vv—w—‘F‘ - __

 

 

THE economcs a? {sum cm? 9RODUCTEON mm ,
SAWMM RESIDUE m EASTERN CANADA

Thesis far the Dear» of M. S.
MICHIGAN STATE UNIVERSETY

fian B. Harm
1963

1" HESWS‘

   
     

  

LIBRARY

Michigan State
University

ABSTRACT

THE ECONOMICS OF PULP CHIP PRODUCTION
FROM SAWMILL RESIDUE IN EASTERN CANADA

BY Ian B. Flann

The present chip production in Eastern Canada
is about 800,000 oven-dry tons annually, or about 6 per
cent of all fibre pulped in this area. The anticipated
production for 1970 is 1,200,000 oven-dry tons.

Entrepreneurs who are considering the production
of pulp chips from sawmill residue require data on which
to base an investment analysis. This paper discusses
the various cost factors which must be considered. These
factors include machine and building depreciation, interest,
insurance, direct labour, power, raw material, machine
maintenance, and transportation cost. Several typical
cost analyses are presented, to illustrate the effect of
changes in both daily and annual production on the cost
per oven-dry ton.

Relevant subjects -- such as chip yield, chip
quality, chip transportation, geographic variation in
market price, reduction in sawing cost due to barking,

and slabwood concentration yards -- are discussed and

Ian B. Flann

illustrated in detail. The paper deals mainly with
softwood chips. However, most of the information is also
pertinent to the production of hardwood chips.

The cost data are mainly based on a field survey
of barking and chipping installations in Quebec and the
Maritimes which was conducted by the author in 1961. All
the other information is based on this survey and on
recent correspondence and trade literature. Due to the wide
variation in sawmill size and condition, and to the sketchy
nature of the cost records at many mills, it was necessary
to exercise considerable Judgement in selecting representative
cost figures for the illustrative analyses. Over forty
sawmills were visited and twenty-one of them provided useful
information.

Typical chip production costs, exclusive of raw
material and transportation charges, ranged from $11.04
per oven-dry ton in a mill sawing 15 M f.b.m. daily and
2 million f.b.m. annually, to $6.20 in a mill sawing
25M f.b.m. daily and 4 million f.b.m. annually, to $5.86
in a mill sawing 70 M f.b.m. daily and 12 million f.b.m.
annually. (One oven-dry ton of softwood is approximately
equivalent to one cord of rough wood).

Lumber exports are a very important portion of
Canada's external trade. Her competitive position in this
commodity has been strengthened considerably through the

production of pulp chips from sawmill residue. The increase

Ian B. Flann

in wood recovery from 50 to 80 per cent of total log volume
absorbs a portion of the fixed costs and in effect lowers
the cost of lumber production. Also, there is a continual
improvement in the average accuracy with which Canadian
lumber is sawn, due to the replacement of many small mills
by large, well-equipped mills sawing 5 to 10 million board
feet annually. In addition, the increased volume produced
at these larger mills has reduced both the production and

marketing costs per thousand board feet.

THE ECONOMICS OF PULP CHIP PRODUCTION
FROM SAWMILL RESIDUE IN EASTERN CANADA

By
Ian B. Flann

A THESIS
Submitted to
Michigan State University

in partial fulfillment of the requirements
for the degree of

MASTER OF SCIENCE

Department of Forest Products
1965

5,. ., q H
' g.- \‘u.“\\.z 3

ACKNOWLEDGEMENTS

The writer would like to express his appreciation
to Drs. A.J. Panshin, A.E. wylie and Otto Suchsland for
their helpful criticism of the manuscript.

The author gratefully acknowledges the permission
granted by the Forest Products Research Branch of the
Canada Department of Forestry to use information, gathered
during the course of his employment, in the preparation
of this thesis. However, the author bears sole
responsibility for the accuracy of the data and for the

conclusions reached.

11

TABLE OF CONTENTS

TITLE PAGE ................... . ......
ACIOIOWENENTS . ........................
TABLE OF CONTENTS ...................... ..
LIST OF TABLES .. .........................
LIST OF FIGURES .......
LIST OF PIATE‘S ...........
LIST OFAPPENDICES . ...... . .......
I. INTRODUCTION ............
II. OHIPIIEID ...... .....
III. CHIP QUALITI ..... . .............
Iv. CHIPTRANSPORTATION
v. PRODUCTION OOST .........
v1. MARKEPPRICE ............
VII. SLABNOODCONOENTRATION IARDS
VIII. HARDWOOD CHIP INDUSTRY ....... ..
II. THE INVESTMENT DECISION ..... .
x. SUMMARY
XI. BIBLIOGRAPHY

iii

’4.

