ajor C VISCOSE - Calejo Future intelligencecalejo.se/wp-content/uploads/2013/08/BMI_lagupplost.pdf · · 2013-08-21No.1 Spring 2013 Greentech - the forest as a future resource

1BRIGHT MARKET INSIGHT

No.1 Spring 2013

Greentech - the forest as a future resourceI N S I G H T

No.1 Spring 2013

I N D E X & R E P O R T O F T H E W O R L D B I O R E F I N E R Y I N D U S T R Y

I N S I G H T

No.1 Spring 2013

INDEX & REPORT for the GLOBAL PULP & BIOREFINERY INDUSTRY

I N S I G H T

VISCOSE THE COMEBACK

Major Capacity Increases Cause Volatility

GLOBAL McKinsey´s advice about the paradigM shift EurOpE frantic activity at sca ortviKen

LAtin AmEricA bright future despite rising costs cHinA tiMe for recovery

nOrtH AmEricA ford focuses on new cellulose Materials r&D&i the centre for world-leading research

prOFiLE Mats nordlander, head of stora enso renewable pacKaging

PAGE 47

Market TrendsFORECAST30 MONTHS

Market TrendsFORECAST30 MONTHS

2 BRIGHT MARKET INSIGHT

CONTENT

Peter Berg, McKinsey: Advice to the forest industry

Volatitlity in the viscose market

CHAPTER 1

6

9

GLOBAL

Frantic acitivity at SCA Ortviken

SCA R&D: Full focus on new materials

SCA Östrand: Equipped for the future

Interview with Ulf Larsson, President of SCA Forest Products

Aditya Birla Domsjö: Leading viscose manufacturer

CHAPTER 2

12

13

EUROPE

14

16

18

The hurricane Sandy gives Resolute a boost

Ford devlops new cellulose materials

CHAPTER 4

30

32

NORTH AMERICA

Pressure from rising costs

Five companies – five growth strategies

Fibria and Ensyn teams up to produce biofuels

Tres Lagoas – the world’s forest industrial metropolis

CHAPTER 5

34

35

LATIN AMERICA

36

39

FSCN – The centre of worldleading research

Bonanza for the mills

Focus on energy efficiency

Fourth generation paper

CHAPTER 6

40

41

42

43

R&D&I

Chinas import boost the pulp price

CHAPTER 7

44

CHRONICLE

A strong market 2013 and 2014

CHAPTER 8

47

INDEX

INDEX PAGE 47

VISCOSE PAGE 9

STORA ENSO fOCuSES ON CHINA PAGE 24

Lumber demand: Time for recovery

New emission standards

Merger in Taiwan

Stora Enso invests EUR 1,6 billion in Guangxi

Interview with Mats Nordlander, Stora Enso Renewable Packaging

Russia and the Angara paper project

CHAPTER 3

20

22

CHINA & ASIA

23

24

26

28

EDitOr–in–cHEiF

EDitOriAL StAFF

DESiGn

puBLiSHEr

SALES

WEBSitE

ADDrESS

pHOnE

E-mAiL

carl Johard per aronsson, henriK brandÃo Jönsson, leonard Johard, Jan höKerberg, MiKael Jåfs, nils lindstrand, lennart pehrson

JoaKiM Karlsson (art director) & terÉse lind, sweet williaMs and pop

caleJo future intelligence ab

håKan freudenthal, sales director

www.brightMarKetinsight.coM

strandgatan 4, 85231 sundsvall, sweden

+46 60159090

[email protected]


Bright Market Insight is an exclusive, qualitative quarterly market report with coverage, interviews, news and analyses from the international markets in Europe, North America, Latin America, China and the rest of Asia and Oceania. It is published four times a year with an exclusive and up-to-date report on news and trends in the international biorefinery and pulp market as well as a unique long-term forecast (Bright Market Index) of pulp prices (NBSK) 30 months into the future.

uNIQuE fORECAST MODELThe Index is a unique proprietary developed forecast model for (NBSK) pulp based on ar-tificial neural networks (ANN). The model distinguishes itself by including a large amount of fundamental data and taking into account the frequencies of market fluctuations. This makes it unique in the commodity market.

Bright Market Index forecasts indicate the correct price directions more than 80% of the time for all time horizons longer than 6 months. The model is also able to identify whether the price will increase or decrease in nearly 80–85 percent of cases where long-range forecasts are made. In a 24-month range, the forecast is very close to the actual price trend. The model predicted two years ahead the deep dip in 2009 and 2011 as well as the increase during the autumn 2012.

PROfESSIONAL AND EXPERIENCED STAffThe Bright Market Insight is produced in close collaboration with academia and the forest products industry and its editorial board includes Anders Anders Luthbom, former BI Director of SCA, Henrik Essén, BI Manager at Billerud and Mikael Jåfs, Senior Analyst at Credit Agricole Chevreux in Stockholm.

The editorial staff are very professional and experienced business journalists around the world. They each cover the following areas:

– The international biorefinery market with analyses, inteviews and news about new capacities and shut-down capacities as well as trend reports.

– Downturn in the biorefinery and pulp markets in Europe, Latin America, North America, and China and Asia.

– Reports on prices, inventories, supply and demand with market analyses.– R&D&I – the latest research news from leading international research centers.

DON´T MISS THE wEbSITEIn addition, Bright Market Insight's website, which requires individual login credentials, is updated with industry-specific news, interviews, market analyses and long-term forecasts 12 months a year. The package also enables subscribers to download key diagrams for their companies' internal powerpoint presentations via brightmarketinsight.com.

We hope you enjoy an insightful read

WELCOME TO A BRIGHT fUTURE

Bright Market Insight

CONT

ENT

CAr l JohAr dE d itor-i n-Ch i E f


MORE EffICIENT AND fLEXIBLE PRODUCTION

WITH STRICTER CONTROL Of RAW MATERIALS

AND ENERGy

In this interview, Peter Berg, forest industry expert at McKinsey & Company describes four distinct, major development trends currently taking place in the forest industry: 1. Radical change in consumption habits. 2. Geographic shift in production. 3. Competition for raw materials. 4. Greater demand for sustainability.

HOw IS gLObAL CONSuMPTION Of PAPER PRODuCTS CHANgINg?“In the west we’re seeing a stagnating or falling market, with less paper being used (particularly graphic paper) than before, while consumption of paper is still growing strongly in emerging economies. Reports in-dicate a decline of as much as 40-50 percent per capita in the west in the past decade, which is putting the industry under im-mense strain. In my view, the decline in the consumption of print and writing paper will be even faster than it has been in the past. In developing countries, people tend to adopt technological innovations faster and switch directly to reading newspapers on mobile phones and the Internet, i.e. technological leap-frogging. If you look at where the penetration of mobile subscriptions is the highest, it’s in the emerging markets where people have simply bypassed landline telephony and its costly infrastructure. On the packaging side the picture is brighter, with growth more or less all over the world. However, growth in the west remains slow and hesitant.”

HOw QuICkLy ARE CONSuMPTION HAbITS CHANgINg?“We usually see a critical threshold for adopting new technology at around 20-25 percent. Above this level, the trend accele-rates. When the penetration of broadband reaches around 25 percent, the Internet

has become a natural part of everyday life. When 25 percent of employees use e-readers at work, the number of uses increase and the spread rate accelerates, which has a direct impact on paper consumption. Technology is constantly developing and in the last two years the number of magazine apps for e-readers has increased twenty-fold, while books and magazines have gone digital and are now available online. The one thing that has prevented e-book reading from spreading even faster are the critical legal issues about rights and pricing. It now appears as though the big US publishing firms and newspapers have found a workable method for paid information.”

wHAT PRODuCTION CHANgES DO yOu ANTICIPATE fROM THIS SHIfT IN TECHNOLOgy?“Production is largely being built up where the consumption is. This means that much of the production is shifting to Asia, and in particular China, which from its previously modest levels has become the world’s largest market for paper consumption. Asia previously accounted for one-third of the global production of graphic paper, today it accounts for half.

However, new question marks have arisen about future pulp production in South America and Asia.

In South America, per-country prices and payroll expenses have risen drastically

Peter Berg’s advice to the forest industry about the paradigm shift:

PARADIGM SHIFT

CONSUMERDECLINE PER CAPITAIN THE wEST IN THE PAST DECADE

50%

Author: Carl Johard, Stockholm


while in China the government has signal-led that it intends to limit the production of paper in certain regions while stimula-ting domestic pulp production.”

DO yOu THINk THAT MILLS wILL bECOME MORE DIVERSIfIED, wITH MORE NEw PRODuCTS AND bROADER PRODuCT PORTfOLIOS?“Yes. We’re in the middle of a paradigm shift. The problem for the forest industry is that it operates in markets mainly for the production of commodities, where investments are high, margins low and it’s far too easy for competitors to build new, more efficient capacity. For future success, the industry needs to develop unique, in-demand and higher-value products in new, smaller segments and niche areas where not everyone can or wants to get involved.”

DO yOu EXPECT gREATER COMPETITION fOR RAw MATERIALS?“Yes. It’s becoming absolutely vital to keep the costs of raw materials and energy under control. Expansion will take place where the prices of raw materials are at their lowest.

If Europe and other regions and countries are to meet their environmental goals, the use of biomass for heating and power will rise sharply. Meanwhile we’re seeing the quality of recycled fibres go down, which will result in the price of recycled fibre, and consequently also fresh fibre, go up. We’re also seeing rising demand for stronger material and reinforcement pulp, which is good news for long-fibre pulp mills in the Nordic region and North Ame-rica. This all means that locally there may be fierce competition for wood materials.

PARADIGM SHIFT

gLOb

AL

You must be lighter on your feet and able to respond quickly to structural changes, says Peter Berg, McKinsey.

the various segment of the pulp market.

Wood demand will increase in Europe, with the main driver being energy source applications.

800

750

700

650

600

550

500

450

400

350

300

2010 2015 2020 2025 2030

m3 million

Paper & Board392 million t

Pulp167 million t

Recycled Fibre224 million t

43%57%

80%20%

34 %66 %

54 %46 %

64 %36 %

Chemical134 million t

Mechanical33 million t

Market Pulp46 million t

Integrated Mills85 million t

Hardwood24 million t

Softwood / Other22 million t

Eucalyptus16 million t

Acacia / Other8 million t

PuLP MARkET STRuCTuRE

EuROPEAN DEMAND fOR wOOD BIOenergy TrADITIOnAl wOOD usAge

sOurce: eu wOOD

sOurce: FIBrIA


There are still significant expansion oppor-tunities in the southern hemisphere. China, which is a major pulp importer, is the ‘joker in the pack’. The country intends to expand its short-fibre pulp capacity and there are clear directives from the government for the country to increase its pulp production, which means more plantations but also an increase in imported raw materials. At the same time, the fear is that, because of the high cost of land, the price of Chinese fibre

will remain high by international standards.

Brazilian plan-tation eucalyptus is much cheaper than Chinese fibre. However, Brazil is currently experiencing a period of great uncertainty, with rising land costs

and payroll expenses. Today you need to venture further inland to find suitable locations, which in turn requires more infrastructure investments and means higher transport costs. We will probably also be seeing an increased cost base in this part of the world.

Russia, on the other hand, has around 20 percent of the world’s timber stocks. But it has no infrastructure and the cost of buil-ding the necessary road and rail networks would be gigantic. International interest in Russia has also been dampened as a result of reports of uncertain owner relationships, cumbersome legal structures and business difficulties.”

HOw wILL SuSTAINAbILITy REQuIREMENTS AffECT THE MARkETS?“It’s hard to say – it depnds on the situa-tion. Growing environmental awareness and CSR initiatives are fuelling demand for sus-tainable materials. This could lead to plastic being replaced by paper, paperboard and other sustainable bio-materials, but also, in some cases, to paperboard being replaced by plastic. In all, the general trend is a reduced need for packaging.”

wHAT DO yOu THINk wILL HAPPEN TO THE PRICE Of PuLP?“There’s a limit to how far pulp prices can can increase. The paper producers must either see their margins shrink or they will need to increase their paper prices. In many paper and paperboard segments, it’s the wrong time to increase prices. It would only lead to reduced demand. Margins are at breaking point, which will probably help to accelerate the market trend towards more refined products.”

IS THE PuLP MARkET bECOMINg LIgHTER ON ITS fEET?“Yes. The forest industry has always had a long planning horizon when it comes to raw material purchases, and this culture has often also filtered through to forest industry companies and their marketing. But this ap-proach is becoming harder to sustain as the market is changing more quickly as a result of rapidly changing consumer habits and financially unstable producers.

China’s pulp buyers have been very opportunistic in the last ten years, causing a change in the market with greater price fluctuations and shorter planning horizons. So today you need to be lighter on your feet and must be able to respond quickly to structural changes.”

HOw wILL THIS CuLTuRAL CHANgE MANIfEST ITSELf?“What we’ll probably see is further conver-sion of machinery and a growing number of swing machines. More companies, some of them Chinese, are considering switching to flexible pulp mills, which can quickly switch from paper pulp to dissolving pulp and back. This will make it even harder for us to understand and anticipate the dynamic in the market.”

wHAT ADVICE wOuLD yOu gIVE yOuR CLIENTS IN THIS uNCERTAIN MARkET?“To survive, you need to be highly mobile and light on your feet, have your own production flexibility and an in-depth understanding of how to improve production efficiency in a volatile market. It’s also a good idea to supplement your basic strategy by guaranteeing a long-term supply of raw materials.”

PARADIGM SHIFT

THE CRITICAL25%FOR ADOPTING NEw TECHNOlOGy

THRESHOLD


The viscose market is experiencing global growth. All the plans for new capacity for dissolving pulp in China, South-East Asia, Latin America and North America entail an imminent risk of a drop in price.

“You need to have a clear and distinct market for your products, otherwise you risk ending up in an open, less attractive spot market where prices could fluctuate con-siderably,” says Peter Berg, forest industry expert at McKinsey in Stockholm.

In the first half of the 20th century, the viscose fibre industry had a period of strong growth, but this was followed by an equally dramatic decline in the second half of the century because of the success of the oil industry‘s newer synthetic fibres. However, in recent years the industry has been show-ing signs of recovery.

Today, 60 percent of the world’s textiles are oil-based synthetic fabrics, around 30 percent are cotton-based while around 5 percent are viscose-based, depending on the sub-segment.

RISINg TEXTILE CONSuMPTIONWith a growing global population, the consumption of textiles will continue to increase. Cotton production, on the other hand, has reached its ceiling and will strugg-le to keep up with demand. More agricul-tural land is needed for food products, while countries such as India and Pakistan recently introduced export restrictions on cotton.

“Despite shrinking crop areas, greater efficiency in cotton harvests is expected to help keep cotton production at today’s sales

MAjOR CAPACITy INCREASES CAUSE VOLATILITy IN THE VISCOSE MARKET

that the price differential in relation to regular pulp will decrease with time,” says Peter Berg, forest industry expert at McKinsey in Stockholm.

‘NORMAL’ PRICE DIffERENCESThe price of dissolving pulp has recently been hit by short-term dynamic changes.

“The rise in the price of dissolving pulp in 2007, and most recently in 2010, was caused by an increase in the price of oil – and therefore also the price of polyester – while the price of cotton also rose as a result of years of poor harvests. The market has subsequently adjusted and prices have dropped. The difference in price between paper pulp and dissolving pulp is now, as before, USD 200-250 over the long term.

levels, which are equivalent to 26-28 mil-lion tonnes per year. In a growing market, the natural alternative will instead be viscose and oil-based fibre,” says Lars Winter, CEO of Aditya Birla Domsjö.

gROwINg INTEREST IN DISSOLVINg PuLPThis market trend has precipitated a gro-wing interest in dissolving pulp. The viscose market is experiencing global growth. New greenfield plants are being built in South-East Asia, while in Europe and in North America, older pulp mills are being conver-ted for dissolving pulp production.

“The volume trend for regular paper pulp and rising prices are persuading more people to switch to dissolving pulp. But when the capacity increases, there is a risk

Author: Carl Johard, Stockholm

gLOb

AL

in a growing market, the natural alternative to cotton will be viscose fibre, says lars winter, CEO of Aditya Birla Domsjö.

VISCOSE


This means that when pulp prices go up, so do dissolving pulp prices, and vice versa,” says Peter Berg.

IMPORTANCE Of STRONg MARkET POSITIONPeter Berg says that mills in the Nordic region and North America that are considering converting to the production of dissolving pulp will not necessarily hit the jackpot.

“It will be hard for them to compete with low-cost companies, so they'll need to find their own unique position in the market where they can manufacture some form of specialised dissolving pulp or find a collaboration partner further along the refinement chain. You need to have a clear and distinct market for your products, otherwise you risk ending up in an open, less attractive spot market, where prices can fluctuate considerably,” says Peter Berg.

fOCuS ON gREEN PROCESSESThere is one cloud on the horizon for viscose: like its competing fibres: polyester polyester and cotton, it is associated with certain environmental problems.

