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PacWest Conference — Brave New World


July 1, 2003
By Pulp & Paper Canada

As leaders in the pulp and paper industry,” began the grace given by Bob Leslie, of Millar Western, Whitecourt, AB, at the conference banquet, “…give us the vision and wisdom to bring growth and suc…

As leaders in the pulp and paper industry,” began the grace given by Bob Leslie, of Millar Western, Whitecourt, AB, at the conference banquet, “…give us the vision and wisdom to bring growth and success to the companies we represent.”

These words were felt fervently by those present and it was for exactly this sharing of knowledge and experience that could potentially improve the current economic status that many attended the PacWest conference.

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Despite opening the conference forum with a list of perceived economic threats — fluctuations due to mergers, gyrations in the stock market and world threats of terrorism — conference chair Arvind Thakore, of Western Pulp, Squamish, BC, greeted participants with a challenge to make the changes necessary to overcome those problems.

“We are simply experiencing the pain of growing into a new era which has tremendous promise,” he stated. “We have to change, and I am sure we have the expertise to change.”

He pointed out that the industry is reorganizing and developing new techniques to deal with this new order. A list of recent accomplishments that have resulted in efficiencies by the industry included automated controls, job flexibility, satellite imagery, and data crunching ability.

He ended the speech by stressing that all these benefits marked the threshold of an exciting age.

“It is an era of challenge to harness these new innovations in techniques, systems and science to make a better world for us,” he said. “All we have to do is rise to this challenge.”

After this message, he introduced Bob Leslie as the program chair. Bob commended the incredible job done by the organizers and spoke of the excellent technical program that could be expected by everyone.

This opened the conference forum and an outstanding panel of industry experts was introduced.

Will adversity make us strong?

First up to speak was George Weyerhaeuser, Jr., senior vice president of technology, Weyerhaeuser. He admitted to finding the title of the conference “catchy” and spoke half in jest by saying of the current world situation, “It only makes us stronger if it doesn’t kill us.”

As had been pointed out by another delegate at the conference, adversity had made the wine industry in British Columbia into a success and George hoped it would do the same for the pulp and paper industry once again. He spoke of the Weyerhaeuser family business and how each generation had met difficulty and had overcome it. Three companies, formed by his great-grandfather, grandfather and father, had had to adjust to hitting the wall.

“Adversity makes us all stronger,” he said. “That’s when you come out with the strength to persevere.” He added that this was what brings back the entrepreneurial spirit.

Getting new technology into place was not easy, according to George. Given the economic situation, it was tough to justify acquiring it. He also saw a better-trained workforce as mandatory and said, “We have to show that we’re relevant to the next generation.”

He ended by acknowledging the fear rippling through the industry but said, “I hope you sense the optimism under the pessimism.”

Training system

Tony Knowles, president of the British Columbia Institute of Technology (BCIT), referred back to a comment made by Arvind Thakore during his introduction when he said that there were so many mergers and acquisitions taking place, people sometimes didn’t know where their paycheque was coming from.

“As long as our cheques are deposited,” joked Tony, “it didn’t matter where they came from.”

On the more serious side, Tony’s presentation was entitled Re-aligning the training system to meet the future skill requirements of the pulp and paper industry.

The first challenge to take into consideration was the large number of potential retirements in the industry.

“By 2006,” he said, “40-50% of the pulp and paper workforce will be eligible for full or part-time retirement.” He pointed out that in 2001, over 1,000 workers were eligible for retirement but only 125 new people entered the industry as apprentices.

And he saw no changes in the near future within all levels of the organization. In addition, with the changing technology, all existing workers must embrace lifelong learning in order to progress.

Tony saw the second challenge as changes to apprenticeship training. Within three years, it was necessary to find a way to increase the number of apprentices going through the system by 30% in order to maintain levels. To accomplish this, opportunities had to be created to make degree/diploma programs more flexible [See Continuing education in the industry: Going, going…, p18]. The locations and schedules of the courses needed to reflect the students’ needs.

The third challenge was adaptation to the constant technological changes. As an example, Tony spoke of computerized pulp quality testing which was replacing traditional lab technology.

Entry-level education requirements were increasing and it was important to find people who wanted to continue learning and growing within the industry. Modernization of plants included the use of network technologies, with significant issues around data integration and security.

“The future,” Tony said, “is challenging but far from insurmountable.”

Back to basics

In his introduction, Dan Veniez, president and CEO of New Skeena Forest Products, said that he sometimes asked himself how he had landed in his current position.

Describing his determined attitude to succeed, he paraphrased Winston Churchill by saying that success was the capacity to go from one failure to another, again and again and again. Despite the challenges faced by the management during the reorganization at New Skeena, he emphasized the importance of performance economics in business before the possibility of a valid social contribution.

