International Forest Products Earns President’s “E” Award for Exports

Nov.17, 2020 - International Forest Products (IFP) announced that it has been selected to receive the 2020 President’s “E” Award for Exports, the highest recognition any U.S. entity can receive for making a significant contribution to the expansion of U.S. exports.

U.S. Secretary of Commerce Wilbur Ross informed IFP of its selection last month.

“International Forest Products has demonstrated a sustained commitment to export expansion. The ‘E’ Awards Committee was very impressed with IFP’s exports,” said Secretary Ross in his congratulatory letter to the company announcing its selection. “The company’s subsequent ability to better manage and diversify risk using multiple export markets is also particularly notable. IFP’s achievements have undoubtedly contributed to national export expansion efforts that support the U.S. economy and create American jobs.”

Dan Kraft, President and Chief Executive Officer of IFP, commented, “On behalf of the International Forest Products team, we are honored and grateful to receive the President’s ‘E’ Award presented by Secretary Ross. The dramatic growth in our export volumes and end markets is a testament to the work ethic, creativity, and entrepreneurship of our entire worldwide team.”

This award is presented annually to U.S. companies and organizations for their role in strengthening the economy by sharing American ingenuity outside of the country’s borders. U.S. companies are nominated for the “E” Awards through the U.S. Commercial Service, part of the Department’s International Trade Administration.

With offices across the United States and in embassies and consulates around the world, the International Trade Administration lends its expertise at every stage of the exporting process by promoting and facilitating exports and investments into the United States; administering Anti-Dumping and Countervailing Duties orders; and removing, reducing, or preventing foreign trade barriers.

Founded in 1972 by Robert Kraft, IFP is a member of the Kraft Group of companies and is one of the largest traders of forest products commodities in the world. Primary grades include containerboard, market pulp, recycled fibers, printing and writing papers, paperboard, flexible packaging, and a wide variety of logs, lumber and panel products.

SOURCE: International Forest Products

Russian Pulp May be Increasingly Important to China's Paper Industry

Oct. 8, 2020 - China's Belt and Road Initiative is a global infrastructure development strategy adopted by the Chinese government that aims to invest in nearly 70 countries and international organizations. The initiative is poised to boost international trade, and it has the potential to accelerate economic growth across Asia, Central and Eastern Europe.

As part of the initiative, the China-Russia and China-Europe railways are already improving delivery capacities in the region. Per a recent article in Xinhua, "Foreign trade volume by railway through Manzhouli, the largest land port on the China-Russia border, exceeded 10 million tonnes in the first half of this year, up 6.4 percent year on year, according to official figures."

Major commodities moved across the border included coal, wood raw materials and construction machinery. China's pulp and paper industry is also benefitting from the expansion in trade.

"A total of 1,505 China-Europe freight trains passed through the port in the first half, an increase of 19 percent compared with the same period last year, carrying 134,700 TEUs of goods in total," Xinhua said.

The rail routes have also become an important transport channel for stabilizing global trade and recovery amid the COVID-19 pandemic, and authorities in the port of Manzhouli have increased efficiencies and reduced logistics and transportation costs. Manzhouli has become an important destination for shipments of pulp to China, which is oftentimes routed to manufacturers in Hebei Province.

According to statistics from Manzhouli customs, in the first half of 2020, 236,000 tons of pulp were imported through the port, an increase of 99.9% over the same period last year, with a value of 830 million yuan — an increase of 57.5%.

Pulp & Paper Insights

Three rail routes have been laid out along the western, middle, and eastern territories: The western passage leaves China through the Alashankou (Horgos) in the central and western parts the country; the middle passage through Erlianhaote from North China, and the eastern passage via Manzhouli from the coastal areas in the eastern parts of China.

As a major global consumer of wood pulp, accounting for about 35% of total demand, China primarily relies on imports to meet its demand. In 2019, China imported roughly 23 million tons of market pulp, including about 10 million tons of softwood pulp. Canada (27%), Chile (16%), Finland (15%), the United States (14%) and Russia (11%) were the top five exporters supplying this softwood pulp.

