HSBC Game Changers Conference The Tree as a Natural Factory. Charlie Clarke

Transcription

1 HSBC Game Changers Conference The Tree as a Natural Factory Charlie Clarke 1 Sappi [Presentation Technology title] Centre [Client - Innovate, Name] Deliver 4 December and Advance 2012

2 Group Overview 2 Fine Paper mills 1 Specialty Paper mill 4 Sales offices 1 Sales office 1 Sales office 1 Sales office 8 Fine Paper mills 16 Sales offices 1 Sales office 2 Fine Paper mills 5 Forest Products mills 8 Sales offices 555,000ha plantations owned and managed 4 Sales offices 1 Sales office Sappi Technology Centre - Innovate, Deliver and Advance

3 Technology is a cornerstone of our Business Sappi Fine Paper Europe Maastricht, The Netherlands Sappi Fine Paper North America Westbrook, USA Sappi Technology Centres South Africa Pretoria Fibre, paper, chemicals & Environment Umkomaas Specialised cellulose Tweedie Forests Research Sappi Technology Centre - Innovate, Deliver and Advance

4 Pretoria Technology Centre Sappi Technology Centre - Innovate, Deliver and Advance

5 The Tree as a Natural Factory 6 H CO 2 + sun = C 6 H Sappi Technology Centre - Innovate, Deliver and Advance

6 Coal formation million years Sappi Technology Centre - Innovate, Deliver and Advance

7 From tree to molecule Sappi Technology Centre - Innovate, Deliver and Advance

8 The pulping process Sappi Technology Centre - Innovate, Deliver and Advance

9 The conventional paper pulp process wood pulping brown pulp Cellulose Lignin Hemicellulose Extractives Lignin to recovery Cellulose 10% Lignin Hemicellulose 4%Extractives paper bleached pulp Cellulose Hemicellulose Sappi Technology Centre - Innovate, Deliver and Advance

10 Wood as a valuable resource Raw material yield (rel. to bdmt) 38 48% Woodyard yield Cooking yield Pulp yield (rel. to bdmt) Wood intake related to bdmt Woodyard 2 Digester 3 Screening 4 Bleaching Fine screening Pulp related to admt Bark Wood losses Cooking losses Screening losses Bleaching losses Fine screening losses 2 4% 1 3% 55 60% 2 4% 4 7% 1 2% Sappi Technology Centre - Innovate, Deliver and Advance

11 The specialised cellulose pulp process wood pulping brown pulp bleached pulp Cellulose Lignin Hemicellulose Extractives Lignin to recovery Cellulose 2% Lignin Hemicellulose 4%Extractives Cellulose Sappi Technology Centre - Innovate, Deliver and Advance

12 The Biorefinery process Thermo Platform Pyrolysis Gassification Chemicals Bio-oil Char Energy wood pulping brown pulp bleached pulp Cellulose Lignin Hemicellulose Extractives Lignin to recovery Cellulose 2% Lignin Hemicellulose 4%Extractives Cellulose Sappi Technology Centre - Innovate, Deliver and Advance

13 Pyrolysis Flue-Gas Ash Bio-Oil Quencher and Separator Incondensable Gases Pyrolysis Gases Char Combustion Fluidised Bed Hot Solids Cold Solids and Char Pyrolysis Fluidised Bed Biomass Air LPG Sappi Technology Centre - Innovate, Deliver and Advance

14 Pyrolysis pilot plant Sappi Technology Centre - Innovate, Deliver and Advance

15 Pyrolysis products char bio-oil diesel Sappi Technology Centre - Innovate, Deliver and Advance

16 Microwave pyrolysis Sappi Technology Centre - Innovate, Deliver and Advance

17 The Biorefinery process Thermo Platform Pyrolysis Gassification Chemicals Bio-oil Char Energy Sugar Platform Hydrolysis Fermentation chemicals wood pulping brown pulp bleached pulp Cellulose Lignin Hemicellulose Extractives Lignin to recovery Cellulose 2% Lignin Hemicellulose 4%Extractives Cellulose Sappi Technology Centre - Innovate, Deliver and Advance

18 Pulp liquor extraction Sappi Technology Centre - Innovate, Deliver and Advance

19 Lignin is good for burning H2[C178H194O62]n(OH)2 where n is the number of repeating units in the polymer Sappi Technology Centre - Innovate, Deliver and Advance