“The viscose process contains carbon disulphide, a chemical which is hard to eliminate and which makes the product less eco-friendly. From an environmental perspective, it’s better than cotton and polyester, but today there is considerable interest in other chemical processes such as Lyocell, which does not contain this chemical,” says Peter Berg.

Viscose has been refined in recent years, which has resulted first and foremost in greater comfort, a superior fit and higher quality.

“But to succeed in the highly competitive textile market, the forest industry needs to develop a material that is far superior to cotton and also cheaper, greener and stronger. The research-driven trend of developing new fibre variants will continue,” says Peter Berg.

You need to have a clear and distinct market for your products, otherwise you risk ending up in an open, less attractive spot market, where prices can fluctuate considerably, says Peter Berg, McKinsey.

VISCOSE


Global production of viscose staple goods is currently dominated by China, South and South-East Asia and Western Europe.

By far the largest producer is China, which is also the world’s largest textile market. The country accounts for 58 percent of global capacity, compared with 8 percent just 20 years ago. China today has 27 plants boas-ting an average annual capacity of 75,000 tonnes. The biggest plant has a capacity of 230,000 tonnes. The rapid increase in capacity in the last few years has been driven by a strong demand for viscose from the fast-growing, export-oriented domestic textile industry. This increase in capacity has been insufficient, however, and imports to the country have therefore also increased.

After China, the rest of South and South-East Asia is the second-largest produ-cing region, and has tripled its capacity in the last decade.

New capacity expansions of 800,000 annual tonnes are planned in China. Both Lenzing and Birla have announced plans to increase the size of their plants in Nanjing and Xiangfan. Xinjiang Faluda has an-nounced that capacity will be tripled to 300,000 annual tonnes, Shandong Yamei is reported to have plans to increase capacity by 200,000 to 260,000 annual tonnes in total, while Anhui Shumeite and Sateri have announced plans to build completely new plants with a capacity of 180,000 and 200,000 annual tonnes respectively.

Domestic growth in China is being undermined by lack of capacity and long delivery times. Textile mills have struggled to keep up with demands for rapid delivery times from the western fashion industry, which plays into the hands of suppliers in closer locations, such as Turkey, Eastern Europe and North Africa.

Lenzing’s fifth viscose production line at its Indonesian subsidiary, South Pacific Viscose, is now in operation. The plant, with a capaci-ty of 320,000 annual tonnes, is the world’s largest manufacturer of textile fibre.

According to Lenzing Asia is the most important market for the Lenzing group.

This is where the company generate more than half of it’s fibre revenue, and so it’s logical that Lenzing’s biggest plant should be in Indonesia, he explains.

PRODuCTION IN CzECH REPubLICMeanwhile, Lenzing has taken full control of the Czech pulp manufacturer, Biocel Paskov, by acquiring the remaining 25 percent of the outstanding shares in the company from the Heinzel group.

After conversion, Biocel Paskov will produce both paper pulp and 260,000 annual tonnes of refined grades of dissol-ving pulp. The pulp will mainly be used by Lenzing for its own needs.

Lenzing is also preparing for the production of 80,000 annual tonnes at its plant in Patalganga in India.

gLOb

ALWOrLD’S BiGGESt viScOSE FiBrE prODucinG pLAnt

cHinA: tHE WOrLD’S LEADinG rEGiOn

VISCOSE

Fine paper21%

Viscose andother

4%

Tissue8%

Publicationpaper16%

Packaging paper and board

51%

CHANgINg TIMES IN gLObAL MARkET

Viscose is still a small but growing part of the the global forest industry, while publication paper is decreasing in an overall growing market.

sOurce: rIsI InDusTry sTATIsTIcs 2009


SCA Ortviken has stepped up its product development work to find new products to succeed publication paper.

“We have a bright outlook on our future. Ten years from now we will remain strong, we will have wider product portfolio, a skilled staff and be well-positioned in terms of the raw material,” says Kristina Enander, Mill Manager at SCA Ortviken.

Frantic activity at Ortviken

Ortviken paper mill, just outside Sundsvall, manufactures 880,000 tonnes of coated pub-lication paper, LWC, and uncoated paper grades on four machines. The raw material is fresh spruce pulpwood, mainly from SCA's own forests in northern Sweden.

As the global market for publication pa-per is shrinking, SCA Ortviken is reviewing its future strategy. The strategy review has led to two parallel development lines.

“In the short term we need to develop and refine the products we already have. In the slightly longer term we also need to find alternative products for our production machinery, which in due time can succeed the production of publication paper," says Kristina Enander, Mill Manager at SCA Ortviken.

The latest product in the family is Grapho-Invent, a new 90-gramme uncoated offset paper. It is part of the Bright Future project, where last year PM5 was rebuilt to produce higher-quality uncoated paper. The project, which was completed in the autumn of 2012, included the expansion of the plant’s bleaching capacity and the rebuilding of both PM5 and the water treatment plant.

STRuCTuRAL CHANgESThe structural change of the last few years, with fewer people reading newspapers, has prompted SCA to begin probing for alternative products. “We are seeing dramatic changes in the market and we need to do something about our situation. We need to find new pro-

ducts for Ortviken. It is a process we have already begun and will be stepping up in the near future. We will be raising the tempo of this development work significantly,” says Enander.

INCREASED EffICIENCyIn other respects the plant is continuing its endeavour of increasing productivity and reducing costs.

“We can hold our own in the industry when it comes to factors such as develop-ment, lower costs and increased producti-vity, but we will not rest on our laurels. We are now focusing on making our mainte-nance work more efficient,” says Enander.

SCA will invest some USD 57 million in expanded cooperation between its ope-rations in Sundsvall – SCA Ortviken and SCA Östrand – and the energy company Sundsvall Energi, increasing its deliveries of energy to Sundsvall's district heating grid.

STRONg OuTLOOk fOR THE fuTuREOver its 150-year history, Ortviken has completed several successful product renewals and the plant has every possibility of being a strong and successful industry in the future.

“We have access to a fantastic fresh fib-re; we have an industry that infrastructural-ly-speaking is located near our raw material and we have our own port. It is also a good position to be in when it comes to other developed products, and we will continue producing publication paper at Ortviken for a long time to come,” says Enander.

The energy extracted from Ortviken's flue gas condenser provides surplus heat to the district heating network corresponding to the heating requirements of 5,000 single-family houses per year. And three years ago a new mechanical pulp line was opened, which paves the way for significant quality improvements and increased capacity.

"Ten years from now we will remain strong, we will have a broader product port-folio, a skilled staff and be well-positioned in terms of the raw material,” says Enander.

Author: Carl Johard, Sundsvall

We are seeing dramatic changes in the market and we need to find new products for Ortviken, says Kristina Enander, Mill Manager at SCA Ortviken.

SCA


The winds of change are blowing through the SCA R&D Centre in Sundsvall, Sweden. Alongside the traditional product development work, more and more time is being spent on researching new materials and new business. And this research has already come a long way in some areas.

Full FOcus On new materials and new business

Major changes have taken place on the research front over the past year, due to the continuing dip in the market for publica-tion paper and the sale of SCA’s packaging business. This has prompted SCA to restructure its research operations.

"We are now set to further develop the organisation, making it more business-oriented and more closely tailored to gene-rating new innovations and new business. Our task for the future will be to develop and propose new products, materials and processes. We need to find new applications for the fantastic forest raw material that we have,” says Örjan Petterson, adding that SCA R&D Centre will increasingly work with the whole of SCA, including the hygiene business, the new energy division and also SCA Timber.

NEw R&D AgENDAThe research centre has been working on a handful of transformation projects over the past two years.

“We’ve identified a number of transfor-mation areas that we’re now working on. In many cases, these are areas that we’ve never researched before.”

The areas identified include packaging, construction materials, composites, chemi-cals, microfibrillated (nano)cellulose and pharmaceuticals.

Packaging is an interesting area of research, and a field in which both the SCA R&D Centre and Mid Sweden University have material and design expertise.

“Future Packaging products. Our strength at SCA is that our fresh fibre raw material is not only renewable, but also recyclable and biodegradable. We are one of few European producers of kraftliner from fresh wood fibre.”

bELIEf IN bIOREfINERIESOn the chemical front, Ortviken has been delivering extremely high-quality turpen-tine at a rate of 300 cubic metres per year since 1984.

“We are the only forest industry manufacturer in the world to produce turpentine of such high quality.”

Together with Mid Sweden University and the Fibre Science and Communication Network (FSCN), SCA R&D Centre is now investigating the potential to manufacture other chemicals.

“There are a number of substances that we can make use of, both from the wood and the wastewater. This is set to be a growth area of the future,” says Örjan Petterson.

MICROfIbRILLATED CELLuLOSEMicrofibrillated cellulose, or nanocellulose, is another research area that is helping to develop stronger fibres and materials. This cellulose is of specific interest when it comes to construction and composite materials.

“Composite materials are particularly interesting to us, especially if they can be manufactured on a large scale on existing paper machines. Many of the paper pro-ducts that we already produce are a kind of composite material, comprising – as they do – fibre, pigments and various surface layers,” says Örjan Petterson.


EuRO

PE

OF HIGH quAlITy TuRPENTINE SINCE 1984

300the SCA r&d Centre has been working on a handful of transformation projects over the past two years.

SCA

PER yEAR CUBIC METRES


SCA Östrand produces different pulp grades, energy and chemicals. With a modern, efficient and flexible production apparatus in place, new products and expansion are on the agenda.

SCA Östrand is already a fully-functional biorefinery with a capacity of 430,000 ton-nes of totally chlorine free (TCF) bleached kraft pulp, 95,000 tonnes of chemical thermo-mechanical (CTMP) pulp and 450 GWh of green electricity, while also ma-nufacturing and selling district heating and chemicals, such as turpentine and tall oil.

“We have gradually increased our capacity over the last 20 years and refined this concept even further. It is an integral part of the sulphate process, where half the wood is turned into pulp and the other half is processed into energy and chemicals. We invest substantial research resources in creating new – and developing existing – pulp business with our raw material, using our processes as the starting point. Being part of a company with such a broad, deep expertise about the whole product and production chain is a huge competitive ad-vantage for us,” says Ingela Ekebro, CEO of SCA Östrand and Pulp Division Manager.

The development of new products is closely interlinked with SCA Östrand’s his-torical growth and future expansion plans.

“Our long-term goal is to double our production capacity to 800,000 tonnes of kraft pulp, 110,000 tonnes of CTMP pulp and 500 GWh of energy plus additional bi-products. It is necessary in order for us to have a strong production economy in the future.”

HALf INTERNALLyApproximately half of the produced kraft pulp is used in the production of SCA’s own hygiene and printing paper. The rema-inder is sold to external customers. CTMP

pulp is used in products such as sanitary towels, printing paper, board products and tissue.

gOOD AT PROMOTIONAL bATCHESBut what makes SCA Östrand truly unique is the mill’s long experience of alternating production.

“When we stopped producing short-fibre pulp, we were quick off the mark to produce alternating batches of softwood kraft pulp. Today we manufacture several different grades of softwood pulp so that we can customise the fibre properties for the end-products they are intended for,” says Ekebro.

Switching between campaigns, which involves the whole production chain from choice of wood raw material to finished product is based on customer orders and a carefully timed delivery plan.

“Here we have the help of our process design, which can handle these rapid switches. This has been a major success factor for us,” says Ekebro.

PRODuCTSSCA Östrand has developed special pulp grades with properties tailored for printing and tissue paper. Today the plant has a number of different kraft pulp products and even more on the CTMP side.

“We are striving to find good pulp products for highly dedicated end-users. Our hallmark is developing and being able offer customised grades for tissue, kraft board and printing products,” says Ekebro and continues:

“In recent years we have also been focu-sing on our own brand names and in this context, our strong environmental profile has been particularly significant for our customers. Our brand name work has helped us create knowledge in the organisa-tion and a clarity in the communication to our customers.”

Accordingly, SCA Östrand recently presented some of its latest grades such as Luna and Celeste Filter, which is a kraft pulp particularly suitable for filter products.

EffICIENCy ENHANCEMENT A CHALLENgEIn order to reach its future capacity targets and to be profitable in long term perspec-tive and continue being a strong player in the forest industry, SCA Östrand focuses firmly on efficiency enhancement.

We are sriving to find good pulp products for highly dedicated end-users, says Ingela Ekebro, Mill Manager at SCA Östrand.

SCA

EqUIPPED fOR THE fUTURE



“These are turbulent times for the industry. Products vanish and new ones appear. Whatever we do really well today may not be good enough tomorrow. This is why we need to be supremely efficient in everything we do. We are extremely committed to maintaining a high produc-tivity level and optimising the fibre for the right end-product,” says Ingela Ekebro and continues:

“We are working hard on our Lean implementation and are becoming skilled in making day-to-day improvements. This includes a more strategic and structured skills development for our 360 employees. Processes and technology can all be bought, but our competitive advantage is our personnel.”

RESEARCH AND DEVELOPMENT Research and development initiatives are equally as important.

“We need to be even more flexible and better at solving problems for our existing customers. We work closely with SCA R&D Centre and Mid-Sweden University and we have our own development unit which serves as a link between the research and our mills. We also have a product group, headed by our Marketing Manager where we combine resources from marke-ting, R&D and production, which decides which products we should focus on. It is an approach that we see as our competitive advantage.”

But SCA Östrand does not limit its innovation work to products. It is equally important to be innovative in process development.

“We pursue both product and process development and we focus on developing efficient processes as well as good products. Energy efficiency enhancement is also part of the process work, i.e. consuming as little energy as possible and selling the energy we do not use.”

bRIgHT fuTuREIngela Ekebro believes in a bright future for SCA Östrand.

“We have high level of competence, a well-invested mill with dynamic plans for the future and demand for wood-fibre based pulp is only getting stronger. It is a market where we should be competing in earnest,” says Ekebro.

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the wind farms will contribute to around 3,000 Gwh of energy per year.

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heavy investments in wind pOwerSCA Energy develops renewable energy and produces refined and unre-fined forest-based biofuels, in addition to managing SCA’s wind-power assets. SCA is one of Europe’s largest suppliers of forest-based biofuels.

SCA Energy also includes SCA’s ventures regarding wind power, whether they are set up as land leases, joint ventures or own development projects.

HEAVILy INVESTMENTSStatkraft and SCA are jointly planning the construction of 360 wind turbines in northern Sweden. Planning has also begun on a further 300 wind turbines together with Norwegian company Fred Olsen Renewab-le and 270 turbines are being planned presently in collaboration with E.ON. In total the investments may amount to around SEK 30 billion for more than 900 wind turbines.

“With all our projects we can achieve close to 5 percent of Sweden’s electricity consumption today. In the wind park areas, only a few per cent of the land is actually used for roads and wind turbine foundations. The rest of the land in the area is managed for forestry as elsewhere. We are thrilled about being able to combine two lines of business – energy production and forest management, where we among other things get access to good roads for timber transports. This increases the value of our forest,” says Head of SCA Energy Åke Westberg.


WE ARE IN THE MIDDLE Of A SEVERE

STORM – BUT THE END IS IN SIGHT

In these difficult economic times, SCA Forest Products continues with unwavering commitment to innova-tion work.

“We’re not seeing any growth in demand for publication paper, so to keep production moving forward, we need to put all the major invest-ments we’ve already made at our plants into use for developing the next generation of products,”says Ulf Larsson, President of SCA Forest Products, in this interview.

wHAT kIND Of SHAPE IS TODAy’S fOREST INDuSTRy IN?“We’re going through tough times and this is affecting every business that is export-led. The Western forest industry is currently in the middle of a severe storm caused by low economic activity, combined with a struc-tural downturn, particularly in publication paper. In Sweden, we’re also suffering the consequences of a very strong domestic currency, which has a negative impact on all the Swedish exporting industries. Although there are strong indications that the end is in sight, it’s going to take a long time before we see any significant recovery.”

HOw ARE yOu DEALINg wITH THIS?“We’re working on it constantly. We want to avoid the big gestures. A healthy organisation has a constantly ongoing de-velopment process. We always try to work consistently on our rationalisation and improvement work.”

HOw RObuST ARE SCA fOREST PRODuCTS’ INDuSTRIAL PLANTS?“We have large and robust production plants and access to fresh fibre raw material of fantastic quality. Thanks to our forward-thinking energy investments, we’ve been able to build up a cost-efficient internal energy supply, which has given a huge boost to the competitiveness of the factories. The mills in Sweden are located close to the supply of raw material, but they have toug-her conditions to contend with in terms of long distribution routes to their customers.”

yOu HAVE CHOSEN TO fOCuS STRONgLy ON INNOVATIONS...“Yes. Whatever our circumstances, and ir-respective of any other decisions, we need to come up with the products of tomorrow in order to maintain production and put the major investments we’ve already made at our plants to best use. Since we’re not seeing any growth in demand for publication pa-per, we’ve launched an innovation process aimed at developing the next generation of products.

“The important thing is for us to take a clearly innovative approach to our business, constantly reviewing it in a drive to improve efficiency and profitability. Innovation always involves hard work with a long-term focus. Successful innovation work leads to differentiation and added value for SCA’s customers and consumers, which in turn establishes strong, market-leading and value-creating products and brands.”

