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John Myers, Duluth News Tribune, Published March 05 2012

Cloquet mill retools for transition from paper to textile industry

For 113 years, there’s been a mill in Cloquet making pulp for use in paper mills — but not much longer.

The mill isn’t going anywhere and still will be making paper, and it still will be turning trees into pulp. But the pulp made by Sappi Fine Paper in the future will be made into clothing and baby wipes.

The Minnesota Pollution Control Agency approved permits for the project last week. Construction on the $170 million project, the first of its kind in Minnesota, is set to begin in April.

Sappi hopes to have the mill fully converted and shipping chemical cellulose, also called dissolved pulp, to textile mills in China, Indonesia and India by May 2013.

“It’s an extremely fast track. It’s kind of scary how fast, actually,’’ said Rick Dwyer, managing director of the Cloquet mill.

In simple terms, the Cloquet mill will be converting wood to a purer form of cellulose fiber. That type of pulp can then be further processed into viscose staple fiber to make textiles like rayon, which can be made into cosmetics, pharmaceutical binders, diapers, cigarette filters, bandages, ingredients for ice cream and yogurt, and even the screens on cell phones and computers.

The move by Sappi, first reported in November, is part of a global strategy to diversify from lower-profit paper pulp into the higher-profit pulp used to make textiles. While the global market is crowded with paper pulp, especially with new South American mills coming on line, Sappi projects a huge shortage of chemical cellulose for rayon over the next 20 years.

“Paper demand is not as strong, particularly for the higher grade of paper made at the mill,” said Wayne Brandt, executive vice president of Minnesota Forest Industries, a trade group for the forest products industry. “That has been largely driven by the recession and somewhat by the electronic distribution of information.”

But Brandt said Sappi’s conversion of its Cloquet mill is less about the decreased demand for glossy paper, which he expects will rebound along with the economy, and more about the increased demand worldwide for wood-based cellulose for clothing products.

South African-based Sappi will continue to make paper in Cloquet, but once the pulp mill is converted to chemical cellulose pulp, the paper plant in Cloquet will have to buy its pulp from someone else. And the mill won’t be selling any pulp for papermaking to other paper manufacturers.

“Our goal at the end of the day is to produce 100 percent chemical cellulose. That’s our most profitable future,’’ Dwyer said. “You can move back and forth (between pulp types); it’s possible. ... But we really feel like the future is going to be converting and staying with dissolved pulp’’ aimed at textiles.

The mill project won’t add any jobs to Sappi’s work force, which now stands at about 760 people in Cloquet. But the change is expected to add years, if not decades to the life of the mill, the company said.

“We aren’t waiting until we get into trouble with (paper pulp) before taking action. We’re looking way ahead on this,’’ said Mike Schultz, who is heading the mill conversion project for Sappi. “I think, if we weren’t doing this, there may have been five, maybe 10 years left in this mill.”

Besides converting the mill’s pulping capacity to a higher-valued growth product, the mill conversion is securing the future of the facility for another generation, Brandt said.

“It’s the biggest investment in the (state’s) forest products industry in over a decade,” Brandt said of the $170 million investment. “That shows great faith on the part of the company, in our resources and our people. That’s tremendously good news.”

Schultz and Dwyer said the $500 million former Potlatch mill expansion here in the 1990s made this mill perfectly suited for the conversion. Now, most of the changes will be adding new technology that will tweak the pulp-making process, with only a few new buildings going up in the next year.

No change in wood demand is expected, and the company will continue to seek out aspen and maple from across the region.

“Driving by on the street, you really won’t notice much that’s different,’’ Schultz said. “It will be the same number of trucks coming in (with wood) and pretty much the same looking project going out.”

Sappi says the move into more rayon comes at a time when the number of acres of cotton planted globally may have reached their peak, even as demand for soft, absorbent and breathable fabric increases.

Polyester and related products, made from refined oil, are considered less comfortable than rayon. And cotton takes much more water, tons of pesticides and valuable farmland that could be growing food, Schultz noted.

“You don’t see us spraying our trees, or watering them,’’ Dwyer noted.

There were 74 million tons of textiles produced globally in 2010. Of that, 48 percent was polyester; 33 percent was cotton; 6 percent was polypropylene; 5 percent was nylon; 4 percent was chemical cellulose (rayon); 3 percent was acrylic; and 1 percent was wool. Sappi expects rayon’s share to more than double in coming years.

This will be the first chemical cellulose plant in North America for Sappi, but the company already is the world’s largest manufacturer of chemical cellulose at plants in South Africa, where it also is moving to expand capacity. There were about 4 million tons of chemical cellulose produce globally in 2010, Sappi notes. But Schultz said that will expand to 17.3 million tons by 2030 “and it still won’t meet demand.”

The Cloquet mill is poorly situated geographically, being so far from the textile mills, but is among the most competitive in the industry at producing pulp cheaper, Schultz noted.

It’s not likely that other Minnesota paper mills, hard hit by electronic communications and the economy, will rush into the chemical cellulose market. Mills in Duluth and Grand Rapids don’t make the right kind of pulp.

Sappi officials say there are other possibilities down the line. Byproducts from the new process include cellulose that could be made into a biofuel like ethanol and sold on the market — but only if technology for that conversion moves forward. In the meantime, the extra byproducts will take the mill form being 95 percent energy efficient to about 99 percent — nearly all the waste product produced is turned back into energy to run the pulp-making process.

Meanwhile, there’s expected to be virtually no increase in emissions at the Cloquet mill, either air or water.

Eventually, Schultz said the mill could supply U.S. textile manufacturers as the nation slowly recovers some of its lost manufacturing muscle.

“Other than Mobile (Alabama), there really isn’t a market here for us," he said. “It would be great if that could change and we could keep those jobs here, too.”