20 The sugar value chain Sappi Technology Centre - Innovate, Deliver and Advance

21 Wood as a valuable resource Raw material yield (rel. to bdmt) 38 48% Woodyard yield Cooking yield Pulp yield (rel. to bdmt) Wood intake Woodyard 2 Digester 3 Screening 4 Bleaching Fine screening Pulp Bark Wood losses Cooking losses Screening losses Bleaching losses Fine screening losses 2 4% 1 3% 55 60% 2 4% 4 7% 1 2% Sappi Technology Centre - Innovate, Deliver and Advance

22 Wood as a valuable resource Raw material yield (rel. to bdmt) 90 98% electricity electricity boiler boiler Wood intake Woodyard 2 Digester 3 Screening 4 Bleaching Fine screening Cellulose pyrolysis filtration extraction distillation Phenols Chemicals Sugars Aromatics Chemicals Sappi Technology Centre - Innovate, Deliver and Advance

23 The Biorefinery or chemical factory Sappi Technology Centre - Innovate, Deliver and Advance

24 The Biorefinery or chemical factory Sappi Technology Centre - Innovate, Deliver and Advance

25 The natural factory Sappi Technology Centre - Innovate, Deliver and Advance

26 The natural factory where are the controls? Sappi Technology Centre - Innovate, Deliver and Advance

27 The natural factory where are the controls? Sappi Technology Centre - Innovate, Deliver and Advance

28 Tree Breeding and the Genomics Era 2001: Human genome sequence published 2006: Poplar genome sequence published in Science 2007: Sequencing of the eucalyptus genome begins by JGI in the US funded by DOE Sappi Technology Centre - Innovate, Deliver and Advance

29 Tree Breeding and the Genomics Era Sappi Technology Centre - Innovate, Deliver and Advance

30 Sappi Technology Centre - Innovate, Deliver and Advance

31 The natural factory where are the controls? Sappi Technology Centre - Innovate, Deliver and Advance

32 Innovate, Deliver & Advance Sappi Technology Centre - Innovate, Deliver and Advance

33 Sappi Specialised Cellulose 34 HSBC Game Changers Conference December 2012

34 Sappi Group: November 2012 Sappi Johannesburg North America Boston Europe Brussels Southern Africa Johannesburg International Hong Kong Sappi Fine Paper Sappi Fine Paper Sappi Paper and Paper Packaging Sappi Trading Mills Mills Mills Sales Office Cloquet Ngodwana Sappi Specialised Cellulose Forests Mills Cloquet * Global SSC Co-Ordination Sappi Specialised Cellulose Mills * The Sappi Cloquet and Ngodwana Mills Saiccor produce both paper and dissolving pulp from the first half of Ngodwana * 35 HSBC Game Changers Conference December 2012

35 Specialised Cellulose?? 36 HSBC Game Changers Conference December 2012

36 Dissolving Wood Pulp (DWP) Cellulose is the most abundant natural organic polymer on earth and is found in all plant materials The plant material (wood from certified forests or plantations) is processed and purified by applying specialised chemistry to extract the cellulose polymers from the wood The purified natural wood cellulose fibres are further dissolved by our customers and re-generated or reformed for a host of applications Wood 37 HSBC Game Changers Conference December 2012

37 Dissolving Pulp Supply Dissolving Wood Pulp Supply 7m tons 2012 Cotton Linter Pulp Including Sappi Specialised Cellulose Mostly China 6 m tons 1 m tons 38 HSBC Game Changers Conference December 2012

38 Global Dissolving Pulp Segments Total Demand 2012 = 5.4mtpa growing at 6% p.a. Sappi Share of Demand = 15% growing to 20% by HSBC Game Changers Conference December 2012

39 TOTAL DISSOLVING PULP MARKET SAICCOR S MARKET CAPABILITY Nitrocellulose VSF/Lyocell/Acetate Filament VSF Textiles VSF Nonwovens Sausage Casings Lyocell Textiles Lyocell Nonwovens Tyre Cord Acetate Di-Acetate MCC Excipients Ionic Ethers CMC Moulding Powders Acetate Di-Acetate (Dry Shred) Acetate Tri-Acetate Non-Ionic L/V Ethers MCC Colloidials Non-Ionic H/V Ethers Cellophane Film Sponge 40 HSBC Game Changers Conference December 2012