HOw ARE yOu HANDLINg THE STRuCTuRAL DOwNTuRN IN PubLICATION PAPER?“For one thing, we’ve sold off our Laakir-chen paper mill in Austria and our Ayles-ford paper mill in the UK, which has re-duced our exposure to standard newsprint. At the same time, we’re working intensively at Ortviken to gradually reposition our product portfolio.

“We have several exciting projects in the pipeline, where we’re working with a number of strategic customers. In some cases, we’re even at the point of test runs with customers.

“In parallel with this, we’ve invested a massive SEK 350 million in PM5 to increase its capacity and manufacture brand new grades of publication paper with higher grammages.”

HOw IS THE INNOVATION PROCESS gOINg fOR SCA’S PubLICATION PAPER fACILITIES?“The large industrial sites have previously enjoyed fantastic margins and stable market trends. However, we can no longer take continued market growth for granted, so I’ve asked the organisation to review the core processes and look into the possibility of generating revenue from supplemen-tary product flows. Alongside this, we’ve established an organisation and a process for developing products that may come to replace the existing ones. The aim is to ensure that our plants remain robust in the future.

Ulf Larsson, President of SCA Forest Products:


SCA


“We’re taking a short, medium and long-term approach to our development work. We have skilled and committed people who know our business inside out and it’s important to draw on all the great ideas and resources that we have internally.”

wILL wE SEE CONTINuED INVESTMENT IN ENERgy?“Absolutely. We’re currently sharpening our strategic focus on energy. Demand for renewable energy is bound to rise, and the desire to switch to greener technology is expected to remain strong. We’ve set up the new business unit SCA Energy to run and develop our business in renewable energy. We’re planning a large number of wind tur-bines. On top of this, we’ll be looking at a range of other processes through the prism

of our strong position as a major European owner of production facilities with surplus heat, forests and watercourses.”

wHAT OTHER AREAS ARE IN THE SPOTLIgHT?“We’re taking a very open-minded ap-proach to identifying new products for the future, based on our relative strengths compared with our competitors. Packaging is, of course, an area of interest. We have a competitive raw material structure, we have existing production processes and we have an in-house organisation and expertise in research and marketing with a focus on packaging. As a group, SCA has a long-term focus on developing its leading positions in advanced packaging in segments with a high degree of refinement. These segments

have a more stable rate of growth and offer us future expansion prospects with good growth. We’re also reviewing the potential in complementary product flows.”

wHAT IS THE TIME HORIzON HERE – wHEN wILL ORTVIkEN CHANgE ITS PRODuCTION STRATEgy?“Publication paper will remain at Ortviken for a good while yet. In terms of higher quality publication paper, we’ve been successful in developing popular products even in a weak market and that work will continue. We’ll also be continuing our move towards more value-added products. These things tend not to involve abrupt switch-overs. SCA Ortviken will see a cautious and gradual change and transition to other products.”

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We will continue our move towards more value-added products, says ulf larssson, President of SCA Forest Products.

SCA

SCA ORTVIKEN WILL SEE A CAUTIOUS AND GRADUAL CHANGE AND TRANSITION TO OTHER PRODUCTS

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ADITyA BIRLA HAS BIG PLANS fOR THE DOMSjÖ BIOREfINERyAditya Birla Group has big plans for the Domsjö Fabriker Biorefinery in Örnsköldsvik in Sweden. The Birla group has acquired Domsjö to develop the company and its products, opening up new possibilities for the future.

Since 2011, Domsjö Fabriker has been a part of the Aditya Birla Group, which is one of India’s leading commercial spheres. The group is also the world’s largest manu-facturers of viscose staple fibre. In addition to Domsjö Fabriker, the Pulp and Fiber business area runs three plants in Canada – of which the latest addition, Terrace Bay, was acquired this year – and one in China with similar manufacturing of viscose staple fibres and viscose filaments.

SIgNIfICANT INVESTMENTS In the last ten years Domsjö Fabriker has invested more than EUR 180 million in the expansion of one of Sweden’s first bio-refi-neries which produces specialty cellulose, lignin, bioethanol, biogas, bioresins and carbon dioxide.

“The latest expansion programme includes investments in a new wood room, a second lignin dryer and a capacity increase in the manufacturing process of specialty

cellulose.” says Lars Winter, CEO of Domsjö Fabriker. He adds: “We are now continuing an investment plan that was begun by the previous owners.”

LEADINg MANufACTuRER Of SPECIALTy CELLuLOSEThe development programme will increase Domsjö Fabriker’s cellulose annual capacity from today’s figure of around 200,000 to 255,000 tonnes.

“This means we can grow alongside our customers in the expanding textile market. We will also be able to increase our products’ refinement value,” Winter says.

Specialty cellulose is today Domsjö


Specialty cellulose is today Domsjö Fabriker´s main product.

ADITyA BIRlA


ADITyA BIRLA HAS BIG PLANS fOR THE DOMSjÖ BIOREfINERy

Fabriker’s main product. “We are one of the world’s leading ma-

nufacturers of viscose, with a seven percent share of the world market,” he says.

Specialty cellulose is used mainly in viscose fabrics and in hygiene products, where it serves as an alternative to cotton. But it can also be found in pharmaceuticals, as a binding agent in food products and has long been used in the heat shields of NASA’s space capsules.

INCREASED MARkET PRESENCEWith Aditya Birla, the company’s market presence has increased.

“We now have access to market chan-nels that benefit us greatly, and also a competent organisation that is enormously strong on resources.”

As well as being a strategic supplier of specialty cellulose to the Aditya Birla group’s globally expanding viscose fibre production, Domsjö also supplies the open and growing global viscose market.

“Cotton production is reported to have reached its ceiling and will have difficulty keeping up with rising demand. Viscose is the natural alternative,” says Winter.

RANkED NuMbER TwO gLObALLy IN DRIED LIgNINDomsjö Fabriker’s other main product is lignin, which is primarily used as an additi-ve for concrete. Lignin improves the liquid properties of concrete and thereby reduces the need for cement. This is beneficial for the environment since the manufacture of cement causes considerable emissions of carbon dioxide.

A single kilo of lignin added to a mixture of concrete is calculated to reduce carbon emissions caused by the manufactu-re of cement by 20 kg. The manufacturing capacity of dried lignin will double to some 120,000 tonnes with the investment in a second lignin dryer.

“Consequently, we will have a 10% share of the world market and become the second largest supplier in the world for dried lig-nin,” says Lars Winter. “During the autumn of 2012 we launched a new product on the market. It is the first lignin product to be based on a proprietary and patent-pending technology and it provides Domsjö with access to a new market segment.”

PROgRESS AT THE ETHANOL PANT Bioethanol is the Domsjö biorefinery’s third business area and it is currently being produced at unprecedented levels in the ethanol plant.

In past years, the process has been fine-tuned, which has led to capacity increases. The goal is to increase annual production to 14,000 tonnes. With the planned increase

in the manufacture of specialty cellulose, a continued positive trend is expected for the ethanol plant, which has an absolute maximum annual capacity of 20,000 tonnes of ethanol.

SwEDEN’S LARgEST PRODuCER Of bIOgASIn addition to the three products, Domsjö also produces methane gas from the bio-treatment of effluents and smaller volumes of bioresin and carbon dioxide. Biogas from the biological treatment plant fuels the two own lignin dryers and supplies heating which covers 20 percent of the plant’s energy needs.

Domsjö is also planning to manufacture cellulose nanofibre from the plant’s cellulose sludge.

The proportion of recovered sludge from the manufacturing of cellulose nano-fibre is 95 percent. Specialty cellulose from Domsjö is very pure, which means that the fibre does not need be treated before manufacturing. The goal is to create new material made from residual products, the-reby increasing the value across the whole production chain.

“All combined, these factors give us good cause for our motto, ‘We make more from the tree,’” says Lars Winter.

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The India-based Aditya birla group is a leading multinational conglomerate, comprising some 50 companies and 120 produc-tion units on six continents and in 36 countries. It is also the world’s largest manufacturer of viscose fibre. group sales total uSD 35 billion and the group has 133,000 employees.

Aditya Birla manufactures viscose staple fibre in India, China,

laos, Domsjö Fabriker in Sweden and at three plants in Ca-

nada: Nackawic, AV Cell in New Brunswick and Terrace Bay.

Domsjö Fabriker occupies an unique position among Adi-

tya Birla’s pulp mills, being the only mill to have an advanced

research operation.

The Group plans to expand capacity by the equivalent of

120,000 annual tonnes in India and 142,000 annual tonnes in

South-East Asia.

number One in the wOrld

domsjö fabriker occupies an unique position among Aditya Birla´s pulp mills, being the only mill to have an advanced research operation.

ADITyA BIRlA


STEADy INCREASE IN WOOD GROWING

COSTS IN SOUTHERN CHINA

China has temporarily lost its appetite for Western logs due to the economic slowdown. But there are signs that a recovery is on its way.

The slowdown of the Chinese economy, combined with worries about a “bubble” in the big cities’ housing markets, led to a cont-raction in construction activities in China during 2012. This caused reduced demand for lumber, and a sharp decline in imports of softwood logs and lumber to the country.

TIME fOR RECOVERyWith reduced demand for logs in the lumber industry in China, log prices fell throughout most of 2012. According to Wood Resources Quarterly (WRQ),

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CHINESE fIbRE uSAgE wAsTe pAper nOn-wOOD pulp wOOD pulp

China will continue to see rising wood pulp production along with rising imports of wood chips to make that pulp.

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sOurce: cHInA pAper AssOcIATIOn, MIIT


Steelmakers, cement producers and con-struction machinery manufacturers saw their sales soar as the stimulus plan opened the spigots on funding for roads, railways, ports, airports and power plants, among other things.

In the spring of 2009, the collapse of the US housing market forced log prices in the states of Oregon and Washington to their lowest levels since the early 1980s.

When Chinese traders discovered that US logs were a bargain, they started to aggressively buy them to support the construction boom in China. Prices went up for 18 months and peaked in May 2011, after more than a 100 per cent increase.

In 2011, China used almost 10 per cent of the softwood lumber produced globally. Canada and Russia are the two dominant suppliers of softwood lumber to China, together accounting for 84 per cent of total imports, with the US, Chile and New Zealand comprise most of the remaining import volume.

RISINg PuLP PRODuCTIONChina will continue to see rising wood pulp production along with rising imports

average import softwood log prices in the third quarter of 2012 were down 13 per cent from a year ago, and domestic Chine-se-fir log prices have fallen about 6 per cent in 12 months.

WRQ also reported that China’s im-ports of logs and lumber fell by 19 per cent in the first eight months in 2012 compared to the same period a year earlier. By volume, log imports were down 17 per cent and lumber imports down 5 per cent.

However, the Wood Markets’ China Bulletin has reported that China’s wood product sector is expanding again, after hitting bottom in the first quarter of 2012, and predicts “that China is working its way out of its housing construction slowdown”.

TEN PERCENT Of THE gLObAL SOfTwOOD LuMbERWhen the global financial crisis hit both the US’ and Europe’s economies in the fourth quarter of 2008, China’s central government launched an enormous stimu-lus package of RMB4 trillion (US$586 billion) to boost domestic demand in both infrastructure investment and consumption during 2009 and 2010.

of wood chips to make that pulp. A new study released by RISI concludes that, large-scale papergrade market pulp produc-tion in China is not a sustainable business over time.

A steady upward trend in wood growing costs in southern China will keep China's pulp producers purchasing ever-increasing volumes of wood chips from greater distan-ces, including North and South America, at very high costs.

Wood costs in China are already almost the highest in the world, and account for as much as 70% of cash costs for bleached hardwood kraft (BHK) market pulp produ-cers in China. Market BHK producers in China have some of the newest and largest pulp lines in the world, and yet are still the high cost producers, even in their own market.

The RISI report indicates that wood growing costs in southern China will pro-bably outpace growing costs in Brazil by a wide margin over the next decade, and this suggests that large-scale papergrade market pulp production in China is not a sustaina-ble business over time.

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NEW EMISSIONSTANDARDS SET fOR CHINA’S PAPERMAKERSChina’s pulp and paper industry is one of the government’s five tar-geted sectors for stricter policies to save energy and cut emissions.

Historically, China’s pulp and paper industry has been plagued by environmen-tal problems, traditionally caused by the widespread use of outdated technology and lack of environmental awareness.

However, in recent years, China has worked hard to modernise the industry in an effort to achieve its overall environ-mental goals. The country has launched campaigns to close old machines nation-wide to reduce pollution and realise cleaner production.

20 MILLION TONNES TO bE PHASED OuTFrom 2006 to 2010, China shut down altogether more than 2,000 pulp and paper enterprises, and eliminated outdated pro-duction capacity of over 10 million tonnes. In the 12th Five-Year Plan, for 2011-2015, China plans to phase out another 10 mil-lion tonnes of backward capacity.

“The most modern machines are instal-led here in China. Actually, you have two

kinds of pulp and paper companies. You have the old ones that might be challenging regarding energy efficiency and pollution. But you have also got the ones that have been installed with facilities that are state-of-the-art. They are more modern than the ones in Europe or North America,” Pasi Laine, Metso's President of Pulp, Paper and Power, told the China Daily recently.

kEy COMPONENT Of THE CHINESE ECONOMyChina’s paper industry’s total output in 2010 stood at nearly RMB600 billion (US$ 95 billion) in value. Even if the market has slowed down since then, the industry is clearly one of the key components of the Chinese national economy.

This was reflected in the fact that the papermaking industry was one of five targeted sectors when China’s State Council issued specific energy-saving and emission-cutting policies in conjunction with the 12th Five-Year Plan in early August 2012.

Local media said that it was the first time the government had set such detailed goals for an individual industry.

HAND-IN-HAND wITH ENVIRONMENTAL PROTECTION

For pulp and paper producers, con-sumption of standard coal for making a tonne of paper and board will be slashed to 0.53 tonnes in 2015, compared with 0.68 tonnes in 2010, according to the plan.

Similarly for the production of a tonne of pulp, the plan is for 0.37 tonnes of stan-dard coal to be used in 2015, down from 0.45 tonnes in 2010.

Regarding pollutants in waste water, the pulp and paper sector will have to cut rates of both chemical oxygen demand (COD), a water emission factor describing the amount of oxygen consumed when dis-solved matter in effluent water oxidises, and ammonia nitrogen emissions by 10 per cent.

The industry-wide discharge of COD emissions will be lowered from 720,000 tonnes in 2010 to 648,000 tonnes in 2015.

For ammonia nitrogen, emissions will be reduced from 21,400 tonnes in 2010 to 19,300 tonnes in 2015.

"We should always bear in mind that economic growth should go hand-in-hand with environmental protection. Envi-ronmental protection policies should be

Author: Jan Hökerberg, Shanghai

seven FOcused areas in china’s Five-year plan

China’s 12th Five-year Plan (FyP) for the pulp and paper industry was released on 30 December, 2011. The ambitious plan

targets balanced growth of total paper and board consumption and production, putting an emphasis on rebalancing demand and

supply. The FyP identifies seven focused areas for the industry:

• Improve the raw material supply. • Increase indigenous innovation, improve technological structure. • Optimize regional development, allocate resources properly. • Conduct clean production, protect environment. • Optimise enterprise structure, promote mergers and acquisitions and implement efforts to improve industrial consolidation. • Improve product structure and product quality. Develop new and environment-friendly products, speed up the upgrading of low-end products. • Establish saving mechanisms, promote appropriate consumption. In addition, the FyP also identifies three key projects and nine support policies.

NEw EMISSION STANDARDS


MERGER BETWEEN TAIWANESE PULP AND PAPERMAKERS YFY Paper spins off its printing paper business to Chung Hwa Pulp.

The merger of the fine-paper business unit of Yuen Foong Yu Paper Manufac-turing Company (YFY Paper), the largest papermaker in Taiwan by revenue, into the Chung Hwa Pulp Corporation came into effect in the end of 2012.

The merger was announced in March 2012, with Yuen Foong Yu spinning off its printing paper business unit to Chung Hwa Pulp in exchange for 640 million new shares worth TND 6.68 billion (USD 230 million) to boost its ownership of Chung Hwa to 55 per cent.

SAfEguARD AgAINST PRICE fLuCTuATIONSThe deal will help to fuel revenue growth of both companies, according to analysts.

Institutional investors told the Taiwan-based China Economic News Service

(CENS) that acquiring the fine-paper business unit would enable Chung Hwa Pulp to enhance self-efficiency in supply of the material as a safeguard against price fluctuations, while heavily utilising wet pulp in papermaking to cut energy costs used in evaporating of secondary condensates. The company could see its sales revenue increase to TND 20 billion in 2013 and its profits double.

A LEADINg POSITIONYFY Paper was founded in 1950 and rose to a leading position in the domestic paper manufacturing industry. The company has introduced a number of different products to the market, including fine paper, indust-rial paper, paper container and household paper products.

