Neucel Specialty Cellulose Ltd.

When the historic cellulose plant in Port Alice closed its doors in 2004, loyal employees on the northwest coast of Vancouver Island believed it would be put to good use. “A lot of the employees from Port Alice that remained here while the mill was closed for 15 months had placed a lot of faith in this place and stuck around, and ultimately were rewarded,” President and CEO Bob Taylor relates.

Sure enough, within a year the plant had been purchased by a new company founded in 2005 – Neucel Specialty Cellulose Ltd. – and up­grading of the cellulose plant began. Now the value of that plant and company has been confirmed again with its purchase by Fulida Group Holdings Ltd. of China for its production of dissolving cellulose pulp, a key ingredient in viscose rayon fiber fabric. Fulida is one of the largest manufacturers of rayon in China.

“Neucel is the biggest employer on the north end of Vancouver Island, so obviously we’re quite important to the local economy, job prospects and career opportunities of a lot of people who want to live in this area,” Taylor points out. “The fact that we have the ongoing and committed ownership of Fulida Group Holdings makes a lot of people feel good about our future.”

Neucel Specialty Cellulose Ltd. will retain its name under its new ownership and supply the majority of its cellulose product for production of rayon staple fiber in China.

“This is one of the most scenic places in Canada, which would make it one of the most scenic in the world,” Taylor emphasizes. “For people who like this kind of environment, there’s nothing better in the world. For those who grew up here and others who come this way, it’s very remote, very pristine, a beautiful area in the summertime, and we get very little snow.”

Good for Business

It is not only the quality of life but of business that makes Port Alice important to its new owners. “We have a deep water port at Port Alice, so we can bring an ocean-going vessel within 30 feet of our warehouse, load it up and send it to Asia, which is largely China for us,” Taylor points out.

“That gives us a great advantage in terms of distribution cost to market. There’s no rail, there’s no intermediate steps – it goes from our warehouse literally onto an ocean-going vessel and then is deposited in Shanghai, China.” The cellulose is transported in bales or rolls, he notes.

Neucel Specialty Cellulose’s other geographic advantage is being on the west coast of Vancouver Island close to a high-quality source of supply.

“We’ve taken great pains to diversify our wood supply both geographically and by supplier,” Taylor emphasizes.

He notes that much wood can be harvested on the north and west coasts of Vancouver Island and on the north and north central coasts of the British Columbian mainland all the way north to Alaska. It can be transported by barge, which is the lowest cost method of transportation there.

“In terms of the diversity of supply and proximity to coastal forest, we’re in good shape with regard to future fiber supply,” he stresses.

Green Production

Because rayon uses renewable resources like wood pulp in its production, it can be considered a greener fabric than ones derived from petroleum products, like polyester. Neucel receives whole logs at its single plant in Port Alice, Vancouver Island, and chips them on site. This enables the company to reclaim the bark and burn it in what are called hog boilers to save energy costs.

“It’s a continuous process,” Taylor explains. “It just has batch digesters – which gives us an advantage in the making of dissolving pulp – and has one or two other batch processes in the middle of our continuous process. We believe this gives us distinct competitive advantages in terms of the quality of the end product.” Another byproduct of the cooking process in the di­gesters is a liquor that is concentrated and burned as a fuel in a sulfite recovery boiler.

Neucel has been improving the reliability of production. “We’ve spent the last five years getting the Port Alice mill back on its feet,” Taylor declares. That effort started with the consortium of investors led by Wellspring Capital Management that formed Neucel Specialty Cellulose Ltd. in 2005 and is being continued by its new owners.

“We have a strong belief that a process that is reliable is a prerequisite to quality, environmental production and cost,” Taylor emphasizes. “Our whole focus has been on improving the reliability of the mill.”

The company is using lean manufacturing and Six Sigma methods combined with current manufacturing techniques and tools to achieve that goal. It also is planning to spend approximately $30 million in capital improvements in 2011. “A lot of that will be spent on our boilers, but we will also be spending a significant share of it debottlenecking the mill throughout the process,” Taylor announces. “The mill is reasonably easy to debottleneck, but it does require some capital in strategic spots.”

New computerized, energy-saving controls for the boilers will be included in the plant upgrade. After the improvements, Taylor expects the mill to produce close to 200,000 tons per year of cellulose versus the approximately 160,000 tons it produces annually now. “That’s not going to happen overnight,” he concedes. “But within the next 18 to 24 months, we’ll see the bulk of it.”

Rayon Forever

The attraction to Fulida of owning Neucel is having a reliable source of dissolving pulp cellulose fiber for its rayon. Few dissolving pulp plants are operating in the world, and presently demand for it is high, partially due to rising cotton prices from flooding in Pakistan – a major cotton producer – and the rising price of the oil used to manufacture other textiles.

Purchasing an ongoing pulp mill enables Fulida to integrate vertically and to obtain instant expertise in pulp production. “The advantage to someone like Fulida is that dissolving pulp is not easy to make,” Taylor insists. “There’s a narrow expertise base in terms of dissolving pulp-making – there’s only literally a half dozen or so mills in the world that compete in this business. We have a long history in Port Alice of dissolving pulp-making. We know how to do it.” Taylor reports that the wood supply in China is limited as well as access to the particular species of western hemlock trees that Neucel purchases.

He believes rayon plants mostly have disappeared from North America, but the fabric is prospering in China.

“Rayon does have some distinct advantages in terms of the way it feels, the way it’s worn,” he asserts. It frequently is blended with cotton and oil-derived synthetic fabrics. “In terms of having an owner that has a long-term vested interest in seeing Neucel prosper, that only bodes well for our future,” Taylor points out.

People Power

Taylor stresses that his employees are as much of a competitive advantage as the plant’s location and port. “I can’t say enough about the people here in the sense that we have a lot of committed people with a can-do attitude,” he emphasizes.

“My first impression was that we had fundamentally good people here who were committed to the organization, and I haven’t changed that. In fact, that perception has grown as I got to know virtually all the people here by name,” he adds. “My lasting impression is that with good people, you can do anything.”

Neucel maintains good relations with employees by being fair with them. “We tell people the truth,” Taylor maintains. “We’re honest about what we think are their strengths and the weaknesses, and at the end of the day, I believe we treat people fairly.” Many employees hired by Neucel in 2005 had worked for the mill’s previous owner. Now, some of them have retired, and new employees have joined the company.

“We have some others who have been here for up to 40 years,” Taylor reports. “It’s a mixed bag. As time goes on, we’re migrating more and more to newer folks. I think people here want to see this place work. At the end of the day, that’s our greatest strength – the combination of that part plus the organization of that commitment through the application of our RoadMap. That combination is the strength of Neucel.”