Capital investment in the Canadian newsprint industry during the last decade has been confined to new DIP capacity and to fixing bottlenecks in the existing equipment. This has caused a further deterioration in production capital competitiveness, which will require massive future investments to correct. The global newsprint demand is increasingly shifting to Asia and Europe where Canada must compete with local recycled-based suppliers and state-of-the-art production lines. The paper demanded by newspaper publishers is also changing. Coated or SC grades, as well as emerging new grades such as coated newsprint (CSWO) are increasingly replacing traditional newsprint. In the above scenarios, Canada's advantages of abundance of high quality fibre for mechanical papers, long papermaking tradition, papermaking skills and moderately priced energy, are not being effectively exploited.
This report discusses the challenges and options the global newsprint industry is facing in demand, technology and supply sides. It describes how latest technologies have been applied to marginal newsprint production lines in different regions of the world to produce value-added products to improve their economy. Lastly, the paper outlines possible Canadian options to use similar approaches to develop value-added products with existing machinery. It is argued that such intermediary step is the best option to maximize profits now in order to make the necessary full-scale investments for competitive long-term production in the future.
Newsprint demand has peaked
The newsprint market in North America has deteriorated since the 1970s and future prospects appear even more pessimistic. The downward trend in North American demand will continue, Table I. The current production level, however, can be maintained through increased exports, assuming that Canada's traditional competitiveness is maintained. The large growing markets for newsprint today are in Europe and Asia, particularly in China with its present very low newsprint consumption.
Increasingly, newsprint publishers in the US and Europe are demanding better quality paper for multi-color printing for newspapers and, especially for inserts and flyers. The publishers are using less newsprint and more bright, glossy or coated paper.
The price of standard newsprint is increasingly affected by DIP-based suppliers and by large machines. Although prices have been high in recent years, there is a clear trend downwards with little hope for any future reversals. On the contrary, new technologies are expected to depress the prices further.
Competitiveness in the Asian paper supply has recently been developed through alliances. In newsprint, Abitibi, Norske Skog and Hansol have formed PAPCO, with operations in South Korea, Thailand and China. Bowater acquired Halla Newsprint in Korea. The Asian customers may already prefer foreign newsprint suppliers with established local subsidiaries, to have a guaranteed long-term commitment.
In Canada, there are 240 paper and board machines, 75 producing just over nine million tonnes (t) of newsprint, and 35 producing 2.5 million t of groundwood specialties. From this total, 45 newsprint machines and 35 groundwood specialty machines are less than 7 m wide.
The current state-of-the art newsprint and SC-machines are 10 m wide with speeds of 1600 to1800 m/min. In Scandinavian countries, newsprint machines narrower than 7 m wide are not considered competitive.
The Canadian small and medium size newsprint machines are not competitive in a sustainable way in global markets. The extra US$50/t transport costs make it difficult for an average Canadian newsprint mill to compete in Europe. The Asian costs, Fig. 1, are, however, suppressed by the devalued local currencies. The demand for newsprint there is much higher than local supply, requiring large and increasing imports, which Canada can effectively exploit. Once these economies recover, their currencies will further strengthen, thus improving the Canadian position further.
An investment cost comparison
Canada's most important production components -- fibre, water and energy -- are competitive, which ensures the viability of its mechanical papers as export products. These advantages become apparent when comparing costs of installing new world-class mills in Central Europe, US urban centres and Canada. Of the three, a Canadian location offers the lowest production costs and, therefore, highest long-term profitability. The Canadian mechanical paper grade industry has a good base for further development.
Grade change alternatives
Changing to value-added grades increases revenues and profitability. The challenge is how to maximize the use of existing machinery and how to select the right technology to produce the selected product. The market is another question -- a small market niche may offer high profits, while a large one may be less risky.
Coated grades have traditionally grown faster than uncoated grades. Coated woodfree papers had an average global annual growth of 6.5% in the 1990s, compared to 4.5% for LWC, 2.3% for SC and 1.2% for newsprint.
The Machine Finished Coated grades (MFC), SC-specialties and newsprint specialties are niche products. Their demand is much a question of tailoring the product for certain uses, and marketing it to the prospective customers. This involves "training" publishers on the benefits of improved properties, which are available at prices lower than LWC. Until recently, MFC producers in Europe have found customers who have previously used SC or LWC.