Besides being the owner of many mills

in Taiwan, YFY Paper has also invested in pulp and paper mills abroad in China and Vietnam. YFY Paper also exports its products to other parts of Asia as well as to the Middle East and Central and South America.

A RENEwED ATTEMPTChung Hwa Pulp engages in the manufac-ture and sale of paper products for cultural, sanitation, and industrial uses in Taiwan. It provides picking pulp, bulky pulp, and high-opacity pulp products. The company was founded in 1968 and is headquartered in Hualien, Taiwan.

YFY Paper and Chung Hwa Pulp origi-nally tried to merge operations in 2001, but had to cancel the plan. In a statement at the time, the two companies attributed “inapp-ropriate political interference” and disagre-ements over labour issues as the reasons for the decision to end the planned merger.

Author: Jan Hökerberg, Hongkong

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implemented in the context of promoting consumption, investment and exports," said Environmental Protection Minister Zhou Shengxian.

A COMPLETE TRANSfORMATIONIt is not only government initiatives that are helping to consolidate and modernise the Chinese paper industry. The companies themselves are also upgrading their facilities.

In a China report by Asia Pulp & Paper (APP), one of the world’s leading pulp and paper producers, the company concludes: “Today’s paper industry has undertaken a complete transformation. Amid techno-logical advances, as well as rising national standards and increased awareness of corporate responsibility, China’s modern paper enterprises are taking active measures to modernise the industry by employing renewable resources within a cleaner production process.” Chan hwa Pulp engages in the manufacture and sale of paper products for cultural,

sanitation and industrial uses in Taiwan.

CHANG HwA PulP


today 700 people work at the Stora Enso´s plantation schools and eucalyptus forests in China.

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Countdown to Stora Enso’s Investment in

Stora Enso will be investing around EUR 1,6 billion in a greenfield pulp mill for the production of pulp and paperboard in the city of Beihai in Guangxi province in southern China. Further expansions are in the pipe-line and China is well on the way to becoming one of the group’s largest and most important markets.

Stora Enso began operations in Guangxi in 2002 and, since then has invested EUR 200 million in building up its 120,000 hectares of eucalyptus plantations in the province. Today 700 people work at the plantation schools and in the Chinese eucalyptus forests.

“This is land ideally suited for growing eucalyptus,” says Mats Nordlander, Executi-ve Vice President of Stora Enso’s Renewable Packaging business area.

PAPERbOARD PRODuCTION AND CAPACITyThe forests are now ready for harvesting. Stora Enso’s management and board recently continued the Chinese initiative by investing EUR 1.6 billion in a new greenfield mill in Beihai in Guangxi. The mill will produce 900,000 annual tonnes of pulp, and will include a new, state-of-the-art paperboard machine with a capacity of 450,000 annual tonnes. The mill is expected to deliver liquid packaging board and va-rious types of consumer product packaging to the whole of China.

“In 2007 we signed a letter of intent to build the mill, and we have spent the last five years planning the project and nego-tiating the terms. It’s a gigantic investment – one of the largest that a Nordic company

has ever made outside the Nordic region,” says Mats Nordlander.

The operation will be conducted in the form of a joint-venture company, of which 85 percent will be owned by Stora Enso and 15 percent by the state-owned Guangxi Forestry Group.

CHINA gROwINg IN IMPORTANCEWith the current investment, China’s importance for the group will increase significantly. China including Hong Kong accounted for around five percent of Stora Enso’s total turnover of around EUR 11 billion in 2011.

“We are already one of the market-leading forest industry players in the count-ry and we have ambitious growth plans in China. If the Chinese market continues to grow until 2020 at the rate that we expect, there will be opportunities for further expansion,” says Mats Nordlander.

In the future, when the market allows, the ultimate objective is to increase capacity at the new mill to 900,000 annual tonnes.

STRONg gROwTHThe global packaging market is currently growing by 3 to 8 percent a year. The fastest growth is being recorded in countries such as China, India and Pakistan.

“All these countries, which are emerging from poverty, need packaging. We antici-pate that 50 percent of the global growth in our key paperboard segment by 2020 will be in China. The number of families in China that are eating hygienically packaged food is rising by 25 percent per year. This is the driving force behind our operation here. With this project we will significantly

increase our sales in the Chinese market,” says Mats Nordlander.

RECRuITMENT CAMPAIgN uNDER wAyToday, Stora Enso has 4,500 employees in China. When the mill in Guangxi is completed, the number of employees in the country will rise to 6,500. This can be compared with the group’s total workforce of 30,000, of which 6,000 are in Sweden.

”We anticipate that in five years’ time, China will be one of the countries where we have the most employees. And that’s not including the 10,000 people who will be working there during the construction phase. In all, we expect that the investment in Guanxi, with contractors, suppliers and auxiliary operations, will create 30,000 new job opportunities in the province,” says Mats Nordlander.

The first recruitment drive for the mill is under way, with vacancies for 300 university graduates to be filled, and 500 more to join them in the spring of 2013.

“The great majority of them will be learning the ropes from scratch and will start off as operators,” he says.

ALL SySTEMS gO IN 2014Construction work on the plant will begin as soon as the formalities are complete.

“All the preliminary decisions have been made but we have yet to receive the final framework decision. Work will commence as soon as the permit arrives. The construc-tion phase is expected to take two years and the company plans to start production at the end of 2014,” he concludes.

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CHINA Author: Carl Johard

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wHAT IS yOuR VIEw Of THE fOREST INDuSTRy’S fuTuRE, gIVEN THE STRONg PRESSuRE fOR CHANgE THAT CHARACTERISES THE INDuSTRy? “There is undoubtedly a lot of pressure for change, and it is being driven by two strong trends. Firstly, some of our products, parti-cularly newsprint, have passed their sell-by date and have reached the end of their product lifecycles. Sooner or later all products eventually reach maturity in their respective lifecycles. The time has come for some of ours. Despite this, I believe we’re still fairly fortu-nate in having slow, relatively lengthy lifecycles compared with, say, the electronics and mobile phone industries.

The second trend is the rising global population and growing middle class, which is shifting the focus of consumption away from North America and Europe to the emerging countries.”

SCANDINAVIAN fORESTS TAkE bETwEEN 50 TO 60 yEARS TO gROw. ISN’T THE fOREST INDuSTRy by TRADITION A SLOw-MOVINg AND CONSERVATIVE PLAyER AMONg MORE LIgHT-fOOTED MARkETS, wITH LONg PLANNINg HORIzONS AND LONg INVESTMENTS DECISIONS?“Not really. For one thing, the forest industry’s investment deci-sions are not dictated by the pace of tree growth. The forest is a base of raw materials. When our industry invests we’re talking about huge investments and long lifecycles. The forest industry’s specially targeted capital investments have a very long maturity time. Flexi-bility is low and capital sizeable, so you need to be very careful and the investments are only made possible by a relatively slow product lifecycle. This means big machines, where the capital cost per unit gets high priority. With a faster cycle, investments as large as these would not be possible, and instead the investments would be in much smaller, more numerous machines.

Globally I also believe that company size is significant. In a changing world, bigger companies are more competitive and have a better survival rate than smaller ones. This is because they can operate on several continents, have a large assortment of machinery and can therefore add flexibility to the structure. Our newsprint operation has been good at creating a network of paper machines,

THE fOREST IS OUR

“All players should agree on a common view and conviction that the forest industry is vitally important to world’s prosperity, economy and development. It is our green oil,” says Mats Nordlander, Executive Vice President of Stora Enso’s most important business area, Renewable Packaging.

where it is possible to shift production to the unit which at the time is most cost-efficient or is otherwise more flexible in its production.”

LARgE COMPANIES ALSO HAVE THE RESOuRCES TO bE MORE EffICIENT IN THEIR PRODuCTION.“Yes, this is the logical outcome of a more flexible organisation. Generally in our industry, production is calibrated on a plant-by-plant basis. Stora Enso is trying to build a network of machines and plants instead, where we create flexibility between plants and try to take advantage of a brutal benchmarking between individual units.”

IN EuROPE, STORA ENSO HAS DIffERENT MAINTENANCE STRATEgIES. wHICH STRATEgy IS bEST?“Maintenance is an area that we have chosen to develop on the basis of geography. We’re constantly striving to expose all our external and internal processes to competition – not just maintenance. We’re convinced that exposure to competition is healthy. We conti-nuously benchmark and monitor our systems, on the maintenance side too. It’s a question of flexibility and we cannot rule anything out in the future. It’s important to have a philosophy of continuous

Author: Carl Johard

GREEN OIL

Stora Enso is trying to build a network of machines and plants and take advantage of a brutal benchmark, says Mats Nordlander, Executive Vice President Stora Enso Renewable Packaging.

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improvement. Getting bogged down in philosophical discussions and principle-based deadlock on certain decisions would be fatal. This is not a religion and in this respect we are strict non-believers in all political currents. Our philosophy is total flexibility.

We’re constantly striving to expose all our external and internal processes to competition – not just maintenance. We’re convinced that exposure to competition is healthy.”

HOw HIgH IS SAfETy ON STORA ENSO’S LIST Of PRIORITIES TODAy?“Protection, safety and the work environment are all top of our list of priorities and our agenda. It is discussed first at all our meetings, and it is our most important KPI that we use to measure our own performance. We implement the same approach all over the world and we have produced a toolbox with ten tools that we are currently implementing across the group.”

IN OTHER wORDS, yOu HAVE THE SAME APPROACH TO SAfETy AT ALL yOuR PLANTS AROuND THE wORLD?“Yes. We emphasise it in all situations. Our policy is that this is not a cultural issue: a Chinese, Pakistani, or Finnish worker is no different to a Brazilian worker in our safety culture. Protection and safety is one area where we are slightly fundamentalist in our ap-proach – here, we make no compromises. Our employees must feel confident that they will come home unharmed.”

DOES SuSTAINAbILITy HAVE THE SAME PRIORITy ON THE AgENDA?“Yes I think so. We are a company that is shifting towards the emerging countries and high-risk markets. This makes sustainability work increasingly important. It always did have high priority, but the current shift has brought new dimensions and is moving new items up the agenda.

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GREEN OIL

"We continuously benchmark and monitor our systems. Our philosophy is total flexibility.”

stOra ensO’s new strategy

Stora Enso is one of the world’s leading manufacturers of

paperboard and paper.

The group has 30,000 employees in 35 countries all

over the world, and annually produces 4.9 million tonnes of

chemical pulp, 11.8 million tonnes of paper and paper-

board, 1.3 billion square metres of corrugated board and

6 billion cubic metres of sawn wood products. Sales

totalled EuR 11 billion in 2011.

Stora Enso’s operations are now divided into four

business areas:

– Printing and Reading – newsprint, magazine and

book paper and fine paper.

– Biomaterials – production of fibre-based pulp and

bi-products from pulp production.

– Stora Enso Building and living – wood products for

construction and interiors, and bio-fuels.

– Stora Enso Renewable Packaging – fibre-based

packaging and innovative packaging solutions for

consumer products and industrial applications.

in its new strategy, Stora Enso has decided to invest in

fibre-based packaging and plantation-based pulp produc-

tion in emerging markets such as China and latin America.

By offering sustainable new solutions for customers,

fibre-based packaging ensures steady, long-term growth in

most segments and has considerable innovation potential.

Plantation-based pulp is based on fibres that grow ten

times faster than trees in the northern hemisphere. Planta-

tions will allow Stora Enso to secure costs and efficiency

in order to meet future needs for paper and paperboard

production.

The Printing and Reading business area will remain

part of Stora Enso, even if the group will become more

concentrated with fewer production lines. Focus will be

oriented towards manufacturing top grades with the

help of investments and initiatives to promote cost and

energy efficiency.

“Our overarching strategy is to continue growing in

growth areas. Packaging and bio-materials are two such

areas we are investing in. Business areas such as Printing

& Reading and Building & living generate sufficient cash

flow to allow us to generate growth in other areas,” says

Mats Nordlander, Executive Vice President of Stora Enso’s

Renewable Packaging business area.

Given that we often tend to act quickly and have earned the reputation of being a pathfinder in new markets, we also break new ground and face new challenges. It’s always easier to be second or third in a new market, leaving someone else to plough the furrows, make the mistakes and go through the learning curve. Our strategy is to be first.”

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AfTER THE MARUBENI AGREEMENTRussia is strengthening its commercial ties with Asia in the forestry industry. Recently, Japan’s Marubeni Corporation signed an agreement to build the gigantic Angara Paper pulp mill in Siberia and a Chinese wealth fund has invested in a Siberian timber company. With this new deal the initial partner Sodra leaves the project.

Angara Paper, a massive Russian pulp mill project in Siberia, got a much-needed welcomed boost in September 2012, when the Japanese trading company Marubeni Corporation signed an agreement with the Russians, taking responsibility for machinery, procurement as well as overseeing the construc-tion of a production facility in Lesnosibirsk in the region of Krasnoyarsk, Sibiria.

The contract was signed in conjunction with the summit meeting of the Asia-Pacific Economic Cooperation (APEC) in Vladivostok, where the leaders of the 21 member econo-mies met to discuss future trade and cooperation issues.

ONE Of THE wORLD'S LARgEST PuLP MILLSAngara Paper is intended to become one of the world’s largest pulp mills. Angara Paper was founded in 2006 to implement the pulp mill project. In 2008, Russia’s Industry and Trade Ministry included the project in the list of priority investment projects but construction was halted because of the global financial crisis.

According to initial plans, the mill will produce 1.2 million tonnes pulp per year, comprising 900,000 tonnes of northern bleached softwood kraft pulp (NBSK) based on birch and aspen and 300,000 tonnes of dissolving pulp (textile pulp), in addition to 380,000 cubic metres of sawn timber.

About 80 per cent of the output is earmarked for export to China, Japan, and other Asian regions. The partners put the cost of the investment project at JPY 280 billion (USD 3.5 billion).

Japan currently imports most of its softwood pulp from North America and northern Europe. Japanese and other Asian paper companies will be able to cut transportation costs by switching to supplies from Russia.

Author: Jan Hökerberg, Hongkong

If yOu wERE TO START uP THE SAME gREENfIELD PLANT IN EuROPE AS yOu ARE DOINg TODAy IN CHINA AND PREVIOuSLy IN bRAzIL, wOuLD IT bE DIffICuLT TO RECRuIT THE SAME EXPERTISE fROM THE uNIVERSITIES? wHAT DOES THE fOREST INDuSTRy NEED TO DO IN ORDER TO ATTRACT yOuNg PEOPLE?“This is what makes China the successful and fast-growing country it is today. We can’t compete on the same pitch, let alone in the same sport. Our challenge is to make our industry appealing enough to attract the very best university graduates. This is a big issue for the future. How can we get the sharpest minds at the universities to continue developing in our industry? In this regard we’ve observed an unsettling trend. In general terms we need to learn to present our industry in terms of its opportunities. Ours is an industry with a bright future.

The economic realities will work to our advantage. Industry and governments share the same platform and have a common vision and conviction that this industry is absolutely vital to world’s prosperity, economy and development. This is our green oil.”

wHERE DO yOu PICTuRE STORA ENSO IN 20 yEARS?“Globally, Stora Enso in 20 years will have a presence in many emer-ging markets and have an even bigger presence than today in Asia and Latin America and in the global packaging market.”

wHAT IS THE bIggEST CHALLENgE fACINg THE fORESTRy INDuSTRy TODAy?“The strongest motivation is that the resources on our planet are limited. The world population will be nine billion in 2050. We therefore need to be smarter in the way we use both finite oil-based resources and renewable resources, to make them last longer. One way is to maximise the productivity of each square metre and every tree. That trend will be very strong. This is an area we also focus on.

sÖdra leaves angara paper prOject

Stora Enso has decided to invest in fibre-based packaging and plantation-based pulp production in emerging markets such as China.

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Construction work on the pulp mill is scheduled to start in 2013 and the mill is supposed to be fully functional in late 2017. The Angara project has cutting rights to 6 million cubic metres of softwood per year in the Krasnoyarsk area.

SöDRA DECIDES TO PuLL OuT Of THE PROjECTMarubeni is a global trading company operating in numerous industries such as food, energy and metals as well as paper and pulp. In May 2012, Marubeni sealed a USD 5.6 billion deal to buy the US grain merchant Gavilon. In the pulp sector, the company has a capacity of approximately 1 million tonnes of market pulp, which is manufactured at two facilities in Canada and Indonesia. It also owns majority shares in several Japanese paper and board producers.

In 2011 Södra Cell of Sweden became the first foreign partner to sign a letter of intent with Angara Paper and the Russian bank Vnesheconombank (VEB). Södra's role in the project was to be an industrial partner with responsibilities for sales, marketing and distribution of future

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pulp production.Under the terms of the agreement, Södra

could hold up to a 10 per cent stake in the company or be paid in cash for its services.

Södra Cell is the world’s third largest market pulp supplier with a total annual production of more than 2 million tonnes.

In January 2013, Södra decided to pull out of the collaborative project for the new planned pulp mill.

