Features Research & Innovation
What’s New… (July 01, 2005)

LEGAL

KRUGER WINS RIGHT TO LOG

MONTREAL, QC — While plans to reinstate logging activities on le Ren Levasseur are in full swing, the Innu are preparing to build a case to stop the forestry company in its tracks. A safeguard order that was put in place on June 17th was lifted on July 5th and will permit the company to harvest trees damaged by a fire and to recover wood that its crews chopped last season. As of now, Kruger will be able to carry out its logging activities on the island until November 17th, at which point an appeal on the safeguard order will begin, the Montreal Gazette recently reported. As a result, the 153 employees scheduled to be laid off due to the safeguard order will be able to hold onto their jobs at least until November. However, the Innu Council of Pessamit is looking to stop the company in its tracks and has confirmed that in addition to the contemplation of the various options it has available, going to the Supreme Court is among that list of options. According to the Gazette, the Innu contend that their ancestral and constitutional rights to the land should precede over those of Kruger, who was granted logging rights on the island in 1997.

ENERGY

CORNER BROOK APPLIES TO BURN RUBBER

CORNER BROOK, NF — High energy costs are prompting pulp and paper mills to investigate and implement alternative measures to secure an adequate supply of fuel at a reasonable cost. So forms the basis for Corner Brook Pulp and Paper’s proposal to burn Newfoundland’s stockpile of discarded tires in an effort to produce energy for its mill. The CBC recently reported the company has declared it can clear the province’s stockpile of 1.5 million used tires within a period of six years.

Despite the positive financial logistics of the program, environmental concerns might prevent Corner Brook from pursuing the method. According to the CBC, Environment Minister Tom Osborne has said the company will be subjected to rigorous environmental criteria should it be granted permission to burn the tires, and will be required to prove the method is safe. Osborne has confirmed he believes the method will generate more pollution, but that the production of dioxins and furans is reduced through the use of tire-derived fuel.

Corner Brook Pulp and Paper isn’t the first corporation of its kind to look into tire burning for energy. In March, Abitibi-Consolidated put plans to test tires to produce energy on the back burner after citizens in the Stephenville area raised concerns over what implications the experiment would have on the environment.

DISPUTE

ANTI-DUMPING DUTIES RETURNED TO WEST FRASER

VANCOUVER, BC — Thanks to a recent NAFTA panel ruling, West Fraser is soon to be almost $30 million U.S. richer. The tribunal declared the U.S. government should repay $29.6 million in anti-dumping duties it amassed from the company.

In making its ruling, which confirmed an earlier finding that West Fraser had not dumped lumber into the U.S., the NAFTA panel rejected U.S. claims that the company was not entitled to a refund of its antidumping deposits.

Although the decision can be appealed, West Fraser remains confident the owed capital will be returned without delay. “We expect the Department of Commerce will comply with [the] ruling and return the monies that are rightly owed to West Fraser,” said Hank Ketcham, chairman, president and CEO.

TRANSACTION

CATHAY MAKES FIRST SALE

TORONTO, ON — A fledgling harvesting program by Cathay Forest is testing the waters for a potential market in northern China. The company cut a modest 140 cubic metres of wood and sold them to a local market for $16,000. The transaction marked the first wood harvest by Cathay from any of its properties.

“We are undertaking a small scale harvesting program to ensure the infrastructure is in place to accommodate a larger harvesting program later this year when the conditions are better suited for cutting,” explained Anthony Ng, the company’s president. “The clearing of standing timber now will allow us to plant our fast growth poplars in the fall and spring in the cleared areas.”

PURCHASE

SKEENA TO BE BOUGHT BY CHINA PAPER

VANCOUVER, BC — The Globe and Mail recently reported there may yet be hope for the Skeena Cellulose Inc. pulp mill in Prince Rupert, BC. However, the prospective aid won’t be coming from the bank account of a North American company, but from that of Sun Wave Forest Products Ltd., a division of China Paper Group. The Globe confirmed that an agency of the Chinese government was given the go ahead by the BC Supreme Court to acquire the mill from a receiver, thereby paving the country’s way into Canada’s resource sector.

