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Going To Romania - Mill Profile

By By Paul MacDonald

Tenneco found that building a $60 million (US) mill complex in Romania in Eastern Europe brought its own challenges. Canadian consultants assisted on the project.

I t’s a long way from Prince Rupert to Romania, but that’s where Canadian sawmilling equipment from the BC coastal city is currently labouring away, a small part of a huge $60-million (US) mill complex recently built by US-based corporate giant Tenneco. In addition to the Canadian equipment, Canadian consultants also played a major role in the outfitting and construction of the Tenneco mill at Buchin, Romania. “We had a good number of Canadians who worked on this project and helped us pull it all together,” says Shawn Kelly, general manager of the massive manufacturing complex, one of the largest wood manufacturing facilities in Europe. Kelly himself is a Canadian, from Rouyn /Noranda, Quebec. Over the years, he has worked on mill startups in North America, South America and Europe. Of the startup management team of 20 North Americans at the Romanian mill, 16 were Canadians, many of them drawn from British Columbia. “I didn’t know most of them, but had heard of them through word-of-mouth,” says Kelly. The Prince Rupert connection comes in the form of the former Wedeene River sawmill, which shut down several years ago, located just outside the city. West Fraser Timber had since bought this small log operation, but was interested in the site rather than its mill. Tenneco was able to source the Wedeene River mill equipment through Vancouver-based Canadian Mill Equipment Sales, a division of Gillespie Sales. Canadian Mill Equipment also assisted with the purchase of large log line equipment from another operation in California. Both lines are now at work at the Romanian operation. “The philosophy was to build an operation around a small and large log line, with the flexibility to produce a variety of products. This equipment fit our needs,” says Kelly. At the same time Tenneco was gathering used sawmill equipment in North America, Kelly and his colleagues were also busy building what would turn out to be one of the largest manufacturing facilities in Romania. It was hardly an easy task, since they faced working within the creaky infra-structure of a former communist country. From the start, the company knew that it would face problems in getting even the most basic building supplies and equipment locally, and planned accordingly.


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Tenneco’s massive complex in Buchin, Romania is one of the largest wood manufacturing facilities in Europe
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It includes equipment from a now shuttered small log mill in British Columbia and large log line equipment from California.

They had to import pretty much all their construction equipment, which did not prove difficult since they were able to obtain a good deal of it through Case Equipment, which at the time was owned by Tenneco. “We had to bring pretty well everything with us,” says Kelly, talking about the construction start on the 44-acre site. “From the big equipment right down to the nuts and bolts.” Long before they were taking in timber at the mill, they had to do some logging of their own to clear the site. They brought their own Husqvarna chainsaws, Timberjack skidders and Volvo logging trucks to achieve the task. LOGGING & SAWMILLING JOURNAL • October 1999 • 23 to page 25 F or Canadian companies faced with restraints on the amount of timber available, and hence growth, overseas ventures can look awfully attractive. “The only advice I can strongly give is to get in there and know the country,” says Tenneco’s Shawn Kelly, general manager of the company’s mill in Romania, who has had a career of mill startups in many parts of the world. “Make the effort and investigate what is there.” Kelly did exactly that in Romania, spending four months driving 10,000 kilometres around the different regions in advance of Tenneco’s commitment to building a mill in the eastern European country. “The hardest part for us in Romania was the bureaucracy of people trying to interfere with what we were doing,” he says. “With their history, any kind of uniform, whether it’s the guy on the railway or the police, is a fright for every citizen in this country because of the communist background.”

