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UBC Theses and Dissertations

A feasibility study of the recycling of newsprint in the Lower Mainland area of British Columbia Johannson, John Ivan 1971

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A FEASIBILITY STUDY OF THE RECYCLING OF NEWSPRINT IN THE LOWER MAINLAND AREA OF BRITISH COLUMBIA by JOHN IVAN JOHANNSON B.Sc. ME., Univ e r s i t y of Manitoba 1958 A THESIS IN COMMERCE SUBMITTED TO THE FACULTY OF GRADUATE STUDIES IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA October, 1971 In presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements for an advanced degree at the Univ e r s i t y of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y a v a i l a b l e for reference and study. I further agree that permission for extensive copying of t h i s thesis for scholarly purposes may be granted by the Head of my Department or by his representative. It i s understood that copying or p u b l i c a t i o n of t h i s thesis for f i n a n a i c l gain s h a l l not be allowed without my written permission. The major portion of the work on t h i s t h e s i s was done during May 1971 and therefore many of the facts presented do not take i n t o account, economic developments which occurred l a t e r i n 1971, such as the United States import surcharge, i n s t a b i l i t y i n the International F i n a n c i a l System, and Great B r i t a i n entering the Common Market. Department The U n i v e r s i t y of B r i t i s h Columbia Vancouver 8, Canada. ABSTRACT Many countries i n the world today have reached the point of f u l l u t i l i z a t i o n of t h e i r forest resources, to s a t i s f y t h e i r need for lumber and pulp and paper products. Others have reached the point where t h e i r consumption i s far i n excess of the capacity t h e i r domestic forest stands can sustain and they are net importers of these products. S t i l l fewer have developed the practice of r e c y c l i n g these products to any appreciable extent. Canada and United States are approaching f u l l u t i l i z a t i o n and have only accomplished a r e c y c l i n g rate of approximately 207« of paper and paperboard products. On the other hand conservationists are c a l l i n g for more e f f i c i e n t u t i l i z a t i o n of resources, ec o l o g i s t s are c a l l i n g for less waste and less p o l l u t i o n , while the burden on c i t y garbage c o l l e c t i o n f a c i l i t i e s , 507> of which i s paper products, i s increasing exponentially. In t h i s thesis the technical processes required to make f i r s t q u a l i t y newsprint from recycled newspaper are shown to be a v a i l a b l e . The economics of such a plant i s examined i n d e t a i l leading to the judgment that i t i s economically sound. The conclusion i s reached that a 300 ton/ day newsprint m i l l can be e n t i r e l y supported by l o c a l l y generated waste newspaper i n a c i t y of three m i l l i o n population or over. Furthermore, i t i s concluded that i f the c o l l e c t i o n and transportation of waste newspapers i s not impeded by governmental regulations or unanticipated competition i n the feeder c i t i e s , such a plant i s s t i l l economically f e a s i b l e a f t e r allowing for water barge transportation of the raw materials as far as 200 miles. TABLE OF CONTENTS Page Abstract i i List of Tables v i List of Figures v i i Acknowledgment v i i i CHAPTER I THE FUTURE OF SECONDARY FIBRE USAGE 1 II SURVEY OF POTENTIAL RAW MATERIALS 8 2.1 Requirements and Sources of Raw Material Re qu i r ement s Sources 2.2 Forecast of Available Raw Material III SURVEY OF POTENTIAL MARKET 14 3.1 A Look at the Overall Market - World Consumption - World Capacity 1969 and 1974 - Canada's Export and Domestic Demand - Canada's Production Capacity 3.2 Market Penetration by Competitive Products 3.3 Marketing Program 3.4 Pricing Strategy IV THE TECHNICAL PROCESSES 31 4.1 The Reclaiming Process Repulping Deinking Screening and Cleaning i i i 4.2 The Paper Making Process - Deaerating, Cleaning, Final Screening Paper Machine - Finishing 4.3 Anti-Pollution Aspects Air and Gas Exhaust - Water Effluent Solids Waste Discharge PHYSICAL FACILITIES 5.1 Plant Location - Freight Costs Transportation F a c i l i t i e s Water Supply Sewers and Effluent Disposal 5.2 Plant Requirements Land Structures Equipment COST AND REVENUE ESTIMATES 6.1 Capital Cost Estimates Summary Structures Equipment - Total M i l l Capital Interest During Construction Start-up Expenses Working Capital 6.2 Manufacturing Cost Estimates Summary Supporting Estimates 6.3 Revenue Estimates 6.4 Return on Investment iv CHAPTER Page VII DISCUSSION AND CONCLUSIONS 89 Bibliography 93 Appendix A Abbreviations, Used 95 Appendix B C i r c u l a t i o n & Newsprint Consumption of Selected D a i l i e s 96 L I S T OF TABLES TABLE Page 1- 1 World Paper C o n s u m p t i o n , by C o u n t r y 1969 3 2- 1 D a i l y C i r c u l a t i o n , S e l e c t e d D a i l i e s , N e w s p r i n t Consumed, Q u a n t i t y R e c e i v a b l e 10 2- 2 T o t a l Paper t o be O b t a i n e d From C o l l e c -t i o n O p e r a t i o n s 11 3- 1 World P r o d u c t i o n C a p a c i t y o f N e w s p r i n t 15 3-2 S u p p l y and S o u r c e s o f N e w s p r i n t , 1969 17 3-3 C a n a d i a n N e w s p r i n t S h i p m e n t s 19 3-4 U.S. N e w s p r i n t S u p p l y and S o u r c e s 19 3-5 E x p o r t Demand f o r Canada's N e w s p r i n t 20 3-6 Canada's D o m e s t i c Demand f o r N e w s p r i n t 20 3-7 T o t a l Demand f o r Canada's N e w s p r i n t 20 3-8 C a n a d i a n and U.S. N e w s p r i n t P r o d u c t i o n C a p a c i t y 22 3-9 C a n a d i a n N e w s p r i n t I n d u s t r y P e r f o r m a n c e 22 3-10 E s t i m a t e d D i s t r i b u t i o n o f S a l e s 27 3-11 M a r k e t i n g , A d v e r t i s i n g , and P r o m o t i o n Expense 27 v i LIST OF FIGURES FIGURES Page 4-1 Process Flow Diagram, Complete Plant 32 4-1.1 Process Flow Diagram, Repulping 33 4-1.2 Process Flow Diagram, Deinking 34 4- 1.3 Process Flow Diagram, Paper Machine and F i n i s h i n g 35 5- 1 B u i l d i n g and Equipment Layout 53 6- 1 Cash Requirement Build-up 67 v i i ACKNOWLEDGMENT The author i s greatly indebted to Dr. W.F.J. Wood and Dr. J.D. Forbes of the Faculty of Commerce and Business Administration, The Univ e r s i t y of B r i t i s h Columbia. Their guidance, h e l p f u l comments, and encourage-ment contributed greatly to the preparation of t h i s t h e s i s . v i i i CHAPTER I THE FUTURE OF SECONDARY FIBRE USAGE The r e c y c l i n g of secondary f i b r e already makes good economic sense and the economics of i t s use w i l l continue to become more a t t r a c t i v e i n the future, p a r t i c u l a r l y a f t e r the next decade. A paper given at the 1971 TAPPI Annual Meeting 1 gives an excellent discussion of the demand that w i l l be placed on the wood products of our forests from various sectors of the economy. If there were no other factors to consider, i n the next decade or so prospective increases i n demands for pulp and paper products could be met by using a v a i l a b l e wood resources i n the United States and Canada, including p a r t i c u l a r l y hardwoods, and residues from logging operations and processing plants. However, the t o t a l demand on our timber resources for lumber, plywood, wood pulp, and other products are l i k e l y to increase more ra p i d l y than a v a i l a b l e and suitable wood supplies, with resultant increases i n competition f o r timber and associated higher prices for the raw material. As t h i s s i t u a t i o n developes the r i s i n g p r i c e of v i r g i n wood f i b r e w i l l improve the economic s i t u a t i o n for recycled secondary f i b r e . Fortunately, for the basic pulp and paper industry, there are c e r t a i n a n t i c i p a t e d developments which extend the hope of delaying t h i s r a p i d l y approaching shortage of v i r g i n wood f i b r e . One such development H.R. Josephson, "Recycling of Waste Paper i n Relation to Resources", TAPPI Annual Meeting 1971 - Unpublished Paper. 2 i s i n the area of improved technology. New and improved digesting methods are being developed which w i l l s i g n i f i c a n t l y increase the f i b r e y i e l d per ton of wood raw m a t e r i a l . Even a small increase i n y i e l d would have the same e f f e c t as a s i g n i f i c a n t increase i n the s i z e of the forest stands. Another such hope i s extended by the knowledge that with improved i n t e n s i -f i e d f o r est management, timber harvest could be increased by a large amount. It has been estimated that over the next several decades the timber harvests could be gradually increased by as much as 150 m i l l i o n cords. This would, however, require large investments i n p l a n t i n g , r e f o r e s t a t i o n and other f o r e s t r y p r a c t i s e s . Much of t h i s p o t e n t i a l timber increase would be i n the small diameter sizes of timber. However, t h i s could well be used for pulp and paper purposes r e l e a s i n g the large diameter timber for the lumber and plywood i n d u s t r i e s . A factor which w i l l , to some extent, o f f s e t these increases i n a v a i l a b i l i t y and u t i l i z a t i o n of wood f i b r e i s the increased p r o v i s i o n for environmental and r e c r e a t i o n a l uses of the forests which w i l l need to be made. The r e c y c l i n g of waste paper i s not a new idea. Indeed the industry has been i n existence for a long time and by 1956 had grown to the point where TAPPI established a deinking committee and held the f i r s t annual deinking conference i n that year. More r e c e n t l y , the name of t h i s committee has been changed to "The Secondary F i b r e Committee". 2 The 1970 Annual World Review of Pulp and Paper gives a d e t a i l e d breakdown of the t o t a l paper consumption, by country, as well as the waste paper consumed i n each of these countries. The data given here i n Table 1-1 i s composed from t h i s reference and reveals that the United Kingdom Pulp and Paper, June 25, 1970, 20th Annual World Review WORLD PAPER CONSUMPTION, BY COUNTRY 1969 Total Paper Consumption (000's Tons) W. Paper Consumption (000's Tons) 7. Recycled U.K. 5,485 2,039 377» Japan 12,467 4,646 37.2% W. Germany 5,711 2,543 44.57. U.S. 53,490 10,446 19.57. Canada 12,758 ? 207. Total 89,911 22,226 24.87. World To t a l 139,896 Table 1-1 4 and Japan are already at r e c y c l i n g rates of 37% while West Germany has ac t u a l l y reached a rate of 44.57c There are also four other European countries which have reached r e c y c l i n g rates between 35 and 407>. By con-t r a s t to the performance of these countries, the United States has only reached a r e c y c l i n g rate of 19.57>. Data for Canada i s less r e a d i l y a v a i l a b l e due to the fact that the paper stock industry i s not as well developed and does not have formal reporting procedures. However, i t i s estimated that the r e c y c l i n g rate i n Canada i s approximately the same as the United States. From Table 1-1 i t can also be seen that the t o t a l consumption of the f i v e countries l i s t e d i s equal to 64.5%, of the t o t a l world consumption. The amount of paper recycled by these countries there-fore represents a s i g n i f i c a n t part of the t o t a l world consumption of paper and demonstrates the si g n i f i c a n c e of the r e c y c l i n g industry. Out of the 10 m i l l i o n tons of paper recycled per year i n the United States, approximately 70%, i s derived from: 1. mixed paper , 2. old corrugated cartons, 3. news. This recycled paper i s consumed l a r g e l y i n food board (607,) and b u i l d i n g board (10%). Food board i s made on multi-layer cylinder machines. This type of process makes i t possible to u t i l i z e large percentages of unbleached or dark coloured recycled f i b r e as a f i l l e r i n the food board covered by l i n e r s of high brightness k r a f t pulp on either side. Since a large pro-portion of the a v a i l a b l e waste paper i s from old corrugated cartons and since a deinking process i s not required for t h i s type of food board manufacture, the r e c y c l i n g industry has centered around food board for many years. 5 With the advent of a f e a s i b l e method of deinking old newspapers there has been a sudden increase i n the amount of news that i s being recycled i n t o newsprint. Any grade of board, wrapping, bag, p r i n t i n g , o f f i c e or w r i t i n g paper can be made from 100% waste paper provided that the r i g h t grades of f i b r e s are selected. In some cases the q u a l i t y i s superior to that made from v i r g i n f i b r e p a r t i c u l a r l y where p r i n t a b i l i t y and dimensional sta-3,4 b i l i t y are important. Two excellent papers have been published on properties and uses of secondary f i b r e s . I f the above statements are true i t would appear that some comments are i n order as to why the North American industry has not accomplished a r e c y c l i n g rate of more than 207o. Some of the main reasons are: 1. as the r e c y c l i n g industry i n a given c i t y or l o c a l i t y t r i e s to expand i t experiences the opposite to what i s commonly known as "increasing returns to scale". The f i r s t 207. of paper recycled i s r e l a t i v e l y easy to c o l l e c t since i t can be obtained from densely populated areas, i n d u s t r i a l and commercial waste, and from converting plants. As the industry t r i e s to increase i t s u t i l i z a t i o n i t must obtain paper from lower density sources and over a larger geogra-phic area. This makes i t more d i f f i c u l t to set up and operate an e f f i c i e n t c o l l e c t i o n program, on an economical b a s i s . Kleinau Jurgen, "Properties of Secondary F i b r e s " , TAPPI, Volume 49, #47, July 1966. 4 Wilbur H. M i l l e r , "Use of Secondary F i b r e s " , TAPPI, Volume 49, #4, May 1966-6 2. To achieve maximum u t i l i z a t i o n i t i s necessary to sort the c o l l e c t e d mixed waste paper i n t o the various grades, each of which can be processed for a s p e c i f i c purpose. Due to high labour costs i n North America s o r t i n g i s expensive and discourages e f f o r t s i n t h i s d i r e c t i o n . 3. As far as the r e c y c l i n g of newspaper i s concerned i t has been found by the newsprint industry, and w i l l be supported i n t h i s t h e s i s , that the minimum economically f e a s i b l e size of a newsprint machine i s at a capacity of 100,000 ADT/year. A c i t y of from 3 to 4 m i l l i o n population would be required i n order for enough used newspaper to be a v a i l a b l e to support such a capacity. Two excellent p a p e r s ^ h a v e been published on the economics of r e c y c l i n g secondary f i b r e . These papers independently a r r i v e at the same conclusion that, regardless of the grade of paper being produced, the cost per ton of deinked f i b r e ready to go to the paper machine w i l l be from $20.00 to $45.00 per ton cheaper than v i r g i n f i b r e of the same grade. I t i s obvious that regardless of whether a m i l l operates indepen-dently or as an integrated m i l l , or whether i t plans to usee 1007. or only a percentage of recycled f i b r e , there are s i g n i f i c a n t economies to be achieved by the r e c y c l i n g of secondary f i b r e . The m i l l s which f a i l to recognize t h i s opportunity w i l l be pl a c i n g themselves at a competitive disadvantage which w i l l surely be to t h e i r detriment. Furthermore, the concept of Bjorn 0. Lehto, "Economics of Recycling", TAPPI, 1971 Annual Meeting. D.W. Bergstrom, "Economics of Secondary F i b r e Usage", TAPPI, Volume 51, #4, A p r i l 1968. 7 recycling has much appeal to both the conservationist and the ecologist. From the conservationist's point of view i t would require more than 50,000 square miles of well managed forest land to produce enough wood pulp to equal the 10,446,000 tons of paper stock which were recycled in the United States last year. From the ecologist's point of view, recycling mills can be made almost totally pollution free, i f a bleaching process is not employed and i f solid wastes can be incinerated or disposed of in burial grounds. CHAPTER I I SURVEY OF POTENTIAL RAW MATERIALS Modern n e w s p r i n t m i l l s a r e d e s i g n e d f o r c a p a c i t i e s i n e x c e s s o f 200,000 tons/annum. The new m i l l s w h i c h have r e c e n t l y s t a r t e d up a t G a t i n e a u and a t Catawba i n U n i t e d * S t a t e s , a r e d e s i g n e d t o p r o d u c e i n e x c e s s o f 600 ADT/day . I t i s , however, f e l t t h a t f o r a d e i n k i n g p l a n t w hich «does n o t have t o s u p p o r t t h e c a p i t a l i n v e s t m e n t i n l o g g i n g o p e r a t i o n s , wood h a n d l i n g o p e r a t i o n s , and t h e groundwood m i l l , and w h i c h have a c c e s s t o a l o w e r c o s t s o u r c e o f f i b r e s , a c a p a c i t y o f 100,000 ADT/annum would be e c o n o m i c a l l y f e a s i b l e . T h i s s t u d y s u p p o r t s t h a t v i e w . F o r s u c h a m i l l the t o t a l f i b r e r e q u i r e m e n t o f 100,000 BDT/annum i s d e r i v e d i n C h a p t e r VI i n e s t i m a t e 6.21. The 100,000 BDT/annum c o r r e s p o n d s a p p r o x i m a t e l y t o 111,000 ADT/ annum. I t i s p r o p o s e d t h a t t h i s 111,000 w i l l be made up o f : newspapers - 100,000 ADT/annum, and p u l p s u b s t i t u t e g r a d e s - 11,000 ADT/annum The 100,000 t o n s o f newspapers w i l l be o b t a i n e d from c o l l e c -t i o n o p e r a t i o n s and t h e 11,000 t o n s o f p u l p s u b s t i t u t e g r a d e s w i l l be o b t a i n e d as a b y - p r o d u c t o f t h e c o l l e c t i o n o p e r a t i o n s or a l t e r n a t i v e l y p u r c h a s e d from p a p e r s t o c k d e a l e r s . C u r r e n t p r i c e s from p a p e r s t o c k d e a l e r s f o r v a r i o u s p a p e r g r a d e s a r e q u o t e d w e e k l y i n t h e Paper T r a d e J o u r n a l . As t h i s s t u d y p r o g r e s s e d i t was q u i c k l y e v i d e n t t h a t o n l y a s m a l l p e r c e n t a g e o f t h e n e c e s s a r y f i b r e f o r a 100,000 ton/annum m i l l was a v a i l a b l e i n t h e G r e a t e r Van-c o u v e r a r e a . The s t u d y was e n l a r g e d to i n c l u d e two o f t h e 600 ADT/day i s e q u i v a l e n t t o 200,000 ADT/annum. T h i s and o t h e r s i m i l a r a b b r e v i a t i o n s a r e u s e d f r e q u e n t l y t h r o u g h o u t t h i s p a p e r . F o r an e x p l a n a t i o n o f them see A p p e n d i x A. 9 major papers i n Portland and two of the major papers i n Se a t t l e . Table 2-1 gives the t o t a l c i r c u l a t i o n , c i t y zone c i r c u l a t i o n , r e t a i l zone c i r c u l a t i o n , and a l l other c i r c u l a t i o n f o r the papers i n the Vancouver, Portland and Seattle areas. A paper previously cited"* r e f e r s to several newsprint c o l l e c t i o n programs which have reached a recovery rate of 507... Applying t h i s 507, p o t e n t i a l recovery rate to the urban c i r c u l a t i o n only of the above c i t e d six d a i l y papers, I have concluded that i t i s possible to c o l l e c t at least 80,000 ADT/yr. from these three c i t i e s from d a i l y newspaper sources only. In addition to the d a i l y newspapers, there are several other sources of suitable paper which can be used i n the production of newsprint. Among them are weekly p u b l i c a t i o n s , telephone d i r e c t o r i e s , and d a i l y and weekly papers which come in t o the c i t y from publishers i n other c i t i e s . In addi-t i o n to these three sources i t i s highly probable that, with a well managed c o l l e c t i o n program, a recovery rate of greater than 507, could be achieved i n the three c i t i e s t h i s study i s based on. It can be shown that, from these sources, i t i s possible to obtain between 20 and 307o of the paper quantity which i s obtainable from the c o l l e c t i o n of d a i l y newspapers. The t o t a l paper to be obtained from the c o l l e c t i o n operation i s compiled i n Table 2-2 and gives the breakdown between d a i l y newspapers and other sources. I have not attempted to substantiate the stated figures of 20 to 307, with quantitative estimates. However, a few comments which follow w i l l serve to i l l u s t r a t e the s i g n i f i c a n t p o t e n t i a l that i s a v a i l a b l e from these sources. Bjorn 0. Lehto, "Economics of Recycling", TAPPI, 1971 Annual Meeting. DAILY CIRCULATION, SELECTED DAILIES , NEWSPRINT CONSUMED, QUANTITY RECEIVABLE Vancouver: Sun Province Total Portland: Oregonian Morning Sunday Wgt'd Avg. Oregon J r n l , Ex. Sat. Sat.Evg. Wgt'd Avg. Seattle: Post I n t e l . Total 258,514 118,350 376,869 244,270 400,779 134,953 126,379 C i t y Zone 167,079 72,178 239,257 140,572 196,475 84,960 76,287 R e t a i l Trading A l l Zone Other % Urban C i r c . 