“The scope of the project has changed compared with the original plan. From our perspective, the project no longer fits in with our future strategy and we have there-fore decided to withdraw,” says Gunilla Saltin, Acting CEO and President of Södra Cell.

THE RfP PROjECTAnother recent Russian-Asian forest indust-ry deal was announced in 2012. In June, the Chinese state-owned sovereign wealth fund, China Investment Corporation, established a joint private-equity fund with its Russian counterpart, the Russian Direct Investment Fund. In September 2012, they made it public that their first investment was a minority stake in the Russian Forest

Products (RFP) Group, an investment of USD 200 million.

The RFP Group is Russia’s second-biggest forestry company. It has operations in Siberia and focuses on the export of raw timber and sawn goods, but also plans to construct a large pulp mill in Russia’s Far East.

If realised, the RFP and Angara pulp mill projects will represent the first major greenfield investments in the Russian pulp and paper industry in decades, according to Bank of Finland’s newsletter BOFIT Weekly.

in September 2012 the Japanese trading company Marubeni Corporation signed an agreement with the Russians in Vladivostok.

Will be one of the world’s largest pulp mills

A MODERNISED AND EXPANDED fOREST INDuSTRyPulp and paper production accounts for less than 1 per cent of Russian GDP. Two-thirds of Russia’s current pulp production comes from the Ilim Group’s facilities in Irkutsk and Arkhangelsk. Paper, containerboard and corrugated paper production is concen-trated in north-western Russia.

About a fifth of the paper and contai-nerboard used in Russia is imported, but the aim is to replace imports with domesti-cally produced paper and containerboard.

In recent years, some of the existing pulp and paper facilities in Russia have been modernised and expanded. For example, US-based International Paper and the European Mondi Group have modernised their production facilities in Svetogorsk and Syktyvkar. The Ilim Group, which has International Paper as a strategic owner, has announced that it is completing a five-year investment programme valued at nearly USD 2 billion. The company’s most recent projects included construction of a pulp line in Siberia and starting production of office and printing paper at its Arkhangelsk pulp and paper mill.

RuSSIA


CHINA AND HURRICANE SANDy GIVE RESOLUTE A BOOSTResolute is counting on China, Hurricane Sandy and increased diversification to give the company a much-needed boost in 2013. The Canadian forest giant has struggled to meet its profit targets and profitability has been put under even greater pressure by the drawn-out dispute over pulp manufacturer Fibrek.

Author: Lennart Pehrson, New York

When Resolute Forest Products – formerly AbitibiBowater – announced a hostile takeover bid at the end of 2011, it turned out to be the start of a long, drawn-out legal battle. Its rival Mercer, which had initially outbid the company, tried to take the dispute to Canada’s Supreme Court before Resolute was finally able to take full control of Fibrek.

However, at least in the short term, this would weigh down on the company’s profit. Upgrading and modernising Fibrek’s main asset – the Saint-Félicien pulp mill in Quebec – has been a costly affair. The plant needed both environmental investments and measures to improve production efficiency, and production had to be shut down completely for a period.

bITTER CONfLICTTo some extent, Fibrek, now a wholly-owned subsidiary, has returned home. AbitibiBowater built and initially owned Saint-Félicien but divested the mill some ten years ago. Later, in 2010, Saint-Félicien became the base of pulp manufacturer Fibrek,

while AbitibiBowater changed its name to Resolute in a new start-up, after requesting protection from its creditors.

The bitter nature of the dispute is surprising considering the earlier close ties between the two companies. Fibrek’s mana-gement did what it could to attract another buyer. When a settlement was finally reached, Resolute replaced all the members of Fibrek’s board of directors and manage-ment team. Given the introduction of new tree-felling regulations, there was also an underlying threat that Resolute would no longer be able to deliver fibre to Saint- Félicien and Fibrek’s other pulp plants.

MANAgEMENT LOOkS TO CHINAResolute operates more than twenty pulp and paper mills and as many wood processing plants in Canada, USA and South Korea. The company now hopes that Fibrek’s pulp manufacturing will help strengthen its profitability prospects and

HURRICANE SANDy

resolute´s own forecsts suggest that timber prices will strengthen in 2013 because of hurricane Sandy´s devastation of the New york region.

$ 50 BILLIONCOST MORE THAN

THE COSTS OF RECONSTRuCTION wIll BE SuBSTANTIAl AND wOOD PRODuCTS wIll BE IN GREAT DEMAND

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thereby help boost its share price, which has been in a constant state of decline. Se-veral industry analysts consider the shares to be undervalued despite a clear risk that the price will continue to be exposed to downward pressure.

Even if all the forecasts about the growth of the global economy are tainted by considerable uncertainty, Resolute’s ma-nagement is confident that pulp prices will rise in the latter part of 2013. In that case, the driving force would be rising demand from China. It is the prospect of increased sales to China that is the main motivation behind Resolute’s interest in Fibrek.

A stronger paper pulp market is of crucial significance as Resolute needs to compensate for the inevitable decline in demand for newsprint. There is currently overcapacity in the North American market and all indi-cations suggest that demand will continue to fall – newspaper readers are expected to abandon physical newspapers when the increased use of surf tablets and other mobile devices digitalise the dissemination of news.

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DIVERSIfICATION AwAy fROM NEwSPRINTPossible silver linings include increased demand from Brazil and other Latin American countries, and markets in Asia. But it has long been evident that a diversifi-cation away from newsprint, which was the company’s core business, is necessary.

Dependence on the weakening newsprint market was the main reason for AbitibiBowater previously having defaulted on its payments.

Diversification away from newsprint is not just based on the acquired pulp mills, which have increased capacity to 1.8 million tonnes per year. Resolute also has strong faith in the wood processing market.

SANDy LIfTS HOuSINg CONSTRuCTIONThe new acquisitions also include several sawmills. The company’s own forecasts suggest that timber prices will strengthen in 2013 due partly to the increase in construction in the recovering housing market in the USA and also because of hurricane Sandy’s devastation of the

resolute has strong faith in the wood processing market.

New York region on the US east coast.When the storm subsided at the end of

October, the cost of damage was estimated to be more than USD 50 billion. Regard-less of the final damage tab, the costs of reconstruction will be substantial and wood products will be in great demand. Resolute’s CEO, Richard Garneau, has said that the effects of Sandy on the wood processing industry are unlikely to manifest themselves in increased demand and higher timber prices until the second and third quarters of 2013.

If pulp and paper prices go up, this should improve profitability after several tough years marked by financial crisis, deep recession and structural problems for newsprint. The problems have neces-sitated cost savings programmes and other measures that may now have improved the industry’s prospects.

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FOrd and weyerhaeuser team up tO develOp new materialsThe quest for greener and recyclab-le products has now brought previ-ously improbable partners together. Cellulose gains new applications as Weyerhaeuser, one of the world’s largest pulp and paper manufactur-ers, teams up with the Ford car giant to develop new materials.

The deep crisis that has hit the US auto industry has roused Detroit. Former oppo-nents to investments in economical and eco-friendly cars have been silenced. The reason is not only the success of Japanese competitors such as Nissan and Toyota; Ford’s own customers are demanding cars that are manufactured with greener techno-logy. In simple terms, consumer demand is taking over the driver’s seat.

gREEN ATTITuDE SHIfTAccording to Ford, a “green attitude shift” among car buyers has made it necessary for the company to change the production pro-cess in order to compete for market shares. Eco-friendlier bio-plastic in manufacturing therefore has the potential to be a successful competitive weapon.

The 2013 Ford Fusion is due to be launched in the USA. In its marketing, the company is emphasising that the new car has more components made from recyclab-le materials. Recycled plastic bottles, for instance, have gone into the seats, old car-pets have been turned into cylinder guards, while the soya bean continues to be used, as material for seat cushions.

uNLIMITED CREATIVITyThe creativity involved seems to be unlimi-ted. Some of the more unconventional raw materials used in car components include old bank notes and used jeans (which make excellent soundproofing).

Using a greater amount of recyclable materials means that more of the compo-nents for the car’s interior – which until now have mostly been made of fibreglass or mineral- or petroleum-based material – can be replaced. In the longer term this will help reduce greenhouse gases, as depen-dence on fossil fuels and resource-intensive disposable materials can be reduced.

CHANgES IN DRIVINg bEHAVIOuRIt is now not only the debate on climate and increased eco-awareness that is driving development. Rising petrol prices have given consumers purely financial motives for demanding more economical cars. However, it is a combination that is telling car manufacturers which direction they need to go.

A study commissioned by Ford shows that its customers are voluntarily changing their driving behaviour in order to save energy and money, both out of considera-tion to the environment and to their own wallets. They are using their cars less and driving more slowly.

And with petroleum-based components becoming more expensive to produce, rising oil prices are also impacting on car production costs.

ADVANTAgE CELLuLOSE fIbRESThis is one of the reasons why Ford has tur-ned to the forest industry to come up with new economical and recyclable component materials. Weyerhaeuser has previously used wood fibre to develop plastic composites, but had failed to satisfy Ford’s exacting demands.

However, after conducting with Weyerhaeuser a series of joint rigorous laboratory tests on prototypes, the bioche-mical experts at Ford’s research department have found that cellulose fibres are, in fact, an excellent base for making new com-posite materials. The plastic composites now being developed satisfy the extremely tough requirements on rigidity, durability and extreme temperatures. It also quickly became apparent that cellulose fibre had several other obvious advantages. Compa-red with fibreglass, components containing cellulose fibre as a raw material are lighter and quicker to manufacture and the process consumes less energy.

Author: Lennart Pehrson, New York

wEyERHAEuSER

MILLION ACRES Of fOREST IS OwNED AND CONTROllED By wEyERHEAuSER All OVER THE wORlD

20


1. ORIGIN 2. STRUCTURE

Cellulose is extracted from sustainably grown and harvested trees and related forestry by-products such as chips.

Cellulose is found in plants and trees, making it one of the most common organic components of cell walls – the very thing that gives wood its remarkable strength and resilience.

Ford has tested cellulose-based plastic composite materials – supplied by forest product leader Wayerhaeuser – for stifness, durability and temperature resistance. Armrests are among the first prototypes that were tested; they met current materials specifications.

3. FUTURE APPLICATIONS

1. ORIGIN

Cellulose is extracted from sutainably grown and harvested trees and related forestry byproducts, such as chips.

2. STRUCTURE

Cellulose is found in plants and trees, making it one of the most common organic component of cell walls – the very thing that gives wood its remarkable strength and resilience.

3. FUTURE USE

Ford has tested cellulose-based plastic composite materials – supplied by forest product leader Wayerhaeuser – for stifness, durability and temperature resistance. Armrests are among some of the first prototypes that were tested; they met current materials specifications.

And Ford has no need to worry about future supplies of cellulose fibres. Weyerhaeuser alone owns or controls more than 20 million acres of forest, not just in North America but all over the world. Wood fibre’s status as a renewable resource is underlined by the fact that the company announced that it planted more than 66 million new trees in 2011.

wIDER RANgE Of APPLICATIONS For Weyerhaeuser, whose head office is just outside Seattle, the auto industry could be a new, much-needed source of revenue. Cellulose fibres can also be extracted from tree waste. If the partnership with Ford is a success, other potential customers should not be long in showing an interest, and not just in the car industry.

With the collaboration with Weyerhaeuser now being strengthened in order to jointly develop car components, Ford is also anticipating a widening range of applications. Initially, the ob-

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jective was to produce composites with cellulose fibres as a base for making components for interior fittings. One of the first prototy-pes to be produced was an armrest. However, during the course of the work, it was discovered that wood fibres could also be used for exterior components and even in the car’s engine.

It may take time for industrial companies to change the ing-rained ways of their supplier chains, but continued development should open the door for more applications for bio-plastic made from cellulose fibres. In the not unlikely event that the price of raw materials – oil in particular – continues to grow in the global market, there is no shortage of incentives for discovering alternative materials.

This trend may be accelerated by the continuing and intensified debate on the looming climate crisis. Ford is hardly the only company that wants to market its products as being increasingly recyclable.

CELLuLOSE IN AuTOMOTIVE APPLICATIONS

the ford blomaterials research team is investigating the use of a plastic composite material that incorporates cellulose fibres from trees in place of fiberglass or mineral reinforcements. The new plastic material meets Ford's requirements for stiffness, durabillity and temperature resistance while offering numerous other benefits. Here is how cellulose fibers could end up in future Ford vehicles:


BUT fUTURE STILL BRIGHT fOR fOREST INDUSTRy IN BRAzIL Author: Henrik Bandão Jönsson, Rio de Janeiro

Despite rising land prices and pay-roll expenses, the future looks bright for the forest industry in Brazil.“Yes, everything is more expensive but I still see some major competi-tive advantages,” says André Barros de Hora, head of the pulp industry department of the major Brazilian bank BNDES.

Ten years ago the Brazilian government commissioned the development bank BNDES to stimulate competitive Brazilian companies that could hold their own in the world market. The most successful outcome is the Batista family who, with a loan from BNDES, have quickly turned the small slaughterhouse JBS into the world’s largest beef producing company.

The next success story could be how the bank develops the Brazilian pulp industry. Over the course of a decade, the bank has ploughed USD 6.6 billion into the industry, most of which went towards the formation of Fibria. To stimulate domestic competi-tion, BNDES was also involved in the formation of market challenger Eldorado, providing USD 1.3 billion dollars in fun-ding for its plants in Três Lagoas.

INDuSTRy REMAINS COMPETITIVEAndré Barros de Hora is head of the bank’s department for the pulp industry, and has a staff of fourteen people that help him analyse the market. Despite higher land prices and payroll expenses, the future for the industry in Brazil looks bright.

“Things may have looked a bit rosier five years ago before the financial boom in Brazil; land was incredibly cheap and payroll expenses were low. Now everyth-ing is more expensive, but I still see some major competitive advantages for Brazil,” says André Barros. “Where in the northern hemisphere, is it cheaper to run a pulp mill than here in Brazil? That’s right... nowhere. We still have many advantages down here.”

bACk IN buSINESS When Lula da Silva was elected President of Brazil, the average price of land in Brazil was USD 1,300 per hectare. Ten years later it is USD 3,600. So land prices have almost tripled, and payroll expenses have followed suit. In 2002 the government set the mini-mum wage at USD 96 a month. Ten years on, it is USD 300 a month. And as workers’ salaries at the paper mills are based on the government minimum wage, the effects

wOOd prOductivity

CoUntrY hArVESt (YrS) YiEld (m3/ha/yr)

Brazil 7 45-50

uruguay 7-8 30

Chile 10-12 20-50

Indonesia 7 20.35

Australia 7 20-25

Iberia 12-15 10-12

Sweden 35-40 5.5

Finland 35-40 4

uSA 25 10

Canada 45 7

SoUrCE: VotorAntim CElUloSE E PAPEl, CA ChEUVrEUx, StorA EnSo

We still have many advantages down here, says André Barros de Hora, BNDES.

have been felt across the whole industry.“Rising costs have made things more

difficult, but it is still highly profitable to run a pulp and paper mill here, where capacity is high. Just look at all the invest-ments being made. Investments tapered off after the financial crisis, but now we’re back in business,” says André Barros, who has written several reports on the pulp industry in Brazil.

kLAbIN fOCuSES ON HygIENEExamples of prominent new investments include Eldorado’s new mill in Três Lagoas and Klabin, Brazil’s largest paperboard manufacturer, which is investing USD 3.2 billion in a new pulp mill in the state of Paraná.

Eldorado’s new mill is one of the world’s largest and has a capacity of 1.3 billion tonnes of pulp per year. Klabin’s new mill is scheduled for completion in 2014 and will have a capacity of up to 1.5 million tonnes of pulp per year. According to the plan, the mill will be the first in Brazil to produce both short-fibre pulp for office and toilet paper, and long-fibre pulp used for making paperboard and diapers.

Pressure From Rising Costs –

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BUT fUTURE STILL BRIGHT fOR fOREST INDUSTRy IN BRAzIL

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fIVE COMPANIES fIVE GROWTH STRATEGIESThe pulp industry in Brazil needs to reduce its production costs to ensure long-term growth. The in-dustry is also very fragmented and there is scope for more integration and consolidations. The five leading companies in Latin America have very different growth strategies.

Klabin:RAw MATERIALS, PuLP AND ENERgyKlabin focuses mainly on Brazil and the production of energy and wood mate-rials alongside its pulp production. The company’s new pulp mill for producing Bleached Eucalyptus Kraft (BEK), cur-rently being built in the state of Paraná, will also allow Klabin to become a more important energy producer.

Fibria:INTEgRATED AND REfINED PRODuCTIONFibria is not looking to strengthen its market position by investing in a new pulp-producing greenfield mill. Instead,

it views the whole forest as a potential and could consider investing in production refinement and biotechnology.

Brownfield investments are more in line with Fibria’s strategy. The goal is to reduce the wood raw materials by 33 percent. This would reduce the risks regarding land costs and acquisitions, which in turn means Fibria could produce more by using fewer raw materials.

