On the road to recovery

Pulp prices, exemplified by Northern bleached softwood kraft (NBSK) pulp in Europe, dropped from a relatively stable long-term level up till mid-2008 of about $900 per air dry metric ton down to a low of about $580 in March 2009. After that the rate of price recovery has been steadily increasing and by mid-November prices are approaching $800 per ton.

Europe still suffering
Pulp mills in the US or in countries with currencies influenced primarily by the dollar now mostly show satisfactory or good profitability while some producers in the Euro area may still suffer due to the appreciation of the Euro and an often high cost position to start out with.

Expansion projects in China, Chile and USA
The medium-term price outlook for the industry in fact includes an upside element due to the economic crisis – several expansion projects have been substantially delayed due to the uncertain market prospects and difficulty to issue debt. However, now projects are picking up speed. Major projects moving ahead include the new Zhanjiang Chenming 700 000 ADt per year pulp mill in south China, the CMPC Laja mill modernization in Chile and the new recovery island for PCA Valdosta in Georgia, USA.

South American mills expanding
Also the prospects for major South American Greenfield projects have improved through the restructuring of the local industry. The new Brazilian fiber giant Fibria formed from the purchase of Aracruz by Votorantím Celulose & Papel is together with StoraEnso pursuing an expansion of the Veracel mill with a second line.

 

StoraEnso and Chilean forest industry major Arauco have also together purchased very substantial forest holdings in Uruguay from Spanish ENCE and are now gearing up for a major greenfield project. In the mean time Suzano is progressing steadily towards the implementation of their since long outlined mega-project in Maranhão State, Brazil.

Bioenergy and biofuels enhance mill value
All-in-all the state of the industry does not at all look as precarious as only six months ago. Good opportunities are to be found not only in mega-projects but also in improvement projects aimed at simultaneous capacity increases and variable cost reduction. Conversion or enhancing of distressed assets toward bioenergy or biochemicals, is also an area that is seeing activity particularly in North America as exemplified by the Red Shield venture by Patriarch Partners in Old Town, Maine. Adding new business areas in biofuels or biochemicals to technically and financially sound pulp mills to further enhance their value is an even more appealing opportunity. We at Chemrec can help you make it reality.