FGE.to - Fortress Paper (formerly FTP.to)

[OptsyEagle]

To people closer to the story it is probably good news but from a headline point of view it sounds as if Fortress Paper is in some kind of financial difficulty.

 

Not really sure why management asks for these deferrals.  Probably because they can and it makes the cash burn rate look a little better.  Obviously they would have had no problem making the payment.

[alertmeipp]

I wanted to post a April fool post saying the tariff has eliminated to zero but decided not to, it would be too cruel to you guys, right?!

 

Cheers!

[triedtestedand]

Chad's where he needs to be right now ... in Beijing.

 

http://www.businessweek.com/videos/2014-04-01/fortress-paper-ceo-says-banknote-use-still-growing

[alertmeipp]

Chad's where he needs to be right now ... in Beijing.

 

http://www.businessweek.com/videos/2014-04-01/fortress-paper-ceo-says-banknote-use-still-growing

 

Will be nice if I can read his body language!

 

[obtuse_investor]

China's Ministry of Commerce Announces Final Determination in Anti-Dumping Investigation (ccnm)

 

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 4, 2014) - Fortress Paper Ltd. ("Fortress Paper" or the "Company") (TSX:FTP) reported today that China's Ministry of Commerce ("MOFCOM") has rendered its final determination in its anti-dumping investigation on the importing to China of cellulose pulp originating from Canada, the United States and Brazil. The final duty imposed by MOFCOM on dissolving pulp imports from the Company's wholly owned subsidiary, Fortress Specialty Cellulose Ltd. ("FSC"), remained unchanged from the previously announced interim duty of 13%.

 

The final duty imposed by MOFCOM on dissolving pulp imports from all other unnamed current or future Canadian dissolving pulp producers, which would include the Company's Fortress Global Cellulose Mill (the "FGC Mill"), was reduced to 23.7%. Despite the reduction, such duty materially impacts the economic viability of converting the FGC Mill to a dissolving pulp mill. Accordingly, the Company is currently evaluating strategic alternatives for the mill.

[phil_Buffett]

China's Ministry of Commerce Announces Final Determination in Anti-Dumping Investigation (ccnm)

 

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 4, 2014) - Fortress Paper Ltd. ("Fortress Paper" or the "Company") (TSX:FTP) reported today that China's Ministry of Commerce ("MOFCOM") has rendered its final determination in its anti-dumping investigation on the importing to China of cellulose pulp originating from Canada, the United States and Brazil. The final duty imposed by MOFCOM on dissolving pulp imports from the Company's wholly owned subsidiary, Fortress Specialty Cellulose Ltd. ("FSC"), remained unchanged from the previously announced interim duty of 13%.

 

The final duty imposed by MOFCOM on dissolving pulp imports from all other unnamed current or future Canadian dissolving pulp producers, which would include the Company's Fortress Global Cellulose Mill (the "FGC Mill"), was reduced to 23.7%. Despite the reduction, such duty materially impacts the economic viability of converting the FGC Mill to a dissolving pulp mill. Accordingly, the Company is currently evaluating strategic alternatives for the mill.

 

so unchanged is not good News or?

 

the positive is the second rate is reduced do 23%. but the unchanged 13% is not good or?

[jeffmori7]

And what would be the justification of this decision, how the Chinese defend their view?

[alertmeipp]

That's disappointing. But thank God the Chinese didn't jack it up. I am sure some of us were worrying about that. FGC will be tricky now. 

 

I guess back to waiting mode. No more double digit pps short term.

 

[sculpin]

There is no justifiable reason for the Chinese to impose this duty. Corruption and payoffs into the hands of the right official is what has led to this duty. One of the many reasons (Sino Forest, Hangfeng etc etc) I will never invest in a Chinese company and will be very careful investing in any industry China can overtly influence.

[alertmeipp]

I guess no one was really betting on it getting reversed. I was ready to buy if this tanks. I think this company is cheap at this price even with 13 percent sticked.  I saw some textile export data, the demand is there.

[triedtestedand]

5 years ... that would take as long as a WTO review anyway ...

 

http://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.mofcom.gov.cn%2Farticle%2Fb%2Fe%2F201404%2F20140400539841.shtml&edit-text=

 

So, what are options, if any?

 

-> Try and sell DP to Lenzing or Birla directly (i.e. non-Chinese VSF producers)?

-> Sell the plant to SAPPI and do more of what they are doing with their Cloquet plant, which is redirecting that output to non Chinese customers, and targeting more of their S. African DP output to China.

-> Do something creative with Birla, who are converting Terrace Bay to DP ... maybe saving Birla a schwack of CAPEX before they go too far down that road?

