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SFK Pulp Fund: View from the Saguenay- Lac St-Jean region of Quebec

Saguenay — Lac St-Jean

To Quebecers, the Saguenay-Lac St-Jean region of the province is synonymous with a richness of natural resources and an equally abundant richness of breathtaking panoramic views. Located 206 kilometres north of the St. Lawrence River, in south central Quebec, the region is vast enough to be referred to by the locals as “our kingdom.”

The area is home to two unique bodies of water: Lac St-Jean and the Saguenay River. The latter is so wide at certain points, that it could almost be considered a lake. It also has the only navigable fjord in North America. Lac St-Jean is large enough to be considered as an inland sea, with a diameter greater than 35 kilometres and was initially called Pikouagami (“flat lake”) by the Native Peoples. As a European explorer, it was Jacques Cartier who first came to this part of Quebec, and set the stage for the creation of trading partnerships with the Montagnais. The Tadoussag trading post was established in 1600 and, with the arrival of the Europeans, the lake was renamed after the patron saint of Jean Dequein, the first Jesuit missionary to visit the area.

With many navigable lakes and rivers, trading flourished, but it was not until 1838 that large numbers of settlers started to colonize the area. The initial lure was lumber, especially the white pine that was abundant in the Saguenay region. Industrial development began with the 19th century sawmills and continued with pulp mills. The first one opened in 1901 at Val-Jalgert, and paper mills followed soon after in1925.

Most early settlers historically focused on extracting and refining the rich natural resources. Lumber mills and pulp and paper plants dot the region. Agricultural output includes dairy products, beef and blueberries. Mining plays a significant role also, with 15% of the world’s niobium coming from Saint Honore. Lastly, hydroelectric dams have been constructed to accommodate the manufacturing of aluminium, with Alcan being a major player in the area.

The population base of the region now is just over 285,000.

Town of Saint-Flicien

Saint-Flicien, located at the mouth of the Ashuapmushuan River on the west shore of Lac St-Jean, was founded in 1865. The Canadian Northern Railway linked the town to points south in 1917. Much like the surrounding region, agriculture and lumber dominated the town’s economy until World War II. It grew significantly in the 1950s with a mining boom that saw copper being mined in Chibougamau and Chapais, and was initially transported by road and later by rail, through Saint-Flicien. The town was always connected to sawmill operations, so it was a natural evolution that a mill would spring to life.

Growing up in nearby Alma, Thivierge recalled how even as a young man, “We all knew that eventually there would be a pulp mill in Saint Flicien, it is the perfect location for such an operation.” In 1974 Donohue Inc and B.C.F.P. formed Donohue Saint- Flicien and acquired an initial three sawmills, along with associated forest operations. Two years later the firm committed $270 million to the construction of a state-of-the-art kraft pulp mill that would employ 315 full-time employees. The mill opened in 1978, and has set a strong standard for the past 28 years of its operation. SFK Pulp Fund is an unincorporated, open-ended trust initially established on May 21, 2002. On this day, SFK Pulp acquired the NBSK pulp mill at Saint-Flicien from Abitibi-Consolidated, indirectly through SFK Pulp Trust and SFK Pulp General Partnership. Today the mill has a production capacity of 1,100 tonnes per day, or 375,000 tonnes per year. It also ranks among the lowest-cost producers of NBSK pulp in North America.

Near home

Florian Thivierge was appointed general manager in September 2005, representing a culmination of over 27 years that he has spent at the mill. “I have worked in the pulp industry for 33 years now and I truly still enjoy every minute. There is always a new challenge to address,” said Thivierge. After earning a mechanical engineering degree from Laval University, he embarked on his career at Domtar’s Lebel-sur-Quvillon kraft pulp mill. In 1979 he returned to the area that he calls ‘home’ and joined SFK Pulp as an engineering superintendent. “I am very lucky to work in a place that I consider close to my heart,” said Thivierge, referring, it can be suspected, to both the Saguenay and the mill.

He has never looked back. For the past 27 years he has participated in every improvement project and capital upgrade that the facility has undergone.

“By being present at every transformation that the mill has gone through, his knowledge is invaluable. It is this experience which makes him an effective manager,” said president and CEO Andr Bernier. “He is close to his people but, at the same time, very demanding of them.” Insiders say that this mill operation has a strong reputation for reliability, with infrequent shutdowns and production quotas that are surpassed on many days. When asked what is different about this mill, Thivierge explained by saying, “We sincerely believe in our people and respect their experience.” Employee turnover is so low that approximately half of the workers have been with the mill since it opened in 1978. Thivierge humorously added, “On our 25th anniversary, we handed out 140 commemorative watches in one evening to honour all those who had served since Day One of the mill’s operation.”

Challenging times

Indeed, in a period that is challenging not only for the forest products industry, but especially for the pulp market, SFK Pulp has set a course for long term profitability through what they refer to as “the extremely vigorous manner in which we manage our operations.” One indicator of success is that SFK Pulp is one of the lowest-cost pulp producers in North America. Management attributes this to several factors such as the mill location, the proximity of its sources of fibre supply, its ability to generate its own electricity at lower costs (typically generates 95% of its annual electrical requirements) and the mill’s efficient layout, as well as the quality and condition of its equipment. “Proper preventative maintenance is critical, and we do an excellent job here, ensuring our reputation for reliability,” added Thivierge. Two complete annual maintenance shutdowns of a seven-day duration are scheduled every year in the months of April and October. In addition, an average of $7.7 million has been spent annually on capital expenditures. These improvements have contributed to value creation by increasing production capacity, by improving the quality of the product and by maintaining that very important competitive cost position.

In conclusion, Thivierge added, “This mill is always on my mind, because I see so much potential for the future, always doing things in uniquely new and better ways.”

Your comments and suggestions are welcomed at zsoltp@pulpandpapercanada.com

Milestones – the First 15 Years

1978Start-up of the 670 admt/d kraft mill

1980Installation of steam turbine generator to operate at 20 MW

1985Start-up of oxygen bleach process

1988Addition of Booster dryer section increases capacity of kraft pulp machine

1989Installation of disc screen to the wood chip system increases capacity to 899 admt/d

1991Second bailing line added

Modification to the digester cooking process improves chip utilization and pulp quality

1992Installation of Clo2 plant eliminates elemental chlorine

IS0 9003 certified

Peroxide bleach stage added