Suzano: EXPANSION THROugH ORgANIC gROwTH AND ACQuISITIONSSuzano’s strategy is to expand both via organic growth and acquisitions.

Suzano enjoys a high growth rate. From 2004 to 2008 the production rose by 100 percent on the back of the acquisition of Conpacel. This growth is being repeated during the period 2008-2013.

To reduce its exposure, Suzano has initiated a close partnership with the large Brazilian mining company Vale, which is investing in the plantation of new produc-

tion forests and the production of wood raw materials.

This move will hopefully help Suzano improve capital efficiency, as Vale invests in the raw materials side.

Stora Enso: uRuguAy AND CHINAStora Enso is preparing to invest in plants in China and Uruguay (see also page 24-26).

Smurfit Kappa: INVEST IN INNOVATION AND REfINED PRODuCTIONFor Smurfit Kappa, Eastern Europe and Latin America are regions where there is scope for investing in increased capacity. In line with the business model, Smurfit Kappa is on the lookout for a more sophis-ticated consumer market. Smurfit Kappa also invest in innovations, given that the company needs to be number one or two in the markets where they operate.

DIFFERENT STRATEGIES

The region where the mill is being built is the least-developed part of the state of Paraná, so the state government is contri-buting some of the funding. The third of BNDES’s flagship investments is Chile’s CMPC which, after the crisis in 2008, acquired the Aracruz pulp plant in Guaiba in the state of Rio Grande do Sul for USD 1.43 billion. CMPC is now to invest USD 1 billion to increase the plant’s capacity from 450,000 tonnes to 1.3 million tonnes of paper pulp per year.

SuzANO STRuggLINgSuzano, Brazil’s second-largest pulp manufacturer is the worst performer. The reason is reported to be a general decline in the wake of falling demand in China, but

the development bank is still concerned, as Fibria’s decline has only been ten percent in the last two years while Suzano’s has been no less than 63 percent in the same period.

BNDES has therefore increased its stake in the company and today owns 18 percent of Suzano. In the third quarter of 2012, the loss was USD 11 million, which is 94.4 percent less than the loss for the same period in 2011, according to Brazilian news agency Estadão.

How the Veracel paper mill, a joint venture between Stora Enso and Fibria in the state of Bahia, will perform remains uncertain. The owners have been planning to extend the factory since 2009, but no decision has yet been taken.

BRAZIl IS ExPECTED TO PRODuCE

20 MILLION

TONNES

Of PULP By 2020


BRAzIL IS STILL CHEAPER THAN

OTHER COUNTRIES

fibria workforce totals approcimately 18,900 professionals.

FibriaAPRIL

AracucoAPP

Georgia PacificCMPCSodra

Stora EnsoWeyerhaeuser

SuzanoBotnia/M-real

JPM-KymmeneDomtar

IlimMercer

IPENCE

West FraserCanfor

Cenibra

0 1000 2000 3000 4000 5000 6000

5,250

CHINESE fIbRE uSAgE

BleAcHeD sOFTwOOD krAFT pulp (Bskp)

BleAcHeD HArDwOOD krAFT pulp (BHkp)

unBleAcHeD krAFT pulp (ukp)

MecHAnIcAl

Brazilian producers at the top. Today's top 4 world producers are all focusing on lowcost pulp production using eucalyptus plantations as the main raw material. sOurce: FIBrIA

Fibria and ensyn team up tO prOduce biOFuelsEnsyn and Fibria have established a strategic alliance that includes an equally-owned joint venture for the production of cellulosic liquid fuels and chemicals in Brazil, as well as a USD 20 million equity investment in Ensyn Corporation by Fibria.

Ensyn and Fibria have established an equally-owned joint venture for the deve-lopment of facilities to produce cellulose-rich liquid fuels and chemicals in Brazil. The goal of the joint venture is to combine the strengths of each party to create a major supplier of renwable liquid fuels supplier.

Fibria, one of the world’s leading pulp producers, brings its industry-leading expertise in fiber production as well as a significant Brazilian fiber resource to the joint venture. The joint venture will also have access to Ensyn’s rights and experience related to its RTP technology for conver-sion of cellulosic feedstocks to renewable liquid fuels.

THE jOINT VENTuREThe strategic relationship includes a USD 20 million equity investment by Fibria in Ensyn Corporation, the Ensyn parent com-

pany. This investment will provide Fibria with ownership of approximately 6% of Ensyn and also provides Fibria with certain rights, which, if exercised, would allow Fib-ria to invest additional capital and increase its holdings to as much as 9% of Ensyn. In addition, Fibria will be granted one seat on Ensyn’s Board of Directors.

Fibria will be joining a group of blue-chip entities working with Ensyn in the development of a global renewable fuels business based on Ensyn’s RTP technology including UOP, a Honeywell company, the world’s leading supplier of petroleum refinery technology. The UOP strategic alli-ance, which takes place through jointly held Envergent Technologies LLC, is related to the engineering and supply of RTP equip-ment and RFO upgrading solutions on a worldwide basis.

THIS IS fIbRIA CELLuLOSE S.A.Fibria Celulose S.A., a Brazilian company, is the world’s leading producer of pulp, with a production capacity of over five million tonnes of pulp per year. Fibria’s production is supported by a forest base covering over one million hectares, spread across seven states in Brazil. The company owns and operates three pulp mills in Brazil and also owns 50% of Veracel, a joint venture with Stora Enso, also in Brazil. Fibria has specific expertise in growing and producing wood fibre based on fast-growth eucalyptus.

Fibria’s workforce totals approximately 18,900 professionals. Fibria invests in the cultivation of forests as a renewable and sustainable source of life, in order to gene-rate wealth and economic growth, promote human social development and ensure that the environment is protected.

THIS IS ENSyNEnsyn Corporation, a US company, is a producer of liquid fuels and chemicals from non-food biomass. Ensyn bases its production on its Rapid Thermal Proces-sing™ (RTP) technology and has a historical production of over 30 million gallons. The RTP technology converts wood and other non-food biomass into renewable liquid fuels and chemicals. Ensyn’s key renewable liquid fuel, Renewable Fuel Oil™ (RFO), is a multi-purpose petroleum replacement fuel with uses in many applications, including heating, conversion to transportation fuels and power generation in diesel engines.

Ensyn is currently executing a signifi-cant expansion of RTP capacity in North America and internationally for the produc-tion of Renewable Fuel Oil (RFO), its principal renewable liquid fuel product.

FIBRIA

Author: Henrik Bandão Jönsson, Rio de Janeiro


BRAzIL IS STILL CHEAPER THAN

OTHER COUNTRIES

Fibria and US company Ensyn have joined forces to produce biofuels. “Brazil has the best biomass and capacity and is still cheaper than other countries,” says Vinicius Nonino, Senior Strategist and M&A Manager at Fibria, in this interview.

HOw DID THIS COLLAbORATION COME AbOuT?“We’ve been talking about diversifying beyond paper pulp ever since Fibria was first founded in 2009. As biofuel is part of our agenda, we began looking around for a possible partner. We made overtures to Ensyn at the beginning of 2011 and tied the knot in 2012. This is our honeymoon.”

IN CONCRETE TERMS, THE COLLAbORATION MEANS THAT fIbRIA HAS bOugHT INTO ENSyN fOR uSD 20 MILLION. wHAT DO yOu gET OuT Of IT?“Technology. This investment alone gives us access to all Ensyn’s technology, which is invaluable to us. In return, Ensyn gets capital to invest in its biofuel refineries in the USA. The company is expan-ding aggressively and plans to start up fifty plants across the USA.”

wILL THE COMPANy bE INVESTINg IN bRAzIL TOO?“Not at this juncture. Our first step is to produce biofuel from the biomass left over from our paper mills, thereby allowing the plants to become self-sufficient in energy. We will produce biofuel for export or domestic consumption as the second step.”


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the forest we own in Bahia is one of the world´s largest eucalyptus forests, says Vinicius Nonino, M&A Manager at Fibria.

FIBRIA


THE bRAzILIAN gOVERNMENT AND THE bNDES DEVELOPMENT bANk HAVE LONg-TERM PLANS TO MAkE bRAzIL A wORLD PLAyER IN bIOfuEL. wOuLDN’T IT HAVE bEEN SIMPLER TO ASk bNDES fOR A LOAN AND ACQuIRE ENSyN?“No, we don’t need to do that. We already have access to everything we need. It’s not in our interest to own companies. Our core opera-tion is pulp and we intend to continue focusing on it.”

yOu wERE THE fIRST COMPANy TO buILD A PAPER MILL IN TRêS LAgOAS. yOuR COMPETITOR ELDORADO HAS NOw buILT AN EVEN bIggER PLANT. wHEN wILL yOu ADD A SECOND LINE?“We’ve already made the decision to add a second line, with a capacity of 1.5 million tonnes of pulp per year. This will allow us to produce 2.8 million tonnes at the plant in Três Lagoas. But we have yet to decide when to extend the plant. That decision will probably be made within the next twelve months.”

wHAT’S THE STORy wITH yOuR OTHER COLLAbORATION PROjECT, VERACEL, wHICH yOu’RE RuNNINg wITH STORA ENSO. THERE’S bEEN TALk AbOuT A SECOND LINE SINCE 2009 buT NOTHINg HAS HAPPENED.“I can’t speak for Stora Enso. It’s true, the project has been delayed but the plans remain in place. The forest we own in Bahia is one of the world’s largest eucalyptus forests. Things will happen for sure; we just don’t know when.”

our core operation is pulp and we intend to continue focusing on it, says Vinicius Nonino, M&A Manager at Fibria.

IN juST A SHORT TIME, fIbRIA HAS bECOME THE wORLD’S LEADINg PuLP MANufACTuRER. DO yOu INTEND TO EXPAND AND START uP PAPER MILLS IN OTHER PARTS Of THE wORLD, SuCH AS LATIN AMERICA OR AfRICA?“We’re already in the right place for business. Brazil has the best biomass and capacity and is still cheaper than other countries. Sure, there is a new frontier in Africa to be discovered, but it’s not the right time; there is still too much instability and too many social problems.”

THIS WILL ALLOW US TO

PRODUCE

FIBRIA

abOut vinicius nOninOVinicius nonino has worked for the Brazilian industrial

group Votorantim for ten years. From 2007 he was the

man behind the merger of VCP (Votorantim Celulose e

Papel) and Aracruz, which resulted in Fibria, the world’s

largest paper pulp company. He has a seat on the board of

Veracel, in which Stora Enso is a co-owner, and is the new

board member of uS company Ensyn. He was educated at

the Brazilian School of Economics (FGV, Fundação Getúlio

Vargas), and also has a degree from New york university.

2.8 MILLION TONNES AT THE PLANT IN TRêS LAGOAS


eldOradO’s investments turn três lagOas intO the wOrld’s FOrest industry metrOpOlisWith Eldorado Brasil commission-ing a new pulp mill, which has a capacity of 1.5 million annual tonnes, and its plans to commission a second line with a capacity of 3.5 million annual tonnes, Três Lagoas in the state of Mato Grosso do Sul in Brazil is set to become the world's forest industry metropolis.

Três Lagoas, in the state of Mato Grosso do Sul, used to be Brazil’s cattle capital. The large slaughterhouses that made Brazil the world’s largest beef producing country were located here. However, when an outbreak of foot-and-mouth disease hit the region in 2005, and the city’s largest slaughterhouse was closed due to serious tax violations, the beef industry collapsed. Três Lagoas, with a population of 100,000, lost its livelihood, but the solution was paper pulp.

wORLD’S LEADINg PuLP METROPOLISToday Três Lagoas is Brazil’s cellulose capital. In the course of just three years, three new pulp mills have been built by three different companies. The first was Fibria, whose mill has a capacity of 1.3 mil-lion tonnes of pulp per year and came into operation at the beginning of 2009.

Second was International Paper, which invested USD 300 million in a pulp mill with capacity of 200,000 tonnes per year.

The third company to open a mill in Três Lagoas was the market challenger, Eldorado Brasil. The company, founded in 2010 by holding company J&F and mana-ged by the world’s largest meat producer JBS, opened in December 2012 a plant with a capacity of 1.5 million tonnes of pulp per year. The plan is to open a second line in 2017 with a capacity of 1.5 million tonnes per year, and a third line is expected

to be completed in 2021. Eldorado estima-tes that its combined annual production will reach 5.4 million tonnes of pulp per year in ten years, making Três Lagoas the world's forest industry metropolis.

INVESTMENT IN TRANSPORTThe new Eldorado company is headed by the successful director José Carlos Grubisich, former CEO of Braskem, Latin America’s largest petrochemical company, and former CEO of the ethanol company, ETH Bioenergia. He has been at the helm of Eldorado since February 2012.

Grubisich has capitalised on Lagoas’s strategic location and has initiated an investment programme of nearly USD 400 million into building an alternative means of transport for pulp. He wants Eldorado to use rivers, waterways and a railway to transport the pulp to the port of Santos.

“With more than 90 percent of our pro-duction going to the international market, we’ve been forced to invest in competitive means of transportation,” says José Carlos Grubisich.

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in just three years three new pulp mills have been built in the city by different companies.

fOCuS ON ASIAGrubisich feels that the reason why Eldo-rado could gain a foothold so quickly was that the company was able to capitalise on the financial crisis of 2008, which effectively stopped many new plants from being built.

“These projects were put on hold, but the market continued to grow,” he explains.

The crisis in Europe is no cause for concern, either.

“We will be focusing on Asia, where the consumption of toilet paper is still low,” he says.

STRATEgIC LOCATIONOne of the contributing factors to Três Lagoas becoming Brazil’s pulp metropolis is its location. The city lies at the edge of the state of Mato Grosso do Sul, where land is still fairly cheap, yet still close to the state of São Paulo, Brazil’s economic engine. This gives Três Lagoas access to Latin America’s best infrastructure, including motorways, railways and the port city of Santos, Latin America’s largest port.

ElDORADO


Fibre Science and Communication Network the centre For world-leading researchWith only 13 years on the clock, Mid Sweden University’s research centre FSCN in Sundsvall has in a number of areas evolved into a world leader in forest industry research and specifically in the fields of paper physics and mechanical fibre technology.

Fibre Science and Communication Network (FSCN) is a multi-disciplinary research centre at Mid Sweden University.

“We work on improving the profitabili-ty of today’s paper industry, and on finding new ways to use the forest as a resource. We engineer materials that are extracted from the forest industry material flows, and then further refined to provide sustainable alternatives to for example plastics. We also develop new ways to use wood fibres, paper and board, for example in three-dimensi-onal packaging structures,” says Professor Kaarlo Niskanen, Head of FSCN.

Today FSCN employs over 80 resear-chers, including many with broad expe-rience from international research institu-tions and the forest industry. Nearly half of the research is specialised in mechanical fibre and energy efficiency.

CROSS-fRONTIER COLLAbORATIONIn addition to its own personnel, FSCN cooperates with the research centres at Mid Sweden University. FSCN also brings to-gether other colleagues in chemistry, elect-ronics, materials science, media technology and graphic design.

“FSCN is first and foremost a network, where we endeavour to work in a multi-disciplinary manner. Many of the problems are complex and require us to attack them from various sides. We have taken a strong system view and we encourage researchers from a variety of fields to work together, engage in useful research and solve relevant problems. When we succeed, we do it ex-tremely well. Already at the start of FSCN, the forest industry also required us to have a multi-disciplinary approach. Therefore, right from the beginning this has been a conscious strategy on the part of FSCN,” says University Lecturer Olof Björkqvist at FSCN, who is backed by Professor Mag-nus Norgren, who says, “Today, FSCN is

a virtual centre formation in which researchers can participate in varying degrees. There is a core, but also a large number of collabo-rative partners.

TwO fOCuS AREASThe Institute has two focus areas: Resource-Efficient Production and Advanced Paper Materials.

Within FSCN’s FORE (Forest as a Resource) research project, FSCN researchers are endeavouring to broaden the product portfo-lio in the mechanical pulp industry.

“Here we have taken a unique holistic approach to an entire mill. Much of the research is in line with the biorefinery ideas to be found in the industry. We are searching for synergies between traditional production and new products, which can be used internally by the industry to add value to existing products or sold as complete new products. Research is based on there being a main flow which one can tap into, refine and exploit,” says Olof Björk-qvist, who adds:

“The concept can assist the industry in converting existing plants, thereby providing greater flexibility and a good survival and development strategy with considerably less capital and fewer market risks”.

INCREASED REfINEMENT VALuE ADDEDFSCN’s researchers are attempting to find the right way for the forest industry to increase its refinement value.

Facts

This is Mid Sweden University

• 16,000 students.

• 600 independent courses.

• 50 Educational programs.

• 30 master’s programs.

• 235 graduate students.

• 1,000 employees.

• 57% teachers with a postgraduate

education.

• SEK 909 million in turnover.

• Very successful in Distance Learning.

This is FSCN

• Founded 1999.

• 80 researchers.

• SEK 80 million in turnover.

• Focus areas:

– Resource-Efficient Production (Mechanical Fibre Technology, Eco Chemistry, water Chemistry, Gasification and Industrial Symbiosis).