MFC is sold for a slightly lower price than LWC (US$50/t). It is used for magazines and other publications primarily for "reading". Global consumption of MFC papers today is roughly 1-1.1 million t/y. In this paper, MFC is considered to comprise a group of grades which are produced on machines with on-line coating and calendering and gloss below 50%.
Coated newsprint (cold-set offset) has not yet been widely accepted despite attempts by several suppliers to launch it. The reason for this is perhaps that the price that the publishers are willing to pay has been too low for the Scandinavian producers (US$100/t lower than LWC), despite the fact that it is sold as a substitute for LWC/MFC/SC for inserts and flyers. Newspaper publishers have, perhaps, not yet fully perceived the business potential for the coated cold-set printing technology in place of the much more expensive heat-set technology.
Currently, a change is taking place in newsprint publishing with coated newsprint showing strong potential. The producers of this grade include Haindl Augsburg and Schwedt Papier in Germany and Norske Skog in Follum, Norway. UPM-Kymmene in Stracel, is converting its giant newsprint machine to produce coated cold-set offset newsprint and other MFC grades. The total potential capacity of coated newsprint will be at least 600 000 t/y after the Stracel conversion is complete. When Haindls new 400 000-t/y LWC machine, with high recycled fibre content in the furnish, starts up, total potential capacity of this grade in Europe will be 1 million t/y. Current coated cold-set offset demand (close to 100 000 t/y) will, no doubt, increase rapidly due to increased supply. This should generate new business opportunities for the Canadian newsprint industry. The coated newsprint market will likely be even more supply driven than the MFC/CFO market, because it offers benefits for the publishing industry. Parallel developments are expected to occur in North America.
In addition to the MFC option, the newsprint industry has the option of converti ng to SC-C, SC-B or SC-A paper. The new on-line multi-nip calendering technologies together with an upgrade in stock preparation, offer possibilities to produce glossy grades on-line at low investment costs and less risk in production know how.
The question the paper mill has to consider is whether it is worthwhile to invest anything in a small paper machine or should it be run as is until its revenue potential is fully exploited. A paper machine represents only 30 to 35% of total paper mill investment. Extensive re-use of existing equipment can critically affect the required investment costs.
UPM-Kymmene pioneered MFC
In the early 1980s, Kymmene's Voikkaa Mill in Finland was facing difficulties with its 5.2-m trim PM 11 newsprint machine. The machine, despite its re-built wet end and speed-up to 1000 m/min, was clearly too small to produce newsprint economically, so Kymmene carried out a major survey of its more profitable options. During 1984, the options were evaluated and in early 1985 the mill elected to develop a new grade: Machine Finished Coated paper (MFC).
Pertti Asunmaa, vice-president and mill manager of Kymmene's Voikkaa and Kymi mills, described the successful development project.
A development group consisting of Kymmene Voikkaa, Valmet, and Nokian Kumitehdas (today Stowe Woodward Finland) was formed to prepare an optimal concept for the new grade. In this way, the mill believed it would best benefit from its own know-how in newsprint and Kaukas' coating know-how. The difficult task was to make full use of the recent re-build and to select the equipment, which would not destroy the project by high investment costs. The final outcome of planning was a fourdrinier table extension ahead of Valmet Sym-Former, two Voith short-dwell coaters and a new soft calender developed jointly by Valmet and Kymmene suitable for matte-finished coated mechanical paper. The delivery included extensive pilot trial runs in the facilities of suppliers during 1985. The machinery was installed in March 1986.
As Asunmaa recalled, the start-up of the new machine was not easy. One special difficulty was caused by the long strike of Finnish electrical workers, the result of which was serious problems with the electric drive (a completely new piece of equipment -- the first programmable logic used in ABB supplied electric drives). There were also problems with the calender soft roll covers, which had to operate at high temperatures and linear loads.
Another challenge was in the marketing of the product. Voikkaa was restricted to selling coated mechanical paper with coat weights below 6 g/m2/side. At that time, the Finnish paper producers had fixed allocations with the Finnpap-sales organization, and the new grade was not permitted to infringe upon LWC quota.
A totally new production culture occasioned by a new wet end chemistry was introduced. To a newsprint producer, coated paper represents a new world. Raw materials, special properties of the mechanical pulp, cleanliness, a narrower control operating window and especially the use and control of fillers, were all new and different.
