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EXPANSION OF PULP PRODUCTION IN THE THIRD WORLD. William Ladrach Zobel Forestry Associates, Inc. zfaforestry.com. Allegheny SAF Meeting Roanoke, West Virginia February 16-18 2010. WOOD FURNISH FOR PULP MILLS.

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expansion of pulp production in the third world
EXPANSION OF PULP PRODUCTION IN THE THIRD WORLD

William Ladrach

Zobel Forestry Associates, Inc.

zfaforestry.com

AlleghenySAF Meeting

Roanoke, West Virginia

February 16-18 2010

slide2

WOOD FURNISH FOR PULP MILLS

Outside of North America and Eurasia, the great majority of pulp mills use plantation wood as furnish.

Common plantation species used for pulp:

Eucalyptus grandis, E. urophylla, E. globulus

Clonal hybrids of Urograndis

Acacia mangium, A. crassicarpa

Pinus radiata, P. taeda, P. caribaea

slide5

According to PriceWaterhouse Coopers, the world average return on capital employed (ROCE) in forest lands was 4.8% in 2007.

In Latin America, industrial forest lands continue to generate income with ROCE’s of 9.3% in 2006 and 7.8% in 2007, according to FAO.

slide6

The US pulp and paper industry is largely composed of widely held companies listed on the stock market and must compete with other sectors (electronics, energy, transportation, pharmaceuticals, etc.) for investors’ dollars.

slide7

The US pulp & paper industry has not been generating favorable returns on capital employed in timberlands and has largely divested itself of its forest lands, selling them to timber investment management organizations (TIMO), real estate investment trusts (REIT) and to a lesser degree to limited liability corporations (LLC) and limited partnerships (LP).

Notable exceptions: Weyerhaeuser, (closely held public company), Simpson Timber (privately owned)

slide8

WOOD PULPS & THEIR USES

Kraft pulp: wood free pulp or free sheet (all lignin removed), used for fine papers, packaging Semi-chemical pulp: some lignin removed, used as corrugated mediumDissolving (sulfite) pulp, used for acetate, film, rayonGoundwood pulp (GW) wood is ground off of logs, used for newsprintPressure groundwood pulp (PGW) logs ground under pressure & steam, used for newsprintThermo-mechanical pulp (TMP) chips ground under pressure and superheated steam, used for newsprint, fiber board (hardboard, MDF) Chemi-thermo-mechanical pulp (CTMP), used like TMP (uses chips, superheated steam & some caustic soda)

slide9

New pulp mills in Third World countries:

Are predominantly kraft mills, producing wood free (lignin free) pulps.

Produce short fiber chlorine-free bleached pulps from tropical plantation trees

A few produce long fiber unbleached pulps in temperate regions using plantation pines

slide11

BRAZIL

Existing pulp capacity by state 2009

slide14

BRAZIL

New and planned pulp mills

1000 mt

Murcuri

slide15

BRAZIL ADVANTAGES

Fast-growing tree species

High level of forest research to improve tree growth and health

Arable land available for more plantations at relatively low cost

Trained & motivated work force

Favorable wood transport systems

slide16

BRAZIL ADVANTAGES

University technical & professional support

Close cooperation among companies, government, universities

Strong economy

National Bank for Social and Economic Development (BNDES) supplies financing for industrial development

slide17

BRAZIL

According to a report by Jakko Pöyry Oy and BRACELPA, the average yield of Brazilian industrial pulpwood plantations is:

40 m³/ha/year (8 cords/a/yr) for eucalypts on a 7-year rotation (double the growth in 1970)

30 m³/ha/year (6 cords/a/yr) for pines on a 15-year rotation. (The trees are measured over bark)

slide18

BRAZIL

To keep up with growing demands for wood products worldwide, Brazil’s current tree plantation area of 5.6 million ha (13.8 million acres) needs to be increased to 12.8 million ha (31.6 million acres) during the next 20 years for Brazil to maintain its relative market share in wood products sales.

harvesters produce 6 m 20 debarked wood over 100 trees hr 3 shifts day 6 days week
Harvesters produce 6 m (20’) debarked wood, over 100 trees/hr, 3 shifts/day, 6 days/week
slide20

