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Paperweek International 2004: Mill Managers’ Forum – Where Is Your Future?

One of the highly anticipated events during PaperWeek 2004 was the Mill Managers’ Forum during which several dozen mill managers listened to a panel of experts and shared their own thoughts on the future of the industry.

One of the highly anticipated events during PaperWeek 2004 was the Mill Managers’ Forum during which several dozen mill managers listened to a panel of experts and shared their own thoughts on the future of the industry.

Saying that he was pleased with the turnout, Rob Wood, director of PAPTAC, introduced Peter Tyne, product manager of NorskeCanada, Campbell River, who confirmed that the audience was “a good cross section of the country.”

First up from the panel was Michel Lafrenire, vice president purchasing, of Transcontinental, Montreal, who spoke about The Future Customer.

Lafrenire admitted that he had initially found it a challenge to speak about the future of the industry in these times. However, he held the attention of the audience of mill managers by describing the particular challenges faced by Transcontinental in adapting to the changing needs of its clients.

In the retail market, one of the problems was the transient nature of some customers. “We don’t know how long they will survive,” Lafrenire said. “Businesses can disappear by tomorrow.”

Another challenge for printing companies is the versioning requested by clients; up to 40 different versions of the same flyer can be ordered, with combinations of different text, shapes and colours, for different markets. This translates into the need to have paper suppliers deliver a variety of shapes and sizes.

In the book market, one of the greatest demands is for recycled content as well as quick delivery of the finished product.

He pointed out that while people had been saying that the Internet would have a serious effect on the quantity of paper consumed, it was not because people were reading less on paper but because people were switching from the standard way of paying bills to paying through the Internet. This affected not only the amount of paper needed to print bills and envelopes but would, in the long run, resulting in increased postal costs, with a direct impact on magazine prices.

Due to the costs of freight, one of the growing needs is for lighter weight paper that can withstand the faster machines with no web breaks and still maintain quality and colour. The new presses, he pointed out, were very demanding.

At this point, Lafrenire threw out a challenge for the mill managers in the audience: paper for magazines, he said, needed a higher opacity and a lower weight.

“Communication between the mills and the printers is very important,” ended Lafrenire, “because any change in specifications must be immediately shared to maintain runnability and consistency.”

Brian Clifford, Mill Manager, Tembec Industries, Cranbrook, took an interesting leap by jumping a decade with his presentation on The Mill of the Future.

“Optimism,” he said, “was diminishing, according to a survey in which 79% of the mill managers interviewed in 2000 were optimistic about the future, whereas in 2003, only 30% were optimistic.”

The reason was easy to see. Mill growth is evident in Brazil, Indonesia, Australia and Malaysia while 92 different pulp mills have shut down in the past five years in North America.

Clifford presented some of the changes that he foresaw in the mill of the future. By 2010, Clifford forecast an increase from 18 to 22 million tonnes (BHKP and BSKP) with the primary growth area to be in South America. In 11 years, hardwood volume would double and softwood would grow by 25%.

One of the necessary adjustments would be to single line production with less moving parts, therefore more compact and with less energy use.

Some of his other predictions were that gasifiers would be added to recovery boilers since they can supply two to three times more power. Bleaching would be reduced and oxygen delignification would be increased. Chip handling in the future would deal with perfect chips. Digesters would move from conventional Kamyr to modified versions. The recovery boilers would go from the present 73% of solids firing to 85+% solids. Effluent treatment would go from aeration stabilization basins to activated sludge. Kilns would use biogas instead of natural gas.

Clifford saw the environmental demands as being of a lower level of challenge as so many of the mills were already trying to adjust.

“We will reach the levels set for us,” he stated, pointing out that the total air emissions were already cut by 80%.

Organizations, he admitted, would be leaner, with people more specialized. The workforce would have to be well-trained and the trades personal would also be operators, augmented with outside contractors. He foresaw maintenance trade personnel, whom he called ‘mechatronics’, with majors in mill-wrighting and pipefitting and minors in electrical and instrumentation.

“There must be no restrictions in contracting out,” he said. A competitive mill might be able to produce bleached pulp at $430 a tonne now. By 2015, this should drop to $331.

The largest cost would be in the labour and supplies. The quantity of process chemicals would be reduced because of better washing and process controls. The use of power would be more efficient. Mills would continue to look for small gains such as better cooking.

Clifford also stressed the importance of encouraging young people to continue their education in the field. He said that it was necessary to portray the industry in an attractive way. There would be significant staff adjustments and unions as well as workers would have to accept this for the future of the industry. Otherwise, the next generation of mill people in Canada would have to learn Portuguese and Spanish.

“It’s not an easy road,” he admitted. But one major idea was to look at what additional markets the mills could reach and, for this, Clifford suggested a combination of pulp and power.

Brian McClay, president of TerraChoice Market Services in Senneville, QC, spoke about The Future Product.

Taking a positive view, McClay said the industry was still a growth business with 2% growth, mostly in Asia and China. However, the North American share of the market went from 35% to 30% in 2002. Expansion in Asia was expected to continue to drive growth and strengthen prices in 2003.

China is going to drive the industry for the next 15 years. “It is happening and will continue,” stated McClay. “North America will lose its share of the print business.”

