SAN FRANCISCO, Sept. 11, 2014 (RISI) -International Paper (IP) has decided to restart the idle containerboard machine at its Valliant, OK, mill sometime later next year, CEO John Faraci told a UBS investment conference Thursday.
He said the $90 million price tag for preparing the machine to run again is "very cost effective" for 360,000 tons/yr of additional capacity at a mill "which has the lowest fixed cost per ton of any facility at IP." The machine, which previously made semichemical medium, was idled in late 2008.
That additional capacity will be partly offset by now moving production at the company's 400,000 tons/yr Cayuga mill in Newport, IN, 100% to recycled paper for gypsum wallboard, Faraci noted. The former Temple-Inland mill previously had been making about 50% recycled containerboard and 50% gypsum facing paper.
Faraci said that IP will have no difficulty absorbing the 160,000 tons/yr of net incremental capacity from these shifts in its mill system because of the mid-2015 expiration of an off-take agreement with owners of three mills the company sold in mid-2012 under an agreement with the US Dept. of Justice required to get approval for the Temple-Inland acquisition.
The three year off-take agreement to buy containerboard from the two owners of the mills (New-Indy and Hood Containerboard) is going from 900,000 tons/yr the first year "to zero" by the second half of 2015, Faraci noted.
He also said that IP could supply more containerboard from its US mill system to its box plants around the world to replace tonnage being purchased from local suppliers. "We've got options for virgin linerboard others don't have because of our box plant system around the world," he noted.
IP earlier hinted at the upcoming shifts in its mill system in its second quarter conference call.