"We can say today, that the concept was very good and the machinery itself worked well," Asunmaa said, of the early experiences with MFC production and of learning process this involved. "Higher speeds required lengthening of the fourdrinier and higher kraft pulp content (20-30%). The runnability of the machine itself has been good from the beginning. Coaters and soft calenders worked as they were expected to, with the exception of soft roll covers in very beginning. The start-up phase nonetheless took almost one year. The first delivery of the full-quality MFC was made on September 22, 1986, six months after start-up. Before that, lower quality coated grades and uncoated grades were produced and shipped. The first year that we were able to produce 100% coated papers on PM 11 was 1988."
Asunmaa pointed out that the one-year start-up was not only a product of the new technology. Converting to a new grade and meeting its specific requirements takes a time-consuming learning process. This will remain the reality in conversions from newsprint to coated grades so it is wise to plan ahead for this. A know-how partner is a critical requirement for the mill starting to produce such from scratch, according to Asunmaa.
Voikkaa's PM 11 was first in Europe and in the Western world to produce MFC grades. A similar product (Bitokoshi), was earlier produced by the Japanese using a gate roll size press, and, usually, hard calenders.
European MFC customers are located primarily in Germany, France and UK. The demand comes from specialized magazines, intended primarily for reading, where the matte is, thus, an asset. The grade is typically a stiff product, which has good four-color printing properties, especially for image reproduction.
Today, as Asunmaa summarized, PM 11 produces 140 000 t/y of MFC-grades, under the name Saimatech, which has a coat weight of 7 to 11 g/m2/side. Production speed is 1250 m/min, at a speed 50 m/min faster than the original design speed. Brightness is 75-80 and gloss 26-27%. PM 11 has been a success story, both technically and economically.
Continuing the MFC expansion
Three paper mills produce MFC-grades in the small Kymi county in southeastern Finland. All of them are alongside Kymi river, along a 40 km range. After the PM 11 rebuild, Enso Kotka (1988) and Tampella Anjala (1989) developed the same grade. All of them had the same reason for the investment: the 5.2-m paper machine was too small for standard newsprint production. Something else had to be found to rescue the operation and the jobs.
Tampella Anjala, today a member of Stora Enso's family, was the global third with its MFC-investment. Product line manager Jouko Ventola, responsible for PM 2's operation, was the PM 2 project manager during the investment decision and the start-up, which took place in December 1989.
The PM 2 investment was extensive and expensive. Essentially, an entirely new 5.5-m machine was supplied with only the breaker stack re-used. The existing dryer cylinders could not be re-used because of the higher steam pressures needed for higher speeds. Total investment cost amounted to FIM620 million (roughly US$140 million).
In the first year, an average of only 200 t/d was produced. "We had several further development projects, some in the machinery side, as well as in learning the process and know-how," Ventola said. "Myllykoski was our know-how partner. Making LWC with an off-machine coater and MFC with on-machine equipment differ somewhat. Kotka started production one year earlier, and sometimes we had to use their supplement deliveries to fulfill our order commitments."
This kind of co-operation was common at that time; Kotka used Voikkaa as a sub-contract supplier when it needed help during its start-up phase.
Ventola agreed with Asunmaa that it is very challenging to convert from newsprint to MFC: "Cultural change from newsprint to coated grades is vast. Coated papers have much stricter requirements. Attitudes have to be changed to enable a successful transformation to the new production A real commitment to the new grade is of vital importance."
Today, PM 2 uses 65% mechanical pulp, 30% kraft pulp and 5% filler. The freeness level is from 60-70 CSF, compared to 100 for newsprint. Proper stock preparation is critical; requirements for screening are much stricter than for newsprint. The whole stock preparation and fibre handling system must be carefully considered. Anjala has an acidic fibreline, while the paper machine has an alkaline system. Today, PM 2 produces 400 to 450 t/d with a total efficiency of 75 to 80%.
Port Alberni's NexGen
Pacifica Paper's Port Alberni, BC, mill produces 240 000 t/y of telephone directory papers on its 6.5-m wide PMs 3 and 4, running at speeds up to 1000 m/min and 200 000 t/y of LWC on 7.6-m wide PM 5 at speeds up to 1200 m/min.
Gary McCaig, operations manager of Alberni Specialties, was the driving force behind PM 5's conversion from newsprint to LWC, aimed at achieving sustainabl e production and improving profitability. He explained the results of NexGen project, which started up in December 1995. (PULP & PAPER CANADA, July 1996, August 1998)
The mill's previous owners, MacMillan Bloedel, studied the LWC options in the 1980s. The projected cost for an off-machine LWC line at the time was not considered attractive and the project was rejected. A new study in early 1990's yielded an acceptable cost thanks to new technologies. Valmet had a film-transfer coating unit, which was able to coat both sides simultaneously at sufficient coat weights for LWC. The pilot trials with a two-nip soft calender produced sufficient gloss at appropriate temperatures and nip loads.
