Analysis of chip quality and value at Norske Skog Pisa Mill, Brazil

Abstract: Norske Skog's pulp and paper mill in Pisa, Brazil, was purchased by Norske Skog in 2000. Norske Skog is a world-leading producer of newsprint and magazine paper, with 18 paper mills around the world. The purpose of this study is to analyse the properties of the chips this mill uses as a raw material, and assess the significance of these properties from a commercial value perspective. The projected production capacity for the Pisa Mill will increase from the current 185 000 tonnes to 385 000 tonnes/ annum when a second production line (PM 2) will be installed from Union in Norway. At present the Norske Skog Mill buys slab wood chips from five sawmills, the mill also produce their own roundwood chips. Pisa Mill is currently using 75 percent roundwood and 25 percent sawmill chips. This study analyses roundwood chips produced at Pisa and from Pisa´s two largest suppliers of sawmill chips. To achieve the purpose of this study, chip samples were collected from three sources. Chip analysis was conducted by mechanical screening equipment (according to SCAN-standards) and an optical scanning machine (on a ScanChip). Chip properties were then assessed using bussiness strategy and cost make or buy concepts. In general the chips from Pisa Mill are short and thin. The sawmill chips have a bigger variation in size compared to the chips Pisa produces for their own consumption. This indicates that the chips from the external suppliers can be improved. And, it is recommended that Norske Skog contunue their dialogue with their suppliers so that the improvements are made. The study has shown that the size distribution of the chips is greater for the chips made of roundwood at Pisa compared to the two additional sawmills being studied. The results from the two sawmills indicate that the sawmill chips can be improved. The chip size distribution from mechanical screening and optical scanning gives variable results. As the difference seems to be the same for all chip sizes, it is independent of which system is being used as long as the method is stated when results are compared. As sawmill chips represent 25 percent of the raw material supply, the quality of this material is of great importance. While the direct costs of the sourced sawmill chips appear to be lower, there are additional direct costs which means that their actual costs are higher. Taking into account the strategic aspects, the company has chosen to buy sawmill chips, there are some benefits of using sawmill chips in their production. The purchasing roll is of great importance when using sawmill chips. From a cost perspective, the price for sawmill chips is lower compared to roundwood chips. Although there are additional costs using the slabwood chip of poorer quality, which has negative effects on the pulp and paper quality. Sawmill chips is a ready-made product, in roundwood chips there are additional costs when producing the chips. Since there have been changes in both sawmill chips and roundwood chips at Norske Skog's mill in Brazil and influence in chip properties, the objective of my thesis is to study the commercial value of these changes and to obtain improved knowledge relating to the relevant characteristics of the wood chips.