Monday, November 23, 2015

Chinese plan $1.36 billion pulp mill in South Arkansas; incentives not yet known

Posted By on Mon, Nov 23, 2015 at 5:55 AM

click to enlarge CHINA DEAL: At signing of letter of intent.
  • CHINA DEAL: At signing of letter of intent.
A Chinese paper company, Shandong Sun Paper,says it will build a mill in Arkansas to process pulp wood into material for diapers and other sanitary products.

Reuters said the $1.36 billion facility would begin with construction in 2016, with completion by 2018.

The announcement came at a ceremony Friday attended by Gov. Asa Hutchinson, who's been on a trade mission to China, and Obama administration commerce officials. The FDA has approved a production plan at the proposed mill.

The project has been under study since at least 2012. Gov. Mike Beebe went to China that year and state development officials later said they were compiling information for Shan Dong Sun Paper to build a plant in the vicinity of Camden or Arkadelphia.  In early 2013, news articles about the possibility said such a plant could create 350 jobs.

This would be a nice boost, both in construction and ongoing jobs.

Some points worth considering:

* Will Arkansas, one of the poorest states in the country, provide low-cost loans or even direct grants to a company from the enormous (communist) Chinese economy?

* Don't forget one of the chief reasons a company would want to build a pulp mill in Arkansas, besides the warm personalities of Mike Beebe and Asa Hutchinson and a proven supply of experienced timber industry workers.  We have millions of acres of pulpwood ready to grind into diaper stuffing. It's cheaper to mill it near where it's cut.

Said Reuters:

The investment by the northern China-based company is the latest in a slew of deals by Chinese manufacturers looking to diversify their operations and take advantage of initiatives and rebates in western countries.

Shandong Tranlin Paper Co Ltd invested $2 billion in a paper and fertilizer plant in Virginia last year. 

Sun Paper declined to give details on its financing of the project, although sources said the company is likely to involve a combination of equity and debt


I wish the former Georgia-Pacific accountant, the late Howard Goggans, was around to do one of his sharp analyses of why the forest industry doesn't need new corporate welfare to locate in Arkansas.

Arkansas Business wrote in early 2013:

A company called Sun Paper — specifically Shandong Sun Paper Industry — plans to invest about $1 billion in building a plant employing 350 in one of those two south Arkansas towns for the purpose of producing paper pulp to be exported back to China.

The smart money seems to be betting on Camden, with its abandoned International Paper Co. site and bountiful surface water supply. In a feature published last summer, trade journal Pulp & Paper International noted that Sun Paper “has a dynamic joint venture with global giant International Paper producing high quality ivory board for liquids and food packaging as well as a lucrative and growing dissolving pulp division.”

But Arkadelphia, unlike Camden, has interstate access.

Updating the item in 2014, Arkansas Business said Crossett had been added to sites vying for the plant.

Reporting in China said the mill would produce 700,000 tons per year and that a third party will be hired to work on investment matters, location and environmental approval. But the letter that was signed also noted that Arkansas " will be responsible for implementing incentives for the project, including preferential tax policies and other policy supports, before May 1, 2016."

FYI: The Koch brothers once owned thousands and thousands of acres of Arkansas forest land through Georgia-Pacific, all of it taxed at pennies per acre thanks to industry-friendly property tax rates, which help hold down the cost of the raw material. We also extend enormous investment tax credits to industries that build here.  It happens, of late, that Arkansas has been growing a timber surplus, too. CORRECTION IN ORIGINAL POST: G-P spun off timber  properties to Plum Creek, which has merged with Weyerhaeuser, but it retains a long-term timber supply contract with Plum Creek.

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