52,355 20,533 72,888 39,284 73,940 22,929 22,941 39,080 25,639 64,719 64,414 130,364 27,064 27,151 83.0% 73.5% 67.5% 72.5% 80.0% 78.5% 79.6% Ann. Newspr, Cons. (tons) 50,000 42,000 18,000 M-S 191,082 121,313 32,492 37,277 80.4% -Sat. M. 171,731 108,041 29,842 33,848 80.3% -Sun. 250,315 126,303 57,768 70,244 73.5% -Wgt'd Avg. 79.3% 38,000 Times Ex. Sat. 244,776 198,266 36,279 10,231 96.0% _ Sat.Evg. 224,862 183,644 34,249 6,969 97.2% -Sun. 310,357 219,917 59,106 31,334 90.0% -Wgt'd Avg. 95.3% 45,000 Tot a l C o l l e c t i b l e Daily Newspape: Table 2-1 TOTAL PAPER TO BE OBTAINED FROM COLLECTION OPERATIONS From Dai l y From Other Total Population Newspapers Sources (Greater (tons/A) (tons/A) (tons/A) Metro Area) Lbs/Cj Vancouver 20,750 4,750 25,500 1,000,000 51.0 Portland 22,350 5,850 28,200 1,053,000 53.5 Seattle 36,450 10,050 46,500 1,474,000 63.0 Tot a l 79,550 20,650 100,200 Table 2-2 I z 1. Weekly p a p e r s - e v e r y s u b u r b a n c i t y a n d / o r m u n i c i -p a l i t y i n t h e V a n c o u v e r a r e a has a t l e a s t one week-l y p a p e r . W h i l e t h e a n n u a l q u a n t i t y t h a t each o f t h e s e p a p e r s consume i s c o m p a r a t i v e l y s m a l l , t h e t o t a l p a p e r consumed by them t o g e t h e r i s s i g n i f i -c a n t . These p a p e r s a r e d i s t r i b u t e d l a r g e l y w i t h i n t h e i r own a r e a and would be r e a d i l y a v a i l a b l e t o t h e c o l l e c t i n g o p e r a t i o n s t r i v i n g t o o b t a i n t h e d a i l y newspapers i n t h e r e s p e c t i v e a r e a s . T h i s would n o t o n l y add t o t h e p a p e r s r e c e i v e d b u t would r e d u c e t h e o v e r a l l c o l l e c t i o n c o s t s p e r t o n . 2. T e l e p h o n e d i r e c t o r i e s - a t t h e p r e s e n t t i m e B. C. T e l e p h o n e d i s t r i b u t e 820,700 V a n c o u v e r m e t r o p o l i -t a n phone d i r e c t o r i e s each y e a r , Less t h a n 1% o f t h e s e a r e s h i p p e d to o u t s i d e c e n t r e s , s i n c e s h i p m e n t s a r e made o n l y upon s p e c i a l r e q u e s t . The r e m a i n i n g 99% o f t h e s e amounts t o 1,970 tons/annum. At a 2/3 r e c o v e r y r a t e , c o l l e c t i o n o f t h e s e d i r e c -t o r i e s would y i e l d o v e r 1,300 tons/annum o f p a p e r o f a s u i t a b l e g r a de to be i n c o r p o r a t e d i n news-p r i n t p r o d u c t i o n . 3. O u t s i d e d a i l i e s and w e e k l i e s - the F i n a n c i a l P o s t has a c i r c u l a t i o n i n t h e G r e a t e r V a n c o u v e r a r e a o f 10,520 c o r r e s p o n d i n g t o 240 tons/annum o f n e w s p r i n t . At a 50% c o l l e c t i o n r a t e t h i s would y i e l d 120 t o n s o f p a p e r o f an a c c e p t a b l e g r a d e . 4. Improved c o l l e c t i o n e f f i c i e n c y - i f t h e r e c o v e r y r a t e o f t h e c o l l e c t i o n o p e r a t i o n i n t h e V a n c o u v e r a r e a c o u l d be i n c r e a s e d from 50% t o o n l y 55%, 22,800 tons/annum would be r e c e i v e d i n s t e a d o f 20,750 tons/annum. T h i s would r e p r e s e n t an i n c r e a s e o f 2,050 tons/annum. The a d d i t i o n a l p a p e r r e c e i v e d from s o u r c e s 2, 3 and 4 above, would amount t o a t o t a l o f 3,470 tons/annum. T h i s , t o g e t h e r w i t h t h e p a p e r a v a i l a b l e f r o m s o u r c e 1 above, s h o u l d q u i t e e a s i l y r e a c h t h e r e q u i r e d q u a n t i t y o f 4,750 tons/annum r e q u i r e d from " o t h e r s o u r c e s " as shown i n T a b l e 2-2. Thus i t i s n o t u n r e a l i s t i c to e x p e c t t h a t a t o t a l p a p e r q u a n t i t y o f 100,000 ADT/annum i s a v a i l a b l e from t h e s e t h r e e c i t i e s . From T a b l e 2-2 i t can be seen t h a t o n l y 25% o f t h e r e q u i r e d o l d newspaper can be e x p e c t e d from the G r e a t e r Van-c o u v e r a r e a . The r e m a i n i n g 75% would need t o come from S e a t t l e and P o r t l a n d . T h i s i s t h e weakest p o i n t i n t h i s s t u d y s i n c e , as C h a p t e r VI w i l l show, the e c o n o m i c s o f t h e c o n c e p t a r e good i n a l l o t h e r r e s p e c t s . To be d e p e n d e n t on S e a t t l e and P o r t l a n d as a s o u r c e o f raw m a t e r i a l would l e a v e t h e p r o p o s e d p l a n t i n a r a t h e r v u l n e r a b l e p o s i t i o n . The s o u r c e o f s u p p l y c o u l d be i n t e r r u p t e d by e i t h e r ; 1. p o l i t i c a l f a c t o r s - s u c h as a change i n r e g u l a -t i o n s i n h i b i t i n g t h e movement o f t h e raw m a t e r i a l , p a r t i c u l a r l y a c r o s s i n t e r n a t i o n a l b o u n d a r i e s o r , 2. e conomic f a c t o r s - s u c h as c o m p e t i t i o n f o r t h e raw m a t e r i a l d e v e l o p i n g i n e i t h e r o f t h e f e e d e r c i t i e s , S e a t t l e o r P o r t l a n d . I t can a l s o be seen from T a b l e 2-2 t h a t S e a t t l e c o u l d p o t e n -t i a l l y meet c l o s e t o 50% o f t h e raw m a t e r i a l n e e d s . As Sea-t t l e ' s p o p u l a t i o n i s a p p r o x i m a t e l y 1.5 m i l l i o n t h i s would i n d i -c a t e t h a t a c i t y o f 3.0 m i l l i o n c o u l d g e n e r a t e th e c o m p l e t e raw m a t e r i a l r e q u i r e m e n t s f o r a p l a n t o f t h e p r o p o s e d s i z e . T h i s 3.0 m i l l i o n f i g u r e has been c i t e d i n o t h e r p a p e r s as w e l l . The i d e a l l o c a t i o n f o r a p l a n t o f t h i s s i z e , from a raw m a t e r i a l s u p p l y p o i n t o f v i e w , would t h e r e f o r e be i n a c i t y o f 3.0 m i l l i o n p o p u l a t i o n or o v e r . F a i l i n g t h i s , t h e n e x t most s u i t a b l e l o c a t i o n would be i n S e a t t l e s i n c e 45% o f t h e n e c e s s a r y waste p a p e r c o u l d be g e n e r a t e d t h e r e , t h e p o l i t i -c a l f a c t o r m e n t i o n e d above would be removed as t h e p l a n t would n o t be d e p e n d e n t on V a n c o u v e r and i t would be a b e t t e r s t r a t e g i c l o c a t i o n , i n any c a s e , f o r m i n i m i z i n g f r e i g h t c o s t s on b o t h t h e f i n i s h e d p r o d u c t and on raw m a t e r i a l s . However, as t h e o b j e c t i v e o f t h i s s t u d y was t o e v a l u a t e t h e f e a s a b i l i t y o f s u c h a p l a n t i n t h e V a n c o u v e r a r e a t h e r e m a i n d e r o f t h e s t u d y w i l l be b a s e d on a V a n c o u v e r p l a n t l o c a -t i o n h a v i n g r e c o g n i z e d t h e above a r e a s f o r c o n c e r n . CHAPTER I I I SURVEY OF THE POTENTIAL MARKET One o f t h e most i m p o r t a n t d e c i s i o n s t o make when s t u d y -i n g a p r o p o s e d p a p e r m i l l i s t h e s e l e c t i o n o f t h e p r o d u c t t o be p r o d u c e d . T h i s d e c i s i o n i s l a r g e l y b a s e d on two f a c t o r s : 1. what p r o d u c t can be made from t h e raw m a t e r i a l s w hich a r e t o be u s e d . 2. what p r o d u c t w i l l be most e a s i l y m a r k e t e d i n t h e p o t e n t i a l m a r k e t s t h a t can be s e r v e d . In t h i s s t u d y t h e raw m a t e r i a l s a r e l i m i t e d t o r e c y -c l i n g p a p e r g r a d e s . A wide v a r i e t y o f raw m a t e r i a l s a r e ob-t a i n e d from t h e c o l l e c t i n g o p e r a t i o n s but t h e s e must be c a r e f u l l y s o r t e d and g r a d e d f o r s p e c i f i c u s e s . As m e n t i o n e d e a r l i e r i n C h a p t e r I any grade o f p a p e r can be p r o d u c e d from waste p a p e r , p r o v i d e d t h e r i g h t g r a d e s o f f i b r e s a r e s e l e c t e d . T h i s s t u d y s e t out t o e v a l u a t e s p e c i -f i c a l l y t h e f e a s a b i l i t y o f r e c y c l i n g n e w s p a p e r s . H a v i n g t h u s l i m i t e d t h e grade o f f i b r e s t o be u s e d as raw m a t e r i a l t h e c h o i c e o f t h e end p r o d u c t i s l a r g e l y r e d u c e d . The two most p o p u l a r p r o d u c t s made from waste news-p a p e r a r e n e w s p r i n t and f a c i a l a n d / o r b a t h t i s s u e . The t i s s u e g r a d e s t o d a y demand a h i g h p e r c e n t a g e , a p p r o x i m a t e l y 50%, o f k r a f t c o n t e n t and f u r t h e r m o r e are m a r k e t e d t h r o u g h w e l l d e f i n e d c h a n n e l s which a r e e x t r e m e l y d i f f i c u l t t o b r e a k i n t o . F o r t h e s e r e a s o n s n e w s p r i n t was c h o s e n as t h e end p r o d u c t f o r t h e p r o -p o s e d m i l l . H a v i n g made t h i s d e c i s i o n t h e r e m a i n d e r o f t h i s c h a p t e r c o n c e r n s i t s e l f w i t h t h e p o t e n t i a l market f o r n e w s p r i n t . A Look at t h e O v e r a l l Market T o t a l w o r l d n e w s p r i n t demand s i n c e 1950 has r i s e n from 7 9.7 m i l l i o n t o n s t o n e a r l y 22 m i l l i o n t o n s i n 1969 , a compoun-ded a n n u a l i n c r e a s e o f a p p r o x i m a t e l y 4.4%. The a n n u a l i n c r e a s e " E x p o r t Demand f o r Canada's P u l p and Paper 1980 and 2000", P u l p and Paper M a g a z i n e o f Canada, Volume 72, #2, F e b r u a r y 1971. WORLD PRODUCTION CAPACITY OF NEWSPRINT  (OOP's Short Tons) Country 1969 1974 North America 13,095 15,025 Japan 1,905 2,865 Western Europe 6,632 7,801 USSR 1,430 1,980 Eastern Europe 553 568 La t i n America 345 366 A f r i c a 164 191 Mainland China 660 935 Near and Middle East 31 116 Far East 263 481 Oceania 408 677 Tot a l 25,486 31,005 Source: World Pulp & Paper Capacity 1969 to 1974. FAO Survey 1970. Table 3-1 16 o v e r t h e n e x t f i v e y e a r s i s e x p e c t e d t o be somewhat s m a l l e r due t o t h e economic c o n d i t i o n s w h i c h p r e v a i l i n N o r t h A m e r i c a and t h e U n i t e d Kingdom w h i c h t o g e t h e r , a c c o u n t f o r a p p r o x i m a t e -l y 55% o f t o t a l w o r l d demand f o r n e w s p r i n t . The demand f o r n e w s p r i n t i s d i r e c t l y r e l a t e d t o p o p u l a t i o n , income, and l a b o u r p r o d u c t i v i t y and t e c h n o l o g y , and i f t h e r a t e o f change o f t h e s e i t e m s were known t h e t o t a l demand c o u l d be a c c u r a t e l y f o r e -c a s t e d . g A n o t h e r s o u r c e g i v e s w o r l d p r o d u c t i o n c a p a c i t y o f n e w s p r i n t , by a r e a , f o r 1969 and p r o j e c t s t h e c a p a c i t y t o 1974. These f i g u r e s a r e shown i n T a b l e 3-1. As can be s e e n , t h e e x p e c t e d i n c r e a s e i n i n s t a l l e d p r o d u c t i o n c a p a c i t y i n N o r t h A m e r i c a o v e r t h e f i v e y e a r p e r i o d i s 15%, o r 2.8% p e r y e a r . T h i s l o w e r r a t e o f i n c r e a s e i s e n c o u r a g i n g f o r C a n a d i a n p r o -d u c e r s , s i n c e , as w i l l be d e m o n s t r a t e d l a t e r , between 73 and 78% o f C a n a d i a n n e w s p r i n t p r o d u c t i o n i s s h i p p e d t o t h e U n i t e d S t a t e s . F u r t h e r m o r e , t h i s r a t e o f i n c r e a s e o f p r o d u c t i o n c a p a c i t y s h o u l d be l e s s t h a n t h e r a t e o f i n c r e a s e o f demand. T a b l e 3-2 g i v e s a c t u a l p r o d u c t i o n , i m p o r t s , e x p o r t s and c o n s u m p t i o n o f t h e f i v e m a j o r c o u n t r i e s p a r t i c i p a t i n g i n n e w s p r i n t m a r k e t . T h i s T a b l e shows t h a t i n e x c e s s o f 50% o f t o t a l w o r l d n e w s p r i n t p r o d u c t i o n i n 1966 was f r o m Canada and t h e U n i t e d S t a t e s . Sweden and J a p a n were a l s o s i g n i f i c a n t p r o d u c e r s , however, t h e y a r e n o t e x p e c t e d t o be s e r i o u s compe-t i t o r s f o r t h e n e w s p r i n t market i n N o r t h A m e r i c a o r J a p a n . J a p a n i s a n e t i m p o r t e r o f n e w s p r i n t and i t i s e x p e c t e d t h a t t h e i r i m p o r t demand w i l l i n c r e a s e s i g n i f i c a n t l y o v e r t h e n e x t few y e a r s , as t h e y s h i f t t h e i r p r o d u c t i o n t o h i g h e r v a l u e p a p e r g r a d e s , at t h e expense o f t h e i r d o m e s t i c n e w s p r i n t p r o d u c t i o n . Sweden have been c o n s i s t e n t l y l o s i n g t h e i r s h a r e o f t h e U n i t e d S t a t e s n e w s p r i n t market and i t i s e x p e c t e d t h e y w i l l c o n t i n u e t o c o n c e n t r a t e t h e i r e f f o r t s on t h e E u r o p e a n n e w s p r i n t m a r k e t . U n i t e d N a t i o n s . FAO. World P u l p and Paper C a p a c i t y 1969 t o 1974. Rome. 1970. 17 SUPPLY & SOURCES OF NEWSPRINT, 1969  (OOP's Short Tons) Actual Production Imports Exports Consumption Canada 8,758 - 8,032 726 U.S. 3,171 6,790 128 9,833 U.K. 871 845 2 1,714 Japan 1,779 178 3 1,954 Sweden 1,029 _2 713 316 Total 15,608 7,813 8,878 14,543 World To t a l 22,700 22,000 Source: Pulp & Paper 1970 Annual Review Table 3-2 18 On t h e c o n s u m p t i o n s i d e , t h e f o u r c o u n t r i e s , Canada, U n i t e d S t a t e s , U n i t e d Kingdom and J a p a n a c c o u n t f o r a p p r o -x i m a t e l y 65% o f t o t a l w o r l d c o n s u m p t i o n . The U n i t e d S t a t e s a l o n e a c c o u n t s f o r 44.7%. T a b l e 3-3 shows t h a t C a n a d i a n s h i p m e n t s o f n e w s p r i n t t o t h e U n i t e d S t a t e s make up a v e r y s i g n i f i c a n t p e r c e n t a g e o f t o t a l C a n a d i a n p r o d u c t i o n (78.8% i n 1966 down t o 73.4% i n 1969). D u r i n g t h i s same p e r i o d Canada's s h a r e o f t h e U n i t e d S t a t e s n e w s p r i n t market d e c l i n e d s t e a d i l y , as i l l u s t r a t e d i n T a b l e 3-4. T h i s d e c l i n e was due t o t h e l a r g e amount o f new p r o d u c t i o n c a p a c i t y coming on s t r e a m i n t h e U n i t e d S t a t e s . I t can a l s o be seen from t h e T a b l e t h a t U n i t e d S t a t e s i m p o r t s from E u r o p e o v e r t h e same p e r i o d d i d n o t i n c r e a s e . 7 A p a p e r p r e v i o u s l y c i t e d s u p p o r t s t h e v i e w o f t h e i m p o r t a n c e o f t h e U.S., U.K. and J a p a n e s e n e w s p r i n t market to C a n a d i a n p r o d u c e r s and p r o j e c t s t h e e x p o r t demand f o r Canada's n e w s p r i n t t o 1980 and 2000. The 1980 p r o j e c t i o n i s s i g n i f i c a n t , b ut t h e p r o j e c t i o n t o 2000 s h o u l d p r o b a b l y be i g n o r e d as f o r e c a s t s f o r p e r i o d s o f o v e r t e n y e a r s have s e l d o m been a c c u r a t e t o any d e g r e e i n t h e p a s t . The r e s u l t s o f t h i s s t u d y a r e shown i n T a b l e 3-5. 9 A n o t h e r p a p e r p r o j e c t s Canada's d o m e s t i c demand f o r n e w s p r i n t t o 1980 and 2000. The r e s u l t s o f t h i s s t u d y a r e g i v e n i n T a b l e 3-6. C o m b i n i n g T a b l e 3-5 and 3-6 t h e t o t a l demand f o r Cana-d i a n n e w s p r i n t from t h e d o m e s t i c and e x p o r t m a r k e t s i s d e r i v e d t o 1980 and 2000. T a b l e 3-8 has been d e r i v e d from two r e c e n t p a p e r s w h i c h " E x p o r t Demand f o r Canada's P u l p and Paper 1980 and 2000". P u l p and Paper M a g a z i n e o f Canada, Volume 72, #2, F e b r u a r y 1971. q "Canada's D o m e s t i c Demand f o r F o r e s t P r o d u c t s ; 1980 and 2000" P u l p and Paper M a g a z i n e o f Canada, Volume 72, #2, F e b r u a r y 1971. 19 CANADIAN NEWSPRINT SHIPMENTS (000's S h o r t Tons) U.S.A. O v e r s e a s Canada T o t a l 1960 5,279 (78.2%) 986 (14.6%) 487 (7.2%) 6,752 1966 6,610 (78.8%) 1 ,154 (13.8%) 620 (7.4%) 8 ,384 1967 6,263 (78.6%) 1,067 (13.4%) 638 (8.0%) 7,968 1968 6,107 (75.4%) 1,315 (16.3%) 674 (8.3%) 8,096 1969 6,417 (73.4%) 1,616 (18.5%) 708 (8.1%) 8,741 S o u r c e : P u l p § Paper 1970.Review T a b l e 3- 3 U .S. NEWSPRINT SUPPLY AND SOURCES (000's S h o r t Tons) Canada P e r c e n t U.S.A. P e r c e n t Europe P e r c e n t Consumed 1960 5,279 71 .0 1 ,954 27 147 2.0 7,360 1964 5 , 648 69 . 9 2,170 26. 9 259 3 . 2 8,077 1965 6,093 72 . 0 2 ,118 25 . 0 254 3 . 0 8,465 1966 6,610 71 . 6 2 ,339 25 . 4 274 3 . 0 9,223 1967 6,263 69 . 1 2,523 27 . 8 283 3.1 9 , 149 1968 6,107 66.2 2 ,835 30 . 7 284 3 . 1 9,244 1969 6,497 65 . 7 3, 105 31 . 3 293 3 . 0 9,741 S o u r c e : A m e r i c a n Newspaper P u b l i s h e r s A s s n T a b l e 3-4 20 EXPORT DEMAND FOR CANADA'S NEWSPRINT (000's tons) Year U.S. U.K. Japan Other Total 1966 6,652 384 19 766 7,821 1980 .7,030 735 950 1,030 9,745 2000 8,675 915 2,320 1,560 13,470 Table 3-5 DOMESTIC DEMAND FOR CANADA'S NEWSPRINT (000's tons) Actual 1966 Consump-t i o n Annual Per Cent Change 1966 -1980 Pro j . 1980 Demand Annual Per Cent Change 1980 -2000 Pro j . 