The first shipment of industrial equipment, some of which is seen here being taken along a road in Finland, is scheduled to arrive in Thurso, in western Quebec. SOURCE: The Globe And Mail
For the town of Thurso, Que., a shot at economic renewal is literally arriving on massive barges in the Ottawa River.
Next month, the first shipment of bulky industrial equipment from Finland is scheduled to arrive in Thurso, in western Quebec. It will be used to transform the town’s hardwood pulp mill into a facility that makes a key ingredient used in the manufacture of rayon, which is seeing big spikes in demand in Asia and elsewhere.
“We’re looking forward to seeing those barges arrive,” said Thurso Mayor Maurice Boivin.
Vancouver-based Fortress Paper Inc. (FTP-T24.880.532.18%) bought the three digesters and other specialized processing equipment from Finnish company Stora Enso Oyi Cellulose Inc. as part of its bold strategy to convert the Thurso mill from pulp used to make paper – a declining market – to dissolving pulp used to manufacture rayon, a product with a bright future.
The man behind the strategy is Fortress chairman and chief executive officer Chadwick Wasilenkoff, a 38-year-old contrarian investor who seeks out opportunities in overlooked or depressed sectors, like the forest products industry.
“There isn’t enough dissolving pulp to feed the market demand for rayon,” Mr. Wasilenkoff said in an interview.
Rayon is a substitute for cotton (it has similar characteristics but is more breathable and absorbent) and is well-positioned because of the shrinking global supply of cotton as growers switch to less-expensive crops, he said.
“Everything just aligned” to make the conversion of Thurso possible, he said.
Fortress, which also makes banknotes and security papers as well as wallpaper, paid $1.2-million to financially beleaguered Fraser Papers Inc. for the mothballed Thurso mill. It is up and running again, producing hardwood pulp until the conversion to dissolving pulp is completed in about a year.
Fortress is investing $153-million in the transformation of the mill, including the building of a co-generation plant. Investissement Québec is providing a $102.4-million loan, and there is another $25-million or so in federal credits and other financial incentives under the green infrastructure program.
Mr. Wasilenkoff said he just returned from China, where he was overwhelmed by the demand for dissolving pulp from rayon producers.
The Thurso mill, which employs 300 people, is expected to produce 200,000 tonnes a year of dissolving pulp and he anticipates very tidy margins, given that the spot price for the commodity is in the $1,650-a-tonne range and total cost for production and delivery should come in at about $600.
“I like sectors that are out of favour – that are older, more mature – so I can get these kinds of opportunities,” says Mr. Wasilenkoff. In 2006, he bought Swiss-based Landqart AG, a venerable security-paper firm that is the exclusive maker of the Swiss franc and also provides euros to 10 European Union member states.
At the same time, he had been on the alert for a pulp mill in the financially strapped forestry industry, looking for something he could buy cheaply and then convert to take advantage of the booming rayon market.
A bargain-hunter, he said he bought the 12-year-old Finnish equipment for $3.8-million.
BY: Bertrand Marotte for The Globe And Mail. Tuesday, July 27, 2010.
SOURCE:
Globe And Mail: “Quebec Mill Sees New Life In Rayon Market”
