Wood you believe it
Swedish company to build R1bn plant at Richards Bay
THE ROTTNEROS GROUP, a leading manufacturer of pulp for the open market (market pulp), plans to close down its struggling Utansjo mill in Sweden and move its production to South Africa after building a R1bn plant at Richards Bay.
The Swedish manufacturer of market wood pulp is anticipating better margins in SA than in the Swedish market, which has been experiencing steep increases in electricity costs. Unreasonably high electricity prices affect the production of pulp.
Rottneros, which is listed on the Nordic small cap list of the Stockholm Stock Exchange, anticipates that SA will provide it with lower and more stable electricity prices than Sweden can. It recently signed a letter of intent with SA forestry cooperative NCT to investigate further aspects related to the cost of investing in a new plant, the technical and commercial side of the mill.
Peter Keyworth, GM special projects at NCT, says the first phase of the feasibility study is expected to be complete by end-July this year. “We’re hopeful that we’ll meet the deadline, as necessary work related to the project has been finalised. We hope to move the process quickly.”
The proposed plant at Richards Bay is to be built and operated by a yet-to-be established joint venture between Rottneros and NCT. The mill will have its own management.
Hopefully, NCT has finally found a partner that won’t pull out of the project. In 2005 it suffered a setback when Swedish partner Sodra Cell withdrew from a similar project after 18 months. Asked why Sodra ducked, Keyworth says that at the time the cost of the investment was high and there was uncertainty concerning future electricity prices in SA. “We’re now confident that the situation has changed and can be managed.”
What attracted Rottneros to investigate moving its pulp mill to SA was this country’s good supply of eucalyptus wood and other raw materials at competitive prices. “We’ve found favourable conditions – particularly on the energy side – in SA,” says Rottneros Group CEO Lars Blecko.
Asked why NCT is part- nering Rottneros, Keyworth says: “We have to have an operating partner. They’re involved in this kind of project. That allows us to enter the market with confidence.”
Rottneros’s contribution to the joint venture will be equity and experience in running a mechanical pulp plant. Both companies anticipate that if the plans are executed, the Swedish plant will be moved to SA and the new mill could be operational by 2009.
Pulp United, a subsidiary of NCT, has already obtained environmental regulatory approval to build the plant from SA’s Department of Agriculture & Land Affairs. Keyworth says Pulp United is also negotiating an electricity supply contract with Eskom.
Entering the market