Vancouver’s Fortress Paper Ltd. (TSX:FTP) announced Monday it signed a deal to sell up to $134.4 million worth of dissolving pulp annually to two Chinese viscose producers.
The dissolving pulp is supplied by Fortress’ Quebec-based specialty cellulose mill, which will have an annual production capacity of 200,000 air-dried metric tonnes of dissolving pulp upon its completion in mid-2011. The company is spending $153 million to convert the recently acquired cellulose pulp mill to production of dissolving pulp.
Fortress CEO Chad Wasilenkoff told BIV in July that the company, which historically has focused on producing banknotes and security-paper, is aiming to broaden its business into a number of other sectors (See “Banknote maker closes financing and eyes acquisitions ” – BIV Business Today; July 7).
In its latest deal, Fortress will sell dissolving pulp to two companies in China that produce an extract called viscose fibre, which is refined to produce rayon and used in fabric and textile industries. Fortress will deliver approximately 84,000 air dried metric tonnes of dissolving pulp annually.
Based on market prices in China, the pulp will sell for between US$1,200 per ton and US$1,600 per ton. Each pulp supply agreement runs for five years starting in the third quarter of 2011.
Wasilenkoff said in a release: “These dissolving pulp supply agreements will provide a hedge against potential volatility in future dissolving pulp prices which we believe should provide greater normalized operating results in this segment.”