The publication indicated that although the transaction is subject to various conditions, it is expected that Sun Wave will fork out roughly $100 million to restart the facility and is planning to use 80% of the 350,000 tonnes-per-year mill’s output to feed its paper operations in China.

CAP EX

AINSWORTH MAKES $200 MILLION EXPANSION

GRAND PRAIRIE, AL — Ainsworth Lumber is gearing up to spend $200 million on an expansion of its oriented strand board (OSB) mill near Grand Prairie. The project will imply an annual increase in production capacity of roughly 600 million square feet and will also include the construction of a hardwood sawmill in Valleyview, AL. Both undertakings are expected to be completed by early 2007.

A second production line at the existing Grand Prairie site is in the expansion plans and it will be able to produce both PSB and other engineered wood products. Once it’s finished, the mill will boast an annual capacity of nearly 1.3 billion square feet.

In addition to boosting capacity, the expansion will also create 300 direct jobs in the Grand Prairie and Valleyview area.

LABOUR

FINNISH LOCKOUT ENDS

HELSINKI, FINLAND — An approved collective labour agreement has put an end to the six-week long lockout at UPM-Kymmene’s Finnish pulp and paper mills. The newly approved three-year wage agreement between the Finnish Forest Industries Federation and the Paperworker’s Union is being called a ‘step in the right direction.’ “The new contract leaves room and possibilities for the local mill management and employees to agree locally on how to organize the work in a reasonable manner,” said Jussi Pesonen, president and CEO of UPM. “It is also positive that people can return to their normal daily routines,” he added.

The cost impact of the new three-year agreement will be 4.4% for the first two years, and the third will be decided in the fall of 2007.

MILLS

TAXES CHOKE HOLD NORSKE CANADA

VANCOUVER, BC — NorskeCanada is blaming a sky-high property tax bill for its inability to invest in its facilities. The company will have to shell out $31.3 million for its five divisions and head office, an amount it says is impeding major reinvestment in its operations, while other North American jurisdictions are creating incentives for industrial development. Even though this year’s tax is marginally lower than last year’s $32 million total, the amount is significantly higher than it would be in other regions, about twice as much per tonne of product than the North American average.

“Industry investment in capacity and innovation is a better way to keep local economies and the tax base strong for the long-term and the municipalities that take this message to heart are continuing to grow and develop as great places to live, work and raise families,” said company president and CEO Russell J. Horner. “We’re fully prepared to pay our fair share to support community infrastructure, but we are also pointing out the realities of a competitive marketplace,” he added.

M
ILLS

FUTURE BLEAK FOR BOWATER THUNDER BAY

THUNDER BAY, ON — The Thunder Bay Chronicle Journal recently reported that tough times are likely ahead for Bowater Thunder Bay. The publication confirmed a company official as describing the facility as being unable to compete and beleaguered by high wood and electricity costs. Although any definitive action has not been declared, supposition in the Thunder Bay area has alluded to potential converting operations that would see the mill churning out higher-margin specialty grades of paper.

The mill started a two-week shutdown of its newsprint operations on July 1st, citing the burden of wood and electricity costs as a reason for the decision. Between 400-450 employees were affected.

PAPERCLIPS

CHEW ON THIS …

Chewing paper is an activity no longer reserved for canines or those under the age of two. At least if you live in Chicago, where Moto restaurant’s executive chef Homaro Cantu is turning the art of sushi making on its head. The 28-year-old doesn’t have stocks in seaweed or sticky rice, rather, he uses a Canon i560 inkjet printer to create his fishy masterpieces. Using edible paper made of soybeans, cornstarch and organic food-based inks, Cantu flavours the back of the paper, powdered with soy and seaweed seasonings, to print out images of sushi pieces. He also prints and flavours photographs designed to fit a theme; for example, a photo of a cow would be seasoned to taste like filet mignon.

