ontario intends to introduce legislation later this year that would modernize its forest tenure and pricing system. This proposed system, if passed, would establish two governance models for managing and harvesting wood from Ontario’s forests.

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Local Forest Management Corporations (LFMCs) would be government agencies that manage Crown forests and oversee the competitive sale of the timber in a given area. Enhanced Shareholder Sustainable Forest Licences would consist of a group of mills and/or harvesters that collectively form a new company to manage Crown forests under the Sustainable Forest Licence that is issued to them.

The new rules are intended to help make Ontario’s timber supply and prices more responsive to market demand, create new business opportunities for entrepreneurs, and facilitate greater local and Aboriginal participation in the sector. The introduction of this legistlation follows several months of consultation on the proposed framework released last April.

The Ontario Forest Industries Association has spoken out in favor of the proposed changes. “We want to thank Minister Gravelle for carefully considering our concerns regarding tenure and pricing reform. The proposed path forward is a positive development and provides much needed certainty for operating mills, while creating opportunities for new investment in the sector,” says OFIA president Jamie Lim.

Linda Jeffrey, Minister of Natural Resources, says the proposed legislation does respond to some concerns raised during the public discussions held last fall. “Our approach contains many of their recommendations, including more involvement by local and Aboriginal communities as well as the separation of forest management operations from the mills where warranted.”

Crown timber is currently harvested from nearly 40 Sustainable Forest Licences spread across northern and eastern Ontario.

Gap diminishes between East and West fibre costs

SEATTLE, WASH – In the fourth quarter of 2010, the wood chip cost discrepancy between pulp mills in Western and Eastern Canada was the lowest it has been in 10 years, according to the North American Wood Fiber Review.

Over the past 20 years, pulp mills in Eastern Canada have consistently had higher wood fibre costs than the mills in the Western provinces, with the exception of a short period in 1995, the Review notes.

Because wood costs account for almost 50% of the production costs for Canadian pulp mills, companies in Eastern Canada have been at a competitive disadvantage.

Despite a price decline in Eastern Canada and an increase of almost 40% in one year in the West, pulp mills in British Columbia continue to have lower wood fibre costs than mills in the eastern provinces.

The North American Wood Fiber Review is published quarterly by Wood Resources International (WRI), a forest resource consulting firm.

Forest companies have strong third quarter

Canadian forest products companies and paper producers recorded strong results and a solid performance for the third quarter of 2010 amid ongoing market uncertainty, PricewaterhouseCoopers reports.

In its latest report on the forest products and pulp and paper sectors, PwC says markets for pulp remained favorable during the quarter in spite of downward pressure exerted by the addition of idled capacity and reduced demand from China. Prices for NBSK pulp remained at near-record levels and averaged just over $1000 per tonne compared with $840 per tonne in the same quarter in 2009. Producers were faced with higher fibre costs during the quarter, but benefited from increased and record production levels, PwC states.

Among pulp and paper producers in West, Mercer shows significant improvement, with net earnings of $62 million in Q3 2010, compared with loss of $22 million in Q3 2009. West Fraser bounces back with earnings of $45 million this year, compared with loss of $199 million in Q3 last year. Canfor also shows growth, while Catalyst Paper’s fortunes have declined, with net earnings of only $6 million in Q3 2010, compared with $13 million for the same time last year.

In the East, Domtar is down slightly compared with year-earlier figures, to $199 million for Q3 2010. Cascades is down slightly as well, at $30 million for Q3 2010. Tembec shows earnings growth to $2 million compared with a loss of $17 million one year earlier. And AbitibiBowater, operating under creditor protection at the time, recorded a loss of $637 million in Q3 2010, almost $300 million more than its year-earlier figure.

Heat recovery system cuts energy use by 11% at Gatineau mill

GATINEAU, QUE. – An innovative heat recovery technology is now operational at Kruger Products’ Gatineau mill, which manufactures tissue products for consumer and industrial use. This technology will lower the mill’s total energy consumption by 11% and CO2 emissions by 14.5% (10,000 tonnes per year).

This $4.8-million project is one of several initiatives that Kruger Products has implemented as part of Sustainability 2015, the company’s five-year plan to reduce its environmental footprint. The project was financed in part by Québec’s Agence de l’efficacité énergétique, which granted $1.9 million in financial assistance through its Heavy Oil Consumption Reduction Program.

