Thanks to it’s robust forestry and paper industries, Georgia has a great deal of biomass to harness. In an April 2008 study, The University of Georgia Center for Agribusiness and Economic Development estimated the state has over 13 million tons of biomass that could be converted into energy each year. This material could generate about 8.6 percent of Georgia’s 137.2 billion kilowatt hours of electricity, enough power to handle about a third of Georgia’s residential electricity needs. As biomass utilization efficiencies increase, the state could increase its biomass conversion to over 19 million tons each year providing even more energy to Georgia.

Georgia has already taken some measures to jumpstart its renewable energy production. Private companies, government agencies and others in Georgia have begun exploring the use of biomass to not only generate electricity but also produce transportation fuels and natural gas. The University of Georgia has received funding from the US Department of Energy and has already developed a pilot-scale facility generating 25 kilograms of hydrogen per day from catalytically reformed biomass. In addition, the US Department of Agriculture is conducting research into using a variety of feedstocks including Bermuda grass, giant reeds and other plants for biofuels. The company Global Energy is also developing biomass-to-energy and waste-to-energy projects in Georgia and throughout the Southeastern United States.

In its 2006 Georgia State Energy Strategy, the Georgia Environmental Facilities Authority identified encouraging the development of distributed biomass-to-energy plants in Georgia as one of its top priorities. This news is by all means encouraging, but biomass projects can create not only energy but research and skilled jobs that will further boost Georgia’s economy. So far, biomass has been primarily used in Georgia’s forestry and pulp and paper industries. However, there is a great deal of promise for expanding energy production to other small-scale industrial, municipal and county government customers and also utilizing several untapped biomass resources including unsellable timber, crop harvest residue, solid waste water sludge and various nutshells.

There are a number of ways to harness the energy in biomass, some of which are currently deployable and others that are promising in the years to come. Combustion is a relatively mature technology that is efficient for heat and electricity; gasification (biomass converted into a gas that can power a turbine or be used as a chemical feedstock), or conversion into a liquid fuel (such as ethanol) are both technically feasible but require greater research and engineering to become widely economical.

Though no single technology is the solution to the energy challenge, biomass is ideal for the local, sustainable projects that will keep skilled jobs in Georgia and hopefully protect the state from turbulent energy prices.

To mark this holiday season, Dr Palm sent £5 Marks and Spencer gift vouchers to 3,000 residents in the South Lynn neighborhood, home of the massive construction site for the company’s newest paper mill at King’s Lynn, Norfolk. The effort was as much a rather astute public relations campaign as it was a resourceful apology for residents being subjected to the deafening noise of pile drivers throughout the summer laying the foundation for the new mill.

Dr Palm, who prides his company on being a ‘family business’, said “… we thought of a voucher for all the people who never complained and never sent the police after us.” Hardly the typical action of a company with reported sales of €846 million annually. Then again, Palm has more than a little to prove to his supporters and his detractors.

One of the biggest

To begin, the project for Palm Paper UK, a subsidiary of Germany’s largest paper company, will culminate in opening one of the world’s largest newsprint mills, costing as much as £350 - £400m and producing 400,000 tonnes of newsprint annually. The mill is also the first international investment made by the parent company, which currently has three mills in Germany producing 1.4 million tonnes/yr. In addition, the mill is completely focused on turning local waste and recovered paper into newsprint, a process typically handled outside the UK by exporting the waste and importing the recycled newsprint.

This is where Palm saw the greatest opportunity. “The reason for building a newsprint mill in the UK is the lack of domestic supply. About 1.2 million tonnes have to be imported every year,” explains Dr. Palm. “We have been shipping newsprint into the UK from our German mills for 13 years and our customers have increasingly asked us to introduce production in this country.” Not to mention the savings on transport and logistics cost introduced by moving production closer to the raw materials.

Problems and challenges

The project has encountered its fair share of problems and challenges. Apart from the early constructions for the 2012 Olympic Games, the project is currently the largest construction site in the UK. An estimated 450,000 - 500,000 tonnes of recovered paper will be needed to meet the goal of 400,000 tonnes of recycled newsprint. To meet this demand, Palm has approached as many as 12 different suppliers.

It helps, however, that the planning for this project was successfully completed in November 2007, to allow Palm to start construction in January 2008. This moved Palm ahead of potential construction planned but not yet started by competitor Ecco Newsprint.

As reported in PPI Pulp and Paper International magazine last July, Ecco has signed a letter of intent with Metso Paper for a supply of a 400,000 tonnes per year machine for a recycled newsprint plant to be built in Teesside, northern England. "It would put a lot of pressure onto the UK market if two machines came online at the same time," said Dr. Palm.

Environmentally conscious

Responses about environmental concerns have also been mixed. Located on the River Great Ouse, the mill is still required to meet conditions for water abstraction and effluent licenses to use water from the Flood Relief Channel and to pump out used water into the Ouse. In this area, Palm has a long history of exceeding European environmental standards and most critics seem content to wait and see.

Palm Paper’s promise of an overall reduction to the carbon footprint is more appealing. The company has never used virgin fibers in any of its papermaking, today using recovered paper exclusively. And by reducing transport of the recovered paper and recycled newsprint back and forth between the UK and Germany, emissions and fuel consumption will be largely minimized.

Moving forward, ahead of schedule

In spite of everything, including the dismal forecasts for the global economy, Palm Paper has not stopped working and is moving forward. The new machine for the facility, designated PM7, is the seventh papermaking machine for Palm and has been purchased from Voith Paper. It is designed for a maximum production speed of 2,200 m/min to produce the 400,000 tonnes/yr of newsprint in the basis weight range of 42 - 48.8 g/m² using 100% de-inked recycled paper.