The U.S. was no longer the greatest consumer of paper products per capita, McClay informed the audience. Belgium had moved into first place. He suggested with a smile that this was because of the number of bureaucrats, or Eurocrats, in that country. Finland was second.

Since 2001, the depressed economy and the Internet had really affected the industry in a negative way. Newsprint consumption had taken a drop and the US printing and publishing output index were down to the levels that were being reached in 1990.

About 45% of printing goes to ads and that was definitely a losing share. Can print compete with multi-media advertising?

“Men’s magazines have suffered greatly,” McClay said, to the amusement of the audience, “due to the stuff that won’t stop coming on the Internet.” Image magazines in general were doing well while news magazines are losing their share of the market.

However, there are some positive developments to look forward to, according to McClay. He agreed with the previous speakers, Brian Clifford, on the solid market for tissue, attributing its steady growth due to issues of health and safety.

New software will prevent spamming and digital televisions will be able to control the advertisements received by the consumer, so that companies will return to paper advertising in the future.

The emergence of hard wood pulp, mostly eucalyptus and acacia out of more tropical climates, would change the industry. This will challenge Canada’s aspen product.

The recovery rate can reach 65% but in some places is only 42%, so we can look forward to a global limit of approximately 55%.

“Lots of Canadian mills use recovered paper from the US,” stated McClay. “Can we afford to compete with the Chinese demand for recover paper?”

Environmental protection group
s have been very active for the increased demand for recovered paper. They have had tremendous success with retailers that have brands to protect. This has led to better product and better reporting on those products, in a way forming more of a partnership with the ENGOs (i.e., WWF) as have done Tembec, Domtar, NorskeCanada and Abitibi-Consolidated.

In summary, McClay said that China’s growth will drive fibre markets for the next three to four years but will be a major exporter during the next recession. North America will continue to lose its share as will print.

Donald White, president of St. Anne Nackawic Pulp, was pleased to share some thoughts on The Future Industry. He said that he did not want to limit the exchange of information to Canada since the national industry was intertwined with the global market.

White had good words about the Canadian people, describing them as Canada’s greatest resource, being resilient, hard-working and conscientious, adding that they also looked forward to a long and happy retirement.

“We need to harness the energy of the people,” said White but admitted that the Canadian pulp and paper industry has stagnated and had not seen the construction of a new world class pulpmill in more than ten years.

During the last 6 years, White stated, the industry has had a great advantage in the weakness of the dollar. The difficulty now was that the mills do not show profit and bankers did not want to lend money to make the large improvements that were necessary before that profit was possible.

“Banks want to invest in profitable competitive mills,” he said, “but Canada needs investment to get there.”

The good news was that the world’s need for pulp and paper products is continuing to grow. He lamented the fact that Canada used to be the leader in technology for the pulp and paper industry but that now Scandinavia has taken over.

“We have not supported research the way we should have,” stated White. “Paprican is struggling in Canada to survive while its quality work and expertise is recognized more outside of the country than within.”

White said that the industry has a near fully utilized fibre base which eliminates the ability to fire a new world class pulpmill in all but the most remote areas of our country.

“We struggle with each other to get fibre,” he said. The result is that the mills reach into remote locations, which can increase costs, while trying to remain competitive with Brazil. “We need to get more fibre out of the lands that are now harvesting.” This, he pointed out, was being done in Scandinavian countries.

There was good news, however. “We have done many things right,” said White. Over the past ten years or so, the mills have become environmentally responsible with much progress in air and water emission. There has also been a good job in supporting sustainable growth in the forest as the industry has learned to tread the resource they relay on responsibly.

In the future, there would be fewer people in the mills due to the development of more instrumentation and process controls. While many of the operations have struggled through touch economic times since the end of the 80s, management and employees have responded by improving the efficiency of the operations and eliminating waste.

“We can take pride in these and many more accomplishments,” said White. “They are evidence that we have the ability to guide our industry to success in the future.”

Phil Riebel, environmental director – NA, UPM Kymmene Miramichi, NB, spoke of the Environmental Strategies for the Future. First, however, in a riposte to Brian Clifford about the next generation needing to speak Portuguese and Chinese, Riebel added that our children might need to learn Finnish as well.

UPM-Kymmene has 22 mills of the size of Miramichi or larger.

More customers are now global and are buying products from mills in several sources. Ten years ago, no paper was purchased overseas, now half the paper comes that way.

“Environmental performance is becoming more and more of a key purchasing factor,” said Riebel. ENGO’s are targeting not mills but customers, for example, by telling them that that the use of catalogues could be equated to the rape of the forests. Most customers don’t know how to respond. Since they are not educated on environmental issues and don’t know how the correct choice, their response was more emotional.

The challenge for the industry, said Riebel, was to educate the customers and the public. The people thought that they understood recycled paper, but that is only part of the paper cycle.

The best way to be environmentally-friendly was through investment.

“The Global Environmental Leadership guidelines use B-A-T (best available technology) and, on a global scale, we have some catching up to do in Canada,” said Riebel. This environmental benchmark is more stringent than in North America.”

Canada is at a disadvantage because the older facilities are challenged to deliver environmentally correct paper. “Because of lack of investment, we lag about 17 years behind in the technology being used,” added Riebel.

The key issues for the future would be to increase the percentage of certified fibre in paper. Beneficial re-use of waste had to be found.

To no one’s surprise, he added that investments were needed to modernize mill assets.