-> Get a Chinese VSF operator to set up shop in Quebec (with low hydro rates etc.), and do similar to cotton market ... where cotton yarn producers are selling more into China, as there is no duty on it (vs import restrictions on cotton)

 

Others?

 

 

[alertmeipp]

Just sit and hope the market will turn while improving the efficiency. This plant worthes a lot more to a company with strong balance sheet so selling make sense. Net debt on it is about 100m? If they can get 150m. That 50m equity value. The market is not giving any option value to Thurso.

[OptsyEagle]

They just never seem to be able to catch a break.  I would say LSQ can be pronounced dead.  If Fortress Paper is struggling to break even with a 13% duty, I can't see them or anyone else moving forward with that conversion, with a 23.7% duty.

 

I am surprised that dissolving pulp prices are still trending in a downward direction.  You would think a few other companies would take some shut down time, or swing to another product, like Thurso did and that would give support for the commodity price.

 

Anyway, this stock is pretty much at the mercy of the commodity price.

[obtuse_investor]

What hurdles, if any, are there for fortress to wind down or dispose of LSQ?

 

I understand that there is a 2.5m$ fee in the event LSQ is dismantled.

[Otsog]

And what would be the justification of this decision, how the Chinese defend their view?

 

Trying to parse through the google translation.  It looks like China just flat out rejected the current cost figures for 2013 including labeling all benefits from cogen as theoretical and speculative and that power production operations were not linked to pulp operations.  Their decision was based on 2012 costs, information related to the period of inquiry when FSC was less efficient

 

Investigating authorities to review the company's production costs and expenses. The company reported a breakdown of the cost of production in the answer-dumping investigation period, and includes direct materials, direct labor, fuel and power sharing as well as manufacturing costs. Company argued that its factories throughout the survey period are in the production phase, the plant is usually not representative of the expected cost structure and operating performance, and should therefore be excluded from any cost analysis in this survey. In addition, the company in the survey period, the cost of which is relatively month most cost structure in line with expectations, but the capacity to enhance the various stages of the existence of the problem makes this operation can not be sustained.

 

The applicant submitted in its "pulp Fortes anti-dumping case against the applicant company requested the investigating authorities do not consider their comments relevant data" in the proposition, Fortes company for its "period and the run-in period starting from 2012 in a month continued to 9 months, production operations and cost structure is unstable, "the proposition does not provide any relevant evidence to prove the existence of the claimed authenticity larger problem. Even consider dumping investigation of the case most of the time Neifutesi's pulp production in the initial period and the run-in period, and the cost structure of its production run unstable pulp, but that does not mean that the investigating authorities in the calculation of dumping margins can does not consider the relevant data. Applicants urge the relevant investigating authorities dismiss these claims and requests Fortes companies.

 

Investigating authorities believe that the cost shall normally be investigated exporters or producers based on records kept by calculation, as long as such records comply with generally accepted accounting principles of the exporting country and reasonably reflect the requirements of the product under investigation and the related production of similar products and cost of sales. Fortes company for production of ideas, investigating authorities found that the cost of data-dumping investigation period last quarter, reflects both the cost Fortes company objective situation, but also the cost of investigating authorities in the recent survey can be reasonably considered Fortes company can be used to determine the reasonableness of the cost of production. In the preliminary investigation authorities temporarily using the company in the last quarter of the cost of production in the dumping investigation period, sales expenses, administrative expenses, financial and other data to calculate the cost structure of the normal value. Fortes company claims Canadian pulp market, the domestic market does not exist, the investigating authorities in the calculation of normal value temporary structures using supplemental questionnaire responses in Fortes reported in Canadian companies in the same industry products in the same category of products under investigation in the supplemental questionnaire responses The average profit margin.

 

On before and after production costs, preliminary final ruling, submitted comments that it should be able to reach our goal of profitability in a month is the month, and the Fortes thermal power plant began operations in this month, reducing the power plant operators The company's production costs. Advocate the use of the company derived from the plant this month as the most representative of the cost of the month to calculate the normal value.

 

Applicants submit comments that this, operation of the initial stage should be produced, and devices using the output of peak judgment is not started commercial production standards. In addition, power plant operators are additional facilities pulp production plant, its operations or not the device is in its pulp production period are not necessarily linked. Therefore, please investigating authorities dismissed corporate claims.

 

Further investigation found that the investigating authorities, the target capacity utilization is only theoretical and speculative value, not the production of the main criteria for judging, in addition, the necessary equipment for thermal power plant is not stable operation of the pulp production facilities, but also can not serve as the basis for judging the production phase.

 

First, the investigating authorities noted that the company's use of 2012 before the preliminary cost of one month argued that the cost of most of the month of relative cost structure in line with expectations. During and after the preliminary field verification, the company made ​​a new assertion that in 2013 the cost was more representative of a month. Investigating authorities believe, from the evidence before the material submitted by the company and the company claims, the company did not submit sufficient evidence to justify the cost of a month which is more representative.