To round out the season, Dr. Palm recently celebrated the ‘topping out’ ceremony at King’s Lynn in early December, signaling the major construction milestone of adding the roof to the new facility. As work stands now, the mill is scheduled to open ahead of schedule in late spring 2009.

Transitory reduction

Our latest forecast for the world economy takes a middle of the road approach. There appears to be no doubt that 4Q 2008 showed a big drop in economic activity, on a worldwide basis. A considerable part of the decline was due to a massive inventory drawdown throughout the supply chain, due partially to concerns about underlying consumption and partially to lack (or high cost) of financing. The reduction is transitory since the level of inventories can’t go below zero, with the extent of the damage to consumption and investment being the important consideration for 2009 outlook.

We are showing the recession in the developed world extending through the first quarter of 2009, before economic activity stabilizes in the second quarter. Positive growth is predicted to resume in the developed world in the second half of 2009, albeit at a modest pace. Massive government stimulus, both on a fiscal and monetary basis, will be the primary factor leading to the renewed expansion.

The only silver lining in this otherwise bleak scenario for the general economy is that commodity prices will be substantially lower in 2009 than the peaks that were reached in the middle part of 2008. Already, oil prices have plunged below $50/barrel from a record level of $147/barrel fewer than six months ago.

Recovered paper and market pulp

The true commodities in the pulp and paper market, recovered paper and market pulp, are showing the same sort of pricing behavior being seen in the broader commodity world. Prices have plunged recently, particularly for recovered paper. Of course, recovered paper has its own set of economics compared with more traditional commodities. The most striking difference is that the cost floor for recovered products can be negative because the alternative for the waste generator is to pay to have the material landfilled.

Pricing of recovered paper and market pulp is likely to be extremely volatile over the course of 2009. Papermakers will have to rebuild their inventories of both materials sometime in the first half. When this happens, prices will probably shoot up, especially for recovered paper since the supply side of this market will have been decimated by the brutal price drop in the latter part of 2008. The inventory bounce in pricing will likely be short-lived, though, and another downdraft will hit both recovered paper and market pulp prices by mid-year. A more sustained upturn in recovered paper and market pulp pricing will have to await the upswing in paper and board demand, which we expect to see gaining momentum by late 2009.

Paper and board

The paper and board side of the industry is not nearly as commodity oriented as the upstream fiber markets are, and producers are making it a priority to reinforce this proposition. Producers are considerably more willing to take downtime to match output to demand, especially for products where concentration ratios have reached relatively high levels. So far, the production discipline and relative lack of trade flows have combined to keep prices from following fiber prices downward in most regions.

Our forecast shows that paper and board pricing will eventually decline across a broad spectrum of grades in the first half of 2009. The two main factors will be the severity and duration of the demand downturn and the general slippage in production costs. We believe the extent of the demand slump will finally overwhelm the ability of suppliers to take the necessary downtime.

Conditions in the paper and board market should start to improve in the second half of 2009, as long as our forecast for the general economy proves to be accurate. Demand will be rising, both as a result of increasing underlying consumption tied to the upswing in economic activity and due to end users rebuilding their inventories. On the supply side of the market, capacity will probably be lower for many grades due to permanent capacity closures driven by the poor demand and pricing anticipated in the first half of 2009. Therefore, operating rates will tend to rise from both the demand and supply sides of the equation. Pricing, though, will probably respond relatively slowly since production costs will still be comparatively low and operating rates, while higher than in the first half of the year, will still be modest.

Hope in the second half

There appears to be little doubt that 2009 will be a poor year for the pulp and paper industry. Demand will drop for the second consecutive year in the developed world for most paper and board grades, following the general economies downward. Producers will do their best to offset the demand weakness by taking downtime and removing capacity on a permanent basis. However, they will probably not be successful in keeping prices from falling due to the severity of the slump in demand. We do see some light at the end of the tunnel, though, with markets improving in the second half of the year. Hopefully, our assessment of the general economy will prove out, instead of Cormac McCarthy turning out to be eerily prescient in his 2006 book, The Road, about an economic nuclear winter in 2009.

Where I am going with this? Well, a Charlie Brown Christmas was released in 1965, almost 44 years ago. And, we’re still complaining. Have we learned nothing? Now, this industry has gone through recessions before. Often, they could be claimed to be self-inflicted; when times were good and products were selling, there was a pell-mell rush to add capacity, followed by oversupply, dropping prices and another recession: the boom and bust cycle. It seemed that the industry never learned the lessons of the past.

Industry did shoot itself in the foot

This time, it seems to be different and this recession is not self-inflicted. It’s obviously a world phenomenon. Look at some of the industrial sectors that seem to be suffering far worse than the pulp and paper sector. And, in the developed world, where per capita consumption of paper and board products has been stagnant in recent years, production discipline has been the name of the game in recent years.

This discipline will obviously have to continue in the near future, and not only in the developed world. Already, for example, there have been announced cancellation/delays of projects in the previously booming Asian countries of China and Vietnam.

Times will continue to be tough and the news seems to be getting worse. Although there is some hope we will begin to see an upswing in late 2009, the most recent report (Canadian Press) I read quoted the chief economist of ScotiaBank who predicted the global economy would not begin to recover until 2010 and even then, the revival could be “gradual” and even “disappointing” in some cases.

Discipline needed now more than ever

The developed countries came out even worse, with “virtually no economic gain” until 2011 or 2012. For countries dependent on commodities, he said that Scotiabank does not believe the markets will improve much for three years. Now, he was speaking commodities in general. Perhaps the pulp and paper sector will see some light at the end of very dark tunnel sooner. But, times will be tough and all the discipline the industry has shown in recent years in some regions will need to continue and even expand to other areas (as it already has).