2000 Demand Avg. Ann. 7o Change 1966 -2000 709 2.2 1,010 3.2 1,880 2.8 Table 3-6 TOTAL DEMAND FOR CANADA'S NEWSPRINT (000's tons) Actual 1966 Projected Projected Projected Projected Demand 1969 Demand* 1974 Demand* 1980 Demand 2000 Demand 8,530 9,007 10,194 10,755 15,350 * Interpolated from Results i n Tables 3-5 and 3-6 Table 3-7 21 have been p u b l i s h e d ' . The t o t a l N o r t h A m e r i c a n p r o d u c -t i o n o f 13.24 m i l l i o n s h o r t t o n s shown i n T a b l e 3-8 shows r e a s o n a b l e agreement w i t h t h e f i g u r e s t a t e d i n T a b l e 3-1, g i v i n g a l l o w a n c e f o r r o u n d i n g e r r o r s and t h e d i s c r e t i o n o f d i f f e r e n t a u t h o r s . The 9.9 m i l l i o n t o n c a p a c i t y f o r Canada shown i n T a b l e 3-8 when compared w i t h t h e 9.007 m i l l i o n t o n p r o j e c t e d demand f o r C a n a d i a n n e w s p r i n t shown i n T a b l e 3-7, would i n d i c a t e an o p e r a t i n g r a t e o f 90.8%. The a c t u a l o p e r a t i n g r a t e s f o r t h e C a n a d i a n i n d u s t r y are g i v e n i n T a b l e 3-9 from w h i c h i t can be seen t h a t t h e t r u e r a t e f o r 1969 was 88%. T h i s shows, r e a s o n a b l e agreement and i n d i c a t e s t h a t t h e p r o j e c t i o n s g i v e n i n T a b l e s 3-7, 3-8 and 3-9 a r e r e l i a b l e . Canada's s h a r e o f t h e p r o j e c t e d n e w s p r i n t p r o d u c t i o n c a p a c i t y i n 1974 as g i v e n i n T a b l e 3-1 i s 11.5 m i l l i o n t o n s . T h i s f i g u r e when compared w i t h t h e p r o j e c t e d demand f o r Cana-d i a n n e w s p r i n t o f 10.194 m i l l i o n t o n s g i v e n i n T a b l e 3-7, i n d i c a t e s an o p e r a t i n g r a t e o f 88.5%. T h i s r a t e i s n o t u n r e a l i s t i c and i s i n d e e d c o m p a r a b l e t o t h e i n d u s t r y ' s o p e r a -t i n g r a t e o v e r r e c e n t y e a r s , p a r t i c u l a r l y i n 1969 and 1970 and t h e e x p e c t e d r e s u l t f o r 1971. On t h e b a s i s o f t h e above f i g u r e s , i t i s my o p i n i o n t h a t t h e C a n a d i a n n e w s p r i n t i n d u s t r y w i l l r e a c h o p e r a t i n g r a t e s o f 88.5% by 1974. W h i l e t h i s i s n o t an i d e a l c o n d i t i o n i t i s c o m p a r a t i v e l y good and s h o u l d n o t d e t e r a p e r s o n from p r o c e e d i n g w i t h p l a n s f o r a new m i l l . A new m i l l w i l l t a k e from 2% t o 3 y e a r s from c o n c e p t i o n t o c o m p l e t i o n and by 1974, t h e s t a r t - u p d a t e f o r t h e p r o p o s e d p l a n t , t h e demand f o r Canada's n e w s p r i n t w i l l be s u f f i c i e n t t o s u s t a i n t h e a d d i t i o n -a l c a p a c i t y . D o n a l d Cameron, " I n f l a t i o n , L a b o u r W o r r i e s Temper B r i g h t F o r e c a s t " . C a n a d i a n P u l p and P a p e r I n d u s t r y , A p r i l 1970. "^Ron G r a n t , " P u l p Grades are t h e O n l y Break i n The Gloomy P r o s p e c t f o r t h e P u l p and Paper I n d u s t r y ' s P r o d u c t s " . P u l p and Paper M a g a z i n e o f Canada, Volume 72, #3, March 1971. 22 CANADIAN AND U.S. NEWSPRINT PRODUCTION CAPACITY (000's S h o r t Tons) U. S 1969 1970 1971 3,346 3,535 3 , 636 Canada# 9,900 10,100 10,300 T o t a l 13,246 13,635 13,936 * S o u r c e : 20th A n n u a l World Review, P u l p and P a p e r , June 25, 1970. # S o u r c e : D o n a l d Cameron, " I n f l a t i o n , L a b o u r W o r r i e s Temper B r i g h t F o r e c a s t " , C a n a d i a n P u l p and Paper I n d u s t r y , A p r i l 1970. T a b l e 3-CANADIAN NEWSPRINT INDUSTRY PERFORMANCE 1969 1970 1971* A c t u a l C a p a c i t y P r o d u c t i o n (000's t o n s ) (OPP's t o n s ) 9 ,9PP IP,1PP 10,300 8 ,7PP 8,80P 8,87P O p e r a t i n j Rate 88 . 0% 87 . 2% 86.2% E s t i m a t e T a b l e 3-9 23 In t h e above T a b l e s , 3-1 t h r o u g h 3-9 i t w i l l be n o t e d t h e r e a r e some m i n o r d i s c r e p a n c i e s . These d i f f e r e n c e s a r e due t o t h e f a c t t h a t i n f o r m a t i o n has been e x t r a c t e d f r o m d i f f e r e n t p u b l i c a t i o n s and r e f l e c t s e r r o r s due t o r o u n d i n g and t o t h e d i s c r e t i o n o f t h e d i f f e r e n t a u t h o r s . M a r k e t P e n e t r a t i o n by C o m p e t i t i v e P r o d u c t s T h e r e has been much c o n c e r n i n r e c e n t y e a r s w i t h i n t h e N o r t h A m e r i c a n p a p e r i n d u s t r y o f t h e d a n g e r o f c o m p e t i t i o n from s y n t h e t i c p r o d u c t s . A good example o f t h i s t y p e o f c o m p e t i -t i o n i s i n t h e p a c k a g i n g i n d u s t r y where s e e - t h r o u g h m a t e r i a l s , s uch as p o l y e t h y l e n e f i l m s have s e i z e d s i g n i f i c a n t s h a r e s o f t r a d i t i o n a l p a p e r b o a r d m a r k e t s . P o l y e t h y l e n e i s u s e d t o d a y not o n l y f o r t o t a l p a c k a g i n g but even i n many c a s e s where pack-a g i n g b o a r d i s u s e d a l a r g e p e r c e n t o f t h e p ackage i s c o m p r i s e d o f s e e - t h r o u g h windows. The p l a s t i c s i n d u s t r y have done a v e r y s u c c e s s f u l j o b n o t o n l y i n d e v e l o p i n g new p r o d u c t s , but i n c r e a t i n g a demand f o r t h e i r p r o d u c t t h r o u g h t h e avenue o f i n c r e a s e d p a c k a g i n g a p p e a l . When such a s i t u a t i o n o c c u r s i t i s d i f f i c u l t i f n o t i m p o s s i b l e , f o r t h e p a p e r i n d u s t r y t o r e g a i n t h i s p o r t i o n o f t h e m a r k e t . As f a r as t h e n e w s p r i n t i n d u s t r y i s c o n c e r n e d , no s u i t a b l e s u b s t i t u t e has as y e t been d e v e l o p e d , and i t i s n o t e x p e c t e d t h a t t h e y w i l l f a c e s u c h c o m p e t i t i o n f o r a c o n s i d e r -a b l e t i m e . At t h e moment, p l a s t i c p a p e r s a r e t o o e x p e n s i v e and w i l l n o t r e p r e s e n t a s e r i o u s c o m p e t i t i o n u n t i l t h e p r i c e o f t r a d i t i o n a l n e w s p r i n t has r i s e n s i g n i f i c a n t l y . T h e r e has however, been one s i g n i f i c a n t t e c h n o l o g i c a l change w h i c h r e p r e s e n t s a c h a l l e n g e t o t h e t r a d i t i o n a l news-p r i n t p r o d u c e r s . In r e c e n t y e a r s o f f - s e t p r i n t i n g has been p e r f e c t e d t o t h e p o i n t where i t can be o p e r a t e d e c o n o m i c a l l y . Indeed, i t i s so e c o n o m i c a l t h a t s m a l l p u b l i s h e r s such as s u b u r b a n w e e k l i e s , o f t e n f i n d i t more e c o n o m i c a l t o use o f f - s e t p r i n t i n g t h a n c o n v e n t i o n a l methods. The use o f o f f - s e t p r i n t -i n g a l l o w s t h e p u b l i s h e r t o use " c o l d s e t " t y p e . T h i s p r o c e s s i s much more e c o n o m i c a l t h a n c o n v e n t i o n a l methods and g i v e s a c o n s i d e r a b l y s u p e r i o r q u a l i t y o f r e p r o d u c t i o n . P u b l i s h e r s 24 who use o f f - s e t p r i n t i n g r e q u i r e a s u p e r i o r q u a l i t y n e w s p r i n t w i t h b e t t e r t h a n n o r m a l s u r f a c e smoothness and l i n t f r e e c h a r a c t e r i s t i c s . N e w s p r i n t made by c o n v e n t i o n a l methods i s n o t a c c e p t a b l e f o r t h i s p u r p o s e u n l e s s g r e a t c a r e i s t a k e n t o p r o -duce t h e s e q u a l i t i e s . Toward t h i s end, equipment m a n u f a c t u r -e r s have r e c e n t l y d e v e l o p e d what i s known as a V e r t i - f o r m a wet end. The V e r t i - f o r m a i s p r o v i n g s u c c e s s f u l but as y e t t h e number o f mac h i n e s i n o p e r a t i o n does n o t r e p r e s e n t a s i g -n i f i c a n t p e r c e n t a g e o f t h e t o t a l n e w s p r i n t p r o d u c e d . The s h i f t from c o n v e n t i o n a l p r i n t i n g methods t o o f f - s e t p r i n t i n g w i l l n o t be r a p i d . P u b l i s h e r s who have t r a d i t i o n a l l y u s e d c o n v e n t i o n a l p r i n t i n g methods a r e s a d d l e d w i t h l a r g e i n v e s t -ments i n equipment and must j u s t i f y t h e r e p l a c e m e n t o f t h i s equipment w h i c h s t i l l has a c o n s i d e r a b l e u s e f u l l i f e t i m e r e m a i n -i n g i n most c a s e s . I t i s t h e r e f o r e , n o t e x p e c t e d t h a t t h e demand f o r c o n v e n t i o n a l n e w s p r i n t w i l l be s e r i o u s l y a f f e c t e d by e i t h e r s y n t h e t i c s u b s t i t u t e s o r t e c h n o l o g i c a l change i n t h e n e a r f u t u r e . M a r k e t i n g Program I t i s p r o p o s e d t h a t t h e f o u n d a t i o n o f t h e m a r k e t i n g p r o g ram be b a s e d on a p o l i c y o b j e c t i v e o f : 1. s e l l i n g a q u a l i t y p r o d u c t , 2. g i v i n g s u p e r i o r c u s t o m e r s e r v i c e , 3. g e n e r a t i n g a r e p u t a t i o n o f r e l i a b i l i t y . T hese a r e t h r e e p o i n t s w h i c h do not add s i g n i f i c a n t l y t o o p e r a -t i n g c o s t s , b u t make t h e d i f f e r e n c e between a s u c c e s s f u l o r an u n s u c c e s s f u l v e n t u r e . I t would r e q u i r e t i m e t o a c c o m p l i s h o b j e c t i v e No. 3 but i t i s w e l l w o r t h t h e e f f o r t as l o n g e r term s u c c e s s w i l l depend on how w e l l t h i s g o a l i s a t t a i n e d . Most o f t h e e s t a b l i s h e d producer, s-• f a i l on.one o r more o f t h e s e p o i n t s f r o m t i m e t o time and i t i s l a r g e l y t h e i r f a i l i n g i n t h i s r e g a r d t h a t a l l o w s new p r o d u c e r s t o e n t e r t h e ma r k e t . At t h e o u t s e t t h e m a r k e t i n g p r o gram s h o u l d be d i r e c t e d a t t h e g e o g r a p h i c a r e a s w h i c h a r e l i k e l y t o y i e l d t h e b e s t p os-s i b l e s a l e s r e s u l t s w i t h a r e a s o n a b l e e x p e n d i t u r e . The amount o f t h e p r o p o s e d company's o p e r a t i n g c o s t s w h i c h can be d i r e c t e d t o t h e s e l l i n g e f f o r t w i l l be l i m i t e d and i t w i l l be c r i t i c a l l y i m p o r t a n t t o a c c o m p l i s h an a c c e p t a b l e m a r k e t i n g r e s u l t . The a r e a s where one c o u l d e x p e c t t o meet w i t h t h e b e s t r e s u l t s a r e ; W e s t e r n U n i t e d S t a t e s , U.K., and J a p a n . These t h r e e a r e amongst t h e f i v e c o u n t r i e s i n T a b l e 3-2 w h i c h a c c o u n t e d f o r o v e r 65% o f w o r l d c o n s u m p t i o n o f n e w s p r i n t i n 1969. I t would be v i r t u a l l y i m p o s s i b l e t o s e l l t o Sweden or E a s t e r n Canada as b o t h a r e s i g n i f i c a n t p r o d u c e r s and d i s t a n c e c o s t s a r e p r o h i b i t i v e . T o t a l n e w s p r i n t c o n s u m p t i o n i n W e s t e r n Canada i s c o m p a r a t i v e l y low and even i f a good market s h a r e were o b t a i n e d , t h e t o n n age i n v o l v e d would n o t be s i g n i f i c a n t . A p p e n d i x B g i v e s a l i s t o f t h e c i r c u l a t i o n and a n n u a l n e w s p r i n t c o n s u m p t i o n o f s e l e c t e d d a i l y n ewspapers i n W e s t e r n N o r t h A m e r i c a . C a n a d i a n n e w s p a p e r s , o t h e r t h a n t h e V a n c o u v e r p a p e r s have been o m i t t e d due t o t h e i r s m a l l c o n s u m p t i o n . The c o n s u m p t i o n f o r t h e f i r s t s i x p a p e r s have been o b t a i n e d by t e l e p h o n e i n t e r v i e w s . The c o n s u m p t i o n f o r t h e r e m a i n d e r have been e s t i m a t e d on t h e b a s i s o f c i r c u l a t i o n and an e s t i m a t e d c o n s u m p t i o n f a c t o r b a s e d on t h e c o r r e s p o n d i n g f a c t o r f o r t h e f i r s t s i x p a p e r s . I t i s p r o p o s e d t h a t t h e new p l a n t aim a t o b t a i n i n g a market f o r 70,000 t o n s / y e a r from t h e W e s t e r n U n i t e d S t a t e s . T h i s amounts t o o n l y 7% o f t h e t o t a l o f 973,700 t o n s a r r i v e d a t i n A p p e n d i x B, w h i c h i n i t s e l f i s a c o n s e r v a t i v e e s t i m a t e . The b e s t way t o o b t a i n t h i s s h a r e i s t o c o n c e n t r a t e on a s m a l l number o f u s e r s , t r y i n g t o o b t a i n as l a r g e as p o s s i b l e a s h a r e o f t h e i r b u s i n e s s . From t h e 25 A m e r i c a n u s e r s l i s t e d i n Appen-d i x B one would o n l y need t o t i e up t h r e e u s e r s a t 15,000 t o n s / y e a r and t h r e e u s e r s a t 10,000 t o n s / y e a r . T h i s s h o u l d n o t p r o v e a d i f f i c u l t t a s k t o a c c o m p l i s h . I t can be seen from T a b l e 3-4 t h a t t h e U.S. i m p o r t s 65.7% o f t h e i r n e w s p r i n t from Canada. A p p l y i n g t h i s p e r c e n t a g e t o t h e 973,700 t o n s / y e a r i n d i c a t e s 640,000 t o n s / y e a r o f t h i s amount w i l l come from Canada. T h i s amount would have t o come from B r i t i s h C o l u m b i a as M a n i t o b a , S a s k a t c h e w a n , and A l b e r t a have no n e w s p r i n t p r o d u c t i o n c a p a c i -t y a t a l l and t h e p r o v i n c e s e a s t o f M a n i t o b a c o u l d not compete 26 i n t h i s a r e a due t o t h e f r e i g h t c o s t d i s a d v a n t a g e . B r i t i s h C o l u m b i a ' s p r e s e n t n e w s p r i n t p r o d u c t i o n c a p a c i t y i s 1,800,000 t o n s / y e a r o f w h i c h 77% or 1,385,000 t o n s / y e a r i s e x p o r t e d . No breakdown i s a v a i l a b l e showing how much o f t h i s goes t o t h e w e s t e r n s t a t e s but i t i s known t h a t a l a r g e amount goes t o J a p a n and the U.K. as w e l l as M e x i c o and some S o u t h A m e r i c a n c o u n t r i e s v i a w a ter t r a n s p o r t from t h e l a r g e B.C. p r o d u c e r s . I t i s a n t i c i p a t e d t h a t t h e p r o p o s e d p l a n t c o u l d o b t a i n 9% o f J a p a n e s e i m p o r t s and 1% o f U.K. i m p o r t s . J a p a n e s e i m p o r t s w i l l i n c r e a s e s i g n i f i c a n t l y o v e r t h e n e x t few y e a r s w h i l e U.K. i m p o r t s w i l l p r o b a b l y r e m a i n a t t h e same l e v e l or r e d u c e s l i g h t l y . The p r o p o s e d d i s t r i b u t i o n o f m a r k e t s would t h e r e f o r e be as shown i n T a b l e 3-10. The f i r s t p r o s p e c t i v e m arket would be t h e W e s t e r n U n i t e d S t a t e s , b o t h c o a s t a l a r e a s s e r v e d by water b a r g e t r a n s p o r t and i n l a n d t o t h e West C e n t r a l S t a t e s s e r v e d by r a i l t r a n s p o r t . In t h e s e m a r k e t s a B.C. p r o d u c e r would e n j o y b o t h an a d v a n t a g e i n p r o d u c t i o n c o s t s as w e l l as i n s h i p p i n g c o s t s v i z a v i z E a s t e r n U n i t e d S t a t e s and C a n a d i a n p r o d u c e r s . One o b v i o u s l y would n o t n o r m a l l y e x p e c t t o be a b l e t o compete w i t h W e s t e r n U n i t e d S t a t e s p r o d u c e r s i n t h e i r own a r e a but s i n c e t h e U n i t e d S t a t e s i m p o r t s a r e 65% o f t h e i r n e w s p r i n t r e q u i r e m e n t s t h e e x p o r t demand f o r C a n ada's, and i n p a r t i c u l a r B r i t i s h C o l u m b i a , n e w s p r i n t i n t h e s e a r e a s i s a c e r t a i n t y . A t l a n t i c p r o d u c e r s as w e l l as Quebec have had s i g n i f i -c a n t c a p a c i t y i n c r e a s e s i n r e c e n t y e a r s and a r e r u n n i n g a t r e l a t i v e l y low o p e r a t i n g r a t e s . I t i s t h e r e f o r e , e x p e c t e d t h a t t h e y w i l l a g g r e s s i v e l y compete f o r t h e E a s t e r n and C e n t r a l U n i t e d S t a t e s m a r k e t s , and s i n c e t h e y have a f r e i g h t c o s t ad-v a n t a g e i n t h e s e m a r k e t s , t h e y w i l l be d i f f i c u l t to compete w i t h . The p o s s i b i l i t y o f s u c h c o m p e t i t i o n s h o u l d n o t , however, be o v e r l o o k e d s i n c e B.C. m i l l s t r a d i t i o n a l l y have had an o p e r -a t i n g c o s t a d v a n t a g e o v e r E a s t e r n m i l l s . J a p a n has t r a d i t i o n a l l y been a s m a l l i m p o r t e r o f news-p r i n t . However, the p e r c e n t a g e o f h e r n e w s p r i n t i m p o r t s t h a t come from Canada a r e v e r y h i g h and i t i s e x p e c t e d t h a t Canada 2 7 ESTIMATED DISTRIBUTION OF SALES % Share Amount o f Method o f A v e r a g e A n t i c i - I mports S a l e s T r a n s p o r - F r e i g h t p a t e d '(tons'/yr) ( t o n s / y r ) t a t i o n C o s t / t o n V a n c o u v e r 10% 50,000 5 ,000 T r u c k $ 1 . 00 Western U.S. 11% 640,000 70,000 B a r g e / r a i l 11 . 