 

Second, the cost shall normally be investigated exporters or producers based on records kept by the calculation, the investigating authorities derived from the company's 2013 annual cost of one month is not to be accepted.

 

Third, the investigating authorities deemed cost data preliminary dumping investigation of last quarter, the company Fortes objective reality is the cost of the case. As the company said, including 2012 in 10 months, including the last quarter of the company's capacity utilization reached an acceptable level of production companies, the use of the quarterly production data is reasonable representative.

 

Based on the above analysis, in the final ruling, the investigating authorities decided to maintain the preliminary decision to investigate the structure of the average cost of the last quarter of the normal value.

[alertmeipp]

This is nice BS. How they justify their #s on new plants then?

Agree, we need DP price to recover to make Thurso money worth. Can't believe 220m+ was sank in for it and it can't even make a dime for us.

 

Hope the other side of business keeping chugging along.

[triedtestedand]

Chad had a few tidbits to BIV magazine about LSQ:

 

http://www.canadianbiomassmagazine.ca/content/view/4146/63/

 

- Wonder how viable energy generation / wood pellet option is ... obviously there's a cogen plant there ... could it be viable by itself and/or with wood pellets?

- On pellet side, looks like some promising development for a company called Rentech refurbishing some plant in Wawa.  Don't know the economics though:

        http://www.canadianbiomassmagazine.ca/content/view/4146/63/

 

 

[colinwalt]

Chad had a few tidbits to BIV magazine about LSQ:

 

http://www.canadianbiomassmagazine.ca/content/view/4146/63/

 

- Wonder how viable energy generation / wood pellet option is ... obviously there's a cogen plant there ... could it be viable by itself and/or with wood pellets?

- On pellet side, looks like some promising development for a company called Rentech refurbishing some plant in Wawa.  Don't know the economics though:

        http://www.canadianbiomassmagazine.ca/content/view/4146/63/

 

I think the first link should have been this: http://www.biv.com/article/20140404/BIV0105/140409970/vancouvers-fortress-paper-very-disappointed-with-chinas-pulp-duty

[OptsyEagle]

I would be interested in their reasons why, a company that has never ever produced dissolving pulp, requires an anti-dumping duty of 23.7%.  Pretty exact number for a company that has no numbers.

 

 

[alertmeipp]

50 percent is dead for sure. But at 23, there is a very slight chance they can find a partner especially if Quebec gov gives enough incentive. R lsq has lower cost. But for sure no one will put in 300m to convert given the current econ. But if they can somehow get a larger loan with very long payment terms that is non recourse.  Finding a partner is possible but not likely

[OptsyEagle]

You're forever the optimist Alertmiep.

 

All I can say is this would be a perfect time for a really big devastating fire.  Would the insurance company actually write Fortress Paper a cheque for $850 Million.  That would be so sweet, as long as no one got hurt ... well except for the insurance company.  I can live with that.  lol.

[alertmeipp]

i am not, otherwise, i will make this a much larger position. But i still might.

[triedtestedand]

r.e. LSQ ...  I think they (presuming support fm Quebec govt) have some shot at one/multiple of:

 

a) enticing a VSF player to Quebec (guaranteeing a proxminal market)

b) energy generation

c) wood pellet

d) fluff pulp (seeing if Paper Excellence can break non-compete w Domtar, and can make good fluff w softwood)

e) selling plant to non-China VSF producer (or to DP producer w non-Chinese customers)

f) selling for scrap?

g) other?

 

There's no way I would proceed with that 23% tariff to build more DP capacity for China.

 

 

[obtuse_investor]

r.e. LSQ ...  I think they (presuming support fm Quebec govt) have some shot at one/multiple of:

 

a) enticing a VSF player to Quebec (guaranteeing a proxminal market)

b) energy generation

c) wood pellet

d) fluff pulp (seeing if Paper Excellence can break non-compete w Domtar, and can make good fluff w softwood)

e) selling plant to non-China VSF producer (or to DP producer w non-Chinese customers)

f) selling for scrap?

g) other?

 

There's no way I would proceed with that 23% tariff to build more DP capacity for China.

 

I think a direct question about future of LSQ would be worth asking at the next conference call. Last conference call was way too light on questions.

[lessthaniv]

I would be interested in their reasons why, a company that has never ever produced dissolving pulp, requires an anti-dumping duty of 23.7%.  Pretty exact number for a company that has no numbers.

 

Probably because $880/mt + 23.7% is a proxy for the costs of the average Chinese producer. In other words, no new supply to China unless it's at a price that keeps the Chinese mills in the black.