Although many companies are just trying to survive (in the days of the Wild West, this was called circling the wagons), there remain some bright lights. In the latest issue of PPI, we showcase our annual five companies to watch: companies doing special things despite trying circumstances. Four of these firms come from the BRIC (Brazil, Russia, India, China), probably no surprise.

We also present our annual outlook, based on reports from the RISI economists and analysts. This looks at the industry by sector and by region. Although it may not be the news we want to read, there are no surprises. Yet, even here there are some positive notes.

The industry has not had its collective head in the sand since late last year. It knows the score. And, it has the will to emerge from this a winner.

Metaphors for a long, dark economic winter still continue to be heard, despite throwing everything including the kitchen sink at the global recession. But there is little evidence that spring will come any sooner, regardless of the massive bailouts in the US and Europe to relaxing monetary policy in China, all in the hopes of spurring exports and reviving near-dormant consumer spending. Canada has even talked about a bailout for its forest products industry. And while each week might bring some hope of stability returning to the markets, enough gloom on the horizon persists to keep all of us in a perpetual state of wait-and-see.

Forest products and TVs - different

The forest products logistics industry has not been completely immune to the downward spiral, although as a whole it has appeared to fare better than others. We have yet to see such alarming news coming from the bulk carriers similar to the recent announcements of cancellations and scappings from the container fleet. And though most ports are facing budget cutbacks and shortages, there have not yet been the warnings of their impending collapse.

Then again, forest products are hardly the same as automobiles or plasma-screen televisions. While consumer spending drives a portion of the larger industry, and definitely affects the transport sector, forest products are also a commodity not completely unlike oil or grain. And as a commodity, the transport of the variety of forest products is necessary for nearly every industrialized economy. Globalization over the last few decades has also produced something of a Janus-like effect on the industry, better allowing it to equally face both the good news and the bad through the geographical diversification of producers and consumers. These are some of the factors that play into the industry's favor.

With that in mind, here is some of the bad news and good to expect in the industry during 2009:

Volumes will go down ...

The recent release from the World Bank projecting world trade to fall next year for the first time since 1982 confirms the worst news for the industry: an overall reduction in freight volumes for the year. The precipitous drop in freight rates during the last half of 2008, nearly all dropping to multi-year lows, did little to offset the reduction in volumes as demand continued to weaken. These absurdly low rates, however, are untenable in the long run and will be raised in the coming year. Lower volumes also mean under-capacity vessels, and fewer vessels, which in turn will add to the cost pressure, affecting both freight rates for both current and future contracts.

... and costs will go up

Just as the sky-high prices of oil were not expected to last, the current rock bottom lows will not last either. Regardless of falling demand or the recent strengthening of the dollar, the price of oil is severely undervalued and is almost certain to rise during the year. As the industry's highest cost component, a raise in price of oil will further affect freight rates, which will be passed on to the consumers. The Pandora's Box of fuel surcharges, once opened last year, are almost assuredly here to stay and they will add an additional cost pressure. However, this in turn might be some good news, since the high cost of fuel will help keep the drive open for alternative fuel initiatives.

Investment in sustainability

The pressure on costs should bring about investments in 2009 to improve overall cost efficiencies, as well as reducing fuel costs. The efforts to implement sustainable practices for companies in every industry will gain speed in the next year, adding potential opportunities for the transport industry. Press articles of ships with sails and washing aircraft more frequently to reduce drag will be just the tip of the iceberg, and the industry should pick up some of its own initiatives. In addition, forest products are themselves renewal, clean and sustainable. From biofuels to recovered paper to more efficient harvesting for pulp, other industries will increasingly look to forest products for their sustainable initiatives and this should directly benefit the transport sector.

Return to business as usual

We can expect companies in the next year to return quickly, if they have not already, to business as usual. This does not mean a return to the business practices of the last few years, but instead to more conservative, traditional approaches to capitalization, investment and growth. It may not be a return to Victorian values, as one UK economists predicted half-heartedly, but companies will be placing a laser-focus on the bottom line, instead of simply the profit line. Efforts will center around 'value' - as in how much value does an employee bring to the organization and how much value does improving customer service increase revenues through customer retention.

Ultimately, the question for 2009 will be whether it is to be a year of recovery or a year of stagnation. Most estimates place the recovery of economic growth for the US beginning somewhere in the second quarter of the year, with Europe drawing close behind. China is expected to continue its growth during the year but at a pace of merely 5 - 6%, far below its average over the last decade.

The key then for the industry is the timeline. If, on one hand, economic growth and consumer spending return as expected, the forest products logistics industry should emerge reasonably strong for 2010. On the other hand, if the growth lags or the recessions turns worse, the industry should expect to suffer through a very long winter as much as everyone else.

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Latin American demand for paper and paperboard accelerated in 2008, due to the optimism in local markets during the first half of the year, consumer inventory purchasing and strong print advertising. But the global financial crisis has affected paper demand throughout the world and the situation is no different in Latin America.

The global economic crisis started affecting containerboard and boxboard demand in the last quarter of 2008. The segments of the paper packaging industry that experienced a decline in demand include those related to sales in supermarkets, such as food and hygienic and cleaning products. Demand for boxboard and packaging papers has been weaker as consumer product companies have been working off these inventories. This has lead to high cartonboard inventories for producers that supply these segments. Graphic paper inventories have also been building as a result of weakness in advertising in magazines and commercial printing.

This is an excerpt from a full story that is available in RISI's Pulp & Paper News Service.