He shared some guiding thoughts with the audience.

At the moment, the industry, in his view, was “a sick puppy”. In his opinion, shareholders and investors were entitled to a reasonable return; however, it was difficult to justify some of the fibre and labour costs.

“The industry needs to confront these fundamentals,” he stated candidly.

British Columbia has been devastated by the Forest Products Code, the softwood lumber dispute, the Jurassic labour practices, hands-off management and the impact of provincial policies.

But, he reminded the audience, Skeena had a ten-year history of poor financial and operating performance, including two bankruptcies within five years by 2001 and the highest cost pulp operation in BC.

There had been no flexibility, no trust, no customer and no money.

“Only deep and bold transformation will alter the basic reality,” he stated. “Ultimately, we are responsible for setting the tone and leading by example.

“The new mindset,” he said, “was that this must never happen again.”

Speaking of himself as the CEO of a company with no debt, he said it was necessary to control the “controllable”: the strategy, culture, new management/leadership, a maniacal focus on profitability and financial cost.

It was also important to upgrade skills by bringing young people into the business.

An overview of New Skeena now was as a low cost producer, exercising financial prudence, with a new labour agreement. To succeed, it was necessary to focus on core strength, complete the modernization program and forge a partnership with the First Nation. He would like to see the end of confrontation and the building of a work ethic.

“Labour and management must take their blinders off,” he said. “They have to park preconceived notions and prejudices and get real.”

Operational excellence at NorskeCanada

Dan McKendrick, vice president Crofton division, explained that union negotiations were very important to the business policy for his mill, as well as the company, including Elk Falls, Alberni and Powell River. With over 4,000 employees, the best success could only be reached through synergy.

“People,” he said, “make all the difference.”

The operating fundamentals were safety, people and finan
cial results. For the latter, the goal was to save $50 a ton for pulp. Through innovative drives and opportunities for improvement, $26 of that was achieved already.

“There are similarities between a 747 and a paper machine,” said Dan, pointing out that both had complicated systems and a control loop and that both were worth between $350-300 million.

“The greatest similarity was that they were only profitable when they were up and running.”

He saw the need to create creating value and he said that in order to do it, it was necessary to develop a culture that promoted learning.

Core beliefs and values were safety, ambitious goals, accountability, involvement to do the right thing at the right time, as well as respect for each other, the company and the unions.

Building strategies for progress

Davor Mehes, vice president of Buckman Laboratories Canada, delivered the presentation that had been co-authored by himself and the expected speaker, Tom Johnstone, president of the company.

Davor explained that the strategy for progress at Buckman was built on a foundation of three pillars: value-focused, strengths-based and process-driven.

The traditional paper industry focus has been on capital expenditures, increased volume, the concept of bigger is better, while keeping costs low and minimized downtime.

This has resulted in a loss in shareholder value and over-capacity.

The impact of universal trends on businesses,” said Davor, “has been the pressure for quick fix, inability to raise prices, supply chain management and downsizing.” One positive influence was for improved environmental performance.

The presentation also stated that business should not focus on the defeat of an adversary as in war and sports (win-lose) but on the creation of value (win-win) for all stakeholders.

Among other good points raised was the idea that the focus should be on people and processes, as well as innovation and the elimination of waste, not only a reduction of cost.

“Attracting and keeping talented people is one of the keys to success,” said Davor. “People offer the greatest potential for productivity improvement.”

Davor discussed the difference between different styles of management. One of the views of traditional management, he explained, invests in machines; with people viewed as replaceable. Process management, on the other hand, invests in people as well as technology.

“Most people can survive the old way,” he said. “Most people can survive the New Way. “It’s the transition that’ll kill you!”

Look Back to the Future

Paul Sadler, manager at Pope & Talbot, Harmac Pulp Ops, enlisted extra-terrestrial help through quotes from a well-known Vulcan from Star Trek to help with his presentation.

Mr. Spock: “It would be illogical to assume that all conditions remain stable”

Paul listed some of the events that had occurred unexpectedly over the past few years, including the downturn of the Japanese economy, the softwood lumber, the environmental movement, the impact of the Forest Practices Code, stumpage policy changes and the reduced timber supply.

This has resulted in mill closures and financial strife.

Mr. Spock: “Change is the essential process of all existence”

Harmac lost one full year of production through the 70s from strikes and lockouts. The turning point in the mid-80s brought a system where individuals were made accountable for illegal actions. The relationship with the union has since been professional. This has caused the plant to have improved reliability, increased capacity, reduced direct and indirect costs, improved fibre yield and quality, as well as improved environmental performance.

“What is ‘good leadership’,” asked Paul, “and how has it played a role in our past?”

Mr. Spock: “Emotions are alien to me. I’m a scientist.”