There are vast coniferous forest resources in Russia, and the manufacturing cost is relatively low. Looking at the cash production cost of NBSKP via the cash production cost module in FisherSolve Next, we can see that Russia has the lowest average cash production cost in the world (260-270 USD / BDT), which is about 25-30% lower than the average cash production cost of Canada. According to Fisher data, the current production capacity of market wood pulp in Russia and Belarus is roughly 3 million tons, of which coniferous pulp accounts for about 65%.

Over the next five years, about 5 million tons of market pulp capacity will enter the supply chain, of which about 3 million tons will be coniferous pulp, which will greatly increase global demand.

Fisher believes that after the total ban on imported RCP that will take effect in 2021 — along with the impact of growing anti-plastics sentiment and the transition to more paper packaging — China's demand for market pulp will increase in the future. Due to its unique position in an expanding market (low fiber costs, location, and position in the Belt and Road Initiative), Russia is poised to become one of the most important market pulp suppliers for China's robust pulp and paper industry.

SOURCE: Forest2Market

SCA to Invest in Pulp Production, to Discontinue Production of Publication Paper at Ortviken Mill

Aug. 26, 2020 (Press Release) - SCA intends to invest SEK 1,45bn in the production of chemically pre-treated thermo-mechanical pulp (CTMP) at the Ortviken paper mill in Sundsvall (Sweden). In parallel, SCA is initiating consultations with trade unions and employee representatives to discontinue the production of publication paper at the mill.

SCA intends to invest to achieve an annual production volume of 300,000 tonnes of CTMP pulp at Ortviken, using the existing infrastructure. The investment is expected to give a positive EBITDA-effect of approximately SEK 0.3bn per annum. Expected start of production in the new mill is the beginning of 2023. SCA today has a production capacity of 100,000 tonnes of CTMP pulp at the Östrand pulp mill. This production will be phased out when the new line starts up, which will allow a future increase in the production of kraft pulp at Östrand Pulp mill.

"Our pulp customers want us to grow with them in product segments such as packaging board and hygiene products, segments with healthy growth," says Ulf Larsson, SCA's CEO. "In line with our strategy, we have gradually reduced our exposure to publication paper. We now initiate negotiations to leave this product segment completely."

Currently, SCA produces coated and uncoated publication paper on three paper machines at Ortviken paper mill with annual sales of approximately SEK 4bn. Demand for publication paper in Western Europe has declined by approximately 5% per year since 2008. During the coronavirus pandemic, demand for publication paper decreased by a further 30-40% and production at Ortviken paper mill has been adapted to the weak order level. This low demand, combined with a weak price development, results in a negative profitability for the operation.

The closure of publication paper manufacturing at Ortviken paper mill proposed by SCA will affect about 800 employees, primarily at Ortviken paper mill, but also in other parts of SCA's operations. The closure would result in non-recurrent costs with cashflow effects which are estimated not to exceed SEK 0.9bn and an impairment of about SEK 1.1bn.

"Through today's proposals, we intend to continue to develop a strong, sustainable and profitable industry based on our renewable forest raw materials", says Ulf Larsson. "This will have a significant impact on many people and we will in a responsible way seek the best possible solutions for those affected."

Negotiations under the Co-determination at Work Act (MBL) with trade unions will now begin regarding the plans to discontinue paper production at Ortviken paper mill, the investment in CTMP production at Ortviken and the impact on other SCA operations. In other jurisdictions affexcted employees and their representatives will be informed and consulted in line with the legal framework.

SOURCE: SCA

UPM Restructuring Plans Include Closing Kaipola Paper Mill in Finland, Selling Shotton Paper Mill in Wales

Aug. 27, 2020 (Press Release) - To ensure future competitiveness of UPM Communication Papers, UPM announces plans for permanent closing of UPM Kaipola paper mill in Finland, sale of UPM Shotton paper mill in Wales (UK) and streamlining Communication Papers business function teams.

In addition, UPM Biorefining and UPM Specialty Papers announce plans for reorganising and streamlining activities in Finnish pulp mills, UPM Forest and UPM Tervasaari mill in Finland.

The planned actions would result in annual cost savings of EUR 75 million. Decisions on the final plans will be made after the co-determination procedures have been concluded.