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The Pulp and Paper Products Council (PPPC) reported that global market pulp inventories spiked yet again in November, closing at a whopping 50 days-of-supply, up two days from the prior month. The statistics, which correspond to more than 5 million tonnes of pulp, surely dampened producers' holiday cheer as they began leaving their offices to take holiday vacations.

With the arrival of Christmas Eve, pulp sales executives from Montreal to Helsinki to Sao Paulo are now settling into their holiday martinis -- a producer contact once showed me that Tanqueray 10 gin is surely among the finest you'll ever find, but at a Christmas cigar dinner I recently discovered that Broker's gin is quite possibly the world's best -- and when they return after New Years they'll be greeting with essentially the same dour market conditions they left behind.

Anticipating poor demand, this year it's not just pulp sales executives who are taking some much needed time off. Mill workers were told to go home at many producers here in North America because there's little need for more pulp in a market reeling from oversupply and not enough demand.

According to a poll I did over the last several months, from September through December producers in North America took more than 800,000 tonnes of downtime, with curtailments happening at 19 different companies. Everyone expects that more downtime will come after New Years, as producers attempt to reverse the ongoing trend of oversupply.

Don't break out the champagne, though. Despite all the downtime and expectations of more permanent or indefinite closures that will clip tonnage from what industry contacts say are now at all-time highs, today's bulge in pulp is so enormous that it'll likely take several months to work off.

"We are taking market-related downtime," said one contact at a North American producer, who nevertheless added that the curtailments were not reducing supplies -- rather, they're preventing an even larger increase in available pulp because weak demand has reduced the tonnage going out the door. "Even at that we are not gaining ground on inventories (rising), we're losing ground."

Faced with paltry order books, producers around the globe have turned to shipping scattershot deals into spot markets. China recently had a temporary rise in deliveries but Western Europe is still weak and producers don't care. They're sending tonnes anyhow, resulting in a buildup of pulp in ports across the continent.

Meanwhile, the USA has entered its traditional yearend fire sale, where producers compete for business in spot markets by outbidding each other in a race to bottom. It's easy to picture Santa on Christmas Eve, riding a sleigh that's bulging at the seams with pulp, his elves frantically tossing bales into the night as households below board their chimneys shut.

US spot prices are now so low that many market pulp mills are already shipping at cash delivered costs. But some consumers aren't taking tonnage at any price because they want to reduce the cash they're holding in inventory before the calendar year closes, and they believe cheap tonnage will still be available in the New Year.

The market's gotten so oversupplied that when a recent fire at a New England warehouse burned about 20,000 tonnes -- something that would normally result in a temporary jump in Northeast spot prices -- it hardly registered at all in the marketplace. The biweekly US spot prices I've posted have slipped every cycle since mid August. One contact warned of off-grade pulp moving as a result of the fire.

"There's a whole lot of pulp from that New England public warehouse," said the tongue-in-cheek contact. "If you hear any wacky numbers in the Northeast it's probably fire damaged pulp. It's a new grade. You can call it Northern smoked pulp."

See you all in 2009, when we can expect more unusual happenings in this wild pulp market.

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A mix of trust and caution dominates the minds of pulp and paper industry players in Latin America regarding the consequences of the global downturn for the local economies. It's impossible to predict what's going to happen in the coming months, and no one dare to risk predicting numbers for the future in the short or medium term.

The International Monetary Fund (FMI)'s World Economic Outlook has defined the current scenario for Latin American countries as a combination of slowing activity, more difficult external conditions and still-high inflation.

Overall, GDP growth is estimated to decrease 5.5% from 2007 to 4.5% to 2008, reaching 3.25% in 2009. The GDP drop for next year reflects the weaker global outlook, softer commodity prices and more tough external financial conditions. According to FMI's forecast, growth in Brazil will come down below trend.

The Brazilian Central Bank on Dec. 19 forecast that foreign investment in Brazil will likely decrease by 25% in 2009 over the amount expected for this year ($40 billion). The bank, which previously estimated incomings of $33 billion, now predicts foreign investment of $30 billion.

Since October, when the global crisis "officially" emerged, Brazilian pulp companies admitted they would be forced to review their expansion capacity plans already announced to the market in order to bring them up to date with the new reality the world will find itself in after the current crisis.

Besides the reduced demand, the new scenario after the crisis will create a more complex process for companies to get credit from financial institutions.

Back to FMI's figures, Mexico's activity will remain sluggish as exports and remittances are dampened by the US slowdown, and it is no different for Mexico's paper and board industry. With uncertainty over the global downturn, most Mexican containerboard players I had a chance to meet during November reported that the local economy dropped due to strong dependence on North American exports.

Mexico's GDP, which was expected to increase by 1.8% this year, will likely show more modest results. According to local contacts, it could range from a decrease of 1.5% to a slight rise of 0.8%. Meanwhile, market contacts said that containerboard capacity expansion delays in China indicate strong paper demand deceleration worldwide.

The most affected packaging sectors in the country are appliances, auto parts and hygienic products. A source told me that Mexico's box demand decreased 15% in October over the same period of 2007. Other consumer goods have showed similar weak sales performance, impacting consumption.

Payment delays are more and more frequent according to buyers in Mexico. Investments are practically nonexistent in the country, excepting for Smurfit Kappa Cartón y Papel Mexico's new box plant. The Smurfit Kappa subsidiary is investing $30 million to build a new, 75,000 tonnes/y converting plant in the municipality of Atlacomulco, northwest of Mexico City, which will start up by the end of 2009.

Another converting paper project in the country is led by Cajas y Empaques Modernos. The company and other four local box industries will invest $18 million to create the first Mexican independent sheet-feeder in the country. It will consume around 8,000 tonnes/month of containerboard (17 million m2/month).