40 Forecast Global DP Segment Sizes and Sappi s Current Capability 1.2m tons Global DP Market 2013 (e) = 5.7m tons * Paper Tyre Cord Etc. Developmental Segments 21% Qualified Segments 79% Lyocell Acetate L/V Ethers MCC (part) / CMC 4.5m tons * Sponges Moulding Powder Cellophane Others* 41 HSBC Game Changers Conference December 2012 VSF

41 Why is Sappi Investing in Specialised Cellulose? 42 HSBC Game Changers Conference December 2012

42 Estimated 2012 Textile Fibres Consumption Split Total Market Demand = ± 74m 80.2m tons tons 43 HSBC Game Changers Conference December 2012 Source: PCI Fibres/Sappi/Gherzi

43 Key Demand Drivers for Textiles Population growth- Global population from a current 6.9 billion to 8.3 billion by 2030 Increasing need for clothes and food Increasing need for more comfortable clothing Rising urbanization and standard of living in the Greater Asian Region Asian middle class population is likely to grow to 2.7 billion by 2030 from the current 1.9 billion people Asian consumers are likely to spend $32 trillion per year by 2030, accounting for 43% of total global consumption Forecast 44 HSBC Game Changers Conference December 2012 Source : Lenzing / Asian Development Bank

44 Cellulose Gap Production of cotton is forecast to remain stagnant or shrink Growth in total fibre consumption will be covered by man-made fibres However certain moisture management properties of cellulose fibres cannot be substituted by oil based synthetic fibres, enhancing opportunity for cellulosics Forecast Cellulose Gap Source : Lenzing 45 HSBC Game Changers Conference December 2012

45 Promotion of Sustainable Nature of Fibre Sustainability conversations : Cotton vs. VSF Cotton needs 15 to 35 % more water Cotton needs over 300 % more land 25% of all insecticides and 16% of all pesticides are used for the cotton production 46 HSBC Game Changers Conference December 2012 Source : WHO / Gherzi / Lenzing

46 Capacity Drivers World Fibre & Viscose Pulp Prices : China (US$/Ton) Competitive Investment Decisions by high cost producers? Current < $1,000 Source :RISI/Sappi 47 HSBC Game Changers Conference December 2012

47 Global DP Competitors Tembec incl. Tartas 4% Birla & Lenzing intergrated excl. Domsjo 11% Domsjo 3% Others 16% Fortress 3% Bamboo China 3% Hunan Juntai 3% Sun Paper 2% Other China DWP 4% Sodra 2% Stora 1% Borregaard 2% Saiccor 11% CLP China 12% Rayonier 7% Buckeye 3% Neucell 3% Bahia 7% Cosmo 2% PT Toba 2% Global DP Capacity 2012 = 7m tons. Sappi Share of Capacity = 11% 48 HSBC Game Changers Conference December 2012

48 Sappi s Competitive Response Sappi s Global Leadership Cost Base Long Term Supply Contracts Proven Technical Competence Supply & Technology Flexibility All 3 Sappi mills in lowest quartile Target 75% Saiccor over 50 years supply into viscose market 3 mills on two continents World class R&D facilities Both Sulphite and PHK capability Research capability across value chain 49 HSBC Game Changers Conference December 2012

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50 Sappi s Competitive Response Sappi s Global Leadership Cost Base Long Term Supply Contracts Proven Technical Competence Supply & Technology Flexibility All 3 Sappi mills in lowest quartile Target 75% Saiccor over 50 years supply into viscose market 3 mills on two continents World class R&D facilities Both Sulphite and PHK capability Research capability across value chain 51 HSBC Game Changers Conference December 2012

51 History of the Viscose Process Timeline 1891 Charles Cross, Edward Bevan and Clayton Beadle discover that xanthated cellulose dissolves in alkali and can be regenerated in acid 1904 Courtaulds & Co. buy rights to viscose patents for 25, Viscose patents expire and production increases from 14ktpa to 225ktpa 1939 Courtaulds have 6 viscose factories in USA, 7 in UK, 1 in France, 1 in Canada and JV s in Germany and Italy Saiccor registered as a JV between Courtaulds, Snia Viscosa, and SA Industrial 1951 Development Corporation 1955 First production of DWP at Saiccor 1988 Saiccor purchased by Sappi 1995 Mkomazi expansion at Saiccor (speciality grades) 2008 Amakhulu expansion at Saiccor 2013 Conversion of Ngodwana and Cloquet to dissolving pulp 52 HSBC Game Changers Conference December 2012