00 J a p a n 9% 178,000 16,500 S h i p 22 .50 U.K. 1% 845,000 8 ,500 S h i p 38 .00 T o t a l 100,000 T a b l e 3-10 MARKETING, ADVERTISING AND PROMOTION EXPENSE S a l a r i e s : T r a v e l l i n g E x p e n s e s : Room § Board w h i l e T r a v e l l i n g : A d d i t i o n a l E x p e n s e s i n F o r e i g n C o u n t r i e s : E n t e r t a i n i n g : A d v e r t i s i n g § P r o m o t i o n a l P r o g rams: T o t a l 4 x 15000 $ 60,000 3 x 500 x 12 18,000 3 x 300 x 12 10,800 1 x 3000 3,000 3 x 300 x 12 10,800 0.5% o f C.G.S. 42,000 $144,600 T a b l e 3-11 28 can m a i n t a i n h e r s h a r e o f J a p a n e s e n e w s p r i n t i m p o r t s i n t h e n e x t few y e a r s w h i l e J a p a n makes l a r g e i n c r e a s e s i n h e r news-p r i n t i m p o r t s due t o s t r u c t u r a l changes w h i c h she i s making i n h e r p a p e r i n d u s t r y as m e n t i o n e d e a r l i e r . The U n i t e d Kingdom has a l s o been an i m p o r t a n t p u r c h a s e r o f C a n a d i a n n e w s p r i n t and i s e x p e c t e d t o c o n t i n u e t h i s t r e n d . As l o n g as t h e U.K. does not become a member o f t h e E u r o p e a n Common M a r k e t , C a n a d i a n p r o d u c e r s w i l l have a c o m p e t i t i v e advan-t a g e o v e r E u r o p e a n p r o d u c e r s due t o t a r i f f s t r u c t u r e s . S h i p -ments f r o m B.C. a r e f a c e d w i t h a c o m p e t i t i v e d i s a d v a n t a g e due to t h e h i g h e r d i s t a n c e c o s t s i n v o l v e d t h a n f o r t h e E a s t e r n s e a -b o a r d p r o d u c e r s . However, when ocean s h i p m e n t i s b e i n g c o n s i -d e r e d t h e a d d i t i o n a l c o s t i n s h i p p i n g v i a t h e Panama as com-p a r e d t o s h i p p i n g from t h e E a s t e r n s e a b o a r d , i s n o t as s i g n i f i -c a n t as when c o m p e t i n g f o r t h e C e n t r a l , and E a s t e r n U n i t e d S t a t e s m a r k e t . F u r t h e r m o r e , t h e l o w e r o p e r a t i n g c o s t s i n B.C. would h e l p t o o f f s e t t h i s d i s a d v a n t a g e . The m a r k e t i n g method t o be employed w i l l b a s i c a l l y be t h e same as t r a d i t i o n a l n e w s p r i n t m a r k e t i n g p r a c t i c e s b e i n g f o l -lowed at p r e s e n t by many o t h e r p r o d u c e r s and w i l l n o t r e q u i r e any s p e c i a l i n g e n u i t y a p a r t from t h e p r o b l e m o f i n i t i a l l y i n t r o d u c i n g t h e n e w s p r i n t made from t h i s s o u r c e . Some e f f o r t s have a l r e a d y been made i n t h i s d i r e c t i o n , n o t a b l y by Garden S t a t e P a p e r i n t h e U n i t e d S t a t e s , who have t h r e e m i l l s p r o d u c -i n g i n e x c e s s o f 300,000 t o n s / y e a r . I t c o u l d v e r y w e l l be t h a t t h e i r e f f o r t s may n o t p r o v e t o be e n t i r e l y a d v a n t a g e o u s . The method w h i c h t h e y use f o r d e i n k i n g employs c h e c m i c a l c o o k i n g and w a s h i n g w h i c h does n o t p r o d u c e as good a b r i g h t n e s s o f t h e f i n a l p r o d u c t as t h e method p r o p o s e d h e r e i n . As a r e s u l t t h e y have e s t a b l i s h e d a p r e c e d e n t o f m a r k e t i n g t h e i r p r o d u c t at $10.00 p e r t o n c h e a p e r t h a n t h e market r a t e . I t i s p r o p o s e d t h a t t h e b e s t method t o i n t r o d u c e t h e p r o d u c t from t h e p r o p o s e d m i l l i s t o g i v e s p e c i a l i n t r o d u c t o r y o f f e r s o f t h e p r o d u c t t o key p u b l i s h e r s , e i t h e r f r e e o f c h a r g e o r at a s u b s t a n t i a l l y r e d u c e d p r i c e , a s k i n g them t o make a t r i a l r u n and t e s t t h e p e r f o r m a n c e o f t h i s p a p e r . I t must be n o t e d t h a t p a p e r u s e d f o r s u c h i n t r o d u c t o r y o f f e r s would need t o be 29 o f an e x c e p t i o n a l l y h i g h q u a l i t y . However, t h i s s h o u l d n o t be d i f f i c u l t t o a t t a i n i f s p e c i a l c a r e and a t t e n t i o n i s g i v e n to the p r o d u c t i o n o f t h e s e r u n s . F o r the f i r s t few y e a r s o f o p e r a t i o n , i t i s p r o p o s e d t h a t a m a r k e t i n g f o r c e s h o u l d be made up o f t h r e e s a l e s m e n ; two s e r v i n g t h e Western r e g i o n o f N o r t h A m e r i c a , and t h e t h i r d s e r v i n g f o r e i g n m a r k e t s , i n i t i a l l y J a p a n and t h e U n i t e d Kingdom. In a d d i t i o n t o t h e t h r e e s a l e s m e n , i t i s p r o p o s e d t h a t t h e r e be one m a r k e t i n g s u p p o r t man i n V a n c o u v e r . H i s f u n c t i o n would be m a i n l y to e x p e d i t e o r d e r s , s h i p m e n t s , and c u s t o m e r p r o b l e m s , but h i s t i m e c o u l d a l s o p a r t i a l l y be d e v o t e d t o market r e s e a r c h a s s i g n m e n t s . The c o s t o f o p e r a t i n g t h e m a r k e t i n g f o r c e o f f o u r men would be b u d g e t e d as shown i n T a b l e 3-11. The budget a l l o w a n c e f o r a d v e r t i s i n g and p r o m o t i o n a l e x penses p r o v i d e s a c e r t a i n f l e x i b i l i t y as a p o r t i o n o f t h i s amount c o u l d be u s e d f o r o t h e r p u r p o s e s , e i t h e r t o s u p p l e -ment o t h e r a l l o w a n c e s o r f o r u n f o r s e e n p u r p o s e s . However, d u r -i n g t h e i n i t i a l y e a r s t h e b u l k o f the m a r k e t i n g e f f o r t w i l l need t o be expended on i n t r o d u c i n g t h e p r o d u c t t o t h e market and p r o -m o t i o n a l programs w i l l p l a y a l a r g e p a r t i n t h i s e f f o r t . P r i c i n g S t r a t e g y As m e n t i o n e d p r e v i o u s l y , p r o d u c e r s who a r e a l r e a d y e s -t a b l i s h e d i n p r o d u c i n g n e w s p r i n t from r e c y c l e d f i b r e have e s t a -b l i s h e d a p r e c e d e n t o f s e l l i n g t h e i r p r o d u c t at $10.00 p e r t o n below th e market p r i c e . T h i s p r i c e d e p r e s s i o n i s j u s t i f i e d by them and demanded by t h e i r c u s t o m e r s due t o the i n f e r i o r qua-l i t y o f t h e i r p r o d u c t , m a i n l y i n t h e a r e a o f b r i g h t n e s s . The m a r k e t i n g program f o r the p r o p o s e d v e n t u r e s h o u l d s e t out i n i t i a l l y t o t r y t o o b t a i n the g o i n g market p r i c e f o r t h e i r p r o d u c t . I t w i l l n o t be i n a p o s i t i o n to be p e n a l i z e d by t h e same q u a l i t y c o n s i d e r a t i o n as e a r l i e r p r o d u c e r s and s h o u l d be a b l e t o compete s a t i s f a c t o r i l y . The most r e c e n t p r i c e change f o r C a n a d i a n n e w s p r i n t was t h e $5.00 p e r t o n i n c r e a s e t h a t went i n t o e f f e c t J a n u a r y 1, 1970. Towards the end o f l a s t y e a r C a n a d i a n p r o d u c e r s announced an a d d i t i o n a l i n c r e a s e o f $10.00. per t o n t o be e f f e c t i v e 30 J a n u a r y 1, 1971. The A m e r i c a n Newspaper P u b l i s h e r s A s s o c i a -t i o n r e a c t e d i m m e d i a t e l y t o t h e announcement and u r g e d t h e C a n a d i a n p r o d u c e r s t o r e c o n s i d e r . The m a j o r i t y o f t h e p r o d u -c e r s r o l l e d back the p r i c e i n c r e a s e t o i n t h e r a n g e o f $7.00 -$8.00 p e r t o n and t o be e f f e c t i v e A p r i l 1, 1971. Many s o u r c e s say t h a t i f any i n c r e a s e goes i n t o e f f e c t at a l l , i t i s h i g h l y l i k e l y t o be more l i k e $2.00 - $3.00 a t o n r a t h e r t h a n $8.00 a t o n . The r e a s o n f o r t h i s s i t u a t i o n i s t h e o v e r s u p p l y o f n e w s p r i n t on t h e m a r k e t , w i t h C a n a d i a n m i l l s r u n n i n g a t an o p e r a t i n g r a t e o f 87.2% i n 1970. The p r i c e o f $152.00 w i l l t h e r e f o r e p r o b a b l y p r e v a i l t h r o u g h o u t t h e m a j o r i t y o f 1971 w i t h p o s s i b l y a modest i n c r e a s e o f $2.00 - $3.00 a t o n . However, i t i s e x p e c t e d t h a t t h e r e w i l l be a marked improvement i n t h e sup-p l y and demand p i c t u r e by t h e end o f 1971 w i t h p r i c e s f i r m i n g and t h e o u t l o o k becoming more a t t r a c t i v e t h e r e a f t e r . I f t h e m i l l p r o p o s e d h e r e i n were b u i l t , i t i s n o t i n c o n c e i v a b l e t o p r e d i c t t h a t by t h e d a t e o f s t a r t - u p o f t h e m i l l , t h e market p r i c e would have advanced t o $162.00 (U.S) p e r t o n . To summarize, w o r l d demand f o r n e w s p r i n t i s i n c r e a s i n g at a r a t e o f 4 . 4 % / y r . w h i l e w o r l d p r o d u c t i o n c a p a c i t y i s e x p e c t e d t o i n c r e a s e a t o n l y 2 . 8 % / y r . By 1974 t h e C a n a d i a n i n d u s t r y as a whole s h o u l d r e a c h an o p e r a t i n g r a t e o f 88.5%. The W e s t e r n U n i t e d S t a t e s i s by f a r t h e most i m p o r t a n t market f o r t h e p r o p o s e d p l a n t . T h i s a r e a consumes w e l l i n e x c e s s o f 1,000,000 t o n s / y r . and a s s u m i n g t h e y w i l l i m p o r t 65% o f t h e i r needs from C a n a d a , t h e n a t i o n a l a v e r a g e f o r t h e U.S., t h e y w i l l need o v e r 650,000 t o n s / y r . A l m o s t a l l o f t h i s w i l l come from B.C. as a r e s u l t o f our c o m p e t i t i v e a d v a n t a g e o v e r E a s t e r n C a n a d i a n p r o d u c e r s due t o f r e i g h t c o s t s and l o w e r o p e r a t i n g c o s t s . J a p a n and t h e U.K. w i l l a l s o be i m p o r t a n t m a r k e t s . J a p a n w i l l i n c r e a s e i m p o r t s o f n e w s p r i n t c o n s i d e r a b l y i n t h e n e x t few y e a r s w i t h Canada, and B.C. i n p a r t i c u l a r , i n t h e b e s t p o s i t i o n t o b e n e f i t from t h e s e i n c r e a s e s . W i t h the e x c e p t i o n o f s p e c i a l i n t r o d u c t o r y programs t h e m a r k e t i n g o f t h e p r o d u c t i o n o f t h e m i l l would be a c c o r d i n g t o c o n v e n t i o n a l n e w s p r i n t m a r k e t i n g p r o g r a m s . CHAPTER IV THE TECHNICAL PROCESSES T h i s c h a p t e r c o n c e r n s i t s e l f e n t i r e l y w i t h t h e t e c h -n i c a l a s p e c t s o f t h e p r o c e s s e s w h i c h a r e n e c e s s a r y t o p r o d u c e top q u a l i t y n e w s p r i n t . The r e a d e r who i s i n t e r e s t e d m a i n l y i n t h e economic a s p e c t s o f t h i s s t u d y does n o t need t o c o n -c e r n h i m s e l f w i t h t h e r e m a i n d e r o f i t . The t e c h n i c a l p r o c e s s e s u s e d and t h e equipment s e l e c -t e d have a p r o f o u n d e f f e c t on t h e u l t i m a t e q u a l i t y o f t h e n e w s p r i n t p r o d u c e d i n any m i l l . The q u a l i t y o f p a p e r can be d e f i n e d as t h e e x t e n t t o w h i c h i t s p r o p e r t i e s c o r r e s p o n d t o t h e demands o f t h e p r o c e s s i n w h i c h i t i s t o be u s e d . Toward t h i s end t h e p r i m e o b j e c t i v e i n d e s i g n i n g a m i l l and s e l e c t -i n g t h e equipment s h o u l d be d i r e c t e d t o w a r d o b t a i n i n g t h e b e s t p o s s i b l e q u a l i t y on t h e f i n a l p r o d u c t . One o f t h e most com-p r e h e n s i v e and s i g n i f i c a n t c o l l e c t i o n s o f p a p e r s on t h i s t o p i c , as w e l l as o t h e r t o p i c s c o n n e c t e d w i t h n e w s p r i n t , can be f o u n d i n t h e P r o c e e d i n g s o f t h e F i r s t N e w s p r i n t C o n f e r -1 2 ence i n V a n c o u v e r , September 1966 . These p r o c e e d i n g s c o n -t a i n 36 p a p e r s o f a h i g h t e c h n i c a l s t a n d a r d w h i c h c o v e r , among o t h e r t h i n g s ; t h e r e q u i r e m e n t s o f t h e newspaper p u b l i s h e r , q u a l i t y and q u a l i t y c o n t r o l i n t h e m a n u f a c t u r e o f n e w s p r i n t and t h e i m p o r t a n c e o f the p a p e r machine i n t h e m a n u f a c t u r e o f n e w s p r i n t . 13 A more r e c e n t p a p e r d i s c u s s e s new d e v e l o p m e n t s i n t h e a r e a o f t e s t s w h i c h can be made i n t h e machine room i n o r d e r t o p r e d i c t t h e r u n a b i l i t y o f t h e n e w s p r i n t on t h e p u b l i s h e r s ' p r e s s e s . F i g u r e 4-1 g i v e s a s c h e m a t i c d i a g r a m o f t h e m a j o r s t a g e s 12 P r o c e e d i n g s F i r s t N e w s p r i n t C o n f e r e n c e , V a n c o u v e r , Septem-b e r 1966. CPPA, T e c h n i c a l S e c t i o n . 13 P u l p and Paper M a g a z i n e o f Canada, Volume 72, #4, A p r i l 1971 REPULPING (& COARSE SCREENING) FIGURE 4-1.1 t DEINKING FIGURE 4-1.2 STOCK PREPARATION FIGURE 4-1.2 PAPER MACHINE FIGURE 4-1.3 FINISHING FIGURE 4-1.3 WAREHOUSE FIGURE 4-1 .3 FIGURE 4-1 33 / \ d e i n k i n g agent (NaOH) I h y d r a p u l p e r No. 1 waste pjpjg_r. 27o vs f i b r e wgt . i h y d r a p u l p e r No. 2 dump chest No. 1 0 r e p u l p e r water surge tank a c c e p t s from secondary v i b r a t i n g s c r e e n dump chest No. 2 (6 - 7%) h o l d i n g tank c o n s i s t e n c y r e g u l a t o r d i l u t i o n r f h i g h c o n s i s t e n c y c l e a n e r s r e j e c t s (37.) . . — d e f l a k e r s d i l u t i o n Jonsson v i b r a t i n g s c r e e n s 1 -.d.ll,a£,i,.on.. screened s t o c k chest (17.) REPULPING FIGURE 4-1.1 from s c r e e n e d s t o c k c h e s t m i x i n g c e l l t p r i m a r y f e e l (9 i n l o a t a t i o n I s s e r i e s ) f l o a t a t i o n agent (sodium s i l i c a t e ) 4% vs f i b r e wgt. a c c e p t s r e j e c t s & f r o t h s e c o n d a r y f l o a t a t i o n c e l l s (2 i n s e r i e s ) r e j e c t s & f r o t h a c c e p t s d e w a t e r i n g screw c e n t r i f u g e e f f l u e n t t o p u l p e r ^ wate r surge tank r e j e c t s t o s o l i d waste d i s p o s a l ^ c e n t r i s c r e e n X r e j e c t s v i b r a t i n g s c r e e n a c c e p t s t o dump c h e s t s . a c c e p t s .57. 3 s t a g e c e n t r i f u g a l c l e a n e r s d e w a t e r i n g r e j e c t s t o s o l i d waste d i s p o s a l r e j e c t s from t e r t i a r y c l e a n e r s t o d e w a t e r i n g screw . 457. d i l u t i o n i i f h o l d i n g c h e s t 37. ' machine broke c h e s t t o p r i m a r y f a n pump DEINKING FIGURE 4-1.2 from screened s t o c k chest (17<>) d e a e r a t i n g p r i m iry f a n jump secondary fan pump Q a c c e p t e d s t o c k primary t e r t i a r y t e r t i a r y r e j e c t s a c c e p t s  4 r e j e c t s p r i m a r y c e n t r i s c r e e n -o-secondary c e n t r i s c r e e n r e j e c t s t o d e w a t e r i n g screw head box f o u r d r i n i e r c w h i t e water p r e s s s e c t i o n (Winder o 0 - 10% b l e e d o f f t o screw c e n t r i f u g e c a l e n d e r s 1 r o l l f i n i s h i n g I warehouse PAPER MACHINE AND FINISHING FIGURE 4-1.3 36 that are gone through i n the process. Detailed flow diagrams for each of these stages are given i n Figures 4-1.1 through Figure 4-1.3. The Reclaiming Process The reclaiming process can be broken down in t o two general subdivisions; repulping and coarse screening,and deinking. The flow diagram f o r the repulping and coarse screening i s shown i n Figure 4-1.1. The two hydrapulpers are batch pulpers. While one pulper i s being loaded and pulped the other i s being emptied to one of the dump chests. Each pulper i s charged with 7,000 l b s . of baled or loose news-pr i n t and enough water to a r r i v e at a consistency of 67o - 77>. The deinking chemicals are al s o added i n the repulper. Caustic soda (NaOH) and sodium hydroxide are used. Each hydrapulper i s c y l i n d r i c a l i n shape and equipped with a 400 horsepower Volkes rotor which accomplishes the repulping a c t i o n . The dimensions of the dump chests are designed to permit soaking of the slushed stock for about one and one-half hours so t h a t chemical can act on the f i b r e s . From either of the dump chests the slushed stock i s pumped to a holding tank. From t h i s point on the process i s continuous. As the slushed stock i s received at the holding tank at a consistency of 67, - 77, i t must be d i l u t e d to approximately 37, before being pumped to the high consistency cleaners. A consistency r e g u l a t i n g device i s used for this purpose. These cleaners consist of si x large diameter c e n t r i f u g a l separators a l l fed i n p a r a l l e l that remove staples, pebbles and d i r t which pass through the perforated plate i n the discharge of the repulper. In the repulper a ragger i s used to remove s t r i n g , b a l i n g wire and any s i m i l a r materials. At the bottom of the repulper there i s a box which catches heavy debris such as stones or metal objects. Af t e r the high consistency cleaners the f i b r e i s pumped to the 37 deflakers. The deflakers consist of a stator and rotor which rotates at approximately 3600 RPM. Due to the f i n e tolerance between the stator and rotor i t i s extremely important that no large objects pass through the high consistency cleaners before being fed to them. In the deflaker any remaining f i b r e bundles that were not broken up i n the repulper are disintegrated. Furthermore, any ink p a r t i c l e s which have not detached themselves from the wood f i b r e s are separated i n the deflaker. It should be noted at t h i s point that when the f l o t a t i o n process for deinking i s used, i t i s not necessary to go through a dewatering and r e d i l u t i n g with clean water, process before going to the deflakers, as i s the case with the chemical and washer method of deinking. After the deflakers the stock i s d i l u t e d to approximately 1% and pumped to Jonsson v i b r a t i n g screens. The perforations i n the screen are .092" diameter. A l l pulp and water pass through the perforations as accepts and the r e j e c t s , consist of staples, rubber bands, wood and s t r i n g , and minute b i t s of p l a s t i c . The r e j e c t s from the Jonsson screens, which con-t a i n appreciable amounts of water and f i b r e are taken back to the dump chests to be put through the process again. After the Jonsson screens the accepted stock i s pumped to the screened stock chest where a s l i g h t d i l u t i o n i s made to return the stock to a 17o consistency, compensating for the r e j e c t water which was returned to the dump chests. From the mixed stock chest we enter the deinking operation. Most r e c y c l i n g m i l l s to date use a deinking process employing chemical freeing of the ink p a r t i c l e s from the f i b r e s and separation of the ink 14 p a r t i c l e s by washing. This process was f i r s t conceived by Mr. Scudder and much of the c r e d i t for the successful r e c y c l i n g of newsprint must be "A Tour Through Garden State Paper Company, Pomona". TAPPI Reprint 38 given to him. A more recent paper describes an almost i d e n t i c a l type of system. This type of system has the disadvantage that as high as 30 - 357o of the f i b r e s are l o s t i n the washing stage, plus the fact that ink separation i s not as e f f i c i e n t , y i e l d i n g a product of deteriorated brightness. The process which i s proposed to be used i n t h i s study i s the 16 17 f l o a t a t i o n process developed by Voith GmbH ' . Tech n i c a l l y speaking, the f l o a t a t i o n process comprises two sp e c i a l operations: 1. The simultaneous removal of the ink p a r t i c l e s from the f i b r e s during the slushing process i n the pulper. 2. The separation of the detached ink p a r t i c l e s i n the f l o a t a t i o n machine. The f i r s t stage has already been described i n the repulping operation above. In order to make the ink p a r t i c l e s r i s e to the surface while the f i b r e s and f i l l e r s remain i n suspension, i t i s necessary to e s t a b l i s h a s e l e c t i v e f l o a t a t i o n process. For t h i s purpose a suitable f l o a t a t i o n agent i s u t i l i z e d , and i s also usually added i n the pulper. The f l o a t a t i o n agents are characterized by a long chain of molecules which contain h y d r o p h i l i c or hydrophobic groups. The hydr o p h i l i c groups of the soft soap act as "f r o t h e r s " and reduce surface tension. However, the hydrophobic (water r e p e l l i n g ) groups react with the hardness s a l t s of the water, producing p r e c i p i t a t e d f l a k y calcium soap. These s t i c k y 15 S. Fahlgren, "An Ideal Deinking Flow Diagram" TAPPI, Volume 49, #4, A p r i l 1966. 16 "Deinking of Waste Paper by F l o a t a t i o n " Voith Technical B u l l e t i n 1846e. ^ H o r s t Gartemann, "The F l o a t a t i o n Process and the Use of Deinked Paper" CPPA, Technical Section, 1971 Annual Meeting - Unpublished Paper. 