A request or even a demand for a bribe sometimes accompanies the uniform, he warns. There remain tremendous opportunities for forest companies and Canadian equipment companies looking to do business overseas, however. Ron Gillespie of Canadian Mill Equipment Sales in Vancouver, which sourced sawmill equipment for Tenneco, has sold sawmill equipment into Eastern Europe, Russia, the Pacific Rim countries and South America. “ I think there are huge opportunities for Canadian companies in different parts of the world,” he says. “Canadians can bring all kinds of expertise to a project.” Gillespie pointed to countries such as Romania, Hungary, the Ukraine and Russia, the latter home to a huge timber resource. “There is as much timber in Russia as there is in all of North America. And the mills that are handling the wood there are 30 or 40 years behind in technology.” He said Canadian companies have to work hard at developing contacts and markets in Russia. The Swedes and Germans, who are also keen to do business in Russia, have a geographical advantage in that they are so much closer. But Gillespie notes that overseas projects still represent risks. “A forest company could invest millions of dollars in Russia, only to see Boris Yeltsin get thrown out and that investment may not be recognized by the new government. It’s a bit like rolling the dice on an investment, but the returns can be substantial.” Substantial, but not through the roof. “A company might be able to make a return of 20 per cent versus a return of five per cent in North America,” he says. “If a company goes over there thinking they are going to make 100 times the profit they are making in North America, that’s foolish. That’s not going to happen.” Labour will be cheaper, as will timber. “But you will have other challenges that will increase the cost of doing business. It’s not going to be as efficient, production is not going to be as high.” As with any other project, the devil can be in the details, such as power supply. Gillespie noted that Tenneco’s Romania project included diesel generators as backup power for the mill. “Power supply in Romania can be inconsistent,” he says. “It can stop and you might not be sure if you are going to get power back in five minutes or five days.” Interested in overseas work? Do your homework.

T he numbers for Tenneco’s operation in Buchin, Romania are impressive even by North American standards—the main sawmill building alone is a massive 45,000 square feet. Much of the used sawmill equipment for the mill was purchased in British Columbia and the United States. It was refurbished, with the company and suppliers building much of the associated conveyors and handling equipment on site. Prince George, BC-based Woodpro Engineering did the mechanical and structural work for the project. While the company has done work for projects in New Zealand and China, this was its first in eastern Europe. “There were a lot of hurdles to pull it all together,” says company president John Rasmussen. “But it was an exciting project, with lots of different aspects to it.” The $60-million (US) operation in Romania has three main components—the sawmill, reman plant, and veneer plant. Sawmill “A” is equipped with an L-M deck chain saw, a 158-centimetre diameter Brunette ring debarker and an Albany eight-foot headrig with a three-knee carriage, complete with Inovec scanning, that takes up to a 150-centimetre diameter log. This is followed by a Powell gang edger and block edger and a Powell board edger. The “B” line has a swing cut off saw, a VK 800 84-centimetre diameter ring debarker, an A K Eriksson 1600 quad band saw and includes a Schrurman edger and Powell board edger.

This line takes the custom cut lumber with wane, about 200 cubic metres of it on an average day, and square edges it. It includes an extensive Valley trimmer system and two Flare Machinery 48 inch resaws. Lumber is produced in thicknesses up to 150 millimetres, widths up to 300 millimetres and lengths up to three metres. The operation has 10 Nardi dry kilns, each with a capacity of 250 cubic metres, with boilers on site using waste wood to produce steam. The reman plant, adjacent to the sawmill, is 1,200 feet long by 150 feet wide. It has a production capacity of 12,000 cubic metres of laminated hardwood panels and 7,000 cubic metres of hardwood flooring per year. It is equipped with six Weinig moulding machines, two RF presses, two Industrial Woodworking finger joiners, two fully automatic SCM panel saws and two Comil shrink wrap machines. The veneer plant, built on the end of the reman plant, is 275 feet long by 150 feet wide and has a capacity of 2,900 cubic metres per year. The veneer plant started with one Marunaka slicer and recently took delivery of a second unit. Servicing all this equipment is a 9,000 square feet maintenance shop. “We’re very proud of our complex and what we’ve been able to accomplish,” says Shawn Kelly, the operation’s general manager. “I don’t think there is a complex this large anywhere else in Europe.” Tenneco Mill is a Massive Deal.

Even the food for the on-site cafeteria, which served the construction crew and is now used by mill employees, had to be trucked in by reefer truck from Belgium and France. “There wasn’t anything avail-able locally. It’s not like there was some-thing like a Loblaw’s or Safeway down the road.” Another challenge the company faced was, to put it mildly, the unusual business practices that still linger in some parts of former communist countries. Tenneco was dead-set against meeting the demands of officials who insinuated the wheels of the project could be greased through bribes, a not uncommon occurrence in the former communist countries of eastern Europe. “We imported $54 million of equipment without a single bribe being paid,” says Kelly. “We wanted to do things right”. Tenneco made sure that the proper approvals and permits for the project were obtained. “When we came here, people put pressure on us from the beginning.