52 Annual Production (Calendar Years) 53 HSBC Game Changers Conference December 2012

53 Technical Value Proposition Technical is part of the core business and not a separate entity Integral relationships with customers, production, logistics, sales and marketing Technical process & product know-how/trade secrets necessary to maintain and defend market share Technical know-how determines playing field and drives business strategy and market participation especially into new products and markets Technical partnerships are key mechanisms to influence customer decisions and behaviors 54 HSBC Game Changers Conference December 2012

54 Process & Product Complexity Cellulose is an extremely versatile polymer which can be chemically converted into numerous products However, it is a natural polymer and therefore subject to significant natural variation depending on the source Many factors have an influence on the functionality of dissolving wood pulps Wood source (softwood/ hardwood/ species; age, season, climate) Process type (chemistry of cooking and bleaching) Sheet structure (delivery package) Every DWP has unique performance characteristics based on the manufacturing history Technical understanding of process influences on pulp reactivity is critical for DP applications 55 HSBC Game Changers Conference December 2012

55 Research Centre s in South Africa Forestry Research Centre (Tweedie) Tree Breeding Propagation Techniques Silviculture Sappi Technology Centre (Pretoria) Fibre Processing Paper Science Chemical Sciences Environmental Sappi Specialised Cellulose CEO (Umkomaas) Applications testing Fundamental cellulose properties Wood to customers product 56 HSBC Game Changers Conference December 2012

56 Forestry Research Pine and Eucalyptus tree breeding programmes 57 HSBC Game Changers Conference December 2012

57 Pulping Capability Bench scale and pilot plant pulping capability 58 HSBC Game Changers Conference December 2012

58 Bleaching Capability Ozone bleaching MC Oxygen delignification HC oxygen delignification Pilot bleaching 59 HSBC Game Changers Conference December 2012

59 Viscose Making Capability Small scale dope making (200ml) 60 HSBC Game Changers Conference December 2012

60 Viscose Pilot Equipment Pilot plant with VSF and VFY spinning capability 61 HSBC Game Changers Conference December 2012

61 Specialised Viscose Dope and Fibre Testing Coulter Counter for particle size analysis Rheometer for dope rheological properties Vibroskop and Vibrodyn for measuring viscose fibre properties Fibre dyeing kit and Vibrochrom for fibre colour and dyeability assessment 62 HSBC Game Changers Conference December 2012

62 Sappi s Competitive Response Sappi s Global Leadership Cost Base Long Term Supply Contracts Proven Technical Competence Supply & Technology Flexibility All 3 Sappi mills in lowest quartile Target 75% Saiccor over 50 years supply into viscose market 3 mills on two continents World class R&D facilities Both Sulphite and PHK capability Research capability across value chain 63 HSBC Game Changers Conference December 2012

63 Supply & Technology Flexibility Sappi Saiccor Location: Umkomaas, KZN, South Africa 800ktpa Sulphite DWP 100% HW Eucalyptus and Acacia Bleach Sequence O-D-E 0 -D-H Saiccor Sappi Ngodwana Location: Nelspruit, Mapumalanga, South Africa 210ktpa Prehydrolysed Kraft DWP Start-up CQ % HW Eucalyptus Bleach Sequence O-D-Z HC /E P -D Sappi Cloquet Ngodwana Location: Duluth, Minnesota USA 330ktpa Prehydrolysed Kraft DWP Start-up CQ % HW Aspen/Maple mix Bleach sequence OO-Z MC /D-E P -D 64 HSBC Game Changers Conference December 2012 Cloquet

64 Conclusion Real DWP demand growth is forecast to continue at 6% p.a. Competition is growing Sappi s DWP strengths are: A very competitive cost position Market leadership position in VSF, Lyocell and MCC Business model anchored on long term contracts with leading customers and very little spot business Strong and mature customer relationships Technical knowledge in all our target segments Secure and sustainable wood basket Supply flexibility 65 HSBC Game Changers Conference December 2012

65 Thank You 66 HSBC Game Changers Conference December 2012