39 calcium soaps act as c o l l e c t o r s which a t t r a c t the separated ink p a r t i c l e s and the f i n e l y dispersed a i r bubbles which are introduced i n each f l o a t a -t i o n c e l l . The slushed f i b r e containing the ink p a r t i c l e s (or grey stock as i t i s called) enters a mixing c e l l . The f l o a t a t i o n agents are also added i n the mixing c e l l s as are the accepts from the secondary f l o a t a t i o n c e l l s . From the mixing c e l l s the grey stock i s pumped to the primary f l o a t a t i o n c e l l s . In the primary c e l l s , the ink p a r t i c l e s r i s e to the top along with the a i r bubbles and can be skimmed o f f the surface, while the flow c a r r i e s the f i b r e s as accepts to the next f l o a t a t i o n c e l l . (For a capacity of 300 tons/day i t i s necessary to have s i x f l o a t a t i o n l i n e s , each l i n e con-s i s t i n g of; a mixing c e l l , nine primary c e l l s operated i n serie s and two secondary c e l l s . ) The accepts from the l a s t primary c e l l are pumped to the c e n t r i screen f o r further processing. The f l o a t a t i o n f r o t h coming from the primary c e l l s flows to a c o l l e c t i n g channel, i s d i l u t e d and pumped to the secondary c e l l s where i t i s r e f l o a t e d to recover any f i b r e s that were not captured i n the primary c e l l s . The accepts from the secondary c e l l s are pumped back to the mixing c e l l while the r e j e c t s and froths from the secondary c e l l s are pumped to a dewatering screw centrifuge. These secondary c e l l r e j e c t s have a consistency of about 27, and i n the screw centrifuge they are dewatered to a dryness of about 25 - 407., i n which condition they can either be incinerated or carted to municipal s o l i d waste disposal b u r i a l grounds. The water e f f l u e n t from the dewatering screw centrifuge i s well c l a r i f i e d and contains almost no impurities. It i s pumped back to the repulper water surge tank. The accepted stock from the primary f l o a t a t i o n c e l l s i s next taken through a c e n t r i screen i n s t a l l a t i o n . The c e n t r i screens are operated under pressure, thus accomplishing a much more compact i n s t a l -40 l a t i o n than older non-pressurized screens. They consist of perforated screen baskets with .065" diameter holes and are equipped with motor driven wiper paddles which, as they ro t a t e , create a vacuum behind the blade which continually c l e a r s the holes i n the screen of r e j e c t s which cannot pass through. The re j e c t s from the c e n t r i screen are put through a Johsson v i b r a t i n g screen. The accepts from the Jonsson screen are pumped back to the dump chest while the r e j e c t s from the Jonsson screen are taken to s o l i d waste d i s p o s a l . The accepts from the c e n t r i screen are taken through three stage c e n t r i f u g a l cleaners where minute p a r t i c l e s and any remaining ink specks are removed. The three stage cleaners are arranged i n the same way as the cleaners shown i n Figure 4-1.3. The Noss Radiclone type of i n s t a l l a t i o n i s a recent development which represents a major advancement i n cleaning technology. The Radiclone i n s t a l l a t i o n requires only less than 207o of the b u i l d i n g space that previous cleaning i n s t a l l a t i o n s required and at the same time accomplishes higher cleaning e f f i c i e n c y . The r e j e c t s from the t e r t i a r y cleaners are fed to the dewatering screw while the accepts are taken, v i a a dewatering device, to the holding chest. The dewatering at t h i s point i s necessary as the consistency of the accepted stock coming from the cleaners i s .457. whereas a consistency of approximately 37> i s desired i n the holding chest. The holding chest must have a capacity of at least two hours of stock f o r the paper machine and would be of unmanageable size i f consistency i s lower than 37.. At t h i s stage i n the process i n a conventional newsprint m i l l , the accepted stock would be taken to a blending chest where the groundwood pulp from the groundwood m i l l , the refined semi bleached k r a f t , and broke from the machine room would be mixed for l a t e r d e l i v e r y to the primary 41 fan pump s t u f f i n g box. Since i t i s not anticipated that v i r g i n semi bleached k r a f t w i l l be used i n the proposed plant, t h i s stage of mixing i s not necessary and broke from the machine room w i l l be delivered d i r e c t -l y to the holding chest. The holding chest i s also equipped with a motorized agi t a t o r to ensure a uniform mixing of the stock i n t h i s chest. The holding chest i s also equipped with a means for d i l u t i n g i f necessary. At t h i s stage i n the process the stock enters the machine room where, i t w i l l be described l a t e r , i t goes through another ser i e s of screening and cleaning operations before being delivered to the machine head box. In order to produce a high q u a l i t y paper, i t i s of utmost importance to have a good formation of the stock on the f o u r d r i n i e r wire. Good formation i s f a c i l i t a t e d by a p r i o r deaerating of the stock and a well designed head box. The deaerating i s necessary to remove a i r bubbles entrained i n the stock. The entrained a i r bubbles have the e f f e c t of increasing the consistency of the stock and i n h i b i t i n g proper d i s t r i b u t i o n of the f i b r e s . The stock i s pumped from the holding chest at 37. and d i l u t e d to approximately 17, ahead of the primary fan pump with recycled white water from the f o u r d r i n i e r white water s i l o . The deaerated stock i s pumped by the primary fan pump, which i n t h i s i n s t a l l a t i o n i s only a low head pump to the deaerating machine. In t h i s i n s t a l l a t i o n i t i s proposed to use a Perivac deaerating machine. A Perivac i s a new development which has only recently been made ava i l a b l e to the industry. Previous deaerating equipment made i t necessary to pass the stock through the cleaners before being deaerated. As the e f f i c i e n c y of the cleaners i s i n v e r s l y propor-t i o n a l to the consistency of the stock, t h i s p r a c t i c e meant that the 42 cleaning equipment was penalized with regard to the maximum attainable e f f i c i e n c y they could accomplish. In the proposed i n s t a l l a t i o n the stock w i l l be deaerated before being fed to the cleaners. Furthermore, ahead of the secondary fan.pump i t w i l l be mixed with accepts from the secondary c e n t r i screen which do not require a further deaerating since the secondary c e n t r i screen i s also of a pressurized type. From the secondary fan pump the stock i s pumped to another Radiclone i n s t a l l a t i o n , of the same type as was described e a r l i e r . The cleaning c e l l s i n t h i s i n s t a l l a t i o n as well as the i n s t a l l a t i o n ahead of the holding chest consist of 3" diameter cyclones arranged i n banks. A small diameter i s necessary i n order to accomplish a high cleaning e f f i c i e n c y , as the cleaning e f f i c i e n c y i s i n v e r s l y propor-t i o n a l to the c e l l diameters. The three stage cleaning i n s t a l l a t i o n i s arranged schematically i n Figure 4-1.3. The stock from the primary fan pump i s pumped to the primary cleaners. The r e j e c t s from the primary cleaners along with the accepts from the t e r t i a r y cleaners are pumped to the secondary cleaners. The accepts from the secondary cleaners are returned to the primary cleaners while the r e j e c t s from the secondary cleaners are fed to the t e r t i a r y cleaners. The accepts from the primary cleaners are next taken to the primary c e n t r i screen. The main purpose of the c e n t r i screen at t h i s point i s to make sure that no large objects which could damage the f o u r d r i n i e r wire are allowed to proceed to the head box. The r e j e c t s from the primary c e n t r i screen are fed to a secondary c e n t r i screen. The accepts from the secondary c e n t r i screen, as previously mentioned, are returned to the secondary fan pump while the r e j e c t s from t h i s screen are taken to the dewatering screw. The accepts from the prim-ary c e n t r i screen are fed d i r e c t l y to the head box of the paper machine. At t h i s point i t should be noticed that the r e j e c t s from the 43 three stage c e n t r i f u g a l cleaners ahead of the holding chest as well as the r e j e c t s from the secondary c e n t r i screen i n the machine room (and possibly also the r e j e c t s from the high consistency cleaners i n the repulping plant) are to be dewatered i n a dewatering screw centrifuge. This w i l l necessitate at least one a d d i t i o n a l screw centrifuge. For a normal deinking plant one screw centrifuge i s required for each l i n e of primary c e l l s and i t i s u n l i k e l y that they would have s u f f i c i e n t capacity to handle the a d d i t i o n a l load from the three sources just mentioned. One of the most important considerations of the deinking process just described i s the s e l e c t i o n of appropriate deinking agents and f l o a t a t i o n agents. A considerable amount i s known today concerning the proper a p p l i c a t i o n of such agents but unfortunately much of what i s known 18 i s guarded for commercial reasons. A valuable a r t i c l e on t h i s subject has been published by a Japanese author. Japan have considerable experience with these systems since a large percentage of t h e i r t o t a l paper production i s from recycled waste paper sources (37.47.. i n 1969). From the head box onward, the remainder of the process i s e n t i r e l y conventional and w i l l conform i n the main, to the l a t e s t p r a c t i s e s for newsprint machines. One of the most important elements of the paper machine i s the head box, for i t i s here that the basic character of the basis weight and moisture p r o f i l e s are established. I f basis weight p r o f i l e s are not u n i -form the heavier streaks i n the sheet have a tendency toward; slower drainage on the wire, less dewatering i n the press s e c t i o n , and slower drying on the drying c y l i n d e r s . As drying progresses on the cylinders Yoshinobu Nakamura and Seitaro Ando, "Deinking Agents" Toho Chemical Industry Company Limited - Technical B u l l e t i n 44 the v a r i a t i o n s on the dryness p r o f i l e are magnified. In order to achieve a uniform moisture p r o f i l e at the r e e l , which i s the ultimate objective, from the point of view of q u a l i t y , drying economy, and maximization of production, i t i s therefore necessary to s t a r t with the best possible basis weight and dryness p r o f i l e s a f t e r the head box. For t h i s purpose the head box must give not only a uniform outflow from the s l i c e on to the wire, but must also ensure a uniform d i s t r i b u t i o n of the f i b r e content wi t h i n the flow. In i t s most modern form the head box i s a four-wall, c o n t r o l l e d flow, air-cushioned type. Features should include a multiple pipe impingement type d i s t r i b u t o r with sectional tapered header, i n t e r n a l flow weir, m i c r o - s l i c e adjusters, a n t i - d e f l e c t i o n s l i c e body and a n t i -d e f l e c t i o n apron l i p . The f o u r d r i n i e r i s of a conventional type and should be equip-ped with several f o i l s as well as a double suction box i n order to ensure maximum drainage. The press section i s another c r i t i c a l aspect of the water removal process. Presses must be properly crowned to ensure uniform water removal across the width of the sheet and to avoid crushing. .A modern press sec-t i o n would include a t r a n s f e r press with suction pick-up. The f i r s t press i s a double f e l t e d suction Venta-Nip transfer press, followed by a second s i n g l e - f e l t e d s t r a i g h t through Venta-Nip/controlled crown press with a top granite r o l l . A suction f e l t r o l l accomplishes the trans f e r to the t h i r d press which i s a duplicate of the second press. A Venta-Nip wringer press arrangement i s used to condition the pick-up f e l t . The dryer section i s the t h i r d area of large importance from the point of view of c o n t r o l l i n g the drying p r o f i l e . The dryers must be equip-ped with a good steam supply and condensate removal system. The condensate 45 removal system should be equipped with syphons which w i l l give the best possible uniformity to the condensate f i l m thickness inside the dryers. This, along with good a i r d i s t r i b u t i o n w i t h i n the hood, w i l l contribute greatly to uniform dryer temperatures across the surface of the dryer face. The dryer section w i l l consist of 43 paper dryers plus two sweat dryers. The o v e r a l l dryer section should be divided into f i v e parts, each complete with i t s own f e l t handling equipment. The f e l t s should be of the permeable operi-weaved type for the proper functioning of the pocket v e n t i l a t i o n system to be described l a t e r . A v e r t i c a l breaker stack i s located between the fourth and f i f t h dryer sections, equipped with a 42" c o n t r o l l e d crown bottom r o l l and a 32" c h i l l e d i r o n top r o l l . The dryer section i s to be t o t a l l y enclosed by a hood on both the machine f l o o r and the basement l e v e l s . In recent years there has been much discussion regarding a new concept of hoods c a l l e d the "high dew point hood" versus the standard conventional hood. The advantage of the new hood i s derived from the fact that i t uses less a i r c i r c u l a t i o n within the hood and operates at both a higher dry bulb temperature and a higher dew point. These factors reduce the e f f e c t of dysfunctional a i r currents within the hood, contributing to better moisture p r o f i l e s . The disadvan-tage of the new hood design i s that i t i s impossible for operators to enter the hood while the system i s i n operation due to the high temperatures and humidities and for t h i s reason the hood i s not gaining the acceptance that was expected. This i s indeed unfortunate because the combination of a lower a i r quantity with a higher temperature of the a i r contributed greatly to the heat economy of the i n s t a l l a t i o n . Regardless of whether a 46 high dew point hood or a standard hood is chosen one should adopt the type of air exhaust system which provides exhaust from both sides of the hood along the eaves of the hood for the f u l l length of the machine. Such a system draws the air evenly from the drying section and allows adjustment for balancing purposes which can be used to accomplish profile corrections. The air systems for the hood should supply a large proportion of the air through air impingement type pocket ventilators. For a great many years, in the history of paper making, i t was thought that the largest percentage of the drying took place during the time that the paper web was pressed against the drying cylinder by f e l t s . In recent years i t has been shown that in fact the largest proportion of the evaporation from the sheet takes place in the draw between the dryer cylinders. Heat is certainly stored in the sheet during the time i t is pressed against the drying cylinder, but this heat manifests i t s e l f by causing the moisture to flash into vapour and leave the sheet during the period the sheet is in a free draw between the drying cylinders. The sheet in this draw is enclosed between two pockets formed by the upper and lower felts and without adequate ventilation of these pockets, the air in them reaches saturation and inhibits further evaporation. The purpose of the pocket ventilating system is to purge these pockets and replace the humid air with hot dry a i r . The most efficient type of pocket ventilator for this purpose is the air impingement type. The PV duct should be located adjacent to the permeable fabric fe l t directly above the inlet side of the fel t r o l l and impinging air on the f e l t at this point. The velocity head of the impingement a i r combined with the pumping effect of the wedge formed by the f e l t and the felt r o l l induces the air directly through the felt into the pocket, from where i t is discharged from both ends of the 47 pocket to the hood atmosphere. A c e r t a i n number of these pocket v e n t i l a t o r ducts can be equipped with se c t i o n a l control devices, s t r a t e g i c a l l y located, to be used for c o r r e c t i o n of wet streaks which manage to pass the press section and enter the dryer section. The dryer section i s followed by calenders, winders, s l i t t e r -rewinder, and r o l l f i n i s h i n g equipment. The f i n i s h e d r o l l s are then trans-ported v i a a lowerator to the f i n i s h e d r o l l warehouse at the main f l o o r l e v e l . These items of equipment are quite conventional and elaboration on them i s not required at t h i s point. A n t i - P o l l u t i o n Aspects For economic reasons of transportation of the waste paper, i t i s mandatory that r e c y c l i n g m i l l s be located i n , or very adjacent t o , metro-p o l i t a n centres. This imposes stringent a n t i - p o l l u t i o n requirements on such a plant. The p o l l u t i o n from such a plant normally would take three d i f f e r e n t forms: 1. a i r and exhaust gases, 2. water e f f l u e n t discharges which usually contain appreciable s o l i d s , 3. s o l i d s discharge. The proposed plant i s designed to adequately cope with a l l three of the above sources of p o l l u t i o n . A i r and Exhaust Gases The proposed plant would have no need of digesting equipment or bleaching equipment and as such the only exhaust would be from the paper machine hood. In order to recover the heat content of the exhaust from the hood, the leaving a i r i s passed through both an a i r - t o - a i r heat economizer and an air-to-water heat economizer. The air-to-water economizer 48 takes the form of a counter-current water spray system which e f f e c t i v e l y removes any f i b r e content which the a i r would have. The gaseous chemical content of t h i s a i r i s so low that i t i s not possible to measure i t and therefore, they are of no concern from the point of view of p o l l u t i o n . Water E f f l u e n t There are three sources where water e f f l u e n t might or i g i n a t e from t h i s plant; the repulping and deinking operation, the paper machine operation or m i l l water for general use such as wash-downs etc. The repulping and deinking operation as described above operates as a 1007c closed system and there i s no water discharge from i t at a l l . Recent publications indicate that i t i s possible to operate a 19 paper machine as a 1007, closed system . The paper c i t e d found i t neces-sary to replace 507, of the titanium dioxide i n the Whitewater with a material c a l l e d Pigment S. The r e s u l t s of t h e i r study proved that, with the use of Pigment S, i t i s possible to recycle 1007, of the white water of the machine and s t i l l produce a paper of almost i d e n t i c a l q u a l i t y to an i n s t a l l a t i o n using a conventional white water system. In t h i s study i t i s proposed that one should i n i t i a l l y t r y to operate on a 1007, closed white water system and i f t h i s i s not p o s s i b l e , the appropriate bleed-off rate should be determined by t r i a l and e r r o r . It i s highly u n l i k e l y that the bleed-off rate need to be i n excess of 107, (refer to Figure 4-1.3). Any such bleed-off water would need to be c l a r i f i e d before being discharged to sewers. The c l a r i f y i n g would remove a l l f i b r e and s o l i d s content and chemical content i n t h i s water would be unharmful. John Lewis and Robert S. Bowman, "Five-Day Operation of a Paper Machine Using 1007, Recycle of White Water". TAPPI, Volume 53, #11, November 1970. 