Planned Actions in UPM Communication Papers

Continued long-term decline in graphic paper demand combined with weakened economic outlook require prompt actions to ensure performance in UPM Communication Papers. In a declining market, competitiveness in company operations as well as local operating environment is of utmost importance.

In 2020, the COVID-19 pandemic related lockdown measures have caused a short-term demand disruption in the graphic paper market. While there are early signs of normalisation in paper demand after lockdowns, the ensuing economic outlook has deteriorated globally.

UPM is committed to maintaining competitive operations under all circumstances. It means adapting capacity to customer demand and increasing the efficiency of operations. Consequently, UPM Communication Papers plans to permanently close its Kaipola mill in Finland latest by the end of 2020. The planned closure of UPM Kaipola's three paper machines would impact approximately 450 positions and lead to a permanent reduction of 720,000 tonnes of graphic paper capacity, thereof 450,000 tonnes of newsprint and 270,000 tonnes of coated mechanical paper.

"This is devastating news to Kaipola. While Kaipola has competent teams and well operated machines, external factors such as high logistics costs, regulatory and tax burden, high cost of labour and increasing fibre costs make it the least competitive among UPM's paper mills," says Winfried Schaur, Executive Vice President of UPM Communication Paper.

Further, UPM Communication Papers plans to reorganise and streamline its business function teams across Europe and North America. These plans would affect approximately 170 positions in more than 10 countries.

"We in UPM are very committed to the paper business and to serving our customers. With our assets, people and strategy, we are confident that we can run a profitable business for years to come. It is good to bear in mind that the world markets for graphic papers still exceed 70 million tonnes, whereof more than 20 million tonnes in Europe. Even if declining, these markets offer profitable business and good cash flow for mills with a competitive cost structure."

"In a mature business, it needs relentless efforts to look after cost competitiveness and to make sure that our assets are in efficient use in all circumstances. Also, the operating environment does have a significant impact on the future success of each operating location. Long-term predictability of the regulatory environment is elemental to attracting investment and maintaining jobs," says Schaur.

UPM also announces its intention to sell its UPM Shotton paper mill for conversion purposes. Current production capacity of the mill is 250 000 tonnes of newsprint in Deeside, Wales. The mill assets include the materials recollection and recycling facility, deinking plant, paper machine line and energy infrastructure as well as established access to the UK recycled paper market.

"UPM Shotton is well positioned to serve the UK market. However, we look for outside opportunities for alternative long-term use of the mill as the newsprint consumption continues to decline. The paper machine is technically flexible to support conversion especially into containerboard production," says Schaur.

Planned Actions in UPM Biorefining and UPM Specialty Papers

To strengthen the competitiveness and long-term performance of its businesses, UPM Biorefining aims to further increase the efficiency of its pulp and forest operations in Finland. The planned measures focus on streamlining the operating model, optimising the cost-structure and advancing digitalisation.

UPM will begin employee consultation process at its Kymi, Kaukas and Pietarsaari pulp mills regarding planned changes in the mill and support organisation. The planned changes aim to increase flexibility and efficiency in the areas of mill maintenance, production and administration. At most, these plans would lead to a reduction of 110 positions.

In the Finnish forest organisation, the planned measures focus on improving cost-efficiency by streamlining the organisation and increasing the use of digital systems and services. The plans would affect maximum 60 positions.

UPM Specialty Papers plans to reorganise and optimise the cost structure at the UPM Tervasaari mill, Finland to improve competitiveness. The planned measures would impact approximately 50 positions at the mill.

Financial Impact

In total, the plans announced today are estimated to impact approximately 840 positions, most of which are based in Finland.

UPM will recognise restructuring charges of approximately EUR 115 million (EUR 55 million cash impact and EUR 60 million as write-offs) as items affecting comparability in its Q3 2020 results, mainly related to the planned actions in UPM Communication Papers. The planned actions would result in total annual cost savings of approximately EUR 75 million.

UPM has earlier this year announced the closure of Chapelle paper mill in France, Jyväskylä plywood mill and streamlining in UPM Raflatac. These actions result in annual cost savings of approximately EUR 45 million.

UPM has a strong track record of continuous improvement in cost efficiency and the company will continue to implement measures to decrease fixed and variable costs in all businesses and functions, as needed.

SOURCE: UPM