EXCLUSIVE:Pulp Mill rebuilding after China imposes tariffs

China accounts for 50 per cent of the world’s market in dissolving pulp and virtually the only growth market able to absorb the current capacity and the growing volume of capacity planned to come on-stream over the next few years.

He said the Chinese government has been looking at a protective tariff on dissolving fibre.

Patterson said despite the tariff being imposed they’re very determined to have full production at the mill in their 18-month timeframe, which means they will have to change what they're producing.

“The tariff for Canadian companies that are operating in Canada range from zero per cent to 50 per cent, because Prince Albert has not yet started production the tariff on Prince Albert’s product going into China has been announced to be 50 per cent,” Patterson said.

He went on to explain what a 50 per cent tariff means, “It means that the product right now sells for $900 a tonne, the tariff would be an additional $450 a tonne. So if you multiply that by 630 tonnes a day, you’ll see it’s a lot of cash and that’s the big concern here.”

Patterson explained that tariffs in place for pulp mills which are already producing, sits at 13 per cent and added the 50 per cent tariff on start-up mills is a way for China to deter start-up mills.

“They want to deter new operations … which would allow some of the Chinese operations to continue running,” Patterson said.

He said himself and the person spearheading the rebuilding of the long-idled Prince Albert Pulp Mill, are still in shock over the severity of China’s decision.

“We did not at all expect to see any kind of decision like this, this catches us way off guard. We expected a tariff, probably 15 per cent, even that cost would have an impact on the operation. A 50 per cent tariff makes it almost impossible to produce the kind of commodity grades at a dissolving pulp that would go into China.”

“What we’re doing is we are moving forward to develop other products and markets the Prince Albert mill can serve,” Patterson said.

Pedro Chang, deputy CEO of Paper Excellence said in a news release the ruling is a travesty, “The average 13 per cent tariff on existing Canadian producer, who ships to China, gives a very unfair competitive edge to our competitors. The 50 per cent ruling against our Prince Albert mill is far more than punitive – it is devastating to the production of dissolving pulp at that facility.”

Patterson said they’re now working with a lawyer to put forward an appeal, which could take anywhere from three to five years, which is why they will be looking at producing other materials at the mill.

He said they can’t live with the mill being shut down during the appeal process.

“We have a pretty nice facility here; we’ve invested money into it to keep going, to leave it sit for three to five years is not in the books. We want to have this facility producing in 16 to 18 months,” Patterson said.

“The only options that remain for the Prince Albert Mill is to look into other prospects such as alternative markets or the development of specialty cellulose grades or fluff pulp for the adult incontinence market, for baby diapers, it’s something that can be produced at this mill. For the sake of preserving jobs and our commitment to the region we are now working 24 hours a day to find a viable alternative product-market mix for this.”

He said these alternatives weren’t looked at in the past because dissolving pulp was the best alternative for the mill.

In the release Chang said, “We are taking immediate steps. Through our legal counsel, we are seeking clarification of the ruling. We are setting up an appeal and we are working hard to re-focus the mill on other markets than China, and on other products.”

Chang said Paper Excellence is fully committed to rebuilding the mill and have it operational within that 18-month time frame.

Patterson figured the rebuilding of the mill could cost anywhere from $100- to $120 million.

He said the process to begin rebuilding as already begun with the mill sending wood samples to a research facility in Vancouver. The facility will process the wood and have word back to Paper Excellence in 10 days, which would confirm if the wood here can make the fluff pulp.

He said they will soon be looking at changing out the equipment, so they can produce other products.

“The 50 per cent interim tariff, it has a really hard blow on what we’ve been doing. We have in the past spent hours and hours specifying the equipment, we have issued some purchase orders for equipment that we’ll now have to retract, which usually carries some kind of penalty with it,” Patterson said.

“The mill was almost at a place of going and as I said we’ll continue to move ahead with the mill. I want to really reassure people that’s what we really want to do.”

“It’s just too important of a mill to us, there’s a nice wood supply here, we have people here and we have talent here. It’s located really well for our operations.”

Paper Excellence also has another operation in Meadow Lake, which has been successful for them and Patterson said they see the same success in Prince Albert.

Right now the mill employees about 46 people who will stay on staff during the rebuilding phase and Patterson expects they will have 250 employees when they’re at full production.

Paper Excellence and Local 1120, the union who the mill gets employees from, said they will continue to work together to get the mill up and running.

“It’s been a relationship of learning in working with the issues around the mill. We’re more than willing to look at different ideas, which the Local [1120] has brought forward and how we can manage the mill and how we can work together effectively,” Patterson said.

Local 1120 is interested in being partners with Paper Excellence.

Patterson said they are also looking at other options for the mill, like opening it up to SIAST as a way to teach students, and possibly keep some skilled workers in the province.

“It’s been a long two years of rocky roads at looking at what we’re going to do with the mill and now we have to go ahead and get it done whether we take on other issues, we have to get it done.”

swallace@panow.com

On Twitter: @sarahthesquid

by Sarah Wallace

EXCLUSIVE:Pulp Mill rebuilding after China imposes tariffs

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