BRAZIL WOOD TRANSPORT

Pine transport in Parana State (south)

slide23

BRAZIL

2009

Fibria was formed by the merger of Votarantim Celulose e Papel and Aracruz Celulose

Combined annual pulp production capacity is over 6 million tons,

Fibria owns more than 1.3 million hectares of forest land

slide24

CHILE

Region 8

Region 9

Region 10

Chiloé Island

slide25

CHILE 2008

2.14 million ha of tree plantations

1.5 million ha of radiata pine plantations

380,000 ha of eucalypt plantations

70% of the forest products are exported, represent 13% of national exports and reached US$5 billion in 2007, including US$1.6 billion in pulp and paper.

Wood and paper products exports are second only to copper.

slide26

CHILE

Celulosa Arauco y Constitución (Arauco) has a combined annual pulp capacity of 2.2 million metric tons from its mills, four in Chile and one in Argentina.

It owns a total of 850,000 ha of tree plantations in Chile, Argentina, Brazil and Uruguay.

Arauco’s largest pulp mill is at Bío-Bío (Region 8), 858,000 tons of bleached long fiber pulp per year.

slide27

CHILE Advantages

Trained & motivated work force

University technical & professional support

Strong economy

slide28

CHILE Challenges

Lands in Regions 8, 9, 10 for radiata pine are occupied and the potential for expansion is limited.

Chiloé island requires slower-growing Douglas-fir and cold-hardy N. Am. Pines

Topography is rolling to steep, requires specialized harvesting equipment

Chile has good forest fire organizations, but radiata pine is highly susceptible to fire damage.

Truck haul capacity is limited by topography, roads.

slide29

CHILE

Specialized harvester tilts for operating on slopes

slide30

CHILE

Radiata pine, 22 years old, 100’ tall trees

slide32

URUGUAY

Plantations: Eucalyptus globulus, Eucalyptus dunnii

Plantations are in northeast and in southwest

slide34

URUGUAY Advantages

Fast-growing tree species

Arable land available for more plantations

Wood available from Argentina across Uruguay River bridge at Concordia, through MERCOSUR agreements.

NE plantations are adjacent to Brazil, wood could move to Rio Grande do Sul to new pulp mills.

slide35

URUGUAY Challenges

Road system mediocre. Poor transport from NE across Rio Negro & Lago de Rincon to Montevideo in South.

Encroachment of plantations on cattle lands.

Strong antagonism by Argentina to construction of Uruguayan mills on Uruguay River

slide36

SOUTH AFRICA

National pulp capacity 2.3 million mtyp

Sappi mills over 1 million mtyp (ground wood & kraft pulp) at Ngodwana (Transvaal Prov.), Mondi 720,000 mtpy kraft mill at Richards Bay (Natal Prov.)

1.5 million ha of plantations, mainly Pinus patula,P. elliottii, P. radiata,Eucalyptus grandis and Acacia mearnsii.

Most plantations are in East (Transvaal Prov.), Southeast (Natal Prov.) and South (Eastern Cape).

slide38

SOUTH AFRICA

Sappi owns 464,000 ha of plantations plus 75,000 ha in neighboring Swaziland.

Mondi has 430.000 ha in plantations.

200,000 ha of new plantations are planned with additional 565,000 tons pulp capacity.

The narrow gauge railroad is used for wood transport, allowing for a larger wood procurement area than with just trucks.

slide39

SOUTH AFRICA

Wood delivered to Sappi mill at Ngodwana by rail

slide40

SOUTH AFRICA

Mondi and Sappi are expanding plantations into Swaziland and possibly into Mozambique to the North.

Mozambique has plans to establish up to seven million hectares of tree plantations.

