pulp non fiction, page-6

osake, I missed you last post while I was commenting (and agreeing) with your earlier one. I'm afraid there's not so much agreement this time round. I didn't see the 11 March AFR article but it was widely reported a few weeks ago that UPM confirmed they were not (at that point in time) in negotiation with GNS. Apart from the interpretation that they had walked away, I still think this can also mean the deal was past negotiation - at a "conditions precedent" stage! If they have pulled out, it isn't for financial viability reasons. See my other post for an explanation of what those other reasons might be.

Bleached Kraft pulp is the only way to pulp the high quality wood going into the Bell Bay mill. To use a CTMP or PGW process would be the equivalent of a butcher using prime aged eye fillet steak to make mince meat out of for use in Shepard's pie! That's why the mills in Brazil and Chile with eucalyptus as their feedstock are all pretty much BKP.

You are also getting ahead of yourself with talk of not one but even two paper machines. The era when there is a nexus between a pulp mill and a paper mill may well be behind us now. Pulp needs to be made in huge volume in a world-scale plant, preferably close to the forest resource, to be viable. That's the GNS proposal. It will be around 1.2 million tonnes of a very homogeneous product. It pretty much goes to make the one type of paper. That exposes a linked paper mill to a higher market risk.

That higher value commodity (pulp versus wood) is much more economically moved around the world than woodchips are. Pulp from Bell Bay could be exported to dozens of stand-alone paper mills around the world. Of course, if you were producing CTMP or PGW pulp, the paper mills you supplied would not be in the high value fine-writing and graphic papers market segment.