According to Paul, the forest industry has done a poor job of communicating to public and employees

Mr. Spock: “This is a troubled place of most violent contrasts — those who receive the rewards are totally separated from those who shoulder the burden. This is not a wise leadership.”

Paul had two thoughts following this observation. His first thought had been in about a step towards a solution. In June 2000, Harmac installed an incentive plan for the entire workforce. The current performance measures safety, environment and production.

Second thought on this: pulp producers have suffered financially over past decade while most suppliers and customers have profited handsomely.

This is not sustainable.

Mr. Spock: “In critical moments, men sometimes see exactly what they wish to see.”

Management has made mistakes; so, too, has Union leadership. This includes intransigence towards financially struggling employers and surprise when the doors are closed and the lights are turned out.

Reality is sinking in, albeit slowly.

Mr. Spock: “Curious how often you humans manage to obtain that which you do not want.”

Paul suggest avoiding this scenario through hard work, innovation, communication, expecting more from employees and suppliers as well as giving something back when it can be afforded.

“We have lots going for us,” said Paul, “but our business deserves our undivided attention…after all, in the words of Spock, what we really want is to:

“‘Live long and prosper.'”

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OPPORTUNITIES & CHALLENGES IN THE NEW MILLENNIUM

A presentation by Patricia M. Mohr, vice-president, economics of the Scotiabank Group, Toronto, was highly anticipated by those attending the conference feature luncheon. The talk on the global growth prospects was packed with information, including the important fact that, despite a subdued 2003 a moderate pick-up for 2004 could be expected. Low US interest rates will persist throughout this year and the trade-weighted US dollar was facing a decline after the bull runs in the early 1980s and the late 1990s.

Some highlights included:

NBSK pulp prices have rallied dramatically in 2003. Pulp prices will likely ease over the summer (but not retest recent lows). Wood shortage in the US south will come to an end.

A sustained recovery in pulp prices should finally get underway in the fourth quarter of 2003, with a moderate pick-up in US advertising activity.

Better overall global business conditions and some pickup in the US “office” employment should also boost demand for uncoated freesheet paper in 2004.

Interest in producing more lightweight coated mechanical grades of paper and boxboard capacity will likely require NBSK in the fibre furnish.

Medium-term challenges

While international prices for pulp and paper should recover significantly over the next several years, cost control will remain vital for mills in western Canada.

China’s share of world demand for pulp and paper will grow, though China has largely been a “spot” rather than a “contract market” for pulp.

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TECHNICAL SESSION AND PRIZES

At Saturday’s Awards Banquet, prizes were bestowed for outstanding papers. The prestigious ‘Eagle’ (H.R. MacMillan Trophy) was awarded to James Lethbridge and Charles A. Easton, NorskeCanada, Campbell River, BC, for their paper on Combustion and emission performance of a hog fuel travelling grate boiler with the addition of bituminous coal.

Best runner-up paper was Using electrical resistance tomography to image liquor flow in a model digester by Chad Bennington, Paprican, and Dimiter S. Vlaev, Dept. of Chemical and Biological Engineering, Pulp & Paper Centre, UBC, Vancouver.

Best novice paper was DCS modulations of recovery boiler firing rates and turbo generator output eliminates steam venting and reduces natural gas usage by Jim McLaren, Celgar and Tim McMann, ABB Automation.

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PAPTAC COURSES

The Pulp and Paper Technical Association of Canada (PAPTAC) offers five to six courses on average per year. These courses cover major processes: from the theory of papermaking to mechanical pulping.

Chip & Wood Quality

September 8-11, Pointe-Claire, QC

The course will address chip production technology and the impact of wood species a
nd quality as well as the impact of chip quality on pulping processes and product properties.

Chimie de la partie humide

September 22-26, Sherbrooke, QC

Le cours englobe la thorie de la chimie de la partie humide dans la fabrication du papier, les lments de base, les interactions entre les diffrents produits chimiques et leur impact sur la production et la qualit du produit fini, souligne les exigences de qualit et les considrations d’ordre environnemental, et il favorise la rsolution de problmes avec l’aide d’experts.

Improving Energy Efficiency & Reducing Green House Gases

October 6-8, Pointe-Claire, QC

Specific process and non-process areas to be covered include pulping and papermaking as well as cogeneration, boiler and steam distribution systems and other mill utilities.

Mechanical Pulping

October 20-24, Montreal, QC

This course covers the theory, equipment design, practical operation, and process control of groundwood and refiner pulping systems.

Theory & Practice of Papermaking

November 10-21, Montreal, QC

Features Wet End and Dry End operations. Everything from headboxes, stock preparations, wet presses, dryers, winders, etc., will be discussed from both technical and practical perspectives.#text2#


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