49 E f f l u e n t f r o m G e n e r a l M i l l Use G e n e r a l m i l l use water i s m a i n l y water u s e d f o r wash-down and c l e a n - u p s e t c . T h i s water w i l l c o n t a i n a c e r t a i n amount o f s m a l l f i b r e p l u s a c e r t a i n amount o f l a r g e r s o l i d ob-j e c t s g e n e r a t e d from n o r m a l m i l l h o u s e k e e p i n g . T h i s water s h o u l d be t a k e n t o a c l a r i f i e r and d i s c h a r g e d t o sewer. S o l i d s D i s c h a r g e The o n l y p l a c e where s o l i d s a r e g e n e r a t e d i n t h i s p r o c e s s a r e from t h e d e w a t e r i n g screw c e n t r i f u g e s . The s o l i d s w i l l c o n s i s t o f i n k , f i l l e r , and f i b r e l o s s e s . The i n k i s l e s s t h a n 1% o f t h e d a i l y p r o d u c t i o n and t h e f i l l e r c o n t e n t , i n t h e c a s e o f n e w s p r i n t i s a l s o l e s s t h a n 1%. F i b r e l o s s e s w i l l b r i n g t h e t o t a l d i s c h a r g e from t h e screw c e n t r i f u g e s up t o s o m e t h i n g l e s s t h a n 5% o f d a i l y p r o d u c t i o n . T h i s means t h a t t h e r e w i l l be s o m e t h i n g u n d e r 15 t o n s / d a y o f s o l i d waste g e n e r a t e d . As t h i s waste c o n t a i n s a l a r g e p e r c e n t a g e o f f i b r e , i t can e a s i l y be i n c i n e r a t e d . A l t e r n a t i v e l y i t can be b u r i e d i n m u n i c i p a l d i s p o s a l g r o u n d s . Summary The t e c h n i c a l a s p e c t s t h a t have been d i s c u s s e d i n t h i s c h a p t e r have shown t h a t t h e r e c y c l i n g o f newspapers p r e s e n t s s e v e r a l u n i q u e and i n t e r e s t i n g p r o b l e m s . The main a r e a s o f c o n c e r n a r e d e a l i n g w i t h f o r e i g n c o n t a m i n a n t s and t h e d e i n k i n g o p e r a t i o n . However t h e t e c h n o l o g y and e q u i p -ment n e c e s s a r y t o p e r f o r m t h e s e p r o c e s s e s a r e shown t o be a v a i l a b l e . CHAPTER V PHYSICAL F A C I L I T I E S PLANT LOCATION T h i s c h a p t e r b r i e f l y d i s c u s s e s t h e p h y s i c a l f a c i l i -t i e s t h a t would be n e c e s s a r y f o r t h e p r o p o s e d p l a n t . I t c o v e r s l a n d and s t r u c t u r e s w h i l e t h e equipment r e q u i r e m e n t s have a l r e a d y been c o v e r e d i n C h a p t e r IV. I t t i e s i n d i r -e c t l y t o t h e p r e c e e d i n g c h a p t e r and t o g e t h e r t h e y form t h e b a s i s on w h i c h t h e c a p i t a l c o s t e s t i m a t e s i n C h a p t e r VI a r e made. The m a j o r f a c t o r s a f f e c t i n g p l a n t l o c a t i o n a r e f r e i g h t c o s t s o f raw m a t e r i a l s and f i n i s h e d goods, t r a n s p o r -t a t i o n f a c i l i t i e s a t t h e p l a n t s i t e , w a t e r s u p p l y f a c i l i t i e s , sewers and e f f l u e n t d i s p o s a l f a c i l i t i e s , and a v a i l a b i l i t y o f l a b o u r . In t h e c a s e o f a p l a n t r e c y c l i n g waste p a p e r t h e f r e i g h t c o s t i s a l a r g e p e r c e n t a g e o f t h e c o s t o f g e t t i n g t h e raw m a t e r i a l i n t o t h e p l a n t . In t h i s s t u d y i t i s fo u n d t h a t o n l y a p p r o x i m a t e l y 20% o f t h e n e c e s s a r y u s e d newspaper i s a v a i -l a b l e i n t h e g r e a t e r V a n c o u v e r a r e a . The r e m a i n i n g 80% i s t o be g e n e r a t e d from S e a t t l e and P o r t l a n d . The c o l l e c t i o n c o s t i n t h e s e c i t i e s i s t h e same as t h e c o l l e c t i o n c o s t i n Vancou-v e r b u t b e f o r e t h e m a t e r i a l i s i n t h e p l a n t i n V a n c o u v e r , t h e f r e i g h t c o s t s n a t u r a l l y have t o be added. F u r t h e r m o r e , 51 i t i s proposed that the waste paper generated from both Seattle and Portland should be brought to Vancouver by barge, n e c e s s i t a t i n g a plant l o c a t i o n with water front f a c i l i t i e s . Freight cost of the f i n i s h e d pro-duct from the plant to the end user w i l l be the same as for other major producers i n B r i t i s h Columbia and should not prove a disadvantage. Since the marketing program i s intended to be directed l a r g e l y at customers on the North American West Coast, as well as at the developing Japanese mar-ket, i t i s hoped that a substantial percentage of shipments can be made by water. Remaining shipments w i l l be by r a i l and by truck. The above b r i e f discussion i l l u s t r a t e s that a su i t a b l e plant l o c a t i o n w i l l need to have r a i l , truck and water transportation f a c i l i t i e s . These are allowed f o r i n the c a p i t a l estimate. Water Supply The water requirements of the proposed plant are considerably below the requirements of a normal plant of t h i s type. As previously mentioned, there i s no discharge from the repulping and deinking operation, and therefore a f t e r the i n i t i a l system i s charged the make-up requirement i s small. The f l o a t a t i o n deinking process eliminates the need of the extensive washing i n s t a l l a t i o n which uses tremendous quantities of water. The paper machine white water system w i l l be almost t o t a l l y recycled and at a maximum w i l l have a discharge of 107o, n e c e s s i t a t i n g a 107o make-up. Under peak demand conditions t h i s plant w i l l require only 950 galIons/minute (equivalent to 740 m i l l i o n gallons/annum at a constant r a t e ) . It i s proposed that t h i s plant be located on water front property on the Fraser River and that the necessary water supply be drawn from the Fraser, processed through the necessary water treatment and taken i n t o the system. The c a p i t a l cost f o r the necessary water supply system of t h i s 52 size i s included i n the estimate. Sewers and E f f l u e n t Disposal The requirement for sewers i s d i r e c t l y proportional to the requirement for water supply systems and the above comments apply. It i s proposed that s o l i d waste w i l l be trucked to municipal incinerators or b u r i a l grounds f o r d i s p o s a l . PLANT REQUIREMENTS The t o t a l land area covered by the actual plant structures plus the outdoor storage i s approximately two acres. It i s proposed that a plant s i t e of approximately f i v e acres be chosen to allow adequate space for possible equipment addi t i o n s , plant expansion, r e c e i v i n g and shipping f a c i l i t i e s and general t r a f f i c on the s i t e . As previously stated t h i s piece of property must have water frontage, and be serviced by the necessary f a c i l i t i e s f o r r a i l and truck transportation. The necessary structures are shown i n Figure 5-1. The major structure w i l l be the paper machine area. As shown i n the Figure, i t w i l l consist of a b u i l d i n g 560 feet long x 84 feet wide with the operating f l o o r 20 feet above ground l e v e l and a mezzanine f l o o r throughout the length of the b u i l d i n g 21 feet above the operating f l o o r . The operating f l o o r w i l l , i n addition to the equipment shown on the drawing, house most of the a u x i l i a r y equipment for the paper machine amongst which w i l l be included the various DC drive motors. The mezzanine f l o o r w i l l accommodate mainly heat economizer i n s t a l l a t i o n s , supply a i r systems for process a i r , supply a i r systems for room v e n t i l a t i o n and the calender cooling equipment. The ground f l o o r area w i l l include the basement enclosure for the paper machine, vacuum pump i n s t a l l a t i o n s , f i n i s h e d r o l l storage from 30' 0 holding chest 25' 0 dump chest 25' 0 dump chest 30' 0 holding chest 25' 0 machine chest 15' 0 machine broke chest covered sorting area repulping perivac * deinking Centrifugal cleaners Centriscreens Jonsson screens Repulpers, cleaners, Jonsson screens Deflakers, Repulper drive Floatation cel l s , Screw centrifuges PLAN ON ELEVATION 120' sl i t t e r & rewinder rewind stand winder calenders Elev.169 T.E. PM Hood Basement enclosure o o a Finishing Finished r o l l storage Maint . shops Elev_J.4l Elev.120 ElevJ-00 lev_^ ELEVATION BUILDING & EQUIPMENT LAYOUT FIGURE 5-1 53 the dry end of the machine to the maintenance shop and a maintenance shop area at the extreme end of t h i s f l o o r . The deinking plant w i l l be 60 feet x 84 feet and w i l l consist of two 20 foot f l o o r s . The repulping plant w i l l consist of a b u i l d i n g 60 feet x 70 feet and w i l l also have two 20 foot f l o o r s . The equipment located i n these areas are indicated on the drawing. The dotted area 60 feet x 70 feet shown on the drawing i s an open covered area to be used for paper s o r t i n g and conveyors feeding the repulpers. In addition to t h i s , there w i l l be an outdoor storage area for waste paper which w i l l be uncovered but w i l l have a 150 foot x 150 foot concrete slab. A l l of the equipment requirements of the plant, with the excep-t i o n of minor d e t a i l s , have already been discussed i n Chapter IV. CHAPTER VI COST AND REVENUE ESTIMATES 6.1 C a p i t a l Cost Estimates In the f i r s t two sections of t h i s chapter the c a p i t a l cost and manufacturing cost estimates are developed. Each section begins with a summary sheet summarizing the various components of the respective costs. The summary sheets are followed by supporting sheets showing how the figures used i n the summary have been derived. In the part of Section 6.1 r e f e r r i n g to equipment, supporting estimates are given only for department numbers 521, 531, 831, and 851. These four departments com-bined amount to 807. of the t o t a l c a p i t a l investment for equipment. My o r i g i n a l estimate was made based on 1970 p r i c e s . For convenience, the remaining items have been prorated from a c a p i t a l cost estimate for a si m i l a r but larger newsprint m i l l , which was made i n 1970. A suitable correction i s made to adjust the prices for i n f l a t i o n to a r r i v e at 1971 p r i c e s . Interest During Construction Table 6-1 gives the d i s t r i b u t i o n of c a p i t a l costs for the purpose of c a l c u l a t i n g i n t e r e s t during cons t r u c t i o n . In t h i s Table a l l items are categorized according to the required lead time for d e l i v e r y and e r e c t i o n , i n advance of the planned start-up date. The f i r s t item to proceed with i s the basic engineering, as a l l basic engineering must be complete before contracts for buildings and equipment can be awarded. It i s a n t i c i p a t e d that 507. of the t o t a l engineering expense w i l l be 55 incurred by the end of the second quarter and the remaining amount w i l l be incurred at equal increments over the remaining ten quarters of the project. The next item i s equipment category 1, which consists of the paper machine and the steam b o i l e r . These items t y p i c a l l y have long de l i v e r y and must be purchased at the beginning of the t h i r d quarter i n order to be sure that they w i l l be erected by the end of the tenth quarter. In a s i m i l a r manner equipment categories 2, 3 and 4 are phased i n i n accordance with respective lead times required. These schedules are shown superimposed on Figure 6-1. In Table 6-2 the cash outflows for each item are .shown by quarter i n order to generate the cumulative t o t a l cash requirement at the end of each quarter. Assuming an equity investment of 407o (or $9,000,000) debt w i l l not need to be u t i l i z e d u n t i l the seventh quarter. On t h i s basis the cash requirement i n excess of equity i s determined and the cumu-l a t i v e i n t e r e s t on these amounts i s derived, giving a t o t a l f or i n t e r e s t during construction of $866,400. The cash requirement build-up i s also shown gra p h i c a l l y i n Figure 6-1. For the purpose of t h i s i l l u s t r a t i o n I have used an i n t e r e s t rate during construction of TL. This may or may not be the appropriate r a t e , depending on; the time period i n which the project goes ahead, the status of the borrower or the method of financing. Interest rates i n any given period w i l l r e f l e c t the Government's p o s i t i o n on monetary p o l i c y and therefore, the timing of the project could have an appreciable e f f e c t on t h i s cost item. Debt funds are more r e a d i l y a v a i l a b l e and at lower rates to borrowers of higher status. I f a firm with an established reputation were taken i n as a partner, debt financing could be obtained at rates 56 within 17o of the prime rate. If, however, the project is undertaken without the participation of an established producer, higher rates would have to be paid. There are two methods which could be used to finance the debt portion of the project during construction: 1. short term debt for the construction period, with the long term debt financing starting when the mill goes into pro-duction, or 2. arrange for the total long term debt financing requirements i n i t i a l l y and reinvest, on a short term basis, the amount in excess of cash flow requirements. To arrive at the 77o rate I have assumed that: 1. the project would go ahead during 1972 and that interest rates would decrease slightly as a result of monetary policy; 2. an established producer would not be engaged as a partner; 3. the second method of financing described above be used. Long term financing should be available at approximately 87. (2-3 /47, above the present prime rate of May 1971). The excess cash could be invested at short term rates in excess of 87, give a weighted average rate, during construction, of 77.. Start-up Expenses The principle components of start-up expenses are interest on investment in excess of equity, again figured at 77,, and loss due to unsaleable production. The other components, overtime pay and start-up supervisors costs are self explanatory. Experience indicates that a start-up period of three months is adequate and the calculations are based on a period of this length. 57 Working C a p i t a l The terms of payment i n the newsprint industry are usually net 90 days. The manufacturer must, therefore, be able to cover h i s manufac-tu r i n g costs for the same period. I have calculated working c a p i t a l at 257o of one year's manufacturing costs. 6.2 Manufacturing Cost Estimates In t h i s section a l l components of manufacturing costs are calcu-lated and supported. Estimate 6.21 derives the saleable production figures for three years, as w e l l as the corresponding requirements for f i b r e raw m a t e r i a l , chemicals, heat, e l e c t r i c i t y , etc. Subsequent estimates are a l l r e l a t e d to these quantities and are based on rates i n e f f e c t at present within the industry i n B r i t i s h Columbia. The cost of c o l l e c t i n g operations, along with respective f r e i g h t costs (assuming a Vancouver plant location) are developed i n Estimate 6.27. Costs are shown for each of four d i f f e r e n t types of c o l l e c t i n g operations, a l l of which have been suc c e s s f u l l y used, and a weighted average cost per ton of raw ma t e r i a l , F.O.B. plant, i s a r r i v e d at. F i n a l l y , i n Estimate 6.28, the annual costs for hourly and s a l a r i e d workers, administration and overhead are estimated. The remaining sections i n t h i s chapter on revenue estimates and return on investment are s e l f explanatory. 58 6.1 CAPITAL COST ESTIMATES SUMMARY Total structures $ 4,381,500 Total equipment 12,766,600 Tot a l structures and equipment $ 17,148,100 B.C. P r o v i n c i a l Sales Tax, 57, on $10,861,500 543,000 Construction overhead, 157=. 2,580,000 Engineering and Contingencies, 67, + 77, 2 ,230 ,000 Tot a l m i l l c a p i t a l , 1971 p r i c e s , Federal and P r o v i n c i a l Tax included $ 22,501,100 Interest during construction 866,400 Start-up expenses 341,000 Working C a p i t a l (257, of 1 year manufacturing cost) 1,750,000 Total investment $ 25,458,500 59 STRUCTURES* Dept. No. Description Material Lab our T o t a l 111.00 S i t e 200,000 120,000 320,000 122.00 Scalehouse and Guardhouse 15,000 10,000 25,000 123.00 Garage 11,500 2,500 14,000 131.00 Sewers - - -132.00 E f f l u e n t Disposal 46,000 14,000 60,000 141.00 F i r e Protection 161,000 69,000 230,000 211.00 Of f i c e and Laboratories 35,000 15,000 50,000 221.00 M i l l Stores (Included i n 851) - - -231.00 Maintenance Shops (Included i n 851) - - -261.00 Fuel Storage and Handling 10,000 5,000 15,000 271.00 Water Supply & D i s t r i b u t i o n - - -281.00 Steam Supply & D i s t r i b u t i o n 56,000 38,500 94,500 291.00 Power Supply & D i s t r i b u t i o n 10,000 5,000 15,000 311.00 Waste Paper Handling & Storage 30,000 13,000 43,000 521.00 Repulping 89,000 54,000 143,000 531.00 Deinking Plant 107,000 65,000 172,000 831.00 Additive System (Included i n 851.00) - - _ 851.00 Paper Machine 2,240,000 960,000 3,200,000 871.00 Paper F i n i s h i n g (Included i n 851.00) - _ _ 891.00 Paper Warehouse (Included i n 851.00) To t a l Structures (1971 Prices) 3,010,500 1,371,000 4,381,500 * Calculated at: Process areas 85<?/cu. f t . Waste Paper s o r t i n g 50<:/cu. f t . Includes a l l applicable taxes. 6 0 EQUIPMENT Dept. No. Description Material Lab our Total 1 1 1 . 0 0 Site - - -1 2 2 . 0 0 Scalehouse 7 , 0 0 0 4 , 0 0 0 1 1 , 0 0 0 1 3 1 . 0 0 Sewers - - -1 3 2 . 0 0 E f f l u e n t Disposal 4 6 , 0 0 0 1 4 , 0 0 0 6 0 , 0 0 0 1 4 1 . 0 0 F i r e Protection 5 4 , 0 0 0 1 5 , 5 0 0 6 9 , 5 0 0 2 1 1 . 0 0 O f f i c e & Laboratories 3 0 , 0 0 0 5 , 0 0 0 3 5 , 0 0 0 2 2 1 . 0 0 M i l l Stores 5 1 0 , 0 0 0 2 , 0 0 0 5 1 2 , 0 0 0 2 3 1 . 0 0 Maintenance Shops 1 3 7 , 0 0 0 1 7 , 0 0 0 1 5 4 , 0 0 0 2 6 1 . 0 0 Fuel Storage 6c Handling 4 7 , 0 0 0 2 3 , 0 0 0 7 0 , 0 0 0 2 7 1 . 0 0 Water Supply 6c D i s t r i b u t i o n 4 6 , 0 0 0 1 4 , 0 0 0 6 0 , 0 0 0 2 8 1 . 0 0 Steam Supply 6c D i s t r i b u t i o n 5 0 0 , 0 0 0 1 3 8 , 0 0 0 6 3 8 , 0 0 0 2 9 1 . 0 0 Power Supply 6c D i s t r i b u t i o n 3 6 4 , 0 0 0 9 6 , 0 0 0 4 6 0 , 0 0 0 3 1 1 . 0 0 Waste Paper Handling 6c Storage 2 0 , 0 0 0 - 2 0 , 0 0 0 5 2 1 . 0 0 Repulping Plant 5 6 1 , 0 0 0 2 0 8 , 1 0 0 7 6 9 , 1 0 0 5 3 1 . 