McCaig explained why PM 5 was chosen for the conversion. "PM 5 happened to have the most suitable infrastructure: CTMP, right scale, and plenty of space around the machine. We were able to minimize the investments in the surroundings by selecting PM 5. It was a very good choice."
The project scope included a screening unit, the new bi-nip press with a separate third nip for two sidedness control, Sym-Sizer film transfer unit with simultaneous coating for both sides of the paper, OptiGloss softcalender (two nips tandem), OptiReel, and a Winbelt winder, all from Valmet. GAW supplied the chemical and coating color preparation systems.
The machine is clearly an MFC-machine -- a film sizer and a two-nip soft calender! But it runs LWC with coat weights of 7-9.5 g/m2/side, and gloss levels of 50-55%. Basis weight varies from 47 to 66 g/m2 (59 g/m2 was average in 1998).
Why LWC? Perhaps, because there was an inadequate demand for low-gloss coated mechanical in North America (which has a demand in Europe), or because of the higher price for LWC and therefore higher profitability. Port Alberni had a good access to Finnish know-how. The Anjala mill was its know-how partner during the NexGen project. Esko Harala, who was the project manager for Voikkaa's PM 11, was Valmet's project manager at Port Alberni. The abilities of the soft calender to generate paper gloss are fully exploited, in respect to heat and nip load. The success was ultimately a combination of planning, research, suitable equipment and managerial talents in the mill.
One difference between Pacifica and its Finnish counterparts is the size of the converted machines, 7.6 m vs. 5.5 m wide in Europe. Port Alberni has CTMP while the others have TMP. Finnish suppliers use SDTA-coaters, while Port Alberni has a film transfer unit, meaning that the Finns need better profiles and a more even surface for good coverage. Gloss is much higher in Port Alberni, over 50% compared to 25 to 45% in Finland, where the usual levels are 25 to 30%. Speed is roughly the same for all of these machines.
Comparison of concepts
All the installed MFC-machines have been successful (in this case MFC means combined on-line coating and calendering). They have all achieved the set target of permanent and substantial improvement in the profitability compared to previous results achieved with newsprint. Also, the return on investment has been good in all cases, although the companies are reluctant to give specific data on this. Table II compares the concepts.
The increased use of filler combined with a higher gloss is an alternative to enhance the appearance of newsprint-type printed products. The SC option entails minimum risk since the risks involved with coating are avoided, and the investment costs are considerably lower.
New technology developments have also made it easy to install high gloss concepts by using on-line multi-nip calenders, a number of which are already produce SC-type paper grades.
The recent demand increase in North America has attracted the investors to install new capacity, such as Stora Enso Port Hawkesbury, NS (340 000 t/y), Irving Paper (Saint John, NB, 200 000 t/y) and Alliance Forest Products (Dolbeau, QC, 150 000 t/y).
In Europe, two new machines and one major rebuild are coming onstream :
1. Steyrermhl, Austria (change from newsprint to SC) 200 000 t/y, started up in June 1999;
2. Lang Papier, Ettringen, Germany, SC and newsprint, 270 000 t/y, start-up in September/October 1999;
3. Haindl, Schongau, Germany, SC and newsprint, 270 000 t/y, start-up in May 2000.
Typical for all these projects is that they have an on-line multi-nip-calender, and are able to produce SC-A. Steyrermhl and Irving are rebuilds, where the investment cost is clearly lower than for a new machine. Irving's investment was roughly 15% that of Stora Enso's Port Hawkesbury, at roughly 60% of Stora Enso's production capacity. Total capacity of these six installations is 1.5 million t/y, a 19% increase over previous SC production.
Stora Enso has installed an on-line multi-nip calender on its 9.3-m wide PM 4 newsprint machine in Varkaus. The products are colored newsprint, newsprint specialties and catalogue papers.
Newsprint is increasingly being substituted with value-added grades. This allows the publishers to optimize their existing printing capacity and improve revenues. For newsprint producers with narrow marginal machines, the new grades offer an opportunity to improve their profitability by investing in recently developed new technologies suitable for such upgrades.
1 Pacifica Papers has typical MFC-equipment, but produces LWCO.