Chinese sign on to build in state

Firm announces $1.36B pulp mill

A publicly traded Chinese company wants to build a $1.36 billion pulp mill in south Arkansas, the governor's office said Monday.

Details of the plan also were included in a letter of intent signed Friday by Shandong Sun Paper Industry Joint Stock Co. and the Arkansas Economic Development Commission. The Chinese firm announced its plan in a stock exchange disclosure Monday.

Sun Paper, which employs more than 10,000 workers worldwide, said in the stock disclosure that it would hire "necessary third parties to help with investment matters, such as choosing the location of the pulp mill and gaining environmental approval."

Southern Arkansas has at least 7 million tons of surplus timber growth every year, said Matthew Pelkki, a professor and holder of the George H. Clippert Endowed Chair of Forest Economics at the University of Arkansas at Monticello.

"That has been the case for years," Pelkki said. "In the last 10 years, it has built up to 75 million tons [of available timber] plus the 7 million tons a year."

Several Asian firms have considered locating in Arkansas in recent years, Pelkki said. He speculated earlier this month that a Chinese company could buy a south Arkansas forest products company.

The production capacity for the Arkansas pulp mill would be 700,000 tons a year, Sun Paper said. That means the mill would need to harvest about 3 million tons of timber a year to produce 700,000 tons of pulp, Pelkki said.

The investment is subject to changes since the document signed by the state and Sun Paper "speaks only to intent and a time frame for feasibility studies," the disclosure said.

Arkansas will be responsible for proposing incentives for the project, including preferential tax policies and other policy supports before May 1, according to the stock exchange disclosure.

Gov. Asa Hutchinson; Mike Preston, executive director of the Arkansas commission; and Li Hongxin, chairman of Sun Paper, signed the letter of intent on Friday in China, but Scott Hardin, a spokesman for the commission, said Monday that he was surprised the company had made the announcement about plans for a mill in Arkansas so quickly.

In the Friday agreement, Sun Paper "basically was committing to look at investing in North America in 2016," Hardin said. "This wasn't a commitment to Arkansas, but they said they would be focusing in on Arkansas."

The Arkansas contingent is scheduled to return to the state today.

"This is another great example of how important these trade missions are in marketing Arkansas to the rest of the world," Hutchinson said in the statement. "Our time with Sun Paper in China was invaluable as we learned more specifics of the company's plans for the next several months."

Arkansas has been working to attract a Chinese company for a large project for several years.

After a trip to China in 2012, former Gov. Mike Beebe said he had talked with two companies there. One was more in line with timber interests in south Arkansas and the other was aligned with retail interests in western Arkansas, Beebe said.

Arkansas plans to work closely with Sun Paper, Hardin said.

"From our perspective, [Sun Paper] is a strong prospect but this is certainly not a complete deal," Hardin said. "There is no incentive package so it is an active project from our perspective."

The objective of the four-page "statement of purpose" signed by Arkansas and Sun Paper on Friday was to study the feasibility of building a pulp mill in Arkansas, the document said.

The letter indicates Sun Paper wants to have a site selected for the mill by May 1.

In the letter, Sun Paper agreed to a timeline that would have it hire engineers and seek an environmental permit after May 1. Sun Paper also agreed to commission an intermodal railroad facility study at a time to be determined, pending retaining a railroad engineering firm.

Sun Paper also said it sought to hire accountants and legal representation by Dec. 31 of this year.

A Sun Paper plant would affect more than just timber landowners, said Max Braswell, executive director of the Arkansas Forestry Association.

"Certainly the logging industry would benefit from that," Braswell said. "And so would related industries that sell chemicals, parts supplies and paper machine components. A plant would be a large energy user, I'm sure."

In the letter, Sun Paper said it would seek an "electrical connectivity study" from Entergy Corp. and Midcontinent Independent System Operator, which operates much of the electricity grid in Arkansas.

Pelkki said it was likely that Sun Paper would produce fluff pulp at a plant in Arkansas and that would be shipped to one of Sun Paper's paper mills near Beijing. China doesn't have enough timber to meet its forestry needs, Pelkki said. Or Sun Paper could use the fluff pulp to make disposable diapers, Pelkki said.

If it materializes, the Sun Paper plant would be the largest superproject in Arkansas.

Under state requirements, a superproject is required to employ 500 workers and invest more than $500 million.

Big River Steel is nearing the completion of a $1.3 billion steel plant near Osceola that is scheduled to begin operation next year. It is scheduled to employ about 525 workers, each earning about $75,000 a year when bonuses are included.

Big River was the first facility to qualify for Arkansas' superproject incentives of $125 million.

Should Sun Paper build a plant in Arkansas, it would not be the end of development in the timber industry, Pelkki said.

"I think there are other mills and facilities that will continue to expand," Pelkki said. "Sun Paper is not going to use up all the available wood in south Arkansas."

Business on 11/24/2015

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