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Investing In The Future


December 1, 2008
By Pulp & Paper Canada

Since forming a joint venture with CDM Papiers Dcor of Quebec in 2001, Felix Schoeller, which is headquartered in Germany, has invested nearly $70 million in Technocell Inc., its Drummondville, Que.-…

Since forming a joint venture with CDM Papiers Dcor of Quebec in 2001, Felix Schoeller, which is headquartered in Germany, has invested nearly $70 million in Technocell Inc., its Drummondville, Que.-based decorative paper mill. In addition, the company has doubled the plant’s production to 30,000 tonnes a year and increased energy efficiency by 25%.

These improvements help position Technocell for resurgence in the United States housing market, with which the decorative paper market has strong links to, as well as for strong growth in the South American market, particularly Brazil.

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“That the mill is still open speaks, at least in part, to the fact that this is a family-owned business with the ability to see and work toward the long term. If we were a public company we would probably be gone,” said Martin Ostermayer, chief operating officer and vice president of Technocell.

Decorative papers are manufactured so far up the supply chain that many industry professionals have not even heard of Technocell. The mill supplies its paper, which is used in the manufacturing of laminates, to impregnators and printers. They in turn sell their stock to board producers, who then sell their product to furniture and cabinetmakers. Furniture made with laminate surfaces containing decorative paper is popular in Europe. On average, the world-wide laminate market is growing at 5% a year, according

to Ostermayer. A fast-growing market segment for decorative papers is laminate flooring. Decorative papers can be coloured and printed to imitate natural wood colours and grain, as well as tile patterns, for example.

Technocell has a 30% to 35% market share in North America and sells over 90% of its product to the United States. But that is not the major concern at Technocell.

“We are less interested in market share than we are in better margin,” Ostermayer pointed out.

Then and now

CDM of the Kunz Group built the Drummondville mill in 1989 and brought in a second-hand Reinhard paper machine from the Netherlands. In addition to printing and impregnation, the company also attempted to integrate vertically with papermaking. However, they made more paper than they could use, leaving them vulnerable to lowball offers from paper buyers. Felix Schoeller Holding acquired a majority stake in the mill in stages, starting with a strategic alliance in 2000 and then finally acquiring 90% of the company in 2006; the other 10% is currently owned by Investissement Qubec, a financial institution and economic development agency.

The mill sits on a 110,000-square-metre property and has about 125 employees. The single paper machine has a trim width of 3.14 metres and a speed of 150-500 metres per minute. It can make paper for low-pressure and high-pressure laminates, and decorative printbase paper. Two separate conveyors feed two pulpers for virgin pulp and broke. The mill has four 61-centimetre Voith refiners and one post refiner. There are labs for production quality testing, process and environmental testing, small-scale research and development, and colour matching.

“We do R&D here to a very limited extent. Most R&D is done in Germany and transferred here. What we do develop here, the Germans help us,” Ostermayer noted.

A $17 million paper machine rebuild that took place in 2005 allows Technocell to make smaller lots more effectively. The mill also installed a natural gas boiler in 2005, keeping the original oil burner as a backup.

The mill only uses eucalyptus pulp, about 90%, or 19,000 tonnes of which is shipped in bundles of sheets from Brazil to Baltimore and then trucked to Drummondville.

Eucalyptus is very absorbent, an important property that facilitates impregnation with resins further down the supply chain.

The production area sometimes resembles a winter scene due to a dusting of titanium dioxide, the main ingredient added to the eucalyptus pulp. This image of pure, fresh snow appropriately hints at the exceptional care that must be taken to keep impurities out of the paper. For example, high-speed cameras photograph the paper constantly: they detect defects as small as a half-millimetre in diametre and allow operators to precisely locate them in the paper.

“Quality always comes first and productivity second. Our product has the longest life cycle you can see [which explains why defects are unacceptable],” Ostermayer said. Of the great skill and judgement of his production workers, he added, “One of our most important capabilities is how we can repeat colours. We are producing a very high-tech product with four aspects: physical parameters, very high quality specifications, colour and cleanliness, and surface quality.”

