Sun Paper project still faces trade headwinds despite Arkansas permit approval

Despite leaping over a 574-page hurdle earlier this week, officials with Chinese paper goods giant Shandong Sun Paper say there is significant progress to be made in U.S.-China trade talks before construction can begin on the South Arkansas timberland project.

Sun Paper’s acknowledgement comes after Gov. Asa Hutchinson on Monday (Sept. 24) told reporters during a media briefing that the state Department of Environmental Quality (ADEQ) had finally approved an air permit to begin construction on the much-awaited $1.5 billion Sun Paper pulp mill near Arkadelphia after a more than three-year wait.

If there is no appeal of the ADEQ permit approval, the next step on the Clark County development is to begin detailed design engineering, said Ray Dillon, spokesman for Sun Bio Material Company, the subsidiary of Sun Paper that was incorporated as a for-profit Arkansas company in early 2017.

“(The) U.S.-China Trade dispute is a significant hurdle to be overcome before substantial progress can be made,” Dillon, the former CEO of Deltic Timber Corp. and Sun Bio spokesman said in response to a Talk Business & Politics inquiry. “No construction date has been established at this time.”

U.S.-CHINA TRADE FRICTION
Although Gov. Hutchinson did not provide a timetable Monday for a ground-breaking ceremony on the Sun Bio project, he did say during a luncheon with the Chinese Consul General later that day that he and an Arkansas trade delegation will return to China in November, the fourth such visit to the Far East nation since he took office in early 2015.

“While there is friction between our two countries at the highest level, when it comes to the people-to-people, business-to-business level, there is a positive relationship and recognition that our economies benefit each other,” said Hutchinson. “As governor, whether you are talking about Walmart or Tyson, or you are talking about Arkansas rice, we want that market open.”

At that same meeting with Hutchinson at the Governor’s Mansion, Chinese Consul General Cai Wei said during an interview with Talk Business & Politics that he will return to China soon to share with business investors that Arkansas is open for business despite ongoing “trade frictions” with the Trump administration.

“Some of the Chinese businesses feel a lack of confidence whether to continue to make full investment,” Wei said not mentioning Sun Paper or the other Arkansas-China projects still in the pipeline. “Of course, this has nothing to do with state government, but it has to do with the federal involvement. From us, we try to give them the true Arkansas feelings. We will give them the new story about the people of Arkansas and encourage them, and that is my job.”

In its “statement of basis” attached to the 574-page Title V air permit application that was approved by ADEQ on Monday, Sun Bio said it intends build a so-called kraft paper mill that will turn wood into wood pulp to produce paper goods.

“The pulp mill and the evaporation plant, recovery boiler, lime kiln, causticizing, power boiler, wastewater treatment, cooling towers, and other ancillary operations will be sized to support an approximate, nominal linerboard production capacity of 4,400 machine dry tons per day at varying base weights,” the application states.

Hutchinson made his first official to China in November 2015, where he returned to Arkansas after signing a “letter of intent on investment cooperation” with Chinese-based Shandong Sun Paper Industry Joint Stock Co. to pursue what was then only a $1 billion pulp mill.

Later in April 2016, during a historic ceremony at the State Capitol, Hutchinson and Sun Paper Chairman and Founder Hongxin Li signed a memorandum of understanding to bring the super project to Arkansas’ “wood basket” region.

In September 2016, Sun Paper officials first announced they had completed talks with global consulting and engineering firm Pöyry Engineering of Helsinki, Finland, to begin design plans for the multi-billion-dollar project in south Arkansas. At the end of that year, ADEQ officials first began holding meetings with Sun Paper officials on its initial application for a Title V air permit and pre-engineering and environmental approvals for the plant.

At the time, Sun Paper officials said they hoped to begin construction on the project in the first quarter of 2017, but that timetable was pushed back several times due to permitting considerations. After Sun Paper completed feasibility studies, the decision was made by the company for the mill to produce dissolving pulp, not fluff pulp as was first considered. Those plans included an additional $500 million investment expanding the size and scope of the mill to manufacture cardboard products that package goods shipped by Amazon, Walmart and other online retailers.

According to ADEQ, it is not unusual for large industrial projects to typically take from six months up to a year or more to gain final approval under the federal Clean Air Act Title V rules for so-called “major sources” of air pollution, which is an industrial facility that emits or has the potential to emit 100 tons of any air pollutant, 10 tons of any hazardous air pollutant or 25 tons of a combination of hazardous pollutants annually.

CHINESE PROJECT PIPELINE
Out of all six Chinese investment projects that have materialized from Hutchinson and Arkansas Department of Commerce Secretary Mike Preston’s frequent Far East trade missions since taking office in early 2015, three have moved beyond the development stage.

Tianyuan Garments Company, which signed a memorandum of understanding at the State Capitol in October 2016, began producing goods for Adidas in January 2018 in a facility at the port of Little Rock. Company officials have said they would invest more than $20 million and bring 400 jobs paying an average of $14 an hour with benefits to the Little Rock area.

Hefei Risever Machinery (Risever), a Chinese-based heavy equipment parts manufacturer, broke ground on a $20 million facility in Jonesboro in June 2018. The plant will be located in the Craighead Technology Park on C.W. Post Road and will employ 130 workers. At his meeting with Wei on Monday, Hutchinson invited the Chinese consulate general back to Arkansas for the grand opening later this fall.

In April, Dragon Woodland Sawmill re-opened a shuttered timber mill after a $10 million renovation in Helena-West Helena. Dragon Woodland purchased the former “Chicago” mill last year and has rebuilt the facility and purchased new equipment. At peak production, the former mill employed more than 1,500 workers during World War II to build crates to ship munitions overseas.

That revamped facility will create approximately 75 new jobs in the Arkansas Delta. The Chinese manufacturer mills mostly red oak, white oak, ash, hickory, gum, poplar, cherry, sycamore and black walnut. In addition to domestic sales, they also export product to China and other Asian countries. Sister companies that support the facility are DragonFly logging and DragonFly trucking, also located in Helena-West Helena.

However, the Pet Won and Ruyi projects in Danville and Forrest City, respectively, have stalled since the Trump administration levied its first round of tariffs on China in the summer of 2018. AEDC first announced that Pet Won would invest $5 million in April 2017 to locate a new pet-treat facility in the Yell County community that would create 70 new jobs at a 28,887-square-foot facility formerly owned by Petit Jean Poultry.

A month later, the Shandong Ruyi Technology Group announced plans to locate its first manufacturing operation in North America in east Arkansas, creating up to 800 jobs that will pay more than $15 an hour when operational. The company, which is China’s largest cotton textile manufacturer, is investing $410 million to retrofit a 1.4 million square foot cotton-spinning, garment factory in the Delta town.

Originally, Shandong Ruyi officials had planned to begin processing more than 200,000 tons of Arkansas cotton annually at the Forrest City facility in the summer of 2018. Officials with Ruyi Group told Talk Business & Politics they would provide an update on the Forrest City project later this year.

Both Ruyi and Sun Paper — which are headquartered in the East China province that is one of the country’s most populous and affluent regions — are also exploring other opportunities in Africa to fuel their growth plans to keep up with China’s fast-growing middle class as well as compete with U.S. companies and other international rivals on the global stage.