JANE MOLONY EXECUTIVE DIRECTOR

PAMSA

PARLIAMENTARY COLLOQIUM ON BENEFICIATION 2 SEPTEMBER 2014

Outline

• What is PAMSA?

• Role of IPAP

• Products and Process

• Production inputs and costs (energy, labour, material, transport)

• Downstream beneficiation

• Facilitating local beneficiation

• Improving global competitiveness

About PAMSA • Formed in 1992

• Promotes interests and efforts of South African pulp and paper industry

• Members – Kimberly-Clark, Mondi, Mpact, Nampak and Sappi. PAMSA representation is 97% on turnover, 98% on production, 99% on forex.

• PRASA part of PAMSA – MOU with SATMA

• Common platform for development and presentation on pre-competitive industry issues – energy, environment, recycling, education, research etc

Role of IPAP to date

• First step to beneficiation is to plant trees – they are a crop not a naturally occurring resource.

• Role of IPAP to be commended – long recognised blockages to doing this.

• IDC – R20m for EIAs* for small growers in E/Cape.

• Right focus but need to move on from here.

*Environmental impact assessments

Traditional “paper” products Printing /writing

Traditional “paper” products

Packaging Tissue

Lesser known uses for wood fibre

gypsum boards fertilisers cement

dust control binders carbon black

Cellulose

Lignin

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total sales value (R millions) by segment PULP

PAPER

PRINTING ANDWRITING GRADES

PACKAGING PAPERS

TISSUE PAPERS

Total sales value in Rands since 2003

% rand value growth per year

• Pulp = 33.2%

• Paper = 5.2%

– Printing and writing = 1.9%

– Packaging paper = 8.0%

– Tissue paper = 8.9%

• Growth in packaging and tissue consequence of socio economic growth – sustainable.

Value-add of industry

• Food security and preservation – Export products

– Goods in transit

• Social – Marketing, advertising, correspondence

– Travel and tourism

• Educational value-add – Education and learning

– Increase literacy

Stages of manufacturing

Source: Sappi

Considering the impact of cost drivers. What can industry exert control over?

34.3%

12.7%

13.2%

15.1%

11.0%

13.6%

Estimated industry cost structure

Fibre

Chemicals

Utilities - all

People costs

Variable selling (includestransport)

Maintenance & other

Increasing cost of energy

TODAY TOMORROW

Eskom’s tariff application will lower SA’s primary and secondary sectors’ ability to compete internationally. Source EIUG January 2013

Will drive unemployment and impact on SA’s exports and balance of payments

How will SA compare?

Cogeneration & renewable energy

• Combined heat and power

• 40 to 60 % less carbon intense

• Low hanging fruit – waiting since 2012 for Co-gen programme

• Improve ability to sell power to 3rd parties, not only to Eskom

• Encourage projects through tax breaks against clear energy self-sufficiency targets

Challenges to sector competitiveness

• Fibre supply

• Administered pricing –Freight rail, port,

fuel, water use, property rates, and electricity to name some

• Cost of legislation

• 100,000 hectares – BBBEE transformation charter.

• Foreign subsidy for tree growing – Chile, NZ, Brazil, Australia and China cheap fibre AND new pulp on line internationally commodity price pressure job losses (170 000 150 000)

• Recovered Fibre under stress

Collected 1.2 million tonnes, 62% BUT exports increasing, request for export tax

Critical factors for local beneficiation

• Competitive cost position for manufacturing • Creation of local or export market for products • Access to skilled people • Secure and stable inputs (energy, raw materials, chemicals)

– Fibre – Recovered fibre

• Enabling environment from legislation – fast track exemptions & exclusions – Welcome streamlining of EIA process – Not exclude sector from incentives (eg MCEP)

• Partnership business labour government

Improving global competitiveness

• Infrastructure

• Utilities

• Other i. Avoid Additional taxes: e.g. Carbon tax – cost and role,

municipal rate increases, waste water discharge charge system

ii.Land claims: delayed settlements

iii.Less red tape not more.

Improving global competitiveness

Tariff

heading

480256

Australia Brazil China India Malaysia

5% 16% 5% 10% 25%

Based on FOB valuation:

± 5,8% ± 18,4% ± 5,8% ± 11,5% ± 28,8%

• Other major countries (e.g. Australia, Brazil, China, India and Malaysia apply much higher tariffs than South Africa)

Tariff regime in competing countries

Improving global competitiveness

Process Research Unit

• Chemical engineering university graduates.

• Three years. 22 students. 21 MSc research projects.

Shrinking markets - digital. High energy costs. Sourcing raw materials. Climate change.

Innovation. Partner with DST – Sector Innovation funding – await finalisation.

Extracting full benefit of the tree.

Research and development

Research PAMSA has supported 21 MSc research projects since 2010

• Use of mill sludge

• Fibre fractionation

• Fresh water use reduction

• Production of bio-oil from pyrolysis

• Biomass gasification

• Fibre sludge to ethanol

• Lignin to bio-material

• Sugar extraction and use

• Char characterisation

Innovative uses for fibre

Isoprene Char

Bio-oil

Bio-renewable chemicals

Bio-fuels

Iso-butanol

Summary

• Forest product sector – good for ‘SA inc.’ • Timber and paper – both strategic resources • Value add – paper products are an enabler • Carbon benefit/sequestration – carbon tax liability • Give back to communities – settled land claims • Train entrepreneurs – 3000 paper recycling • Circular economy • Assist security of power supply • Develop new products & uses for fibre

Let’s work together on beneficiating

our fibre for a sustainable industry.

Thank you