Plants in the works
If entrepreneur Dan Warren is successful, more than $100 million will be invested in a new birch LVL plantand co-gen power plantin northwestern Ontario over the next two years.
By Tony Kryzanowski
When Dan Warren purchased the assets of a mothballed particleboard plant in Atikokan, Ontario three years ago and resurrected it as FibraTech Manufacturing Inccreating 130 jobs in the processit brought back a lot of optimism to this fishing and hunting Mecca located an hour west of Thunder Bay. That was only the beginning.
Over the next two years, more than $100 million is slated to be invested in a new co-generation power plant and birch laminated veneer lumber (LVL) plant, creating over 200 additional jobs in an area that has been hard hit by job losses in the forestry sector.
This past June, the Ontario government allocated 165,000 cubic metres of birch located within a two- to three-hour radius of Atikokan to a joint venture company called Superior Laminated Lumber Corp. It consists of Warren and an experienced LVL producer who will act as the operating partner. It already has an established LVL marketing network in North America.
The joint venture company is presently substantiating the fibre basket identified by the Ontario Ministry of Natural Resources, and should the tentative plan proceed as anticipated, construction will begin in the spring, with the first board delivered in spring, 2009. The cost of the project is about $60 million and it will be located on the existing FibraTech plant site in Atikokan.
Warren says that there has been considerable ongoing discussion internally about the potential use of underutilized species since he purchased the particleboard plant. Birch is plentiful, but not harvested to any great degree in the area. What has made the LVL plant concept viable are technological advances in peeling veneer from small diameter logs. The practice is already common in Europe.
“Veneer logs used to have to be a minimum of 12 to 16 inches in diameter,” says Warren. “We anticipate that our average log size in this LVL plant will be seven inches and that there will be a small two-inch core left. We will grind up that two-inch core for particleboard, which we believe will represent 30 to 40 per cent of our raw material needs.”
At present, FibraTech has temporarily traded its round wood allotment from the province for a steady supply of sawdust and wood shavings, primarily from Bowater and Buchanan Lumber. The plant consumes about 120,000 oven dried tonnes of wood residuals per year.
In addition to being less reliant on outside sources for its raw material, Warren anticipates further savings through synergies with the existing fibreboard plant, such as sharing maintenance staff and power facilities, using the same existing rail spur, and warehousing.
Topping off the entire concept is the $55 million being invested in a 10-megawatt co-generation facility that will supply both the fibreboard and LVL plants with their power requirements. Operated by a separate company called Atikokan Power, the plant will also be constructed on the FibraTech site. The co-gen plant will burn wood biomass to generate power, with a substantial amount coming from the sander dust, sawdust, and waste products generated by the particleboard plant. Right now, the particleboard plant operates its own burner and has already reduced its natural gas consumption by 95 per cent, electrical load factor by 37 per cent, and emissions by 70 per cent. The low and high pressure steam generated by the plant will be used to heat the particleboard plant’s wood dryers and press oil.
Essentially, the co-gen plant will take the forest products plants off the provincial power grid and help the entire operation to become even more efficient. It will also give the fibreboard plant the option of taking back its round wood allotment and grinding a portion of its raw material, if economic conditions favour taking that direction.
The particleboard plant’s green line is currently not being operated but can be re-commissioned if need be. “Our plan to have a totally integrated operation is really the way to go,” says Warren. The co-gen plant will also sell power to Ontario’s Hydro One. Another 25 full time jobs will be created once it is operational.
Not only does the technology now exist to peel small diameter logs, but the joint venture group has already done considerable research and development on the particular attributes of birch veneer.
“The birch veneer is quite exciting to our partner because of the initial results,” Warren says. “We actually cut birch here in Northern Ontario, peeled it, dried it, and sent it to their facility. They laid it up and got better results on this product than they are getting on LVL from Douglas fir.” That means the company will be able to potentially sell the product at a higher price to users of premium LVL products. Unlike many other forest products, LVL generally is a growth product due to its ability to substitute for large solid wood products used in structural applications that are becoming harder to find and more expensive to buy.
“We intend to market our products where you would traditionally use light steel or solid wood products in the range of 2x12s to 2x16s,” Warren says. Applications include door headers, top headers on walls, structural floor products and door framing. This could work out particularly well for FibraTech, as the particleboard plant already manufactures door cores. Combining the two door elements will result in a higher value product.
There is no doubt that diversifying the forest product mix manufactured and shipped from the FibraTech site will bring a greater measure of overall stability to the operation, says Warren. “It’s another addition to our product line and it is a higher value product,” he says. “It’s a very exciting product for us because it is something completely different and a little out of the ordinary, which we like.” Warren brings an impressive resumé not only to the ownership of FibraTech, but also to this new birch LVL plant venture. While he says he’s enjoyed his share of recreationhunting and fishingwhile growing up in Atikokan, he had already purchased and was renting out two homes in Atitkokan as a teenager.
Warren was just a born entrepreneur. He started out in the industry working for 16 years at Proboard, then moved on to establish the sales and marketing department for a new particleboard plant in Quebec. He then spent five years at Canpar Industries in Grand Forks, BC, followed by managing a particleboard plant for MacMillan Bloedel (MB) in Vancouver. MB was later purchased by Weyerhaeuser.
He finally struck out on his own and started his own forest products distribution company in Vancouver. When Proboard went into receivership, the opportunity arose for him to purchase a plant in his old hometown.
Given the wealth of knowledge and experience he had accumulated, fueled by his entrepreneurial spirit, Warren felt it was time to kick it up a notch. It took a year longer than he had hoped to gather all the financing needed to purchase the plant, but it finally came together. Funding was finally secured by a combination of the Northern Lights Credit Union and the Credit Union of Ontario.
Many Proboard employees got their jobs back, while the plant has been running with an expanded product line and much more efficiently over the past three years. For example, the whole log chipping area has been idled, with shavings transported from area sawmills and conveyed directly into the plant. FibreTech has also switched from primarily hardwood to softwood furnish. Since purchasing the particleboard plant, Warren says he’s invested about $15 million into the operation. This has been spent primarily on new value adding equipment such as a Giben angular cutto- size plant, as well as an energy plant, high efficiency truck dump, a new press roll, automation of the sander outfeed system and automatic strapping. “Our per hour production is up substantially and we’ve cut costs by $8 million per year,” says Warren. “But we have a long way to go.”
The particleboard plant production is smallerat 100 million square feet per year on a 5/8ths inch basisbut its three production lines make it extremely versatile. It manufactures high-end industrial particleboard used in highend office manufacturing, cut-to-size products, run of the mill industrial particleboard for the kitchen cabinet and furniture sector such as IKEA, plywood cores, specialty underlay, water resistant products, door cores, and lock blocks for door cores. The expanded product line has allowed the company to broaden its market from primarily the American Midwest to the entire United States and Canada.
“We try to add value and not compete with the big plants that strictly run a couple of different sizes in commodity type products,” says Warren.
Cost cutting and the desire to capture as much value as possible is paramount in the minds of all particleboard producers at present, he adds, because of the competitive impact their customers are feeling, primarily from China.
“The Chinese influence in the US and Canada in the furniture industry has hurt our customers badly,” he says.
The downswing in the American housing market and high exchange rate are not helping the situation either. The original business plan when Warren purchased the plant predicted the highest exchange rate at $0.80 Canadian to the American dollar. It is now, of course, above the American dollar.
So construction of the LVL plant couldn’t occur at a better time to secure the overall future of jobs in the forestry sector in this part of northwestern Ontario.