June 27, 2008

Domtar Considering Saskatchewan Offer

By Anonymous

Two North American pulp mills could potentially bring northern bleached softwood kraft (NBSK) to the marketplace, with Domtar once again beginning discussions with government officials about reopening the Prince Albert, SK, mill that was idled in 2006. Evergreen Pulp, a smaller mill, recently shifted to bleached softwood kraft output in California. Domtar met with Saskatchewan's energy and resources minister in late February, its second meeting this year since the conservative Saskatchewan Party killed an earlier memorandum of understanding (MOU) between the province and Domtar that would have brought back Prince Albert as a standalone market pulp operation, a company official told Pulp & Paper Week. The province and Domtar's MOU signed last September called for redeveloping the Prince Albert complex into a 328,000tonne/yr NBSK mill that would sell to the domestic and export markets including to Asia (P&PW, Sept. 17, 2007, p. 1). But the new government killed the agreement in part because it included the province investing C$100 million.

The province's latest offer addresses issues such as "infrastructure support, cogeneration, (and) biomass generation of energy," said one contact, who didn't believe a deal was pending over the short term.

Domtar CEO Raymond Royer said last fall that any scenario for the mill to reopen under its ownership - Domtar has never run the facility but acquired it as part of a merger with Weyerhaeuser's fine paper division - hinged on it becoming a first quartile operation even with a Canadian dollar close to par with the US dollar. Regarding the latest provincial offer, the contact said that "doesn't make it world class. You need fiber agreements. You need to look at cost of labor, transportation, the whole system of production."

Meanwhile, Domtar is finalizing a plan to move the paper machine out of Prince Albert to a mill in the US south, most likely Plymouth, NC, contacts said in late February. It will take months to dismantle the uncoated freesheet (UFS) PM, reorganize it into some 400 containers for shipping, and deliver it to the southern location where a milder climate is expected to keep it preserved better than in the colder weather of Prince Albert.

One contact said that just because the PM is being relocated to the US south doesn't mean it will run. "They (could) rebuild and restart it somewhere but that's not a decision that's been taken. There are many options. Maybe someone would want to purchase that equipment and if so, that's an option to study. Right now the important point is to preserve it," the contact said.

Excluding the paper mill would increase the operational efficiency of its pulp production at Prince Albert if it restarted. Before it shut, Prince Albert made an estimated 280,000 tonnes/yr of UFS and 130,000 tonnes/yr of market NBSK pulp. Contacts believe if it ran full bore on market pulp, it could even surpass the originally projected 328,000 tonnes/yr, reducing its per tonne cost of production. A Domtar official wouldn't comment on the specifics of the firm's negotiations with the province. If the two sides work out a deal quickly, it would likely take months to restart the miH. "We are not in the business of commenting on follow-up meetings on corporate development issues. If we do, it'll be based on a concrete offer and if we do have an offer, we'd have to analyze it, do a process of go between. I won't comment on its evolution."

While the future of Prince Albert won't likely be known for sometime, Evergreen Pulp is on a fast track to becoming a market NBSK producer at its 200,000-tonne/yr mill in Samoa, CA, contacts said. The facility recently swung from unbleached kraft (UBK) production mostly for use at parent company's Lee & Man containerboard mills in southern China and is now looking to sell the bleached softwood kraft to the open market across Asia.

Industry contacts said that Evergreen Pulp has swung from unbleached to bleached output over the past two months but that it plans to produce and sell bleached softwood going forward. "They are calling it NBSK and selling it like it's NBSK," said one contact, who said Evergreen's brightness so far has been lower than tonnage produced at other North American mills.

About 75% of Samoa's past output went to Lee & Man containerboard mills, but a reduction in the firm's UBK requirements is allowing it to move the output to the open market, contacts said. In addition to its new focus on producing and selling market NBSK, Evergreen Pulp is the front runner to acquire and operate a shuttered dissolving pulp mill in Cosmopolis, WA, from Weyerhaeuser.

Evergreen parent Lee & Man also plans to start two new bleached hardwood market pulp lines, one this year in Chongqing, China, and the other next year at a planned mill in southern Vietnam.

Copyright Paperloop, Inc. Apr 2008

(c) 2008 Pulp & Paper. Provided by ProQuest Information and Learning. All rights Reserved.