Speaking of surface quality, one of the unique aspects of decorative paper is that the paper machine, which has no top wire, only finishes and de-waters one surface of the paper.

Higher efficiency, lower waste

Technocell has worked hard to improve efficiency.

“We measure very carefully the relationship between the cost of preventative maintenance versus repairs,” said Ostermayer of Technocell’s maintenance operations. The mill has a core competency in maintenance, repairs and overhauls (MRO), but outsources big jobs, including bringing in as many as 40 MRO people during shutdowns. Maintenance has become more performance-oriented, with more focus on the planning process.

“For us it is important that everything works at the same time; for example, if we lose a pump we can lose the colour on the machine,” Ostermayer noted.

The mill has also reduced waste, such as fibre in the water and the loss of pigments like titanium dioxide, which costs around $2,300 a tonne.

“It has a lot of environmental impact during production. So if you are not losing it, you are making savings during production. This has been one of the big focuses in the mill since the acquisition. We have cut the losses by at least half,” said Ostermayer.

Ostermayer has also spurred his employees to recycle broke, which recoups not only materials, but also the investment made in the first place.

“Sometimes people throw away broke with the regular garbage. I didn’t like that,” he said. Garbage has been reduced from 70 tonnes to just 10 tonnes a month, with the added bonus of reducing tipping fees.

Production techniques have been refined in the course of many projects, which is helping Technocell hold its own, if not quite get ahead of spiralling energy costs in the midst of an industry-wide market slump. “We are suffering, but we are fighting it with a lot of projects: we had a huge productivity project last year where we focussed on flow control, more efficient use of the machine by running the personnel properly, energy projects, buying in US dollars…” Ostermayer explained. The mill has given a lot of training to operators for the next job up the union ladder: if, for example, one operator goes on vacation, the one below can step in and do the job well.

Challenges and opportunities

The main objectives at the mill, however, have been to increase the amount of good paper made versus broke, and to increase the paper speed. It has certainly helped that Technocell can bring in technical expertise, equipment and product philosophy from its parent company in Germany.

“There was an old saying that if the papermaker was sitting on his butt, the mill was making money. Those times are over,” Ostermayer declared. “I want our papermakers to follow up on quality, inspect their workplace to see if their equipment is working well, prepare their team for the next grade change. We do a lot of grade changes and they take a real team effort: stock preparation, paper machine, quality department and maintenance department activities have to be coordinated very highly so we are efficient and do not lose time. Besides improving production quality we have become more cost-efficient; for example, doing things right the first time and reducing energy costs. We have worke
d a lot to bring up the technical standards of the mill.

“We have also worked on organisation and efficiency: we put a lot of emphasis on training the supervisors and operators to work together and do their jobs in a standardised and very efficient way. I feel that in general, but even more so in Canada, if we don’t inform people properly, they don’t feel involved and things don’t work.”

Technocell has a web portal for its customers, called MyTechnocell.com.“It is almost solely about supply chain management. This is a very important thing for us, because it improves the processes of our clients. We share a lot of data with them, such as logistic and quality data, basis weight, colour and when stock is produced. They need information to streamline their processes,” Ostermayer explained.

Like other pulp and paper companies these days, Technocell is making improvements while fighting to survive soaring energy and transportation costs while waiting for better market conditions.

“We suffer from the logistics costs, energy costs. Kyoto is a certain amount of effort too. You have to fill hundreds of pages of data for that. For small mills, all the changes in law is something that occupies our work force. But what could break our necks are energy costs and the devaluation of the US dollar,” Ostermayer said, reviewing the challenges he faces. “There are opportunities out there right now, particularly in South America. That market is getting more attractive due to the strengthening of the Brazilian currency. We operate in a growing market. That is pretty special in the pulp and paper industry.”

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