U.S., South African Projects Increase Sappi's Global Lead in Chemical Cellulose

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Paper and packaging group Sappi Limited (NYSE:SPP) (Johannesburg, South Africa) is set to consolidate and increase its position as the largest global producer of chemical cellulose, which is used in the textiles and consumer goods markets, with projects in South Africa and the U.S.

Currently, the company produces about 750,000 tons of chemical cellulose annually at its Saiccor plant in South Africa's Kwazulu-Natal province. It is now investing $170 million to convert the Cloquet kraft pulp mill in Minnesota to chemical cellulose and will see production of 330,000 tons a year begin in 2013.

This will be brought on stream at the same time as the expansion at the Ngodwana mill in Mpumalanga province, which will produce kraft linerboard, newsprint and 210,000 tons of chemical cellulose, and bring the total production for the group to 1.3 million tons annually.

"The conversion project at the Cloquet mill is consistent with our announced strategy to diversify further into this fast-growing segment," said Ralph Boettger, the chief executive officer of Sappi Limited. "The low-cost global position of Sappi's Cloquet pulp mill will provide an attractive platform for growth with our current chemical cellulose customers, as well as open up new markets to us."

Mark Gardner, president and chief executive officer of Sappi Fined Paper North America, said that the planned conversion would allow for the continued production of kraft pulp, with maximum flexibility to react to changes in global pulp markets. The Cloquet project, together with the $13 million coated paper investment at Somerset Mill in Skowhegan, Maine, ensured that the company could grow profitably in both cellulose and fine paper markets for years to come.

The Somerset Mill project includes upgrades, cost structure improvements, and the production of a broader range of products. The PM3 rebuild project is slated for completion in third-quarter 2012.

The Cloquet conversion project will not affect the company's coated paper business at the site. Dry fiber-handling systems and improvements to paper machine capabilities ensure that the product quality across all grades will be unaffected.

Currently, the Cloquet pulp mill produces hardwood kraft (NBHK) pulp for market sales. Sappi will work closely with its pulp customers to ensure an orderly transition, including making supplies available from its Somerset mill where appropriate. For related information, see May 11, 2011, article - Sappi Expands South African Chemical Cellulose Production to Maintain Global No.1 Rank.

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