– Advanced Paper Materials (Paper Physics, Print and Packaging Appearance, Digital Printing Centre, Material Physics, Organic Chemistry and live Paper).

FSCN



Bonanza for the mills:

NEW TECHNOLOGy PURIfIES THE PROCESS WATER AND EXTRACTS VALUABLE METALS AND CHEMICALSUsing a new technology, FSCN has successfully managed to purify process water and extract a large quantity of valuable metals and chemicals. The results for the mill industry are fewer process disrup-tions and profitable by-products.

Clean water is a prerequisite of problem-free production. “Pulp and paper mills use large quantities of water in their produc-tion. And today we know that half of all the disruptions and paper breaks that occur in production are due to contaminants in the water. Moreover, contaminants require increased chemical and fresh water con-sumption,” says Magnus Norgren, Professor of water chemistry at FSCN.

Therefore, one of the important areas of research within FSCN has been attempts to purify process water and extract many of the valuable interfering substances contained in it.

“Major values must be dealt with. It is important both from the sustainability and the financial points of view,” says Professor Norgren.

PROMISINg RESuLTSThis research work has now yielded promi-sing results.

“We believe we can reduce costly production disruptions and at the same time, prior to bleaching, harvest chemicals and metals from the water process, thereby creating new value,” says Professor Norgren.

A whole new technology has been deve-loped at FSCN for this, which has also resulted in a new development company, Chemseq, which has hived off from the university.

“We solved the problem by using a separation technique. At the moment, we are scaling up the purification process in a pilot test at the Ortviken paper mill,” says Professor Norgren, who is also CEO of the newly started Chemseq company.

MAjOR VALuE TO bE EXTRACTEDBesides metals, there are many valuable che-micals to be extracted from the waste water.

“We see the possibilities for recovering as much as 1000 tonnes of lignans per year at a value of EUR 4,000 - 5,000 per tonne,” says Professor Norgren.

Other products are fatty acids, resin acids, di and triglycerides, steryl esters, ste-rols and hemicelluloses (galactoglucoman-nan), which is perhaps the most accessible substance to be extracted in the process. At present, work is being done to make a biofoam of the hemicellulose, which can then be used as an intermediate layer or as absorbent in a hygiene product.

R&D&

I

“We are looking for opportunities for interplay and symbiosis with previously established mill installations and perhaps companies whose material flows are today not the most favourable and optimum. We conduct research into packaging and have many projects aimed at reducing energy consumption, and making paper more ri-gid,” says Professor Per Engstrand and adds:

“Within FSCN we’ve shown that we’re very successful at co-production with in-dustry. The methods we use are important for ensuring that research results are also implemented in practical applications,” says Professor Per Engstrand.

NEw APPROACH RESEARCHProfessor Magnus Norgen explains that the successes are based on FSCN being part of a relatively young university unencumbered by traditions and academic demarcations.

“Perhaps we also have a more modern way of looking at the role of the academic. Our role is and should be greater utility. In this region where we are so close to manu-facturing, it comes naturally to us to work closely with the forest industry and ensure that the results we produce can also be applied out in the real world.”

We work on improving the profitability and on finding new ways to use the Forest as a Resource, says Professor Kaarlo Niskanen.

A whole new technology has been developed by Chemseq.

FSCN



SUBSTANTIAL RESOURCES INVESTED TO BOOST ENERGy

EffICIENCyMechanical pulp accounts for 40 percent of FSCN’s turnover and today remains the Institute’s largest field of research. Substantial resources are being invested to help the indus-try to boost energy efficiency.

Mechanical pulp production is vital to the world’s pulp and paper industry.

“Mechanical pulp fibres retain their strength over several recycling cycles and are a necessary part of the recycling system, par-ticularly for print paper in Europe. Without mechanical pulp fibres, the established fibre balance – where new fibre is manufactured mainly in northern Europe while recycled paper is used in print paper across the whole of Europe – would be disrupted,” says Pro-fessor Per Engstrand, FSCN.

This is simply because the maximum collection rate is 80 percent and that the return pulp process is 70-80 percent.

More than 40 percent of the paper and board manufactured today is partly based on virgin natural wood fibre from mecha-nical pulp, quite simply because the desired end-product properties would otherwise not be achieved.

Mechanical pulp processes also have the advantage that the yield from wood to finis-hed pulp is high. Normally the yield from the wood material is more than 95 percent compared with only 45-50 percent in most chemical processes.

wORLD-LEADINg RESEARCHToday FSCN is a world leader in research into mechanical pulp. FSCN has long been generating a close collaboration between academia and several forest industry com-panies in order to create better conditions by improving the level of knowledge and by enhancing the technical solutions at the companies.

The biggest research programme today is E2MP - rp (Energy Efficient Mechanical Pulping Research Profile) with a total fun-ding of SEK 84 million between 2011–2017, of which SEK 36 million comes from the KK-foundation, SEK 12 million from Mid Sweden University and at least SEK 36 million from participating industry com-panies such as SCA, Stora Enso, Holmen, Metso and Andritz.

FSCN, SCA, Stora Enso and Hol-men are also conducting a joint research programme (E2MP-i), with industry companies contributing at least SEK 45 million and the Swedish Energy Agency contributing SEK 30 million (2011–2016). Research funding is being invested in projects run by universities and businesses all over Sweden. The collaboration even includes a strong Norwegian investment of around SEK 30 million, where PFI (Trond-heim) is conducting an extensive project, E2MP-ox, with Norske Skog and Andritz (2010–2014).

“The common goal of this extensive research is to increase energy efficiency by 50 percent when manufacturing mechanical pulps, both thermo-mechanical pulp which is used for print paper, and chemo-mecha-nical pulp which is used for fibreboard. We

started this research programme in response to the surging electricity costs which have affected the paper industry. We and all the participating companies and other research partners are doing all we can to help the industry cut its current electricity costs by at least half,” says Professor Per Engstrand who is in charge of the E2MP-rp programme and is taking part in two other parallel initiatives.

MORE INITIATIVESIn another project, FSCN is pursuing gasification activities and conversion to synthetic gas.

“At our pilot plant in Härnösand, we are converting biomass into a synthetic gas which consists of hydrogen and carbon mo-noxide. Then we can further process it into various fuels such as DME, or lead the gas through a gas turbine to form the same type of combined power station used for natural gas. Once the process is optimised, we can extract 50 percent of the energy value from electricity and the rest as steam and hot water,” concludes Professor Engstrand.

We are doing all we can to help the industry cut its current electricity costs by at least half, says Professor Per Engstrand.

FSCN


THE COMMON GOAL IS TO INCREASE ENERGy EffICIENCy By 50 PERCENT WHEN MANUfAC-TURING MECHANI-CAL PULPS

50%


NEWBORN: fOURTH GENERATION PAPERWhile printing paper constituted the first generation, corrugated board the second, and hygiene products the third, Professor Tetsu Uesaka and his research team at FSCN are now working on develop-ing of the fourth generation paper.

Whilst all the previous generations have now become mature products, there is a great need for developing a new product platform for the industry.

“In our research work, we are now in the process of adding an extra dimension to paper, literally. In ordinary paper- and board-making, the fibres are laid on a plane, creating a 2D fibre network. However, there are many ways of forming a three di-mensional fibre network, so you can create new functionalities and thus new products based on such structure,” says Professor Tetsu Uesaka.

“fORMAbLE” PAPER“For example, by creating special orienta-tion of fibres within the network, we can make a very stretchable paper. Such paper can be thermo-formed (deep-drawn) into

a 3D object, such as tray and cup, similarly to thermo plastics. Typical applications include food, consumer and industrial packaging markets that are currently oc-cupied by fossil-fuel based materials. The new formable paper is an alternative to plastics for the future green society,” says Tetsu Uesaka.

R&D&

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We are trying to utilise the nature-inspired design principle to develop the 4th genera-tion of paper, says Tetsu uesaka.

a cross-industry and cross- disciplinary sustainable initiativeMid Sweden University has in close col-laboration with other universities, institutes and industry companies taken an initiative to set up a cross-industry and cross-disci-plinary research project for the paper and textile industries.

The purpose of this national initia-tive to create a new research agenda is to strengthen Sweden’s attractiveness and competitiveness for sustainable growth and social benefit through the parallel renewal of two value chains, both of which are based on the forest industry and which have many

raw materials, processes and actors in common.

The first one is dedicated to finding new ways to create products and generate more value-added through advanced and functionalised paper surfaces.

Applications can be found in areas in-cluding energy storage, catalysing surfaces, advanced packaging and changes in appea-rance and surface from external stimuli.

The other one concerns processes rela-ting to the production of wood cellulose-based fibre for textile purposes, the new

value streams and products it can generate, but also the advanced and functional textile products that can be developed. There are applications to be found in outdoor sports and work wear and medical engineering.

By meeting, the paper and textile industries could develop both the skills and technology for structurally similar processes, but above all, they could collaborate on developing a strategy for the renewal and extension of the above mentioned value chains.

FSCN

fuNCTIONAL fILTERAnother example is air filtering. Maintain-ing air quality is increasingly important in offices, industrial plants, public transporta-tion, hospital and home environments. Cur-rently the majority of high performance air filters are made of non-renewable materials.

“We can provide a green solution for the functional filters as well. Natural wood fibre has another network structure within its own structure. We can utilise much smaller pore structures to capture airborne hazardous materials of even nano-scales. The fibre network with a wide spectrum of pore sizes can provide an extremely effective and environmentally-friendly filter for improving air quality,” says Tetsu Uesaka.

The existing market is large and growing larger still.

NATuRE-INSPIRED DESIgNWhat drives all these ideas?

“Our ideas are very much inspired by how nature designs functionality. Na-ture always starts with simple, ubiquitous materials, but after that, it creates a layer of complex structures according to the required functionality. We recently found that nature’s design principle is seen also in origami, the ancient Japanese art of paper-folding. We extract a lot of ideas from origami in designing 3D structures of fibre networks. It is always fascinating to see plain paper being transformed into a comp-lex 3D object by origami,” says Tetsu Uesaka.



CHINA’S IMPORTS BOOST THE PRICE Of PULP

Market analysis:

“Market analysts can currently be divided into two camps. One ar-gues that new capacity volumes are excessive and will push prices down for the rest of the year, while the other sees the international business cycle as the key factor. In my view, the key indicators – and therefore also the price of pulp – bottomed out in the second half of 2012. Despite general concerns about the economic outlook, I antici-pate that pulp prices will continue to increase during the current year,” writes Mikael Jåfs, Research Coor-dinator at Credit Agricole Chevreux Nordic in this article.

The major forest industry companies have chosen different strategies to meet the chal-lenges of the future. However, one thing they all have in common is that they are trying to distance themselves from products that have fallen in demand and are instead focusing on areas where the outlook is brighter.

Production lines for newsprint are being shut down while substantial invest-ments are being made in new capacity for pulp, board, viscose and bio-energy.

This is why the stock market currently has a favourable view of listed European companies that produce packaging; a fact that is reflected in the share prices of Smurfit Kappa, Mondi and Billerud Kors-näs compared with companies that focus strongly on printing paper such as Holmen and Norske Skog.

fOREST HOLDINgS INCREASINgLy IMPORTANTMeanwhile competition over wood materials is intensifying, both from energy and industry companies. The balance between supply and demand is expected to become strained, which will increase the

significance of plantations in the southern hemisphere. Control of raw materials is growing in importance and tomorrow’s winners are companies such as Holmen, SCA, Stora Enso and UPM that have access to their own base of raw materials.

Investments in new pulp capacity will mean that companies must have access to their own forests in the northern hemisphe-re or fast-growing eucalyptus plantations in the southern hemisphere.

In the light of these circumstances, we can look forward to the following trends:

1. Increased demand from emerging mar-kets – particularly China, where imports of pulp and return fibre are also expected to rise.

2. Rising demand for fresh fibre. Return fibre can only satisfy part of China’s gro-wing needs, while cellulose fibre can only be recycled 6-7 times before it becomes

unusable. This requires a constant inflow of fresh fibre to the global production of paper and packaging.

3. More focus on sustainable energy. Forests have been classed as a CO2-free renewable energy source in Europe, a political decision that has fuelled demand for wood materials, particularly in Europe.

PuLP PRICE VS LEADINg INDICATOR nBsk (eur) eA cOMpOsITe leADIng InDIcATOr (rHs)

mikael Jåfs is Research Coordinator at Credit Agricole Cehfreux Nordic in Stockholm.

MARKET ANAlySIS

Author: Mikael Jåfs, Stockholm

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jan

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jan

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jan

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jan

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- 6.0

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sOurce: DATAsTreAM

there is a clear historical connection between key indicators and the price of pulp. If their growth curves are placed side by side, it can be clearly seen that they share a similar trajectory, but the price of pulp lags behind by about 6-9 months.


CHRO

NOCI

LE

European companies with their own pulp mills in latin America are the big winners, having low financial costs and being well placed to win new market shares by expanding their existing pulp production.

4. Rising price of raw materials. The forests in the northern hemisphere are currently fully utilised as a source of raw materials, and growing demand is expected to lead to higher prices. The large tracts of forest in Russia will remain unutilised for the fore-seeable future due to inadequate infrastruc-ture and excessively high risks.

5. Greater focus on companies controlling their own supply of wood materials.

6. Increased use of forest plantations in the southern hemisphere.

The industry’s plantations account for just under three percent, or 110,000 million hectares, of all existing forests, but 35 percent of all industrial wood material production in the world. Industry experts forecast that this portion will increase to 45 percent by 2030. Ownership, control and legal and political security determine where investments in fast-growing plantations will be made. Countries such as Brazil and Uruguay are therefore highly ranked. In many other places, land may only be leased for certain periods. Consequently, most of the new plantations are expected to be established in the southern hemisphere, in regions such as Latin America, New Zealand and Australia.

Pulp is a bulk product and low manu-facturing costs are therefore particularly important for manufacturers. Producers that have access to fast-growing forest plantations have lower raw materials costs. However, many of these companies with new production lines are struggling with weak balance sheets and low net profits. As a result of the decline of pulp prices since summer 2011, several global pulp manufac-turers have actually been running at a loss. This is why European companies with their own pulp mills in Latin America are the big winners, having low financial costs and be-ing well placed to win new market shares by expanding their existing pulp production.

CHINA STOkES THE PuLP MARkET At the same time, global demand for pulp is expected to continue to rise, despite the continuing slump in the printing paper market in Europe and North America. This is caused by an equal acceleration in de-mand for tissue, paper and packaging in the

emerging markets. Tissue manufacturing in particular requires large quantities of pulp.

China and Europe are today the world’s two biggest pulp importing regions. Annual pulp consumption in China has increased from six million tonnes in 2000 to today’s figure of 19 million tonnes. With new tissue and packaging lines starting up in the coun-try, this is a development that is unlikely to lose momentum.

Last year China’s pulp imports rose by 20 percent compared with the previous year. This will probably help to increase the price of return fibre and pulp even more, particularly as Chinese buyers expect the price to be even higher in six months – which history has shown to be the right time to replenish stocks.

With lower paper usage in the develo-ped economies, the equation will lead to gradually rising waste paper costs. Further-more, as waste paper prices increase over time, this will trigger additional demand for pulp, as many producers want to reduce the pricing risk and turn to pulp as a raw mate-rial, which carries less pricing volatility.

RISINg PuLP PRICESMarket analysts can currently be divided into two camps. One argues that new capacity volumes are excessive and will push prices down for the rest of the year, while

the other sees the international business cycle as the key factor. If it improves, the new capacity volumes will be absorbed more optimally.

In my view the key indicators – and therefore also the price of pulp – bottomed out in the second half of 2012. There is a clear historical connection between key indicators and the price of pulp. If their growth curves are placed side by side, it can be clearly seen that they share a similar trajectory, but the price of pulp lags behind by about 6-9 months.

One of the most crucial indicators is imports to China, and the latest signals sug-gest that they will continue to increase. De-spite general concerns about the economic situation, we therefore expect that the price of pulp will continue to increase during the current year.

However, the general economic and structural uncertainties are a constant overhanging threat. No one knows today how quickly demand for printing paper will decline in the mature part of the world. However, it is all too easy to be blinkered by the situation in Europe and North America when assessing the situation from a global perspective

SuSPICION Of fOREST INDuSTRy SHARESEven though the economic climate remains

MARKET ANAlySIS

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25

WESTERN EUROPE

CHINA

20

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01986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

STRONg PuLP DEMAND INCREASE IN CHINA

China and Europe are today the world’s two biggest pulp importing regions. Annual pulp consumption in China has increased from six million tonnes in 2000 to today’s figure of 19 million tonnes.

rather uncertain, the level of doubt and concern about listed companies in the forest industry such as Stora Enso, UPM, Metsä Board, Holmen, SCA and Billerud Korsnäs has been significantly reduced. This does not mean it has disappeared alto-gether, but it has merely been eased due to the steady gains made by the international exchanges in the last few months, and the price of pulp.

