Norske Skog has decided to transfer a paper machine from Norske Skog Union in Norway, which closed earlier this year, to its Norske Skog Pisa mill in Brazil.
Norske Skog has decided to transfer a paper machine from Norske Skog Union in Norway, which closed earlier this year, to its Norske Skog Pisa mill in Brazil. This will increase the company's annual Brazilian newsprint capacity from 185 000 tonnes to 385 000.
"We expect market developments for newsprint in South America to remain highly interesting," says Norske Skog chief executive Christian Rynning-Tønnesen. "This investment shows good profitability, and will reinforce our position as the leading player in the region."
Newsprint consumption in South America shows a healthy growth, and the continent currently has to import this product from other parts of the world to meet demand. Brazilian consumption has risen by five per cent annually since 2003, and the total market will exceed 500 000 tonnes this year. About two-thirds of this volume is imported.
At an investment of USD 210 million, the Norske Skog Pisa project will be financed by cash flow from operations. The investment will be done within the normal annual Capex spending of the company of approximately NOK 1.5 - 2 billion. Raw material supplies are secured through long-term delivery agreements which ensure a favourable price for wood fibre.
In addition to the transfer itself, the project includes upgrading the paper machine and expanding its capacity as well as necessary buildings. A new thermo-mechanical pulp (TMP) unit must also be built to increase capacity for producing wood pulp for making paper, and environmental investments will also be made in the mill. The investments and up-grading of the machine will ensure that the paper produced will have a very high quality.
Provided the necessary approvals from the Brazilian authorities are obtained during the first half of 2007, the machine could be operational at Norske Skog Pisa in early 2009.
Norske Skog Pisa, part of Norske Skog since the acquisition of Fletcher Challenge in 2000, currently has one paper machine and some 350 employees. The workforce will increase by about 100 when the new machine is installed.
Norske Skog has another South American mill - Norske Skog Bio Bio in Chile. The company's earnings in the continent are good, with a gross operating margin of 28 per cent for January-September 2006 and 32 per cent on average in 2001-06.
Paper production ceased at Norske Skog Union in March. Virtually all the 360 people then employed at the mill have subsequently found new jobs. A separate local organisation has been established to head up development of the former Klosterøya mill site into a new powerhouse for business development in the town of Skien. Disassembling the paper machine and transferring it from Norske Skog Union will free up space for creating new activities at Klosterøya.