Chip and ship - keeping mills supplied whatever the weather

BRUSSELS, April 18, 2011 (RISI) - Raw material supply security is always a major concern for pulp and paper companies. It is one of the driving forces of the industry and a company's raw material procurement plan can often make the difference between success and failure.

The year 2010 was unusual in many ways, but especially in terms of weather. The effects of the "El Niño" phenomenon (the variable climate pattern that occurs across the tropical Pacific Ocean about every three to five years) was intense in the US South, bringing a large surplus of rain to the area, as shown in the rainfall maps.

This increase in rainfall, in certain areas up to 200% (N.O.A.A. data service), had a direct effect in wetlands hardwood harvesting operations in the area, making it almost impossible to be carried out. The most important implication of local fiber supply was the drastic reduction in some cases in the pulp logs and woodchip inventory at the different pulp and paper mills in the south east US. The immediate challenge was to avoid running out of raw material and the associated extra costs of replacing those raw materials. Different paper companies started a quest to find supplemental raw material sources that could supply enough woodchips to keep the mills up and running.

Fulghum Fibres specializes in fiber processing and trading, with a production of more than 18 million tons/yr. With 35 chipping operations under contract, export operations, logs procurement operations, and with offices and representatives in various places worldwide including USA, Chile, Uruguay, Australia, New Zealand and South Africa, Fulghum Fibres has a very active presence in the international woodchip market.

In 2009, Fulghum Fibres was contacted by a long-time customer to provide technical assistance at one of their operations. The client was Nippon Paper and the operation was AMCEL, a joint venture in Brazil between Marubeni Corporation, Nippon Paper Industries and NYK-Nippon Yusen Kaisha. Located in the northeast corner of Brazil, next to the Amazon river, AMCEL produces close to one million tons/yr of Eucalyptus Urograndis (with a small percentage of Acacia Mangium), with an expansion capacity of up to three million tons/yr.

A US enquiry

While Fulghum was involved in the AMCEL chipping operation, providing technical assistance and evaluating possible new projects, Fulghum's headquarters in the US received an enquiry from Georgia-Pacific (G-P) about importing woodchips from Fulghum's South American operations or for contacts from Fulghum's extensive fiber network. Fulghum's Chilean and Uruguayan operations had their production already committed, so it was not possible to fulfill G-P's requirements from Fulghum's existing operations. AMCEL, however, had capacity available. Fulghum and AMCEL started working hard and fast on their production programs to evaluate this challenge. At the same time, G-P investigated import port options in the Gulf area to unload woodchip carriers.

There was, however, a missing link: the USDA permits to import eucalyptus woodchips from a tropical zone into the US. Fortunately Fulghum had these permits in place and received the blessing to continue this importing. This, together with the Forest Stewardship Council (FSC) chain of custody permits that Fulghum had in hand through its export operations in Chile and trading division, meant that everything was in place to start this new venture.

After arranging all the legal aspects of the operation, in mid-February the green light was given for AMCEL to proceed with the production and vessel loading of two full woodchip carrier cargos for G-P. At the end of February, Lee Temple, fiber general manager at G-P, together with Fulghum personnel, traveled to the AMCEL facilities in Brazil to supervise the loading of the first vessel. Production and quality of the product were monitored during the five-day loading time. This visit confirmed the high quality of the product together with Amcel's enormous potential for fiber supply.

Woodchip carriers have an average capacity of 40,000 green metric tons (44,000 green short tons), loaded in six discrete holds. The Reserve, LA, port was chosen for the unloading by G-P. With a stationary crane and an ample stock pile area, the port was ideal for the incoming woodchip carriers. Sailing time from Santana to Reserve was only 10 days, a refreshingly short voyage time compared with the long round trips often experienced in the international woodchip market trade.

Some initial technical problems with the unloading equipment and operation made the unloading of the first vessel a little slower than expected, but the chips arrived just in time at the Port Hudson mill, thus avoiding problems that could have been generated by the lack of raw material at the mill. The second vessel offloading also concluded with few issues.

In addition to the two vessels for G-P, Fulghum Fibres concluded a two-vessel sale of similar fiber to MeadWestvaco (MWV), imported through the port of Beaumont, TX, and dispatched to the Evadale, TX, pulp mill. Hard work and fine coordination had to be implemented in order to arrange four vessels (two for G-P and two for MWV) at short notice, but AMCEL and Fulghum had the capacity to fulfill the requirements needed. Initial unloading rates at Beaumont were also lower than expected, although with time, the unloading team reached the required rates.

The four vessels of chips imported to the US Gulf region were processed during the months of March, April and May 2010. This was obviously a new venture for both pulp mills, using a single species supply as compared with the diet of mixed southern hardwood chips, but the need for supplemental volume was balanced with the technological advantages of the eucalyptus short fiber supply.

While the supply of 200,000 green short tons of Eucalyptus chips to the two pulp mills was statistically small in comparison with the overall fiber consumption, it is safe to conclude the following:

• The logistics from Brazil to the Southeastern USA worked for both pulp mills
• The chips were imported with the appropriate USDA approvals
• The chips were received, offloaded and transported to the two pulp mills within the forecasted time frames
• The chips were stored, digested and processed into final products with no downtime

Some encouraging signs on kappa control and paper machine speeds were reported.

More rainy years such as 2010 could be ahead. The benefit of planning in advance for such contingencies, including having a back up volume committed from a "trouble free" zone, could be extremely beneficial for the pulp and paper industry.

http://www.fulghumfibres.com Eucalyptus Urograndis is a fast growing species that was genetically designed to grow in warm tropical weather and has similar characteristics to its world-famous relative and “world star” Eucalyptus Globulus, making it very attractive to the world pulp and paper industry.