For a meager $240 a head, adventuresome diners can partake in a 20-course meal experience, wine included. According to a recent story published in the New York Times, at least two or three items made from paper are typically included in a meal at Moto. If that isn’t enough, diners can nibble on their menus. They’re edible too.

Source: The New York Times

ENVIRONMENT

PINE BEETLE TAKES TEN YEAR TOLL

VANCOUVER, BC — The CBC recently reported the effects of the mountain pine beetle epidemic in BC will start showing up ten years from now, when trees killed by the pest will no longer be able to be used by the industry, and will precipitate a drop in production.

Craig Campbell, leader of PricewaterhouseCoopers performance improvement practice for the global forest and paper industry, confirmed the area afflicted by the epidemic is double the size of the annual allowable cut in the province. Where the real trouble lies is in the urgency to harvest the attacked wood as quickly as possible so it doesn’t go to waste. However, in a decade, when all the wood has been harvested, Campbell confirmed there will be a tremendous decline in the amount of wood harvested in BC. Campbell further acknowledged that while mills are increasing business in their haste to cut down the trees, once they begin to be processed, that business will just as quickly decline, culminating in sawmill closures and job losses.

In response to the recent announcement by Ainsworth Lumber in which it communicated its intent to drop more than $400 million to build two OSB mills in BC, Campbell remains skeptical and declared his presumption that the life span of these mills will likely only be ten years.

INDUSTRY TRENDS

June overseas pulp prices settle unchanged or lower; eucalyptus suppliers mostly refuse to budge

World pulp prices stayed about the same or dropped by $10-$20/tonne at the end of June, depending on the grade and location. The markets settled before the July 1 end of the nationwide Finnish pulp and paper work stoppage, which lasted for 47 days. The Finnish stoppage, along with unscheduled production losses at various mills around the world, has helped steady what has been a softening market. It kept prices fairly stable in Europe, but in Asia, buyers kept up the pressure for lower prices, and in some cases, they succeeded. For China in July, Russia’s Ilim Pulp Enterprise kept its softwood pulp price unchanged, closing business at $470/tonne. But for hardwood pulp it lowered its price by $10/tonne to $490/ tonne. Chilean pulp is also reportedly keeping its $480/tonne price in China for July.

Even though hardwood pulp prices have slipped some, recent worldwide hardwood pulp price transactions have been higher than those of softwood pulp, a stark contrast to last year, when softwood pulp prices were about $100/tonne higher.

Hardwood angle. Softwood pulp prices fell in Korea in June by $10/tonne, while non-bleached eucalyptus kraft (BEK) hardwood pulp prices fell by $20/tonne, triggered when a major Indonesian supplier lowered its price by that amount on June 28th, said a Korean agent.

Sources said BEK suppliers held firm on their prices except in such markets as Korea and Italy. The Korean agent said there was some pricing at $550/tonne net as well as the $570/tonne net price set for Asia since April. And a Chinese agent said Brazilian BEK discounts are increasing.

The gross BEK prices in the U.S. and Europe have held at $635/tonne and $600/tonne, respectively. But Italian agent and buyer sources said there were some sub-$600/tonne prices too, to as low as $580/tonne.

BEK supplies are continuing to forgo business rather than reduce prices and suppliers said their inventories are so tight that there is no reason to capitulate, sources continued to say.

As a result, a major Brazilian company’s BEK business was about 33% of usual volumes in June and about 50% of usual in May, and that another company had no business in June, an Asian source said. Both companies have scheduled maintenance shuts in the coming months, which will limit their shipments to Asia.

Asia Pulp & Paper Co.’s Hainan Island tonnage which has been selling in China for the equivalent of $480-$490/tonne, and Indonesian pulp, selling at $510-$520/tonne, has provided an alternative source of hardwood pulp.

The Finnish stoppage, which cut into birch pulp production, led integrated Scandinavians to buy BEK in the interim, helping keep the price firm at $600/tonne in Northern Europe and providing a home for tonnage that Chinese customers have refused to buy, sources said.

All prices in U.S. dollars