Among the new sheet feeder's advantages, is competitiveness to supply raw material since the five converting firms together will be able to negotiate large-scale volumes and consequently better prices and payment conditions.

Early among investments, Corporación Durango's Empresas Titan packaging division announced plans to build three "mega" corrugated box plants in Mexico to replace a number of its older existing plants. The first one started up about two years ago, in Apodaca, northeastern Monterrey, with a production capacity of 8,000 tonnes/month.

The remaining two were planned to be installed in the coming three years in the Mexico City and Guadalajara areas, but after the company's filed for bankruptcy on Oct. 6, there hasn't been any new movement regarding the remaining two converting facilities.

In Argentina, key players of the graphic industry were unanimous at the Conlatingraf event to say the US financial crisis has lowered estimates for developing economies. Most experts who presented some data of graphic markets said that Brazil and Mexico have an important position to lead Latin America's demand recovery by means of concentrating their efforts in their local consumer markets.

The Latin America Economic Commission (Cepal)'s director, Bernardo Kosacoff, emphasized that foreign investment in Latin American countries has decreased due to the US downturn, especially from immigrants who live in North America.

Argentina's Investment and External Trade Bank's VP, Hugo Guerrieri, stated that the financial institution is promoting some financing programs for small and medium companies attending the local graphic sector needs.

Some of the bank's initiatives are to support credit financing with interest rates of 4.75-5.25% as well as developing customized products for each province of the country.

In general, speakers at Conlantingraf said that graphic paper industries will have to increase productivity. Printers will have to reduce fixed costs replacing older equipment with more updated machines and focus on low-volume printing and customized products. It will also be necessary to optimize customer service by reducing delivery times.

It's time to review figures, investments and reschedule commercial strategies also in Latin America. The potential to "survive" is enormous, but this current situation shows that all markets needs to keep themselves aware. It's not only a question for delaying projects but settling them in for the new world "after crisis period."

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The primary factors that will affect prices in 2009 are:

• The Economy
• Paper Demand, both domestic and offshore
• Exchange Rates
• Capacity Closures
• Operating Rates
• Manufacturing Costs

... but not necessarily in that order.

Our economic assumptions are in line with the consensus, but may be weighted toward the lower end. We believe that GDP will decline through the second quarter of 2009, returning to positive yet still subpar growth in the second half of 2009. Annual growth for 2009 will be about -1.7%. This compares to growth in the last three recessions of -1.9% in 1982, -0.2% in 1991 and +0.8% in 2001. So economically, it will be similar to the 1982 recession.

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But in the Atlantic, despite much weaker demand in the fourth quarter, 2008 has unquestioningly been a record year for the overseas woodchip trade to Europe. It appears (end of year shipments are also uncertain in this market) that Turkey will take the prize as the top woodchip importer in the Atlantic region, with close to 600,000 BDMT of imports. This has been mostly pine from the US South and Turkey, but includes smaller volumes of hardwood from Canada and Brazil, and even a couple of vessels of pine from Venezuela. These chips are not for pulp production, but are all utilized by several large MDF producers whose expansion in recent years has far outstripped local wood supplies. Spain, which was the first European country to resume woodchip imports since the early 1980s, was the second largest market for woodchip imports in 2008, with a volume of about 450,000 BDMT, primarily eucalyptus from Uruguay but also beginning to import from a new supplier in the Republic of Congo at mid-year. Other woodchip importing countries in Europe in 2008 included Finland, Norway, Portugal and Sweden. In addition to the supplying countries already mentioned, three vessels from Chile were dispatched to European customers as well.

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One of the attacks comes from none less than Ambassador Alan Oxley, head of World Growth International www.worldgrowth.org, a non-profit organization set up to expand and improve the health and economic welfare of disadvantaged populations. Speaking at the Poznan Climate Change conference held in Poland recently, Oxley said: "Green activists like the WWF and Friends of the Earth perpetuate the misconception that forestry is a black and white issue, but it is time to turn the tide in the global forest debate. "

I subsequently spoke to Oxley who declared that many Western governments and environmental activists have gone too far, and are now proposing that deforestation be halted in tropical zones which will undoubtedly lead to poverty in developing countries. He also attacked the FSC system of certification saying that it was "biased against forestry in developing countries and would bind business to restrict the economic benefit forestry can deliver".

The NGOs would probably respond to Oxley's words quite vehemently. I recently also spoke to George White of the WWF who has just returned from India where the organization has just launched its Global Forest and Trade Network (GFTN) – India. The GFTN and the work it does is worth a look http://gftn.panda.org/ as it proclaims to address all issues, not simply the environmental ones, and has sophisticated set ups on all the continents. India is the latest large country to sign up and pulp and paper companies who have shown interest there are the two largest, ITC and BILT Ballapur Industries. White says that the companies are keen to come on board as it gives them access to large overseas customers that have also signed up to the GFTN on the buying front.

Add all this to the strong interest shown by banks and commercial institutions in getting in on the act - for instance Merrill Lynch, which announced a plan earlier in the year to preserve a large tract of forest in the Indonesian province of Aceh for the purpose of selling carbon credits, as well as aiming to stop illegal logging - and we can clearly see that we have quite a party ahead, which has all the right ingredients for quite a punch up!

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Among the highlights: the use of hardwoods, with one person saying we would see continuous cooking of hardwoods everywhere.

Another was how paper would be treated, talking about composite materials, i.e., paper and another product such as plastic, designed to improve, not replace paper.

Drastic reduction in water consumption was also predicted. Computers were also seen as a boon. "Now it is feasible to design a whole paper mill with a computer control."

