Chinese duty on pulp makes Fortress LSQ plans not viable

Pulp & Paper Canada
April 08, 2014
By Pulp & Paper Canada

China's Ministry of Commerce (MOFCOM) has made a final determination in its anti-dumping investigation concerning viscose-grade dissolving pulp produced in Canada, the U.S. and Brazil.

Fortress Paper reports that the final duty imposed by MOFCOM on dissolving pulp imports from the company's subsidiary, Fortress Specialty Cellulose Ltd., remains at 13%, unchanged from the previously announced interim duty.

According to analyst reports, the final duty applied to Tembec is 13% as well, but not all of Tembec's dissolving pulp production is viscose-grade. Neucel is reported to be exempt from the duty.

The final duty imposed by MOFCOM on dissolving pulp imports from all other unnamed current or future Canadian dissolving pulp producers, which would include the Fortress Global Cellulose Mill at Lebel-sur-Quevillon, Que., was reduced to 23.7%. Despite the reduction, such a duty significantly impacts the economics of converting the FGC Mill to a dissolving pulp mill.

Chadwick Wasilenkoff, CEO of Fortress Paper, told Business in Vancouver that the Lebel-sur-Quevillon mill would be economically unviable with this 23.7% duty. He added that an agreement with the previous owner prevents Fortress Paper from producing paper pulp for eight more years, so the company is exploring options such as energy production and wood pellet manufacture for the site.
Similarly, Paper Excellence changed its plans to convert the shuttered Prince Albert, Sask, mill to dissolving pulp when the duty was announced last fall. The company is now considering fluff pulp as an end product.

Wasilenkoff commented: “We are very disappointed by this outcome and wholly disagree with MOFCOM's determination.” Referring to the Fortress Specialty Cellulose mill, which produces dissolving pulp or hardwood kraft, he said the company would focus on its strategy to improve production efficiency and reduce costs.

“We also remain confident that current market conditions for dissolving pulp will improve as the market adjusts to a reduction in supply caused by the MOFCOM duties," Wasilenkoff concluded.

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