There is still doubt on the stock market about companies in the forest industry. This is why their shares are being traded far below their book equity value. At the same time, many of them are virtually prin-ting money. UPM, for example, recently reported a cash flow equivalent to EUR 1 billion per year. This high return in no way reflects the stock market’s valuation of these companies.

Another interesting aspect is that share prices and pulp prices also show a remarka-bly similar trajectory.

I have looked at the share price perfor-mance between these points in time for Stora Enso (net seller), and UPM (neutral pulp balance), and compared it to SCA's (net buyer) share price performance. The result is fairly conclusive. In periods of fal-ling pulp prices, SCA outperforms the other two companies, and in periods of rising pulp prices, Stora Enso and UPM tend to

outperform SCA. Today, we believe that the pulp price is approaching a trough. If correct, the historical pattern would indi-cate that Stora Enso and UPM will outper-form SCA during the coming months. In other words, when the price of pulp goes down, companies that are net buyers of pulp will outperform the net sellers.

STRONg STOCk MARkET gOOD fOR THE INDuSTRy Stock markets bottomed out in August. Since then we have seen indices rising steadily on most global stock markets. In the short term, most people believe there will be a pause in this trend. However, I and our strategists believe that, post a relatively short period of market declines during the coming couple of months the upward trend will continue for the rest of the year. Forest industry shares will subsequently also be given a lift on the back of increasing stock market optimism.

MARKET ANAlySIS

Deviation

THE UPWARD TREND WILL CONTINUE fOR THE REST Of THE yEAR

sOurce: upM, pppc

30 MONTHfORECAST

Market Trends

currEnt mArkEt rising prices – declining stocKs – increased deliveries – china on the Move – greater MarKet stability FOrEcASt BriGHt mArkEt inDEx higher spring prices – accelating prices late 2013 – new stability 2014

SEPTEMBER2014

Deviation

AUGUST2015

Still fallingIN

DEX

BRIGHT MARKET INDEx

Editor : Leeonarde Johard , Pisa

BRIGHT MARKET INSIGHT 45

46

A STRONG MARKET IN 2013 AND 2014 WITH PRICE LEVELS ABOVE USD 1,000 DOLLARSA better balance between supply and demand continued to drive the dollar-based prices in the market, both for NBSK and for Bleached Eucalyptus Kraft (BEK).

According to Bright Market Index’s latest forecast from 28 February 2013, the last month’s increase will continue throughout 2013 and approach new levels above 1000 dollars in 2014.

BRIGHT MARKET INDEx

BRIGHT MARKET INSIGHT

INDE

X

RISINg PRICESA better balance between supply and demand continued to drive the dollar-based prices in the market, both for NBSK and for Bleached Eucalyptus Kraft (BEK), at the end of 2012 and in January and February 2013. On February 28, the prices were USD 810-820/tonne for NBSK and USD 770-780/tonne for BEK. The price increase was not as strong in euro, as a result of the euro strengthening slightly against the US dollar.

PuLP DELIVERIES AND STOCkSIn January, global pulp deliveries fell by 12.8% to 3.454.000 tonnes, a decrease from 3.960 million tonnes the previous month, according to data from the Pulp and Paper Products Council (PPPC).

Deliveries were 2.3% down on the same period the previous year, a reduction from 3,536,000 tonnes in January 2012.Transports of BSK fell from 1,831,000 tonnes in December to 1,796,000 tonnes in January, 1.9% down on the previous quarter.

Global producer stocks totalled 36 days delivery in January, BSK was 32 days (up three days) and BHK was 41 days.

World-20 producer stocks rose by four days to a total of 36 days from December to January.

CURRENT PULP MARKET

PIX NbSk EuROPE INDEX HISTORy

A better balance between supply and demand continues to drive the dollar-based prices in the market for NBSK.

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BRIGHT MARKET INDEx

sOurce: FOex


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bLEACHED SOfTwOOD PuLP IMPORTS TO CHINA

China´s pulp imports for the full year 2012 increased.

PuLP IMPORTS TO CHINA ON THE RISEFrom November to December, China’s total pulp imports fell by 1.3% to nearly 1,394,000 tonnes, according to the Chinese customs authorities. The temporary decline in December, which followed an increase of 3.8% in November, was mainly attributable to a reduction in BSK pulp.

China’s pulp imports for the full-year 2012 totalled around 16,462 thousand tonnes, an increase of 14.8% compared with 2011.

PRICE INCREASES IN CHINAIn February, several NBSK producers announced that the demand for their products is normal and, given current stock levels, have announced price increases of

USD 20-30 per tonne to USD 930 per tonne in North America, USD 860 per tonne in Europe, and USD 720 per tonne in China. Further increases are expected. In North America, Europe and in China, se-veral manufacturers of Bleached Softwood Kraft (BSK), i.e. Canfor Pulp, Arauco, Ilim Group, Mercer International, Metsä Fiber, Södra, Resolute, Domtar, Tembec and West Fraser, announced price increases in February.

A number of manufacturers have pus-hed forward their price increases for March until 1 April.

Prices of BEK will increase by around USD 20 per tonne in the corresponding period, an increase initiated by Fibria, Cenibra and Suzano.

MARkET ANTICIPATES PERIOD Of gREATER STAbILITyAs a result of the customary seasonal increase at the beginning of the year, many sellers expected prices to continue climbing.Many manufacturers of NBSK have also announced a phase goal of USD 860 per tonne in Europe.

However, several other market experts expect a period of greater price stability in the short and medium term. Producers are expected to continue their attempts to con-solidate their price increases in February. The anticipated new capacity increase in Latin America, financially strained buyers and sel-lers, and the continuing uncertainties about the economic situation, are expected to put a temporary lid on further price increases.

BRIGHT MARKET INDEx

sOurce: FOex


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PuLP INVENTORIES

After declining for three consecutive months, stocks of pulp are on the rise again.

In January, Brazil exported 635,000 tonnes of pulp – mostly BHK, which is 10.8% down on the corresponding month in 2011.

China’s total pulp imports declined by 2.2% in January to about 1,364,000 tonnes compared with the previous month. This decline was caused mainly by a 15.7 percent decline in imports of BHK while instead imports of BSK climbed 3.0% to 543,048 tonnes.

ELDORADO gOINg STRONgThe period saw an influx of new pulp capa-city while outdated capacity disappeared from the market. In its latest survey, RISI expects global capacity to increase by 2.7% in 2013, 3.7% in 2014 and 3.6% in 2015.

At the end of December, Eldorado com-missioned its new production plant for BEK pulp in Tres Lagoas. The first volumes, which were transported to the USA in mid-January, have not yet caused a discernible effect in the market. However, the situation will change during the year when the new plant reaches full capacity of 1,500,000 ton-nes per year. Transports from Eldorado are expected to begin arriving in Europe at the end of February and in March.

The Ilim Group’s new production line in Bratsk in Siberia in Eastern Russia, which has a capacity of 720,000 annual tonnes of bleached sulphate market pulp, has been hit by severe delays. Production, originally scheduled to begin in the second quarter of 2012, now appears to be starting gradually.

BRIGHT MARKET INDEx


In 2012, the Ilim Group’s other production lines produced some 2.6 million tonnes of pulp and paper products, around 1.6 mil-lion tonnes of which was market pulp, an increase of two percent compared with the previous year.

SubSTANTIAL wIND-uP Of CAPACITy VOLuMES In 2012, pulp and paper capacity in Europe, Middle East and Africa equivalent to some 2.5 million tonnes was shut down. As in previous years, newsprint accounted for the lion’s share, almost half of the capacity cut-backs.

The largest closure during the year was UPM’s Albbruck plant in Germany, which produced 320,000 annual tonnes of coated

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transports of BSK fell from 1.831.000 tonnes in December to 1.796.000 tonnes in January, 1.9% down on the previous quarter.

the price increase is not as strong in euro, as a result of the euro strengthening slightly against the dollar.

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EXCHANgE RATES EuR/uSD

bLEACHED SOfTwOOD kRAfT (bSk) PuLP SHIPMENTS

BRIGHT MARKET INDEx


LWC paper. In March, the Norwegian company Skogs closed its Follum plant, which produced 145,000 annual tonnes of refined newsprint and book paper and 145,000 tonnes of machine-finished coated paper.

On the packaging front, the market players reduced production capacity by around 750,000 tonnes last year, mainly by shutting down small machines. The only exception was the closure of the Peterson plant in Moss, and the closure of Mondi’s corrugated board plant in the Czech Republic.

The Chinese authorities announced that they have permanently closed outdated pulp and paper capacity equivalent to 8.3 million annual tonnes, which is slightly higher than the announced domestic target figure of 8.2 million annual tonnes.

The extensive programme of wind-ups of outdated industrial capacity is being carried out this year to encourage invest-ments in newer, cleaner production. Most of the machines that are being shut down are small and obsolete and are considered to be a major source of pollution from the industry.

INDE

X

According to the Bright Market Index latest forecast from 28 February, the increase in the past months is likely to continue.

BRIGHT MARKET INDEx


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1200,00 $

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700,00 $

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900,00 $

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NbSk ANALySIS, fEbRuARy 2012

fORECAST –BRIGHT MARKET INDEX

2013 Bmi forecast

Feb 828

Mar 835

Apr 840

May 843

Jun 848

Jul 857

Aug 868

Sep 879

Oct 893

Nov 909

Dec 925

2014 Bmi forecast

Jan 942

Feb 959

Mar 980

Apr 1005

May 1026

Jun 1043

Jul 1060

Aug 1063

Sep 1061

Oct 1051

Nov 1042

Dec 1040

2015 Bmi forecast

Jan 1034

Feb 1024

Mar 1016

Apr 1008

May 996

Jun 983

Jul 967

HIgHER SPRINg PRICESAccording to the Bright Market Index latest forecast from 28 February, the increase in the past months is likely to continue in early 2013, although the market is un-certain due to concerns about economic growth and exchange rates.

ACCELERATINg PRICES LATE 2013Strong demand will lead to higher prices towards the end of the year. Since our previous forecast, we have seen weakening Chinese imports, so the forecast is slightly lower this time around.

NEw STAbILITy 2014In 2014, the price will approach a new level above USD 1000. It will then probably drop back to lower levels.

BRIGHT MARKET INDEx


2

1. Price history

6. Rate of exchange

5. Chinese imports

4. Pulp shipments

3. Pulp inventories

2. Price

4 6 8 1210

6 MONTHS fORECAST

12 MONTHS fORECAST

2

1. Price history

6. Rate of exchange

5. Chinese imports

4. Pulp shipments

3. Pulp inventories

2. Price

4 6 8 1210

24 MONTHS fORECAST

2

1. Price history

6. Rate of exchange

5. Chinese imports

4. Pulp shipments

3. Pulp inventories

2. Price

4 6 8 1210

in the color scheme red means strong positive effect and blue means strong negative effect.

inFluencing FactOrs 6 months 12 months 24 months

Price change 15.1 67.3 73.7

Price -44.7 -71.3 -110.7

Stocks 30.8 61.6 85.1

Deliveries -6.5 -15.5 40.2

Chinese import 13.3 22.3 51.1

EuR/uSD 17.7 34.3 24.6

The table above shows the impact of different factors on the market according to our statistical model. It focuses on how the current price level will affect future prices when compared with a scenario in which current variables are geared to average historical values since 1998. Positive values indicate where current levels contribute to a higher price trend.

The table clearly shows that decreasing stocks and China’s import needs will be reduced, resulting in a strong, immediate impact on prices in both the 12- and 24-month perspectives Exchange rates also affect the daily price to a certain extent while deliveries play a key role in the 24-month perspective.

INDE

X

bMI MODELPredictions are based on using machine learning to automatically develop an opti-mal model for the market. Machine lear-ning is a modern trend in statistics where the formal a priori assumptions of classic statistics theory are replaced by empirical equivalents. Its development was inspired by how the brain works, and is derived through theoretical learning models and new results are continuously tested on state-of-the-art systems using a long series of test problems.

During the last decade this field of research has consistently been a top perfor-mer when it comes to comparing statistical models in finance, medicine, image recog-nition, text classification and other areas. In the majority of comparative studies they have even outperformed human experts.

The models can generally be categorised into sub-groups: support vector machines, neural networks and nearest neighbour methods, which are all closely interrelated. They are based on a system of independent units or neurons, all of which take care of their own small part of the calculation process.

While this is a structure with a capa-city for complexity it has been shown that mathematically-speaking, the best models are often the simplest. The main object of machine learning is therefore to generate simple, strong prediction rules from data. The next step is a series of hard statistical tests to show that the underlying principle behind these rules remain unchanged over time and do not only provide an accurtae historical description.

BRIGHT MARKET INDEx


400,00 $

300,00 $

200,00 $

100,00 $

0,00 $

-100,00 $

-200,00 $

-300,00 $

-400,00 $

2002 2003 2004 2005 2006 2007 2008 2009 2010

BRIGHT MARKET INDEX BMI forecastPrice trend

historical overview of Bright Market Index 24-month forecasts compared with actual price fluctuations.

bRIgHT MARkET INDEX, ALwAyS gETS IT RIgHT prIce TrenD BMI FOrecAsT


EDITOR-IN-CHIEf Carl Johard is an entrepreneur, financial journalist and communications expert. He has previously been a mar-keting and communications manager at SSG Standard Solutions Group AB, which is owned by the seven largest forest industry companies in Scandinavia, executive editor and US correspondent for the Swedish business magazine Veckans Affärer, director of Ruder Finn, editor-in-chief of Nordisk Papper & Massa, editor-in-chief for Global-NetFinancials three offices in Scandinavia and stock market editor for Privata Affärer, as well as a number of news agencies.

CARL jOHARD

ANN EXPERT, HEAD Of bRIgHT MARkET INDEX Leonard Johard gained an engineering degree from the Department Institute of Applied Physics at the Royal Swedish Institute of Technology (KTH) and studies perception robotics as a postgraduate at the Scuola Superiore Sant’ Anna in Pisa. Leonard Johard is an expert in Artificial Neural Networks. In 2008/2009, he was also employed as a market analyst with responsibility for monitoring the international electricity markets at Telge Energi. He is the architect behind Calejo’s unique fore-casting model.

LEONARD jOHARD

EDITOR CHINA/ASIA Journalist, author and businessman in Hong Kong and Shanghai. He spent some 25 years as a journalist in Sweden at the national Swedish news agency TT and the business magazine Veckans Affärer. He moved to Asia in 2002, where he runs his partly owned company Bamboo Business Communi-cations Ltd which helps companies to communicate with their Chinese customers and employees.

jAN HÖKERBERG

SALES DIRECTOR Marketing consultant, product developer/entrepreneur and business leader with profes-sional experience of working in Sweden, Europe and Asia. His career has focused primarily on the international forest industry, in both B2B and consumer goods. He has previously been an adviser to Taren Company Limited, Borneo Malaysia, Vice President Paper Division at Handelshuset Ekman & Co, Marketing Director Riau Paper, Indonesia, Business Area Manager for SCA Wifstavarfs Paper Mill and SVP of SCA’s Strategy and Business Development staff function.

HåKAN fREUDENTHAL

EXPERTS AND EDITORIAL STAff


EDITOR LATIN AMERICA Multi-award winning journalist and author who has lived in Rio de Janeiro since 2002. He covers Brazil and Latin America for leading Swedish and Danish newspapers and magazines, including the Swedish daily newspapers Sydsvenskan and GP, plus Denmark’s Politiken.

HENRIK BRANDÃO jÖNSSON

EDITOR NORTH AMERICA Economics journalist and author who lives in New York. For 30 years, he has been the US correspondent for Swedish newspapers such as Dagens Nyheter, Sydsvenskan and Dagens Industri plus the business weekly Veckans Affärer. He has also published a number of books.

LENNART PEHRSON

EDITOR EuROPE Political and business journalist with long experience from several leading Swedish news-papers and magazines.

PER ARONSSON

MARkET ANALyST European Research Coordinator, Pulp&Paper at Credit Agricole Cheuvreux Nordic AB in Stockholm.

MIKAEL jåfS

EDITOR R&D&I Science journalist with a focus on research and technical development. He previously worked for several specialist journals, including Svensk Papperstidning (paper indu-stry) and Skog & Forskning (forest industry), and was media coordinator at the research institute Innventia.

NILS LINDSTRAND

fuTuRE MANAgEMENT A development coach and a training contractor with long experience of coaching and management development for organisations and large, listed Swedish companies, among them SCA. He is also guest lecturer in coaching and management development at the Gothenburg Business School.

ERIK HäGGSTRÖM

ART DIRECTOR Art Director and partner at Sweet Williams and Pop in Sundsvall and Stockholm.

jOAKIM KARLSSON

ART DIRECTOR ASSISTENT Art Director Assistant at Sweet Williams and Pop in Sundsvall.

TERÉSE LIND

EXPE

RTS

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Documents

ajor C VISCOSE - Calejo Future intelligencecalejo.se/wp-content/uploads/2013/08/BMI_lagupplost.pdf · · 2013-08-21No.1 Spring 2013 Greentech - the forest as a future resource