Two of my favorites unfortunately have not yet seen the light of day. The first is atomic power where one seer said he foresaw the day when he could carry a six-month's fuel supply in a bucket. The other was instant paper; this person envisioned a product much like spray paint except that it would be paper coming out of the can. However, the old aerosol cans used fluorocarbons that damaged the earth's ozone layer, another reason for the environmentalists to target the industry.

Doomed to repeat

I wonder what today's prophets would predict the state of our industry will be 45 years hence, in 2053. It might be déjà vu all over again or perhaps a cynic would look more towards Winston Churchill's warning that those who could not remember history were doomed to repeat it. With the state of the economy and fears for the future, many are too concerned about tomorrow to worry about the day after tomorrow, let alone five or 10 years down the road. This year's mill manager survey shows that many are treading water and just keeping their heads above it. The plummeting economy has obviously affected morale in many companies, an added burden for managers who also have to worry about rising costs while striving to stay profitable and competitive.

I remember a recession in 1982, another in the early 1990s and then again in the early part of this century. perhaps it will be up to the forward thinkers, like those surveyed in 1963 who will bring back this industry. Instead of the "same old, same old", maybe you will be able to carry six month's worth of power in a bucket.

The mill managers are at least optimistic. No less than 81% of them said that it is possible to stay competitive for the long-term.

Giving credit

Although we are in the midst of a horrible overall recession, it is not the actions of the forest products industry that will bring the country (or the world) out of it. We may be guilty of many things but we did not cause this crisis. RISI's macroeconomic specialist, Scott Howard, has an excellent Comment article explaining how the banks, despite tightening lending standards, still must "give credit where credit is due". As he notes, smaller financial institutions and companies are the true drivers of the economy and will they be able to access capital in a time when corporate profitability over the next few quarters will probably suffer.

My best wishes to all of you for the New Year.

On the one hand we already have the CEPI framework and the publicly available specification, PAS 2050, with an ISO standard also in the pipeline (work on the proposed ISO 14067 is scheduled for completion in March 2011). Yet, on the other, many retailers are starting to question the value of carbon labelling consumer products since (as Paul Rowsome of Carrefour has stated) only a minority of customers look at carbon labels, while the labels themselves are prone to inaccuracies, are not necessarily the cheapest way to reduce emissions, and can overlook other environmental impacts.

As energy and environment director, CEPI, Marco Mensink pointed out during the mini-summit, there is no such thing as a 'carbon neutral' product, only one where the carbon emissions needed to make it have been neutralized.

This does not mean that carbon footprinting is a waste of time, however. Dr Kay Williams, one of the scientists who developed the UK's PAS 2050 standard explained that it allows a company to see 'hotspots' of emissions and take appropriate steps. "It is important to recognise that carbon footprinting is not just about labelling products," said director, Edge, Michael Sturges. His organisation has conducted two case studies in this new field. The first, sponsored by the Periodical Publishers' Association (PPA) attempted to quantify the carbon footprint of the UK magazine publishing sector in general terms: the next step will be to develop a tool to allow individual publishers to calculate the carbon footprint of their specific publications.

The second case study is a potential good news story for paper. Edge carried out a lifecycle assessment of standard printed, web-based and tablet e-paper newspapers. The results revealed that while reading news online for 10 minutes produced a smaller carbon footprint than reading a newspaper, the reverse is true if you read the news online for 30 minutes, because of the energy consumed by the computer, etc.

"Carbon wise, paper is one of the best products to sell," confirmed Energy and Environment Director, CEPI, Marco Mensink, adding that pulp and paper "is the first sector with a well-received and internationally used framework for carbon footprints."

A compelling reason for the paper industry to push carbon footprinting: probably not. A sign that the industry should have nothing to fear from the footprinting movement: most definitely.

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A team from Imerys in Cornwall and the University of Exeter, in the UK, have been studying the beetle, which has an extremely white shell made of very small scales, to understand the mechanism behind this.

Dr Pete Vukusic, who leads the natural photonics research at Exeter university, recently appeared on the BBC Radio 4 show Material World speaking about the topic. He explained that the beetle exhibits an "amazing quality of whiteness for a very limited thickness of material". The team is trying to apply the principles behind this to the paper production process. Vukusic said that the work is in progress at the moment and looking very promising.

In an article published last year in the journal Science, the researchers reported that the beetle’s scales "are characterized by their exceptional whiteness, their perceived brightness, and their optical brilliance, but they are only 5 µm [five millionths of a meter] thick". The scales have an irregular structure, which scatters light, giving them their brilliant whiteness.

The researchers measured the scales' whiteness and brightness as 60 and 65, respectively, according to ISO standards, which they described as remarkable given the mere 5 µm thickness. Much more structure is needed to achieve the same result in a synthetic product. For comparison, the researchers pointed out that conventional white uncoated woodfree papers, made of bleached woodpulp, can be upward of 25 times thicker than the beetle's scales but return only an 8% superior brightness.

Carbonate or kaolin crystal inclusions and optical brightening agents are added to paper coating formulations to improve the perceived appearance of white. However, individual 5-µm-thick calcium carbonate coating layers have a brightness of only 40 to 50, with such poor opacity that its whiteness value is meaningless, the researchers concluded.

If the team manages to mimic the effect of the beetle's scales, it could have a wide range of applications, not only for the paper industry, but also for paints and ceramics, with the development of bright, white, ultra-thin materials.

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Conditions changed in China starting about last July, just before the Olympics started in Beijing. This was widely noted at the time, but almost all observers expected a surge in orders and activity after the Games ended. That did not happen. By the end of August, the Baltic Dry Index was well off its recent highs and spiraling downward. All of this happened before the mid-September bankruptcy of Lehman Brothers, which of course did a surprisingly large amount of damage to the world financial system and further damaged confidence and the real side of the economy.