The increase in pulp capacity in Southern Africa will depend on increasing the tree plantation area.

slide41

INDONESIA

Installed pulp capacity is 5.3 million mtyp

Plantations are primarily Acacia mangium

Major mills are in Sumatra, one in Borneo

Mill startup has been with natural mixed hardwoods as forests are cleared, then the sites planted with acacias.

slide44

INDONESIA Challenges

Financial difficulties, corruption (Kalimanis Group), national banks holding US$13 billion debt on failed forestry/pulp projects promoted with financial incentives

Social antagonism to industry takeover and clearing of lands

Resistance by environmentalist to land clearing and conversion to plantations

slide45

INDONESIA Challenges

Lack of trained manpower

Lack of professional & technical personnel

Lack of university technical support

Lack of effective cooperation among companies, universities, government

Lack of effective forest research

Lack of good transport systems

slide46

INDONESIA Challenges

Effective % plantation area in Timber Estates (HTI) is low due to: Hilly land, organic soils (histosols), swamps

Difficulties of adapting mechanized harvesting systems to terrain

Growth rate for acacia plantations is relatively low, 20 m3/ha/yr (4 cords/a/yr)

slide47

INDONESIA

Felling short wood with chainsaws, hand debarking, shoulder transport of short wood to the road

slide48

INDONESIA

Improperly loaded truck, no binders on load.

Labor adjusting wood standing on top of trucks

slide49

INDONESIA

Bi-train 12’ wide, 105 ton GVW on company road in Sumatra

slide50

INDONESIA

GVW 105 tons

11 axle bi-train in Sumatra

Detail of 5th wheel connection

slide51

CHINA

Much of the additional world pulp capacity is aimed at sales to China.

Approx. five million tons of new pulp capacity is planned or under construction in China.

Government plans to establish 5.8 million ha of industrial tree plantations by 2015.

slide55

CHINA

2007 FAO statistics

Pulp capacity: 6 ½ million mtpy

Paper capacity: 78 million mtyp

Plantations: 31 million ha (2005)

(USA 104 million ha in plantations 2005)

slide56

CHINA Challenges

Social challenges of establishing large industrial tree plantations in areas of high population density

Difficulties and cost for developing infrastructure for efficient plantation management (roads, fire control, mechanized harvesting)

Example: APP mill on Hainan Island

slide57

CHINA Challenges

Large extensions of temperate plantations established with slower growing species like mason pine (Pinus masoniana, similar to N. American red pine (Pinus resinosa), and with cottonwoods.

Eucalypts planted in South compete with agriculture for land use

slide58

CHINA Challenges

Hilly topography & distance from coastal populations limits efficient industrial plantation development in the SW.

The potential for expansion of tropical species to the north is limited in Hunan, Guandong, and Guangxi due to the continental land mass and winter cold blasts from the North.

New pulp mill design capacities are generally lower than most world class mills

conclusions
CONCLUSIONS

New pulp mill construction is centered in tropical and sub-tropical regions.

New pulp mills are primarily bleached kraft short fiber (bleached hardwood freesheet).

Expansion of industrial conifer plantations outside of N. America and Europe is limited.

Low-cost wood furnish to mills is crucial to the economic success of the forest industry (fast growth, efficient harvesting & transport).

conclusions60
CONCLUSIONS

China and Japan will continue to be major consumers of wood pulp due to the differential between pulp & paper production capacities.

Brazil has a very large potential to expand its plantation wood base and to increase its pulp production capacity, primarily for export.

Indonesia has severe limitations to the expansion of its wood pulp industry.

predictions
PREDICTIONS

China will continue to expand its industrial plantations and pulp industry in spite of significant challenges. Increasing internal demand for pulp and paper will overcome logistical obstacles and relatively higher costs to produce pulp.

North American long fiber pulp production is not threatened by international competition, but may be limited in the future by limited wood supplies, aging mill infrastructure and an inability to attract investment capital.

slide62

END

ZOBEL FORESTRY ASSOCIATES, INC.

zfa @ bellsouth.net

slide63

Selected sources of data on pulp & paper

afandpa.org (Am. forest and paper assn)

andi.com (association of pulp and paper

industries)

bracelpa.org (Brazilian pulp & paper assn)

faostat.org (Food and Agriculture

Organization of the United Nations)

icfpa.org (international council of forest &

paper associations)

pulpmill watch.org

stcp.com.br (Brazilian consulting company)

*/some data may vary slightly due to source