Kruger Products partnered with Thermal Energy International to develop and install the heat recovery technology. The central heat recovery system will capture hot, humid air from two of the mill’s three paper machines and reuse it to heat process water as well as the facility itself during the winter.

Nova Scotia clarifies strategy for future forest policy

The Nova Scotia government has announced six strategic directions that will be the basis for the province’s future forestry policy. The new rules will reduce clearcutting, prohibit whole tree harvesting, and ensure commercial buyers of biomass are subject to the same rules as the forest industry.

The Mi’kmaq and key stakeholders will be invited to provide input before the policies are finalized. Rules and guidelines to support these directions will become part of the next steps in the strategy process.

The strategic policy directions are:

  •  Reduce the proportion of wood harvested by clear cutting to no more than 50% of all forest harvests over a five-year period.
  •  Prohibit removing whole trees from the forest site to maintain woody debris, which is important for soil and biodiversity management and is consistent with the province’s Renewable Electricity Plan. Christmas tree harvesting will be exempt.
  •  Incorporate forest biomass harvest requirements in the Code of Forest Practice and revise regulations to ensure commercial users of biomass for energy or fuel production are registered buyers and subject to the same rules as the forest industry.
  •  Analyze options for a province-wide annual allowable cut to limit total harvested amounts.
  •  Public funds will not go toward herbicide spraying for forestry.
  •  Private land owners will not need management plans to harvest their woodlots for non-commercial energy use.

The Department of Natural Resources is in the final phase of writing a natural resources strategy. The forest policy framework and more information is available at gov.ns.ca/natr.

AbitibiBowater emerges from bankruptcy protection; Garneau takes the reins

MONTREAL – Calling itself a transformed company, AbitibiBowater completed its reorganization and emerged in December 2010 from creditor protection.

“Through our restructuring efforts, we have transformed this organization a
nd given AbitibiBowater a new future – one driven by a company-wide commitment to profitability and sustainability,” stated then-president David J. Paterson. “By strengthening our competitiveness and dramatically improving our financial position, AbitibiBowater has become one of the lowest cost forest products companies in North America.”

David J. Paterson stepped down as president, after having led the company through its far-reaching restructuring. Richard Garneau, a member of the Board of Directors of AbitibiBowater and the former president and CEO of Catalyst Paper, took over as president and CEO of AbitibiBowater on Jan. 1.

The company has streamlined its asset profile, closing or idling 3.4 million tonnes of paper capacity. This represents capacity reductions of 41% for newsprint and 32% for commercial printing papers. Wood products capacity was reduced by 21%.

As well, AbitibiBowater states it has developed a flexible mill portfolio with a mix of U.S., Canadian and international mills located strategically to support low-cost, on-time delivery as well as the ability to adapt to changing market dynamics.

The company has sold non-core assets and land holdings for total aggregate proceeds of more than $940 million.

The restructured entity has reduced its debt burden significantly, and eliminated $880 million of annual fixed costs.

The papermaker entered into agreements with provincial authorities in Ontario and Quebec, reducing annual pension fund contributions by approximately $200 million. These reductions have been made while registered pension plans continue to pay 100% of obligations to retirees and beneficiaries. The company will gradually move towards normalized solvency funding over a 10-year period.

A new executive team was announced in January, that will report directly to Richard Garneau, president and CEO.

“The executive team we have put in place represents an excellent blend of proven experience and fresh thinking,” stated Garneau. “We believe that with the support of all company employees, we can deliver on our commitment to further reduce costs and enhance our competitiveness.”

Alain Boivin will join the company as senior vice-president, pulp and paper operations. Boivin most recently was vice-president of mill operations, central region at Smurfit-Stone Container Corporation and will assume his new responsibilities at AbitibiBowater on March 7, 2011.

Briefly…

 

Clearwater Paper Corporation has completed its acquisition of Cellu Tissue Holdings, Inc. The acquisition includes a tissue plant in St. Catharines, Ont.

Kemira has announced price increases of five to 15% for its paper chemical products in all major markets to compensate for the energy impact, raw material costs, and increased freight costs.

ABB has opened a new factory in China for quality control systems and web imaging systems. ABB will transfer its entire QCS and WIS manufacturing business from its Ireland and Finland facilities to the new location.


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