This is an excerpt from a full story that is available in RISI's Pulp & Paper News Service.

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Forest growth is essential to enable us to meet the demand for wood while also balancing environmental goals.

If we say the forest industry has historically been focussed on competing in a free market based on customer value and functionality, we are now facing a whole new ball game. This is most evident in energy and climate change. Forest growth has a lot to contribute here and has the capacity to become a key part of the climate change solution.

The sawmill and pulp and paper industries not only create employment outside major urban centres, they create net exports for Sweden of over SEK 100 billion per year. The political risk inherent in owning and running this type of business in Sweden is increasing in line with the growing level of political blind faith in unilateral, national rules. We would like to challenge our politicians to apply constructive rules by all means, but first make sure they are internationally harmonised. This must be done before we voluntarily reduce the value of our net exports without any measurable environmental benefit, as is currently the case.

Europe's greatest contribution

The forest in Sweden and Europe, growing and well-managed, is most probably Europe's greatest contribution to countering the doomsday scenario represented by the threat of climate change.

On a global basis however the deforestation level is unfortunately as much as 0.2% annually. And this deforesting is occurring in the most important of our forest sinks, the equatorial forests. In these jungles, trees can bind as much as 1,500 tonnes of CO2 per hectare in extreme cases. The amount of CO2 released to the atmosphere through deforestation is more than the total fossil fuel emissions from all the transportation in the world. Which means that stopping deforestation would potentially balance out the emissions of the transportation industry as a whole. Clearly it is completely absurd to allow exploitation of jungle in South-East Asia for palm oil plantations. It takes more than a hundred years for palm oil to compensate for the 1,500 tonnes of CO2 lost through deforestation and compensate for the fossil CO2 it is intended to replace. An extraordinarily poor equation.

Can we do more than stop deforestation? Definitely. Our calculations show that were half the total production forests in the world (almost half the total forested area) managed and certified with the same care as Swedish forest, we'd be guaranteed growth of some 1%. This amount of forest growth absorbs large quantities of CO2 for photosynthesis. In combination with stopping deforestation, this would be equivalent to the entire net amount of CO2 currently generated by global fossil fuel usage. Were all the world's mills and factories to maintain CO2 discharges at the current level we would not only have 30% more forest (without using more land), we would also gain a 30-year respite to create economic alternatives to today's fossil-fuel based society. What special interest group could possibly say no to that?

There is still more we can do

Passive forest management results in a lower CO2 uptake than efficiently-used forest. Young forest binds more carbon than old. Producing packaging paper, for example, reusing it, then using it to produce energy, beats fossil-fuel based alternatives and provides a better CO2 equation than using the best available techniques to produce biodiesel. Nowhere else is the CO2 equation better than when we build our houses in timber rather than cement. Every tonne of timber used to replace cement reduces CO2 emissions by 1.5 tonnes, which makes timber houses an excellent way of reducing CO2 emissions.

Based on what we know today, we potentially have 30 years to deal with the climate threat.

Sustainable new energy solutions need time to mature. The contribution of forestry to energy production can never be more than limited on a global basis. Too much focus on bioenergy may even hinder us from our major contribution of, in a sustainable manner, binding CO2 through growth and product substitution where it is most effective. In Sweden the level of CO2 emissions is some 54 million tonnes per year. The Swedish forest binds more than 100 million tonnes annually through growth. Increasing growth by 50% would be an extremely cost-effective way to further reduce CO2, equivalent to the total amount of Sweden's emissions. Add the forest carbon sink into the CO2 calculation and start making real solutions possible!

As well as CEO of Södra, Leif Brodén is also chairman of the Swedish Forest Industries Federation

As of Dec. 12, estimates from the ever-expanding federal stimulus package suggest the green component (wood, wind, solar, etc.) will be a whopping $50 billion over two years. If 20% falls to wood energy, that near term spending of $10 billion would spur formidible growth, providing tens of thousands of new jobs - and wood demand of perhaps 120 million green tons, long-term. (The nation's wood consumption for pulp and paper, in comparison, averaged 215 million tons in recent years.)

Such demand growth would create a $3 billion per year wood energy market at current prices. And a good bit of that "green collar" expansion is already underway, topping 32 million tons, according to RISI's Wood Biomass Market Report.

Why wood? Where, when?

In place for decades, wood and derived fuels (black liquor) already account for one third of total renewable energy consumption in the US, 50% when excluding hydroelectric.

So, where and when? Largely due to fiber supply, one RISI projection has the largest growth occurring in the South, with a share of just under two-thirds (75 million tons), followed by 25% in the West (30 million tons) and 12% in the North (15 million tons).

How soon, ultimately, rests heavily in the hands of President-elect Barack Obama and the next Congress.

Foresters and analysts argue over what volumes are practical - or affordable. Others worry over billion-dollar capital spending crashing down haphazardly from Washington - with little regard for forest sustainability or the existing forest industry. Scattered cries of complaint have already been heard, including "cutting down the nation's carbon sink for electricity - it's wrong," or "paper and lumber mills will not survive."

Gearing up politically (if not scientifically, socially or economically), an"energy czar" may soon be appointed to speed implementation and drive plant construction through the labyrinthian Departments of Energy and Interior and the Environmental Protection Agency.

With wind and solar energy both limited geographically, wood energy hold promise for wider, prompt results. New wood-based systems are relatively labor-intensive to install (providing desired jobs), but the wood electricity and pellet technologies are simple and well established. In addition, both can be scaled to an array of applications large and small. Cellulosic ethanol and its huge refineries remain a few years out, due to technical hurdles, but remain a key goal, reducing dependence on imported oil.