We did not know what their positions were and quite frankly, I couldn’t give a damn. We’re here to build a mill using a North American system and with North American safety. “We just carried on and built the project. To have to wait for the OK of every individual who approached us, whether they were a government official or not, we would have never been able to do what we have done. If that’s called being a bull in a china shop, so be it. That’s what it took to get the job done.” That said, the company made the effort to build up a great deal of local goodwill, rebuilding the infants ward at the local hospital, providing food baskets for families at Christmas and healthy bonuses for employees. In fact, the mill has its own Romanian registered hospital on site, equipped with North American equipment and staffed with a doctor and three nurses. Right from the start, they also paid higher than average wages, three times the local average wage, in fact. “We didn’t want anyone pointing fingers at us for coming and trying to take advantage and paying low wages to our employees.” They also pay their logging contractors promptly. “This was appreciated in a country where some of the loggers in the past were paid 10 per cent down, with the rest in six months, nine months or not at all,” says Kelly. But in terms of support from government, well, forget it.   “To have to wait for the OK of every individual who approached us, whether they were a government official or not, we would have never been able to do what we have done. If that’s called being a bull in a china shop, so be it. That’s what it took to get the job done.

The government did not do one damn thing for us,” says Kelly. Almost a year to the day, after a lot of fast-track, 24-hour-a-day construction, the reman plant was up and operating— using locally-sourced lumber for feed-stock on an interim basis—and the main sawmill started shortly thereafter in 1998. “People who visit our operation can’t believe what we took on and that we were able to build it in such a short period of time.” The end result is a huge manufacturing facility, approximately 235,000 square feet, with 850 employees that operates 24 hours a day on a three-shift basis producing hardwood lumber, edge-glued panels, flooring and veneer for European markets and beyond. Kelly is extremely enthusiastic about the wood supply for the mill, which is predominantly beech. “Romanian beech is acknowledged to be among the best in the world,” he says. “Not only for its white colour but for its excellent fibre structure. The quality of the wood itself steered us to doing a hardwood opera-tion from the start.” The overall wood supply also led Tenneco to set up a hardwood operation. “It’s 75 per cent hardwood and 25 per cent softwood in the region around our plant. Add to that, mathematics alone tells you it takes far less cubic metres of hardwood to make money than softwood. To generate the same kind of income with softwood, we would probably require four or five times the volume.” In addition to the beech, the mill also produces a limited amount of product from maple, cherry and white oak. There is a huge potential in the local wood basket.

There is an official annu-al allowable cut of 14 million cubic metres a year. Currently, only seven mil-lion cubic metres is being logged, and four million of that is used for firewood. The Tenneco operation will use 240,000 cubic metres of wood this year, most of it hauled in by rail during the main logging season between January and May. An average of 43 rail cars of logs a day arrive at the mill. The balance, about 10 per cent, is brought in by truck. Reflecting the global nature of the for-est products business, their markets are literally all over the globe. They are cur-rently shipping about 3,550 cubic metres of product a month, 2,500 of that in lum-ber, 900 in fingerjointed panels and 150 in veneer production. The market for lumber includes Korea, Taiwan and the European countries. The fingerjoint panel material goes mostly to Demark, Germany and Britain. “We’ve become a bit of a showcase plant because of what we’ve been able to do in terms of building a large North American-style plant and running it in a North American-way,” says Kelly. But they are in the business of running a mill producing quality product, not in simply being a stop for dignitaries on some Romanian industrial tour. “We’ve now become a big player in the world of hardwoods,” he says, noting that their product follows National Hardwood standards. Even though the plant is operating smoothly, Kelly says there is still some tweaking to be done, and it’s not all on the equipment side. The North American management team is facing some diffi-culties in getting Romanian managers to take responsibility and make decisions, a clear hangover from the communist era when making the wrong decision— in some cases—could cost your life. But he notes that the mill has a young workforce, with only vague memories of the communist regime and its asso-ciated unproductive workplace practices and heavy-handed bureaucracies that stood for decades. “For us as a management team, it’s not just getting the building up and get-ting the machinery going in the mill. Some day, the Romanian management will be taking over from us, the North American managers. We want to be able to leave and know that we’ve got people trained to make decisions, and to make the right decisions.”

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