Diversifying operations: Kruger refocuses paper mills
Oct. 17, 2017 - It’s something we’ve heard many times before — the global pulp and paper industry is amid great change. In this time of transformation, one way mills can stay innovative is by identifying new markets and product areas to specialize in. Kruger Inc.’s recent announcement of its diversification strategy is an example of how the company plans to adapt to market and customer demands.
October 17, 2017 By Alyssa Dalton / Pulp and Paper Canada
Founded in 1904, Kruger is a producer of tissue products, 100 per cent recycled containerboard products, corrugated packaging, publication and specialty papers, renewable energy, cellulosic biomaterials, and wines and spirits. In early September, it detailed a $377.6-million commitment to diversify the operations at its Brompton and Wayagamack Mills into specialty niches, such as flexible food packaging, labelling and digital printing.
A new entity
Kruger and the Government of Québec have formed a partnership by which Investissement Québec, acting as the government’s agent, will grant loans and a loan guarantee totalling $59.8 million and acquire an equity participation of 37.5 per cent, or $44.6 million, creating a new entity — Kruger Specialty Papers Holding L.P. — that will comprise the assets of the Brompton and Wayagamack Mills, as well as the Biomass Cogeneration Plant adjacent to the Brompton Mill. The co-gen plant and the thermomechanical pulp mill at the Trois-Rivières Mill in Quebec will supply Brompton and Wayagamack with raw material.
“There’s a saying that instead of buying energy, the cheapest energy you can buy is efficiency. It’s the energy you’re already buying but are also going to use it to do something else,” says Eric Gingras, senior industrial energy efficiency specialist at Natural Resources Canada, who is responsible for the forestry, pulp and paper sector. “Today, [businesses] are trying to be lean and efficient with everything they do, and being efficient [with their] input is one way.”
The new specialty papers entity, according to Kruger, will supply products that are in high demand due to changing market trends around the world, specifically increased demand for sustainable packaging and the growing popularity of e-commerce. These new specialty products include food packaging paper, labelling products (backing paper) and coated paper for digital inkjet web presses to print mass-circulation catalogues and flyers that can be customized for targeted mailings.
To carry out the diversification project, Kruger Specialty Papers Holding L.P. will invest $107.5 million over the next three years that will enable the Brompton and Wayagamack Mills to gradually reduce the production of some publication paper products that are in decline, such as newsprint and magazine paper, while accessing new markets that are on the rise around the world. The goal is that by the end of the three-year project, the Brompton Mill will focus exclusively on specialty products and will no longer manufacture 200,000 metric tonnes of newsprint annually.
More than 500 jobs in the Mauricie and Estrie regions are expected to be maintained as a result of the project.
The investment — which will help secure new production equipment, as well as modify existing equipment, make technical improvements to boost productivity, and support various energy efficiency measures — will be allocated as follows:
• Wayagamack Mill: $32.9 million;
• Brompton Mill: $47.5 million;
• Trois-Rivières Mill: $22.3 million; and
• Biomass Cogeneration (Brompton): $4.8 million.
The spotlight on bioeconomy
The specialty papers developed by Kruger will include cellulose filament (CF), a bio-based strengthening agent that is extracted from wood pulp fibre using a chemical and enzyme-free process. The engineered biomaterial — and Canadian innovation — is manufactured at the Trois-Rivières demo plant, the first in the world to manufacture this product. Commissioned in June 2014, the demo plant is a collaboration between Kruger and FPInnovations and has a 5-tonne a day production line. CF can be used as a lightweight strengthening additive to produce lower cost commercial pulps, papers, packaging, tissues and towels. Looking to the future, CF may be combined with many materials to create high-value products ranging from flexible packaging and films to structural and non-structural panels in building construction.
The potential initial market for CF as a strength-reinforcing agent for traditional pulp and paper products is conservatively estimated at 120,000 tonnes per year in North America. In addition, a similar- sized, non-traditional market is forecast for thermoplastics, reinforced plastics, thermosets, adhesives, and non-woven fabric and coatings, representing a total revenue potential of $500 million per year for companies that make use of CF.
Derek Nighbor, CEO of the Forest Products Association of Canada (FPAC), believes that ongoing partnerships with governments and academia will be “critical as our sector continues to reinvent itself.”
“The future success of the forest products sector in Canada is dependent on a number of things, but at the top of that list would be reliable access to economic fibre and our ability to innovate and continue to transform our businesses,” he says. “Transformation takes many forms from developing new value-added paper products to making biomaterials from wood fibre; from building more in Canada and around the world with wood to having more energy produced from woody biomass.”
It is clear Canada must stay proactive and adapt to changing market demands in order to compete.
This feature was originally published in the Fall issue of Pulp & Paper Canada.
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