Either way, an ongoing RISI assessment of the plan reveals wholesale changes to forestry and traditional wood users. More than $13 billion in public and private investment capital was pumped into US clean energy industries in 2007, according to the Department of Energy.

First jobs, then climate change

Beyond the initial green collar stimulus capital, other powerful shifts are underway, led by climate change advocates in Washington. Staking his position, President-elect Barack Obama declared recently, "Few challenges facing America - and the world - are more urgent than combating climate change."

Leading Democrats, eager themselves to drive changes in Washington, seek quick enactment of legislation in January. One prominent measure requires electric utilities source 15% or more of energy from renewables by 2020. Woodfiber is a primary replacement for coal. The chairman of the Senate Energy and Environment Committee plans to introduce that measure, eit0her stand-alone or inserted into the larger stimulus bill. Beyond that, Obama and Congressional Democrats have supported a tough new national Renewable Portfolio Standard (replacing scattered state plans already underway). Dominant in the South: Wood to replace coal-based electricity.

Nevertheless, what is already emerging amounts to a crazy quilt of often-competing local strategies. Some states are making progress, others falling behind. Different industries, utilities and regions each have varying energy objectives due to local renewable sources.

As example, in California, Florida and elsewhere, already existing energy proposals run into staunch opposition from area residents as well as local and state bueacracies. To overcome that, a recent executive order by California's governor promises a "fast track" permiting process to smooth over zoning and enviornmental hurdles.

Congressional wrangling

Back in Washington, Congressman Henry Waxman wrested control of the powerful House Energy and Commerce Committee chairmanship just hours after Congress first met after the November election. He has long advocated climate-change regulation, sometimes radically.

Democrats, led by Waxman, dumped prior Chairman John Dingell over his go-slow approach to global warming and energy. Congressman Rick Boucher, from coal-rich Virginia, may also lose his subcommittee leadership role under Chairman Waxman who supports a moratorium on coal-fired power. Boucher's likely replacement is Congressman Ed Markey, point person for House Speaker Nancy Pelosi's climate change adgenda.

And the proposed government incentives exclude the many billions of dollars of private sector funding required in new projects. As such, wood energy investments could dwarf failing paper and lumber operations in just the next several years - almost an imponderable outcome.

On the fiber side, these aggressive political goals far exceed the Department of Energy's own targets for wood energy, outlined just in June. DOE, before the election, had expected wood-based electricity to increase by a factor of 1.75 to 2012, while the current projection implies an increase of 5 times.

RISI's new Wood Biomass Market Report focuses on wood biomass feedstock pricing, project development and capital investment, government incentives and regulations and policies as it tracks the rapidly growing market. Subscribe online at www.risiinfo.com/woodbiomass, call us at 866.271.8525 (press option #3 for Wood & Timber), or email us at wt@risiinfo.com for subscription details.

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“Far out”

Decades ago, it seems I wasn’t the only person dreaming something as “far out” as holograms and space travel. Featured in the November 1963 issue of Pulp & Paper, editor Albert Wilson interviewed engineers who attended the 18th Annual TAPPI Engineering Conference. Each of the interviewees predicted how the paper industry would change and grow in the years ahead.

• Atomic power – “The day is coming when I’ll be able to carry a six months’ fuel supply for a mill in a bucket in my hand – atomic power. There will be no soot and no air pollution. Also, if kraft mills don’t bleach, they may be out of business. The housewife is demanding attractive packages,”

• Treatment of paper – “There will be a marriage of woodfibers with other materials with other material, such as plastics, glass and all types of synthetic fibers – not as a substitute for paper, but to improve the product. We also will redesign our converting plants to reduce manpower and costs.”

• Use of hardwoods – “Use of hardwoods is just in its infancy. It is going to be a big factor in the South where it hardly has been touched. We will have continuous cooking everywhere and this will speed up the use of hardwoods.”

• Computers – “Now it is feasible to design a whole paper mill with a computer control. We have the programs to do it.”

• Cloth-like paper – “There will be continued improvement of paper to make more cloth-like and softer qualities for home use and hospitals, and it will be accomplished both through improved fiber and fiber preparation and converting.”

WAY far out

• Instant paper – “The day of instant paper may be coming. You may be able to buy it in a can and spray it out or peel it off. It would be the most beautiful paper you have ever seen and you would have a choice of qualities or kinds. There would be no more paper machines as we know them today.”

• Paper from petroleum – “Who knows what may happen in 50 years – paper may be derived from petroleum products and wood may become the source for transportation fuels and lubricants.”

• Drying – “We will get rid of all the steam dryer rolls on the machine. We will drastically cut down the size of the machine room. It could be infrared or electronic drying.”

• Water – “Mill locations no longer will depend so heavily upon water supply and effluent disposal. Water requirements and mill effluent will be reduced to less than 10% of present quantity by improved treatment and reuse. Also high frequency waves and ultrasonic applications for defibering stock will replace mechanical defibering.”

• Electrical techniques – “We will see progress in drying. It possibly will be done by electricity in some form or other such as using quartz lamps. Some things we have done in drying will be looked at again in the light of new techniques. The thyristor drive is coming. It gets rid of rotating drives. It is all static.”

• Wood preparation – “We may see a machine which will climb a tree, cutting the limbs and debarking on the way up and chipping on the way down. The chips would go through a pipeline, treated en route with chemicals and steam, and come out as pulp at the other end, 50 miles away.”

After reading the predictions of engineers of the 1960s, it would be interesting to note the predictions of modern-day engineers and other papermakers. Showing the forecasts from 45 years ago will bring light to how far we’ve come in the papermaking industry, and more importantly, how much further we will go.

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