Fortress says that it is disappointed by MOFCOM's preliminary decision, and believes the decision represents an unsupported assessment of injury to China's dissolving pulp market and the allegations of "dumping" activities by Canadian producers. MOFCOM's interim duty, Fortress noted, will materially harm the business of Chinese viscose fiber producers, which is a significant domestic industry.
Fortress points out that, as set forth in the report China's Antidumping Investigations against Cellulose Pulp by Canadian economist Michael Stone, changes in the price for dissolving pulp have largely been driven by factors such as the price of cotton and a globally weak textile fibers market. Furthermore, cost of wood fiber, it adds, is the largest single input cost in dissolving pulp production, which places Chinese producers at a disadvantage due to their need to import fiber and not as a result of any alleged dumping activities by foreign dissolving pulp producers.
According to Fortress, the duty imposed by MOFCOM will be ineffective in reducing wood fiber costs for Chinese producers, and may end up causing significant harm to China's viscose fiber producers. The complete text of Stone's report is available on Fortress Paper's website under the heading "Investor Relations."
Chadwick Wasilenkoff, CEO of Fortress Paper, says that "this is a challenging time for Fortress Paper, but we have prepared for this eventuality and have implemented a strategy that should mitigate the short-term adverse effects of MOFCOM's preliminary determination. We wholly disagree with MOFCOM's conclusion that Canadian dissolving pulp producers are dumping exports into China and have expressed this view to MOFCOM in the strongest manner. As a response, we are assessing our legal options and will be working with the Canadian government to have this determination reviewed by the WTO."
In part to mitigate adverse effects of the dissolving pulp duty, Fortress reconfirms that it has the ability to implement a "swing mill" strategy at its FSC Mill. The company intends to enter into agreements to provide customers with regular volumes of northern bleached hardwood kraft (NBHK) pulp, including specialty maple NBHK pulp. The FSC Mill's commitment to providing customers with regular volumes will allow the company to secure better purchase orders for its NBHK pulp.
The FSC Mill, Fortress continues, will be able to lower its cost structure accordingly and achieve a capacity increase of approximately 25% when redirecting production from dissolving pulp to NBHK pulp and specialty non-paper grade pulps.
TAPPI
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