0 0 Deinking Plant 1 , 7 3 9 , 0 0 0 3 3 3 , 0 0 0 2 , 0 7 2 , 0 0 0 8 3 1 . 0 0 Additive System 5 6 , 0 0 0 1 4 , 0 0 0 7 0 , 0 0 0 8 5 1 . 0 0 Paper Machine 5 , 7 0 9 , 0 0 0 8 1 0 , 0 0 0 6 , 5 1 9 , 0 0 0 8 7 1 . 0 0 Paper F i n i s h i n g 2 5 0 , 0 0 0 7 7 , 0 0 0 3 2 7 , 0 0 0 8 9 1 . 0 0 Paper Warehouse (Included i n 8 7 1 . 0 0 ) T o t a l Equipment ( 1 9 7 0 P r i c e s ) $ 1 0 , 1 5 1 , 0 0 0 $ 1 , 7 8 0 , 6 0 0 $ 1 1 , 9 3 1 , 6 0 0 Add 7 % I n f l a t i o n 7 1 0 , 5 0 0 1 2 4 , 5 0 0 8 3 5 , 0 0 0 Total Equipment ( 1 9 7 1 P r i c e s ) $ 1 0 , 8 6 1 , 5 0 0 $ 1 , 9 0 5 , 1 0 0 $ 1 2 , 7 6 6 , 6 0 0 61 DEPT. 521 REPULPING 521 .21 Hydrapulpers 521 .31 Pumps & Agitators 521 .33 T i l e Tanks 521 .34 Pipe Valves & F i t t i n g s 521 .35 Insulation 521 .38 Process Controls 521 .41 Motors 521.43 Motor Starters 521 .44 Power Wiring 521 .51 Hi Consistency Cleaners 521 .56 Deflakers 521 .58 Jonsson Screens 521 .77 Process V e n t i l a t i o n 521 .78 Room V e n t i l a t i o n T o t a l Material Labour Tot a l $ 96,000 $ 6,000 $ 102,000 47,000 5,400 52,400 51,000 41,500 92,500 75,000 45,000 120,000 4,000 4,000 8,000 76,000 38,000 114,000 37,000 - 37,000 24,000 - 24,000 59,000 50,000 109,000 17,000 3,000 20,000 33,000 4,000 37,000 17,000 6,000 13,000 10,000 1,500 11,500 25,000 3,700 28,700 $ 561,000 $ 208,100 $ 769,100 62 DEPT. 531 DEINKING 531 .21 Voith Equipment, including F l o a t a t i o n C e l l s 531 .22 Screw Centrifuges 531 .31 Pumps & Agitators 531 .33 T i l e Tanks 531 .34 Pipe, Valves & F i t t i n g s 531 .36 Cranes, Hoists ( i n Dept. 851) 531 .38 Process Controls 531.41 Motors 531 .43 Motor Starters 531 .44 Power Wiring 531 .81 Cent r i Screen 531 .82 Jonsson Screens 531 .83 Cen t r i f u g a l Cleaners 531 .77 Process V e n t i l a t i o n 531 .78 Room V e n t i l a t i o n $ Material Labour Tot a l 933,000 $ 140,000 $ 1,073,000 270,000 40,000 310,000 120,000 18,000 138,000 30,000 3,500 33,500 75,000 45,000 120,000 76,000 38,000 114,000 20,000 - 20,000 10,000 - 10,000 20,000 15,000 35,000 18,000 3,000 21,000 20,000 8,000 28,000 97,000 15,000 112,000 10,000 1,500 11,500 40,000 6,000 46,000 1,739,000 $ 333,000 $ 2,072,000 63 DEPT. 831 ADDITIVE PLANT 831.31 Pumps and Agitators 831.32 Tanks and F i t t i n g s 831.34 Pipe Valves and F i t t i n g s 831.35 Insulation (Included i n 831. 831.37 Material Handling 831.38 Process Controls 831.41 Motors 831.43 Motor Starters 831.44 Power Wiring To t a l Material Labour Total $ 9,000 $ 1,000 $ 10,000 30,000 4,000 34,000 9,000 5,000 14,000 7,000 3,000 10,000 1,000 - 1,000 - 1,000 1,000 $ 56,000 $ 14,000 $ 70,000 64 DEPT. 851 MACHINE ROOM Material Labour Tot a l 851.31 Pumps and Agitators $ 212,000 $ 19,000 $ 231,000 851.32 Tanks and F i t t i n g s 6,000 1,000 7,000 851.33 T i l e Tanks 38,000 38,000 76,000 851.34 Pipe, Valves and F i t t i n g s 185,000 130,000 315,000 851.35 Insulation 18,000 20,000 38,000 851.36 Cranes and Hoists 135,000 13,000 148,000 851.38 Process Controls 150,000 58,000 208,000 851.41 Motors 108,000 - 108,000 851.42 E x c i t a t i o n Units 15,000 - 15,000 851.43 Motor Starters 73,000 - 73,000 851.44 Power Wiring 200,000 155,000 355,000 851.51 Pulpers 60,000 6,000 66,000 851.52 Screens 28,000 5,000 33,000 851.53 Cen t r i f u g a l Cleaners 97,000 15,000 112,000 851.54 Deaerator (Perivac) 65,000 10,000 75,000 851.55 Refiners and Deflakers - - -851.56 Saveall - - -851.60 Paper Machine 3,510,000 220,000 3,730,000 851.71 Winder and Drive (Included i n 851.60) _ - -851.73 Machine Drive 354,000 30,000 384,000 851.75 Dryer Drainage (Included i n 851.60) - - -851.76 Lubrication System (Included i n 851.60) - - -851.77 Machine V e n t i l a t i o n 330,000 70,000 400,000 851.78 Room V e n t i l a t i o n 125,000 20,000 145,000 To t a l $ 5,709,000 $ 810,000 $ 6,519,000 DISTRIBUTION OF CAPITAL COSTS FOR CALCULATION OF INTEREST DURING CONSTRUCTION Structures $ 4,381,500 Equipment, Category I 7,761,000 Equipment, Category 2 2,130,000 Equipment, Category 3 2,130,000 Equipment, Category 4 745,000 Engineering, 6% on $17,148,100 1,030,000 Construction Overhead, 15°L 2,580,000 $20,757,500 * Note that $1,200,000 for contingencies, plus $543,000 B.C. P r o v i n c i a l Tax are not included i n t h i s t o t a l . TABLE 6-1 Quarter 90 Dys Af t . Item 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th S/U : Totals Engineering 250.0 250.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 1030.0 Structures 788.6 788.6 788.6 788.6 788.6 438.5 4381.5 Const.O/Head 464.0 464.0 464.0 464.0 464.0 226.0 2580.0 Eqpt. #1 998.0 998.0 998.0 998.0 998.0 998.0 998.0 775.0 7761.0 Eqpt. #2 393.4 393.4 393.4 393.4 393.4 213.0 2130.0 Eqpt. #3 479.2 479.2 479.2 479.2 213.0 2130.0 Eqpt. #4 167.5 167.5 167.5 167.5 75.0 745.0 Sub To t a l 250.0 250.0 1051.0 1051.0 2697.0 2697.0 3176.2 3343.7 3343.7 699.7 220.5 53.0 1940.0 20757.5 B.C. Tax * 10.0 10.0 42.0 42.0 107.9 107.9 127.0 133.7 133.7 28.0 8.8 2.0 To t a l 260.0 260.0 1093.0 1093.0 2804.9 2804.9 3303.2 3477.4 3477.4 727.7 229.3 55.0 19585.8 Cumulat.Tot. 260.0 520.0 161-3 SO 2706.0 5510.9 8315.8 11619.0 15096.4 18573.8 19301.5 19530.8 19585.8 19585.8 Cash Require-ment i n Excess of Equity # 2619.0 6096.4 9573.8 •10301.5 10530.8 10585.8 10585.8 Incremental Amt. 2619.0 3477.4 3477.4 727.7 229.3 55.0 Int.on t h i s Amt. to End of 12th Quarter X 274.5 302.0 243.0 38.2 7.7 1.0 Cumulative Int. 274.5 576.5 819.5 857.7 865.4 866.4 866.4 CASH OUTFLOW, INTEREST DURING CONSTRUCTION (Thousands of Do l l a r s ) BY QUARTER TABLE 6-2 * 57o on Supply Portion = 47„ on Supply Plus E r e c t i o n . # Assume Equity = 407 of Total M i l l C a p i t a l = $9 m i l l i o n X Calculated at 7% per Annum 67 68 START-UP EXPENSES (For One Quarter) Interest on Investment i n Excess of Equity Saleable Production (30% x 100,000 x 3) x 12 $ 162.00/ton Less manufacturing cost (807« x 100,000 x 3) x 12 $ 63.50/ton Cash Outflow Start-Up Supervisors from Equipment Suppliers Deinking - $200/day x 30 Paper Machine - $200/day x 30 Other smaller equipment 5 x $200/day x 14 Overtime pay Total $ 185,000 $1,169,000 1,269,000 $ 100,000 100,000 6,000 6,000 14,000 $ 26,000 26,000 30,000 $ 341,000 6.2 - MANUFACTURING COST ESTIMATES SUMMARY STATISTICS Item Units Amount Newsprint Sales Waste Newspaper Pulp Substitute Grades * Pulp Substitute Grades # Alum Fuel Oil Electric Power Water Labour - Operating No. of Production Days FTPA ADTPA ADTPA ADTPA TPA Bbl/A MWH/A MG/A MH/A Days/A 108,000 100,000 5,500 5,500 900 184,000 87,380 470 355,000 345 MANUFACTURING COSTS Item Rate Amount - $/A Waste Newspaper $14.85/ADT 1,485,000 Pulp Substitute Grades * $14.85/ADT 81,700 Pulp Substitute Grades # $47.00/ADT 259,000 Alum $57.50/Ton 51,750 Sodium Hydroxide $56.00/Ton 112,000 Sodium Silicate $30.00/Ton 120,000 Fuel Oil $ 2.70/Bbl 496,500 Electric Power $ 5.25/MWH 458,000 Other Materials 893,900 Labour 1,484,900 Administration & Overhead X 1,290,000 Contingencies 27o 135,215 Total $ 6,867,965 Unit Manufacturing Cost $/FT $ 63.50 * From own collecting operation. # Outside pur chase, i f necessary, includes freight. X Includes salaried operating workers. 70 NEWSPRINT MILL ESTIMATE 6.21 Item Units Amount Year 1 Year 2 Year 3 Paper Machine No. 1 1 1 Paper Machine Speed FPM „ 2,200 2,700 3,000 Basis Weight Lb/3000 f t 32 32 32 Trim at Winder - Maximum Inches 184 184 184 Trim E f f i c i e n c y % 98 98 98 Trim at Winder - Average Inches 180 180 180 Wire Width Inches 206 206 206 Production at 100% E f f . TPA 89,500 110,000 122,000 (excluding wrapper e t c . ) Overall E f f i c i e n c y % 82 86 88 Production at Overall E f f TPA 73,500 94,500 108,000 (excluding wrapper e t c . ) F i n i s h i n g Materials TPA 750 1,000 1,130 Finished Production FTPA 74,250 95,500 109,130 (in c l u d i n g wrapper etc. ) Finished Production FTPD 215 277 315 (inclu d i n g wrapper etc. ) Moisture at Reel % 7.5 7.5 7 Actual Production BDTPA 68,700 88,400 100,000 Fib r e Loss BDTPA 750 900 1,000 Tota l F i b r e Required BDTPA 69,450 89,300 101,000 Furnish D i s t r i b u t i o n - Pulp Substitute Grades % 5 5 5 - Pulp Substitute Grades # % 5 5 5 - Repulped Newspaper % 90 90 90 - Pulp Substitute Grades BDTPA 3,500 4,500 5,000 ADTPA 3,850 4,950 5,500 - Pulp Substitute Grades # BDTPA 3,500 4,500 5,000 ADTPA 3,850 4,950 5,500 - Repulped Newspaper BDTPA 62,450 80,300 91,000 ADTPA 68,700 88,300 100,000 Alum Ton/A 560 715 900 Sodium Hydroxide TPA 1,390 1,780 2,000 Sodium S i l i c a t e TPA 2,780 3,560 4,000 Heat MB/A 472,000 600,000 682,000 E l e c t r i c Power MWH/A 37,500 48,000 54,700 Water for Paper Machine MG/A 345 427 470 Operating Period Days/A 345 345 345 * From own c o l l e c t i n g operation # Outside purchase, i f necessary, includes f r e i g h t . 71 REPULPING & DEINKING ESTIMATE 6.22 Item Units Amount Year 3 E l e c t r i c Power Pulp Substitute Grades Repulpable Newspaper MWH/A ADTPA ADTPA 23,600 11,000 100,000 HEAT ESTIMATE 6.23 Repulping & Deinking Newsprint M i l l M i l l General Power B o i l e r A u x i l i a r i e s T o t a l Heat from B o i l e r s Fuel O i l E l e c t r i c Power MB/A MB/A MB/A MB/A MB/A Bbl/A MWH/A 60,000 683,000 109,000 111,000 963,000 184,000 2,860 ELECTRIC POWER ESTIMATE 6.24 Repulping MWH/A 23,600 Newsprint M i l l MWH/A 54,700 Steam Plant MWH/A 2,860 Water Supply and E f f l u e n t Disposal MWH/A 1,355 M i l l General MWH/A 3,000 Substation Loss MWH/A 1,865 T o t a l MWH/A 87,380 WATER SUPPLY AND EFFLUENT DISPOSAL ESTIMATE 6.25 Newsprint M i l l and Repulping & Deinking M i l l (90 recycle) MGA M i l l General MGA Total MGA 320 150 470 E l e c t r i c Power - Water Supply - E f f l u e n t Disposal MWH/A MWH/A 705 650 T o t a l MWH/A 1,355 72 OTHER MATERIALS Item Units Repulping & Deinking $0.50/ADT Newsprint M i l l $6.00/FT F i n i s h i n g Plant $1.50/FT Steam Plant $0.03/MB Power Supply & D i s t r i b u t i o n $0.04/MWH Water Supply and E f f l u e n t Disposal $2.50/MG M i l l General $1.00/FT ESTIMATE 6.26 Amount  Year 3 50,000 580,000 150,000 29,000 3,700 1,200 80,000 Tot a l 893,900 73 COST OF WASTE PAPER ESTIMATE 6.27  Plan A (from Apartments only). Greater Vancouver population 1,000,000 C i r c u l a t i o n (of Sun and Province) to C i t y Zone excluding R e t a i l Trading Zone 239,257 7. L i v i n g i n Apartment Buildings ( a l l types) 33.37. Apartment Population 333,000 Average number persons per family unit 2.5 No. of family units 133,000 7. Receiving at least one d a i l y paper (assumed) 807. No. of papers received/day 106,500 Weight per paper per week (measured) 4.1 l b s . Weight of paper received/week 218 tons Weight of paper received /annum (by residents) 11,300 tons Achievable recovery rate from apartments (assumed) 807, Recoverable paper/annum 9,050 tons Overall Average No. of Apartments/building 50 No. of Apartment Buildings 133,000/50 2,660 Required No. of pick-ups/week (4 weeks between pick-ups) 665 No. of pick-ups/day/truck 40 No. trucks required 665/5 x 40 = 3.3, say 3 Cost per truck: Receiver Buckets: $20,000/5 years $ 4,000 Truck: $8,000/5 years 1,600 Crew: 1 d r i v e r 8,400 1 loader 6,000 Operating Cost 1,000 T o t a l $ 21,000 Cost per Ton = 3 x 21,000 = $ 6.95/Ton 9,050 74 COST OF WASTE PAPER ESTIMATE 6.27 Plan B (as operated i n A u s t r a l i a ) U t i l i z e s canvas receivers l e f t at single family homes and empties at four week i n t e r v a l s . Non Apartment Dwellers 666,000 No. of population covered by t h i s c o l l e c t i o n plan ( a r b i t r a r i l y chosen) 250,000 C i r c u l a t i o n covered by t h i s Plan 55,500 Average No. persons per family unit 4.5 Approximate No. of single family homes 55,500 No. of receivers deployed 55,500 Weight of papers per week (4.1#/paper/week) 114 tons Recoverable paper per annum 5,920 tons No. of weeks between pick-ups 4 No. pick-ups/week 55,500/4 13,880 Pick-up rate 80/Hr. Less Unloading time 257. Net pick-up rate 60/Hr. Pick-ups/week/truck (40 hrs. x 60) 2,400 No. trucks required 13,880x2,400 = 5.78, say 6 Costs: (per truck) Cost/truck: (from Plan A, excluding buckets) $ 17,000/Year Bag Receivers/truck: 1/8 x .50 x 74,000/3 years 1,540/Year To t a l $ 18,540 Cost/ton 6 x 18,540 = $ 18.80/ton 5,920 Quality Weighted Cost/ton = 18.80 + 2.50 $ 11.90/ton * 2 * At least an equal amount of corrugated cartons and mixed paper can be received from each household. These can be sold or u t i l i z e d i n an integrated operation; $2.50 represents s o r t i n g costs per ton. 75 COST OF WASTE PAPER ESTIMATE 6.27 Plan C (as operated by Thames Board M i l l ) U t i l i z e s a t r a i l e r p u l l e d behind the normal municipal garbage c o l l e c t i o n v e h i c l e . The loaders are paid a bonus t o segregate the paper and throw i t i n the t r a i l e r . No. of p o p u l a t i o n covered by t h i s plan ( a r b i t r a r i l y chosen) 250,000 Avg. No. of persons/family u n i t 4.5 Approximate No. of s i n g l e f a m i l y homes 55,500 No. collections/week/house 1 No. pick-ups/day/truck 400 No. t r a i l e r s deployed 55 ,500 = 25.8, say 25 400 x 5 % of houses having newspaper 80 C i r c u l a t i o n covered by t h i s plan 44,500 Recoverable paper per annum (55,500 x .8 x 4.1 x 52) 4,730 tons 2,000 Weight of newspapers c o l l e c t e d / y r . / t r u c k 190 tons Costs (per t r a i l e r ) T r a i l e r 2,000/3 $ 700/year Bonus to crews $5.00/ton x 190. 950/year R e t r a n s p o r t a t i o n t o pla n t $1.00/ton x 190 190 T o t a l $1840/year Cost/ton = 1840 = $9.68 190 Q u a l i t y weighted c o s t / t o n = 9.68 + 2.50 = $7.73 2 Plan D (passive) Quantity a n t i c i p a t e d t o be p a s s i v e l y r e c e i v e d from Scouts and other s e r v i c e o r g a n i z a t i o n s 2,000 TPA Cost $ 8.00/ton Weighted Average Cost Quan./Yr.(tons) Cost ($/ton) Cost/A Plan A 9,050 6.95 62,988 Plan B 5,920 11.90 70,507 Plan C 4,730 7.73 36,610 Pa s s i v e 2,000 8.00 16,000 Other sources" 3,800 8.57 32,604 25,500 218,709 Weighted Average Cost $218,709 = $8.57/ton 25,500 *See Page 11, c o l l e c t i o n cost assumed t o be equal to the average f o r Plans A through D. 76 COST OF WASTE PAPER ESTIMATE 6.27 Freight Costs Van - Seattle Van - Port. Van - LA Tot. Per Ton Tot. Per Ton Tot. Per Ton 4000 ton barge return t r i p 5,000 .65 7,300 .95 30,000 3.75 Wharfage etc. i n Van. - - - - -Unloading/Loading i n Van. - - - - - -Wharfage etc. i n destina-t i o n (includes long shoremen) - 5.00 - 7.00 - 5.00 Unloading/Loading at destin a t i o n - 1.00 - 1.00 - 1.00 6.65 8.95 9.75 Baling and Warehouse Costs i n Seattle and/or Portland Warehouse r e n t a l (100' x 100' - 10,000 ^ ) $ 10,000 Baling Machine 15,000/5 years 3,000 Sa l a r i e s : 2 labourers/sorters 12,000 Baler operator 7,000 F o r k l i f t truck 5,000/5 years 1,000 Tota l Annual Cost $ 33,000 Cost/Ton: Seattle $33,000/46,500 = $ 0.71/ton Portland $33,000/28,200 = $ 1.18/ton Cost of Waste News Vancouver Portland Seattle C o l l e c t i o n Costs * 8.57 8.57 8.57 Baling and Handling Costs - 1.18 0.71 Freight to Vancouver - 8.95 6.65 Total ($/ADT) 8.57 18.70 15.93 * Assume c o l l e c t i o n costs i n Portland and Seattle same as i n Vancouver. / / COST OF WASTE PAPER ESTIMATE 6.27 Weighted A v e r a g e C o s t V a n c o u v e r S e a t t l e P o r t l a n d Tons 25,500 46,500 28,200 100,000 C o s t / T o n $ 8.57 15.93 18.70 A v e r a g e C o s t 1,485,500 100,000 T o t a l C o s t $ 218,500 740,000 527,000 $1,485,500 = $14.85/Ton FREIGHT ON FINISHED PRODUCT FROM VANCOUVER C i t y P o r t l a n d S e a t t l e Oak 1 and San F r a n c i s c o S a l t Lake C i t y Denver V a n c o u v e r J a p a n U. K. T o t a l Q u a n t i t y ( T o n s / y r ) 20,000 20,000 10,000 10,000 5 , 000 5 ,000 5,000 16,500 8,500 F r e i g h t Rate * 8 . 95 6,65* * 9.75 * 9 . 75 26 . 00 27 .20 1 . 00 22 . 50 38 . 00 100,000 T o t a l $ 179,000.00 133,000.00 97,500.00 97,500.00 130,000.00 136,000.00 5,000.00 371,250.00 323,000.00 $1,472,250.00 OVERALL WEIGHTED AVERAGE $14.72/Ton WESTERN U.S. WEIGHTED AVERAGE $11.00/Ton * Based on two-way c a r g o , c a r r y i n g waste news on r e t u r n t r i p . LABOUR ESTIMATE 6.28 SUMMARY Annua1 Department Operating Force Labour Annual Cost Salary Hourly Total Man Hours Salary Hourly To t a l Repulping & Deinking Plant 16 16 34,176 $128,300 $128,300 Newsprint M i l l 4 28 32 59,800 $ 56,600 292,000 348,600 F i n i s h i n g and Shipping 1 33 34 74,048 10,380 251,000 261,380 Technical Control 8 8 16 17,088 56,400 59,400 115,800 Maintenance Shops 9 59 68 121,700 83,000 542,000 625,000 M i l l Stores 2 2 4 4,080 13,100 15,700 28,800 Steam Plant - 8 8 17,520 - 77,700 77,700 Material Handling & Yard 1 16 17 26,300 8,580 86,800 95,380 Overtime Allowance-' 32,000 32,000 25 170 195 354,712 $228,060 $1,484,900 $1,712,960 * As suggested by the industry's current experience 79 REPULPING AND DEINKING PLANT Tota l Job Rate MH/Day Cost/Day Men/Tour Men Paper Store & Belt Conveyor $ 3.50 48 $168.00 2 8 Repulper & Screen Tender 3.62 24 87.00 1 4 F l o a t a t i o n & Chemical Prep. 4.41 24 105.80 1 _4 Tota l 96 $360.80 4 16 Labour - 356 days $/A 128,300 To t a l Cost $/A 128,300 Labour MH/A 34,176 NEWSPRINT MILL (180" trim machine) Tour Boss (Salary) $1,190 - $ - 1 4 Stock Preparation Operator 4.41 24 105.84 1 4 Machine Tender 6.80 24 163.20 1 4 Back Tender 6.03 24 144.80 1 4 Th i r d Hand 5.12 24 123.00 1 4 Fourth Hand 4.25 24 102.00 1 4 F i f t h Hand 3.94 24 94.60 1 4 Sixth Hand 3.56 24 85.50 1 _4 To t a l 168 $818.94 9 32 Labour - 356 days $/A 292,000 Salari e s 1,190 x 4 x 12 $/A 56,600 To t a l Cost $/A 348,600 Labour MH/A 59,800 80 FINISHING AND SHIPPING Job Rate Foreman (Salary) 800 Checker $ 3.44 Fi n i s h e r s 3.30 Scaleman 3.60 L i f t Truck Drivers 3.40 Car Preparer 3.26 Rewinder Operator 3.60 Rewinder Helper 3.30 Core Leading Man 3.62 Core F i n i s h e r 3.41 U t i l i t y Man 3.26 To t a l Labour - 356 days Sa l a r i e s T o t a l Cost Labour MH/Day Cost/Day Men/T. Total our Men 1 1 24 $ 82.50 1 4 48 158.50 2 8 24 86.40 1 4 48 163.00 1 8 24 78.20 1 4 8 28.80 1 1 8 26.40 1 1 8 29.00 1 1 8 27.30 1 1 8 26.10 _1 _1 208 $ 706.20 12 34 $/A 251,000 $/A 10,380 $/A 261,380 MH/A 74,048 TECHNICAL CONTROL Technical Supt. (In Admin.) Control Supervisor (Salary) Process Engineer (Salary) T o t a l Labour 356 days Salaries T o t a l Cost Labour 972 865 648 595 324 3.62 3.33 24 24 48 86.80 80.00 $ 166.80 1 1 1 1 1 1 I 8 $/A $/A $/A MH/A 1 1 3 1 1 4 _4 16 59,400 56,400 115,800 17,088 81 MAINTENANCE SHOPS Job Rate Maintenance Co-ord. (Salary) $ General Shop Foreman (Salary) Millwright Foreman (Salary) P i p e f i t t e r Foreman (Salary) E l e c t r i c a l Foreman (Salary) Instrument Foreman (Salary) Record Clerk (Salary) Stenographer (Salary) Millwright S h i f t Millwright Machinist Welder Clothing Lead Man Auto Mechanic P i p e f i t t e r E l e c t r i c i a n S h i f t E l e c t r i c i a n Lead O i l e r S h i f t O i l e r Tinsmith Painter Carpenter R o l l Grinderman Instrument Mechanic Helpers S h i f t Helpers Cleanup Average 4.33 Tota l Labour - Day Workers (255 days) - S h i f t Workers (356 days) T o t a l Labour Sa l a r i e s T o t a l Cost Lab our MH/Day Cost/Day Men/T Total our Men $ 1 1 - 1 1 - 1 1 - 1 1 - 1 1 - 1 1 - 2 2 - 1 1 32 4 4 24 1 4* 16 2 2 24 3 3 8 1 1 8 1 1 24 3 3 24 3 3 24 3 4* 8 1 1 24 1 4* 8 1 1 8 1 1 8 1 1 8 1 1 24 1 3 96 15 12 48 2 8* 16 2 2 432 $ 1,870.00 60 68 $/A 359,000 $/A 183,000 $/A 542,000 $/A 83,000 $/A 625,000 MH/H 121,700 * S h i f t Workers 82 MILL STORES Tota l Job Rate MH/Day Cost/Day Men/Tour Men Storekeeper (Salary) $ 7,700 $ 1 1 Stenographer (Salary) 5,400 - 1 1 Receiving Clerk 3.92 8 1 1 Counterman 3.62 _8 I 1_ Tot a l 16 $ 54.40 4 4 Labour - 255 days $/A 15,700 Salari e s 1,175 x 12 $/A 13,100 To t a l Cost $/A 28,800 Labour MH/A 4,080 STEAM PLANT Sh i f t Engineer $ 4.35 24 $104.20 1 4 Assistant Operator 3.84 24 92.20 I 4 Tot a l 48 $196.40 2 8 Labour - 365 days $/A 71,700 MH/A 17,520 MATERIAL HANDLING AND YARD Foreman (Salary $ 715 L i f t Truck Driver 3.40 Labourer 3.22 Watchman 3.30 Tota l Labour - S h i f t Workers (365 days) T o t a l Labour Salaries T o t a l Cost Labour - $ - 1 1 24 81.60 2 8* 24 77.20 1 4* 24 79.20 _1 _4* 72 $238.00 4 18 $/A 86,800 $/A 86,800 $/A 8,580 $/A 95,380 MH/A 26,300 * S h i f t Worker 83 ADMINISTRATION Salari e s Monthly Annua1 Po s i t i o n No. of Employees Rate Cost M i l l Manager 1 $ 2,500 $ 30,000 Assistant M i l l Manager 1 1,800 21,600 Plant Engineer 1 1,500 18,000 Pulping & Deinking Superintendent 1 1,250 15,000 Paper M i l l Superintendent 1 1,450 17,400 Mechanical Superintendent 1 1,350 16,200 E l e c t r i c a l Superintendent 1 1,350 16,200 Technical Superintendent 1 1,350 16,200 Of f i c e Manager 1 1,200 14,400 Personnel Manager 1 1,000 12,000 Engineers 1 1,100 13,200 Draftsman 1 600 7,200 Purchasing Agent 1 950 11,400 Timekeeper 1 550 6,600 Scheduling 1 600 7,200 Cost Accountant & Paymaster 1 900 10,800 Clerks & Stenographers 10 400 48,000 Nurse _1 550 6,600 To t a l 29 $ 288,000 84 OVERHEAD General Overhead Expense O f f i c e Supplies, communications, o f f i c e equipment r e n t a l , a s s o c i a t i o n dues, t r a v e l expense, and miscellaneous expenses. $/A 100,000 Pa y r o l l Additives Annual Hourly Paid P a y r o l l $ 1,484,900 Fringe Benefits at 21.7% 322,000 Annual Sa l a r i e d P a y r o l l - M i l l Salaried Personnel $ 288,060 - To t a l Administrative Sal a r i e s 288,000 To t a l S a l a r i e d P a y r o l l $ 516,060 Annual Salaried P a y r o l l Expense at 107.