| Some good news in Canadian mills |
Neil McCubbin
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 Over the past few years much of the news of Canadian mills has been about shutdowns of paper machines and whole mills. The historically large proportion of newsprint in the production mix has been part of the problem. In addition, the infamous black liquor subsidies of a few years ago kept many US kraft mills afloat while several Canadian competitors closed down in the kraft market recession, some permanently.
There have been no new fiber lines and all too few major investments in Canadian mills since the large mill modernisation/expansion project at Castelgar in 1993.
As everyone who has worked on feasibility studies for major mill upgrades or new mills knows, the "nuts-and-bolts" calculations of capital and operating costs, followed by textbook economic analyses, are not the final word on whether a proposed project is implemented. Faith in the future and optimism play at least as large a part in decisions by boards of directors.
Sometimes these decisions have been disastrously wrong, leading even to near bankruptcy, avoided only by an unwanted take-over. I often wonder how many numerically viable projects have been chopped off in recent years before construction, by directors who lacked confidence in these tough times.
Major mill upgrade
Irving of New Brunswick is a privately held company with faith in the future. Since the family's first venture into the pulp and paper industry well before World War II, it has been steadily expanding, and has been successful against difficult odds on more than one occasion.
The most ambitious project in the Canadian pulp industry since Castlegar is now nearing completion. Projected cost is C$450 million. The centerpiece is a new continuous digester to replace 14 aging batch units. The new system includes chip handling and various auxiliaries. It's planned also to replace three old pulp dryers with one new one.
I have worked on the Irving site on several projects in the past, and can only admire the skill of the engineers who can wiggle all this equipment into what I consider the most constricted pulp mill site in North America. As is apparent in the Google Earth photograph, the mill is on a rock constrained by water on three sides. Any attempt at increasing the site area is limited by the ferocious tides of the Reversing Falls that sweep around the mill four times per day.
The current modernisation of a large part of the mill is only one of several that has replaced the whole system over the past 30 years or so, demonstrating the company's faith in the future.
The projects at Saint John will presumably reduce operating costs substantially, which will improve the mill's competitive position against mills that have not upgraded for years. With the slow but steady drop in published pulp prices over the last year, we have to wonder when the next North American mill will close. Given the current activity, and Irving's history, I suspect that the Saint John mill will be running far into the future.
Lignin recovery
West Fraser is also demonstrating faith in the future with a new lignin production facility being commissioned in the mill in Hinton, Alberta. Although the $30 million investment is much less than Irving's, it must be considered higher risk because it uses innovative technology and is aimed at a market that will need some research.
The new technology, known as LignoForce, has been developed by FPInnovations of Montreal and NORAM Engineering, of Vancouver. Essentially, black liquor is oxidised and acidified to precipitate the lignin in a form that can be separated from the inorganic components by filtration. The lignin can be further purified by washing and can be dried as desired.
The intended market is for adhesives in engineered wood products, so it is much closer to home than some pulp mill bio-technology projects aimed at products in fields in which most forest products companies have no experience. However, some product development is still required for this application.
In addition, it is hoped, to generating a new revenue stream for the Hinton mill, the removal of the lignin from the kraft black liquor stream will reduce the thermal load on the recovery boiler, allowing the mill to increase pulp production when the boiler is the bottleneck.
Although modest relative to the new Klabin mill in Ortigueira, Brazil, that was mentioned in the last issue of PaperMoney, the above two projects show some signs of renaissance in the Canadian pulp industry. The Klabin mill is a demonstration of the level of competition the older North American mills face nowadays. To me, the most impressive statistic is that it generates 270 MW power, while using only 120 MW in the mill. At about 650 kWh/ton pulp, it is an efficient power user. (North American mills I am familiar with use over 1000 KWh/ton pulp.) The Klabin mill will have a healthy revenue stream from sales of electricity, even when pulp markets are at their bottom.
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