Pulp and Paper

bales of wood pulp

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 Ortviken Mill

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.



UPM Kaipola Mill

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.



KaiCell Fibers

KaiCell Fibers’ Paltamo Pulp and Bioproduct Mill Gets Environmental Greenlight by Finnish Authorities

July 22, 2020 - KaiCell Fibers said that the Regional State Administrative Agency for Northern Finland (AVI) has approved an environmental and water usage permit application for the company’s proposed pulp and bioproducts mill to be built in Paltamo in northeastern Finland.

The mill’s projected annual capacity is 600,000 ADMT (air dried metric tonnes) of which about 85% will be NBSK (Northern Bleached Softwood Kraft) pulp, and about 15% will be chemical pulp from hardwood (birch), also known as BHKP (Bleached Hardwood Kraft Pulp).

“It is very positive for the Kainuu region that the Paltamo mill project now has a clear path towards implementation,” said Hannu Heikkinen, CEO of KaiCell Fibers. “AVI’s decision further strengthens the venture’s credibility and enables us to seek financing also outside Finland. We can therefore take the next steps towards building the mill with confidence.”

KaiCell Fibers’ Chairman Eero Suutari credited the team that prepared and submitted the permit application.

“They did an extremely thorough job, and went particularly deeply into the very areas that have recently been subjected to scrutiny and tightened rules from the authorities. This way they clearly established that the future mill will operate in harmony with its environment, nature and the local community,” Suutari said.

Paltamo mayor Pasi Ahoniemi emphasized that the municipality stands firmly behind the KaiCell mill venture.

“Converting our fibre wood into market pulp locally would mean a tremendous shot in the arm for the region’s strained economy. Global pulp demand continues to grow, and the mill is projected to generate a positive effect of more than 200 million euro per year. Not only for the forest sector, but throughout our economy,” the mayor said.

KaiCell Fibers Oy/Ltd is a company funded by private investors and the Regional Council of Kainuu (Kainuun Liitto) with the objective of building and operating a state-of-the-art pulp (NBSK) and bioproducts mill in Paltamo, Finland. For further information, visit: www.kaicellfibers.com.

SOURCE: KaiCell Fibers Ltd.


Sodra Varo pulp mill

Södra Announces Plans to Increase Pulp Capacity at Its Värö Mill in Sweden

July 22, 2020 - Södra recently announced that it is planning a new investment for its pulp mill in Värö, Sweden, which will allow the mill to increase capacity from its current 700,000 tonnes per year (tpy), and move towards 850,000 tpy.

“The investment is part of Södra’s new Group strategy and means that we can continue to follow our chosen path and grow together with our customers. Increasing production will strengthen our competitiveness and our position in the global market as a long-term and secure partner,” said Peter Karlsson, Interim President and CEO at Södra.

In 2016, Värö was completely rebuilt to become one of the world’s most modern and largest softwood pulp mills with a capacity of 700,000 tpy, but it has the potential for 850,000 tpy.

“It was soon apparent that the new line had even greater potential than we had anticipated. We now see a possibility to further increase production in a cost-efficient way by the end of 2022. This is a major first step toward the 850,000 tpy that is within the framework of the existing environmental permit,” said Marcus Åsgärde, Mill Manager for Södra Cell Värö.

A secure fibre base for the additional capacity is guaranteed as Södra will source the wood needed from the forest estates of its 53,000 members. The project is scheduled to start up in April 2022 and will ramp up until the end of the same year.

“Our control of the value chain, from seedling to value-added products and services, makes Södra a unique business partner. We invest in growing our industrial operations, but only in parallel with ambitious sustainability targets to increase the growth of our members’ forest estates. This investment also facilitates future investments in optimizing pulp quality – that’s important because we know our customers’ expectations will only increase in the future,” said Magnus Björkman, Business Area President for Södra Cell.

Södra is Sweden's largest forest-owner association, with 52,000 forest owners as its members. Södra is also an international forest industry Group, with operations based on processing its members' forest products, such as softwood and hardwood pulp, and wood products. To learn more, please visit: www.sodra.com.


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