-- 52,000 Property Taxes Prov i s i o n f o r l o c a l taxes* 200,000 Insurance Prov i s i o n f o r Insurance* 100 ,000 To t a l Overhead $/A 774,000 * Approximately, as estimated from industry experience. 6.3 REVENUE ESTIMATES U n i t s Year 1 Year 2 Ye a r 3 Ye a r 4 Year 5 S a l e a b l e P r o d u c t i o n G r o s s S a l e s * TPA 73,500 94 ,500 108,000 108,000 108,000 $/A 12,274,500 15,781,500 19,116,000 19,116,000 19,116,000 C o s t s and E x p e n s e s : 2 U n i t M a n u f a c t u r i n g C o s t $/T 67.30 66.42 66.72 68.39 70.10 C o s t o f Goods Manufac-t u r e d $/A 4,946,550 6,276,690 7,205,760 7,386,120 7,570,800 F r e i g h t on F i n i s h e d P r o d u c t 3 1,081,920 1,391,040 1,589,760 1,589,760 1 , 589, 760 M a r k e t i n g , A d v e r t i s i n g ^ and P r o m o t i o n Expense $/A 144,600 144,600 144,600 144,600 144,600 A d m i n i s t r a t i o n and Overhead I n c l u d e d i n U n i t M a n u f a c t u r i n g C o s t I n t e r e s t on Long Term D e b t 5 1,320,000 1,320,000 1,320,000 1,320,000 1,320,000 7,493,070 9,132,330 10,260,120 10,440,480 10,625,160 E a r n i n g s B e f o r e Income Tax^ 4,781,430 6,649,170 8,855,880 8,675,520 8,490,840 7 D e p r e c i a t i o n (See Page 86) 3,636,000 2,952,200 2,402,750 1,961,150 1 ,606,000 T a x a b l e Income 1 , 145,430 3 ,696,970 6,453,130 6,714,370 6,884,840 Income Tax (50%) 572,715 1 ,848,485 3,226,565 3,357,185 3,442,420 Income A f t e r Tax 4,208,715 4,800,685 5,629,315 5,318,335 5,068,420 a v F o r an e x p l a n a t i o n o f n o t e s see Page 86. 86 DEPRECIATION CALCULATION S t r u c t u r e s , p r o r a t e d s h a r e o f t o t a l m i l l c a p i t a l $ 5,760,000 Equipment, p r o r a t e d s h a r e o f t o t a l m i l l c a p i t a l 16,741,000 $22,501,000 S t r u c t u r e s Equipment T o t a l Y e ar 1 288,000 3 ,348, 200 3,636,000 Year 2 273,600 2,678,600 2,952,200 Year 3 259,950 2 , 142 , 800 2,402,750 Year 4 246,950 1 ,714,200 1 , 961 ,150 Year 5 234,600 1 , 371 ,400 1 , 606 , 000 EXPLANATION OF NOTES, PAGE 85 1. Based on $162/ton i n y e a r 1, (1974) and a p p l y i n g an e s c a l a t i o n o f $1 0 / t o n i n y e a r 3. 2. An o v e r a l l a v e r a g e e s c a l a t i o n f a c t o r o f 2.5% p e r y e a r has been a p p l i e d t o t h i s i t e m , b a s e d on raw m a t e r i a l -3%, c h e m i c a l s , f u e l o i l and e l e c t r i c i t y - 1.5%, l a b o u r , a d m i n i s t r a t i o n and o v e r h e a d 3%. 3. Based on $14.72/ton c a l c u l a t e d on Page 77. 4. See T a b l e 3-11, Page 27. 5. C a l c u l a t e d a t 8% p e r annum o f $16,500,000. 6. E a r n i n g s b e f o r e Income Tax and D e p r e c i a t i o n . 7. I n d u s t r y p r a c t i c e u s e s t h e d e c l i n i n g b a l a n c e method at a r a t e o f 5% f o r s t r u c t u r e s and 20% f o r equi p m e n t . 87 6.4 RETURN ON INVESTMENT  Payback Method Year 1 $ 4,208,715 Ye a r 2 4,800,685 Year 3 5,629,315 Ye a r 4 5,318,335 Year 5 5,068,420 Ye a r 6 (8.6%) 433, 030 T o t a l I n v e s t m e n t $ 25,458,500 Payback P e r i o d = 5.08 Y e a r s I n t e r n a l Rate o f R e t u r n Method 25 458 500 = 4 > 2 0 8 » 7 1 5 + 4,800,685 + 5,629,315 + 5,318,335 (1+R) ( 1 + R ) 2 ( 1 + R ) 3 ( 1 + R ) 4 5 , 068,420 5 , 068 ,420 ( 1 + R ) 1 0 ( 1 + R ) 4 At R = 16% PV = $24,047,539 At R = 13% PV = $27,072,669 T D D 25 ,458, 500 24, 047 ,539 _ , „~ 1 . ,„ = 1 6 - 27;o72;669 - 2 4;o47; 539 x 3 = 1 6 - l - 4 0 = l 4 - 6 0 * Assume income a f t e r t a x i n y e a r s 6 t h r o u g h 10 can be m a i n t a i n e d a t l e a s t a t t h e l e v a l o f y e a r 5. D e p r e c i a t i o n a l l o w a n c e w i l l d e c r e a s e and income t a x w i l l i n c r e a s e but s e l l i n g p r i c e w i l l i n c r e a s e more t h a n o p e r a t i n g c o s t s due t o supply/demand p i c t u r e f o r n e w s p r i n t . F u r t h e r m o r e p l a n t o u t p u t can be i n c r e a s e d as t h e sy s t e m g e t s p e r f e c t e d and e x p e r t i s e i s g a i n e d i n o p e r a t i n g t h e p1 a n t . 88 COST OF CAPITAL Cap i t a l Structure: 40% Equity = $ 10,000,000 60% Debt = 15,458,500 T o t a l C a p i t a l i z a t i o n $ 25,458,500 Cost of Equity: Assume a P/E r a t i o of 12 for a new independent company but with an exceptionally good prospectus. This only s l i g h t l y over h a l f the P/E r a t i o s which are common for well established companies i n the industry. Share pr i c e $ 6.00 Dividend proposed .50 Assume f l o a t a t i o n costs 5% Cost of Equity = .50 = 8.77% 5.70 Cost of Debt: Assume long term debt can be obtained for 8%, and the company i s i n the 507o tax bracket. Cost of debt = .08 (1 - T) .08 (.50) 4% Weighted Average Cost of C a p i t a l : K = .40 x 8.77 + .60 x 4.0 w = 5.908% This compares with an Internal Rate of Return of 14.6% , i n d i c a t i n g that even i f there were appreciable errors i n the above assumptions regarding Cost of C a p i t a l , which there are not l i k e l y to be, the investment i s s t i l l extremely a t t r a c t i v e . CHAPTER V I I DISCUSSION AND CONCLUSIONS Q u a l i t y and B r i g h t n e s s I f t h e r e i s any p o t e n t i a l danger t h a t t h e n e w s p r i n t p r o d u c e d by t h i s p l a n t has q u a l i t y c h a r a c t e r i s t i c s l o w e r t h a n v i r g i n n e w s p r i n t , t h e d a n g e r would have t o l i e i n t h e r e p u l p i n g and d e i n k i n g o p e r a t i o n . The s c r e e n i n g , c l e a n i n g and p a p e r m a k i n g p r o c e s s e s a r e c o n v e n t i o n a l and i n f a c t , i n many r e s p e c t s , a r e s u p e r i o r t o t h o s e i n o p e r a t i o n s i n c e t h e most modern equipment and t e c h n i q u e s have been c h o s e n . C o n c e r n f o r s t r e n g t h c h a r a c t e r i s t i c s i s u n f o u n d e d s i n c e s t r e n g t h d e f i c i e n c i e s can be compensated f o r by t h e a d d i t i o n o f more k r a f t or p u l p s u b s t i t u t e g r a d e s . A c r u c i a l p o i n t i s t h e b r i g h t n e s s o f t h e end p r o d u c t as no p r o v i s i o n has been made f o r r e b l e a c h i n g o f t h e r e c y c l e d s t o c k and i t i s d e s i r o u s t h a t a b l e a c h i n g s y s t e m be a v o i d e d f o r a n t i - p o l l u t i o n r e a s o n s . The f l o a t a t i o n s y s t e m was c h o s e n f o r t h e d e i n k i n g p r o c e s s and t h e m a n u f a c t u r e r s o f t h i s equipment make c l a i m s t h a t t h e s t o c k i s r e t u r n e d t o t h e same b r i g h t n e s s as t h e o r i g i n a l n e w s p r i n t s t o c k b e i n g r e c y c l e d . T h i s i s p r o b a b l y a v a l i d c l a i m as t h e y have s y s -tems i n o p e r a t i o n w h i c h have a c h i e v e d t h e s e r e s u l t s . However, s i n c e t h e s u c c e s s o f t h i s v e n t u r e c o u l d s t a n d or f a l l on t h i s q u e s t i o n , i t i s f e l t t h i s c l a i m w a r r a n t s f u r t h e r t h o r o u g h i n v e s t i g a t i o n b e f o r e an a c t u a l p r o j e c t p r o c e e d s . 90 V u l n e r a b i l i t y o f Raw M a t e r i a l S u p p l y I t was d e m o n s t r a t e d i n t h i s s t u d y t h a t t h e V a n c o u v e r a r e a c a n n o t s u p p o r t more t h a n 25% o f t h e p l a n t ' s raw m a t e r i a l r e q u i r e m e n t s . I t was a l s o d e m o n s t r a t e d t h a t t h e d e f i c i e n c y o f raw m a t e r i a l s c o u l d be o b t a i n e d on an e c o n o m i c a l l y f e a s i b l e b a s i s from S e a t t l e and P o r t l a n d . However, t h e p r o c u r e m e n t o f raw m a t e r i a l s from t h e s e c i t i e s i s b a s e d on two c r i t i c a l a s s u m p t i o n s : 1. t h a t changes i n laws or r e g u l a t i o n s w i l l n o t come i n t o e f f e c t , i n h i b i t i n g t h e movement o f t h e s e m a t e r i a l s ; 2. t h a t c o m p e t i t i o n f o r t h e s e m a t e r i a l s w i l l n o t d e v e l o p i n t h e r e s p e c t i v e c i t i e s . The p o s s i b i l i t y o f c o m p e t i t i o n f o r t h e raw m a t e r i a l s i s n o t a t a l l remote and i n f a c t i s a l m o s t a c e r t a i n t y i n t h e f u t u r e as v i r g i n wood f i b r e s o u r c e s become f u l l y u t i l i z e d . The b e s t way t o combat t h i s c o m p e t i t i o n i s t o q u i c k l y and f i r m l y e s t a b l i s h c o l l e c t i n g o p e r a t i o n s i n e ach c i t y , w h i c h would n o t l e a v e room f o r a c o m p e t i t o r t o g e t s t a r t e d . A n o t h e r o b v i o u s s o l u t i o n t o t h i s p r o b l e m i s t o l o -c a t e t h e p l a n t i n a c i t y o f between 3 and 4 m i l l i o n p o p u l a -t i o n . Such a c i t y would be l a r g e enough t o s a t i s f y t h e raw m a t e r i a l r e q u i r e m e n t s o f a p l a n t w i t h an a n n u a l c a p a c i t y o f 100,000 t o n s . A compromise s o l u t i o n would be t o l o c a t e t h e p l a n t i n S e a t t l e w h i c h a l o n e c o u l d g e n e r a t e o v e r 45% o f t h e raw m a t e r i a l n e e d s . M a r k e t S t r e n g t h The market s t u d y i n t h i s r e p o r t i n d i c a t e s t h a t w i t h i n 91 two y e a r s t h e market s h o u l d be s t r o n g enough t o m a i n t a i n t h e p l a n t at an o p e r a t i n g r a t e o f 88.5%. T h i s i s a s a t i s f a c t o r y l e v e l o f o p e r a t i o n but t h e p r e d i c t i o n i s o n l y b a s e d on a market f o r e c a s t and must be r e v i e w e d w i t h t h e same r e s e r v a -t i o n s as any o t h e r market f o r e c a s t . O t h e r C o n s i d e r a t i o n s I t has been f o r c e f u l l y d e m o n s t r a t e d by s e v e r a l o t h e r a u t h o r s t h a t 50% o f t h e w e i g h t o f m u n i c i p a l r e f u s e i s composed o f waste p a p e r o f a l l t y p e s . The c o s t o f m u n i c i p a l g a r b a g e c o l l e c t i o n r a n g e s from $5.00 t o $10.00 p e r t o n . A c o l l e c t i o n program s u c h as i s p r o p o s e d h e r e , would r e d u c e the c o s t s o f m u n i c i p a l c o l l e c t i o n s d r a s t i c a l l y and i t i s t h e r e -f o r e c o n c e i v a b l e t h a t c i t i e s c o u l d be c o n v i n c e d t o s u b s i d i z e t h e c o l l e c t i n g o p e r a t i o n s . A p l a n t s u c h as t h e one p r o p o s e d h e r e would be a l m o s t e n t i r e l y p o l l u t i o n f r e e and m oreover has a p r o f o u n d e f f e c t on e x t e n d i n g t h e u t i l i z a t i o n o f e x i s t i n g f o r e s t s t a n d s . Both o f t h e s e f a c t s w i l l t a k e on i n c r e a s i n g i m p o r t a n c e w i t h t i m e and t h e r e f o r e w i l l soon be m a t t e r s o f c o n s i d e r a b l e i n t e r e s t t o b o t h P r o v i n c i a l and F e d e r a l Governments. One s h o u l d t h e r e f o r e , i n v e s t i g a t e t h e p o s s i b i l i t y o f n e g o t i a t i n g government i n c e n t i v e s , p e r h a p s i n t h e f o r m o f g r a n t s or c o r p o r a t e t a x c o n c e s s i o n s . C o n c l u s i o n s T h i s s t u d y has r e a c h e d t h e f o l l o w i n g c o n c l u s i o n s : 1. A p l a n t f o r p r o d u c i n g 100,000 t o n s p e r y e a r o f n e w s p r i n t u s i n g from 90% t o 100% r e c y c l e d p a p e r s 92 i s e c o n o m i c a l l y f e a s i b l e i n any c i t y o f o v e r 3 m i l l i o n p o p u l a t i o n . I t i s even f e a s i b l e i n a s m a l l e r c i t y s u c h as V a n c o u v e r or S e a t t l e s u b j e c t t o t h e above r e s e r v a t i o n s . U s i n g t h e s i m p l e p a y o f f p e r i o d method o f e v a l u -a t i o n t h e a f t e r t a x pay back p e r i o d i s 5.08 y e a r s . Based on a V a n c o u v e r p l a n t l o c a t i o n t h e a f t e r t a x I n t e r n a l Rate o f R e t u r n i s e s t i m a t e d a t 14.6%. The c o r r e s p o n d i n g w e i g h t e d a v e r a g e c o s t o f c a p i t a l i s 5.9%. I f t h e p l a n t were l o c a t e d i n a c i t y o f o v e r 3 m i l l i o n p o p u l a t i o n t h e r a t e o f r e t u r n would be even b e t t e r as f r e i g h t c o s t s o f raw m a t e r i a l s would be c o n s i d e r a b l y l o w e r . BIBLIOGRAPHY Bergstrom, D.W. "Economics of Secondary F i b r e Usage". TAPPI, Volume 51, #4, A p r i l 1968. Cameron, Donald. " I n f l a t i o n , Labour Worries Temper Bright Forecast". Canadian Pulp and Paper Industry, A p r i l 1970. Fahlgren, S. "An Ideal Deinking Flow Diagram". TAPPI, Volume 49, #4, A p r i l 1966. Gartemann, Horst. "The F l o a t a t i o n Process and the Use of Deinked Paper CPPA, Technical Section, 1971 Annual Meeting - Unpublished Paper. Grant, Ron. "Pulp Grades are the only Break i n the Gloomy Prospect for the Pulp and Paper Industry's Products". Pulp and Paper Magazine of Canada, Volume 72, #4, March 1971. Josephson, H.R. "Recycling of Waste Paper i n Relation to Resources". TAPPI Annual Meeting 1971 - Unpublished Paper. Kleinau, Jurgen. "Properties of Secondary F i b r e s " . TAPPI, Volume 49, #47, July 1966. Lehto, Bjorn 0. "Economics of Recycling". TAPPI, 1971 Annual Meeting Unpublished Paper. Lewis, John and Bowman, Robert S. "Five-Day Operation of a Paper Machine Using 100% Recycle of White Water". TAPPI, Volume 53, #11, November 1970. M i l l e r , Wilbur H. "Use of Secondary F i b r e s " . TAPPI, Volume 49, #4, May 1966. Nakamura, Yoshinobu and Ando, Seitaro. "Deinking Agents". Toho Chemical Industry Company Limited - Technical B u l l e t i n . Ullman, Uddo. "Newsprint Quality Control". Pulp and Paper Magazine of Canada, Volume 72, #4, A p r i l 1971. "Export Demand for Canada's Pulp and Paper 1980 and 2000". Pulp and Paper Magazine of Canada, Volume 72, #2, February 1971. "Canada's Domestic Demand for Forest Products; 1980 and 2000". Pulp and Paper Magazine of Canada, Volume 72, #2, February 1971. "A Tour Through Garden State Paper Company, Pomona". TAPPI Reprint. "Deinking of Waste Paper by F l o a t a t i o n " . Voith Technical B u l l e t i n 1846e. Rome 1970. United Nations. FA0. World Pulp and Paper Capacity 1969 to 1974. 94 Proceedings F i r s t Newsprint Conference, Vancouver, September 1966 Technical Section, CPPA. 20th Annual World Review, Pulp and Paper, June 25, 1970. 95 APPENDIX A Bone d r y t o n s p e r day, i . e . 100% d r y s o l i d s c o n t e n t . A i r d r y t o n s p e r day. P u l p and/or p a p e r , i n s t o r a g e , a b s o r b s m o i s t u r e from t h e atmosphere u n t i l an e q u i l i b r i u m v a p o u r p r e s s u r e i s r e a c h e d . T h i s e q u i l i b r i u m o c c u r s a t a p p r o x i m a t e l y 10% m o i s t u r e c o n t e n t . F o r c o n v e n i e n c e t h e i n d u s t r y has a d o p t e d a s t a n d a r d w h i c h r e c o g n i z e s an a i r d r y t o n t o have 90% d r y f i b r e c o n t e n t ; i . e . one ADT = 0.9 BDT. Bone d r y t o n s p e r annum. A i r d r y t o n s p e r annum. F i n i s h e d t o n s p e r annum, i n c l u d e s t h e w e i g h t o f wrapper. Tons p e r annum. M i l l i o n BTU's p e r annum. Mega Watt Hours p e r annum. M i l l i o n g a l l o n s p e r annum. Man h o u r s p e r annum. B a r r e l s p e r annum. 96 APPENDIX B T o t a l C i r c u -D a i l y Paper l a t i o n V a n c o u v e r Sun § P r o v i n c e 376, 869 P o r t l a n d O r e g o n i a n 244, 270 P o r t l a n d Oregon J o u r n a l 134, 953 S e a t t l e P o s t - I n t e l 1 i g e n c e r 191, 082 S e a t t l e Times 244 , 776 San D i e g o U n i o n 160, 796 San D i e g o T r i b u n e 119 158 Orange County R e g i s t e r 173 , 440 O a k l a n d T r i b u n e 202 , 920 San B e r n a r d i n o S u n - T e l 81 , 420 San R a p h a e l 40, 000 S a n t a C r u z 20, 000 S a n t a B a r b a r a 50 000 S a n t a M o n i c a 40 000 S a n t a Rosa 49, 400 San F r a n c i s c o E xaminer 190, 103 San F r a n c i s c o C h r o n i c l e 460 105 Los A n g e l e s H e r a l d - E x a m i n e r 514, 562 Los A n g e l e s Times 999 ,431 S a l t Lake C i t y D e s e r e t News) 192 552 S a l t Lake C i t y T r i b u n e ) Denver P o s t 249 538 Denver Rocky Mtn. News 200 972 P h o e n i x R e p u b l i c 190 ,567 P h o e n i x G a z e t t e 115 109 Oklahoma C i t y Oklahoman) 288 890 Oklahoma C i t y Times ) Oklahoma C i t y J o u r n a l 52 074 A n n u a l C o n s . F a c t o r N e w s p r i n t T o n s / y e a r C o n s . - t o n s Per 1000 C i r c . 50, 000 132 42, 000 172 18, 000 134 38, 000 199 45 , 000 185 21 , 300 133 15, 800 133 32 500 185 37, 600 185 10, 800 133 5 300 133 2, 700 133 6 700 133 5 300 133 6 600 133 35 200 185 85 000 185 95 ,000 185 200 ,000 199 33 000 172 42 800 172 34 ,600 172 32 ,700 172 21 ,200 185 49 ,700 172 6 , 900 133 E s t i m a t e d T o t a l C o n s u m p t i o n : 973,700 T o n s / y e a r 

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