Calhoun pulp mill shifts away from newsprint

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Paper shuffleResolute Forest begins tissue productionas Calhoun pulp mill shifts away from newsprint

CLEVELAND, Tenn. - The shift from paper to tissue production at one of America's biggest pulp mills, in Calhoun, Tenn., should help ensure the future of the Resolute Forest Products facility in McMinn County despite the ongoing decline in the demand for the newsprint alos produced at the plant, company CEO Richard Garneau said Thursday.

Following the company's annual meeting here Thursday and a board tour of the Calhoun facility on Wednesday, Garneau said he is encouraged by the start of the tissue production lines in Calhoun. Although the initial investment at the pulp and paper mill ended up costing about 10 percent more than originally forecast, Garneau said production and packaging of the new tissue products started about a month ahead of schedule and the new technology should give Resolute an advantage in capturing more of the growing tissue business.

"We continue to optimize the operation and we're very pleased with what we have now," Garneau said. "I think it is going to take a year or two to bring production (of the tissue products) to full production. The quality is excellent."

Resolute announced in June 2015 its entry into the growing tissue market with the construction of the $270 million state-of-the-art tissue machine and converting operation in Calhoun to use the high quality wood pulp produced at the facility on the Hiwassee River. Calhoun's first rolls of bath tissue came off the converting line last August and the entire converting operating was fully in operation by the end of last year.

Garneau said he hopes by the end of the year to be in full production of the tissue machine line in Calhoun, which is capable of producing 66,000 short tons of premium tissue.

While investing in the new production in Calhoun, the Canadian paper maker also acquired Atlas Paper Holdings in 2015 for $156 million to gain recycling and virgin paper tissue plants in Tampa, Miami and Sanford, Fla.

The tissue market is growing by 1.5 to 2.5 percent a year. Garneau said. In contrast, demand for newsprint is declining by about 10 percent a year. The former Bowater plant in Calhoun, which Resolute Forest Products acquired in 2007 with the merger of the former Abitibi-Consolidated and Bowater, was one of the earliest newsprint plants in the South when it was built in 1954.

Two years ago, Resolute also added a large continuous pulp digester at the Calhoun mill to boost its market pulp capacity by 100,000 metric tons and improve the quality of its pulp for new markets.

"Unfortunately, newsprint is going to continue to decline and we continue to face strong headwinds in our paper business," Garneau said. "We have had to close machines and mills in Georgia, Canada and South Korea. We know that that mechanical paper that we make at the mills is probably going to have five years or so - maybe more or maybe less -so the focus for us in Calhoun will be to use the quality pulp we have to integrate into our new lines."

The Calhoun mill has cut the number of machine lines it operates from five to three, but Garneau said he is hopeful of adding more of the new tissue machines and making more investments in Calhoun once the tissue production is profitable and begins generating more business for the company.

Resolute Forest Products, which is based in Quebec, Ontario, operates 40 manufacturing facilities in the United States and Canada.

Earlier this month, the company temporarily laid off 1,282 employees at three of its sawmills in Quebec after the United States last month imposed preliminary anti-subsidy duties on imports of Canadian softwood lumber. The tariffs, which the U.S. Department of Commerce announced in April, affect $5.66 billion worth of imports of construction materials from Canada and come as the U.S., Canada and Mexico prepare to renegotiate terms of the 23-year-old North American Free Trade Agreement (NAFTA).

Garneau dismissed U.S. claims that Resolute and other Canadian softwood lumber makers and suppliers were dumping their products on the U.S. market below costs.

"I can assure you in central Canada (where Resolute operates its mills) there are no subsidies," he said. "We have an auction system that mirrors what we have in the Untied States. In each of our previous disputes (before the World Trade Organization of NAFTA) Canada has always prevailed and I don't think this case will be any different."

The tariffs could mean that fewer houses are built in the United States if lumber from Canada is less available, Garneau said.

"I think the U.S. consumer should insist on having access to the Canadian lumber and recognize that free trade helps everyone," he said.

Many of Resolute's mills in the United States export to Mexico and other countries and a trade war could end up hurting both consumers by pushing up the price of goods and even some U.S. plants that might export less to other countries if a trade war results, Garneau said.

The Resolute CEO said NAFTA "has been good for the three Amigos" of Canada, Mexico and the United States.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.