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Wood ready for second wind
Photo: Jeff Brungardt, left, and Greg Elton of Sappi display a wide variety of
products that incorporate the firm’s new wood-based fiber.
It seemed like a no-brainer last month when the Area Partnership for Economic Expansion (APEX) announced that a new study has found Northern Minnesota and Wisconsin have an extensive supply of underutilized wood species.
For many people, lumber, particleboard and paper come to mind as likely end uses. But APEX has a broader goal.
“We’re on the cusp of several great developments in the area of cellulosic fuels and biochemicals,” said APEX President and CEO Brian Hanson. “Our region could see some of that investment within the next five years.”
It’s already happened at Sappi’s Cloquet mill. Late in October, the company held an open house to demonstrate how it converts wood pulp into a specialized cellulous product that’s being used in everything from clothing
to processed food.
“It’s one of the most versatile materials on the face of the Earth,” said Deece Hannigan, Sappi vice president of procurement and fiber resources. Beyond textiles and consumables, its pulp byproduct can be added to pharmaceutical
drugs as a binder, be converted into hard plastics and become a component in explosives, just to name a few uses.
It received far less publicity regionally, but UPM, owner of Blandin Paper in Grand Rapids, also has entered the biochemical market. In June, the Helsinki-based corporation entered into a joint development agreement with
U.S.-based Renmatix, which manufactures celluslosic sugar for the biochemical and biofuels markets. The long-term goal is to make cost-competitive bio-based alternatives to petrochemicals.
Similar processes can be developed at other pulp and paper mills in Minnesota
and Wisconsin. For economic developers, the challenge is to partner existing
wood processors, which have already invested hundreds of millions of dollars
into their plants, with start-up biofuel or biochemical companies capable of producing high-demand new products, said APEX Director of Business Development Elissa Hansen.
“We did a fair amount of outreach (to mills) in the past, but at that time, timber
and paper companies were busy. Then the business environment changed. The recession brought construction to a halt,” reducing the demand for
studs and wood panels. “Electronic devices reduced the demand for
paper. Now, mills are more interested in talking,” Hansen said. “None
of these new companies would be directly competing with paper mills, but they could become partners (with existing mills) to diversity their output and help
them stay in business. I think every paper company is looking at other ways to use their pulp right now.”
The area’s plethora of trees isn’t the only factor providing impetus for new
wood fiber uses.
Sappi officials say population growth, combined with higher third-world incomes, has led to growing demand for better clothing. The supply of cotton will soon become insufficient, and cellulous is a likely replacement.
“The same can be said for things like plastics,” Brian Hanson said. “The base
for plastics is moving from petroleum to renewables such as ag (corn in particular) and wood. We know it’s coming.”
Sappi, a worldwide corporation with $6 billion in 2012 sales, had sufficient
resources to finance its in-house venture into cellulosic fiber. The same can’t always be said of start-up firms that develop new wood-based products.
“Wood fuel and bio chemical companies, because of the emerging technology
situation they’re in, can’t get typical bank financing. It takes either revenue
bonds or non-traditional financing,” Elissa Hansen said.
“The amount of money they’d be looking at would go way beyond what we
tend to have available to make developments happen in this region,” Brian Hanson explained. “There are certain large equity houses such as Piper Jaffrey that are interested in alternative type projects. That’s the kind of firm they might turn to.”
Another trend that’s developing is for established petrochemical firms to invest
in emerging biochemical companies. As trends change, it’s anticipated that corporations such as Dow and DuPont will acquire their biochemical counterparts.
Northeastern Minnesota and Northwestern Wisconsin have an abundance of
infrastructure to support large new wood-based industrial investments. The same features that originally attracted the forest products industry more than a century ago – experienced loggers, ample water, transportation corridors and strong utilities – continue to be major assets moving forward.
“Having the knowledge, skills and supplier network does give us a competitive
advantage,” said Elissa Hansen.
Corn-based ethanol is probably the best-known ag-based fuel product to
gain market momentum, but wood pellets could also become a viable product,
particularly in Europe. In the United States, pellets primarily power industrial
boilers. Overseas, they’re a popular home heating fuel, and the wood supply
might not be sufficient to meet demand. Development of a wood pellet plant in
our region is considered likely, economic developers say, and pellets could be exported on ships.
Key to success for the next generation of wood-based products is development
of commodities that will be profitable without a subsidy, Brian Hanson said.
Although ethanol received a tax subsidy for many years, similar incentives might not be available to help other bio products get off the ground.
Having a favorable business climate will help, he added, and some trade associations already are lobbying state lawmakers to help accommodate the next generation of forest-based products.
Success came quickly for Sappi, which modified its mill and began production
within a 16-month time frame.
“Our goal was to be at budget by the end of our fiscal year on Oct. 1 and we
made that goal,” said Cloquet mill Managing Director Rick Dwyer.Previous BusinessNorth Exclusives Articles:
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