WP

17
21
25

50

56
57

76

LIST OF TABLES

Table 1. Distribution of Sawmill Chip Production by

Provinces in Eastern Canada in 1962 (in Oven-dry Tons) ....... 3
Table 2. Equivalent Cords of Rough Pulpwood by Provinces . . . . .. . . . . . . .. A
Table 3. Chip Yield per Thousand Board Feet of Softwood Lumber ........ 11
Table A. Comparative Lengths of Truck and Rail Hauls by

Provinces (in Miles) ..... 22
Table 5. Effect of Variation in Moisture Content on

TranSportation Cost per Oven-dry Ton ......................... 21+
Table 6. The Approximate Volume Occupied by an Oven-dry Ton

of Red Spruce Chips Under Various Conditions of

Compaction ........................ ....... .................... 24
Table 7. The Effect on Chip Production Costs of Raising the

Daily Production Rate from 15 M f.b.m. to 25 M f.b.m.

while the Annual Rate Remains Constant at 2 million f.b.m. 37
Table 8. The Effect on Chip Production Costs of Raising the

Daily Production Rate from 15 M f.b.m. to 25 M f.b.m.

while the Annual Rate Remains Constant at 1. million f.b.m. 38
Table 9. The Effect on Chip Production Costs of Raising the

Annual Production from 2 million to A. million f.b.m.

while the Daily Production Remains Constant at 15 M f.b.m. ... 39
Table 10. The Effect on Chip Production Costs of Raising the

Annual Production from 5 million to 8 million f.b.m.

while the Daily Rate Remains Constant at 30 M f.b.m. bl

iv

Table 11 .

Table 12.

Table 13 .

Table 11...

Table 15 .

”The Effect on Chip Production Costs of Raising the

Daily Production from 30 M f.b.m. to 45 M f.b.m. while

the Annual Rate Remains Constant at 7 million f.b.m. 1.2
The Effect on Chip Production Costs of Raising the

Daily Production from 50 M f.b.m. to 70 M f.b.m. while

the Annual Rate Remains Constant at 12 million f.b.m. ........ 1+3
The Cost of Producing Barked Slabs in a Mill with a.

Daily Production of 10 M f.b.m. and an «Annual Production

of 2 million f.b.m. .... 55
The Reduction in Sawing Costs per M f.b.m. Attributable

to the 10 per cent Increase in Daily Production Due to
Barking-«No Change in Annual Production 61
The Reduction in Sawing Costs per M f.b.m. Attributable

to the 10 per cent Increase in Daily and Annual Production

62

Due to Baficm 00.0.0000.........OOOOOOOOOOOOOOOO00.00.0000...

Figure 1.
Figure 2.
Figure 3.
Figure A.

Figure 5.

Figure 6.

- LIST OF FIGURES

Chip Yield per Thousand Board Feet of Lumber . . . . . . . . . . . . . 6
Effect of Log Length and Form on Chip Yield . . . . . . . . . . . . . . 12
Variation in the Relative Volume of Slabs, Edgings

and Trim According to Diameter Class ..... ...16
Price Relationship Between Chips, Labour and Food

in Eastern Canada ..... ... 15
Relationship Between Chip Production Cost and Annual
LumberProduction.... ....... . ......... 59

AnaJ-YSiS or Gmss Retum 0.0..O........OOOOOOOOOOOOOOOO... 63

Plate 1.
Plate 2.
Plate 3.
Plate h.
Plate 5.
Plate 6.

Plate 7 .

Plate 8.
Plate 9.
Plate 10.
Plate 11.

Plate 12.
Plate 13.
Plate 1h.
Plate 15.
Plate 16.

rLIST OF PLATES

Rosser barker with crossways feed .

Rosser barker with inline feed . . . ...... . ......... . . . . . .
Spruce log entering ring barker . ..... . .....
Outfeed end of ringbarker............ .......... . ..... .
Infeed side of rosser barker installation . ...... . . . . . . .
Outfeed side of rosser barker installation . ....... . . . . .

Ring barker installation; note concrete base

forbamer .....OOOOOOOOOOIOO..OOOOOOOOOOO......OOOOO...
Double chip bin, and sawdust bin .... ..............
Chipper with inSpection plate removed ......

Chipper infeed at small central chipping yard ....
Sawmill chipping centre; slab receiving deck

is behind chipper and screen .
Truckload of slabs .
Side dumping of trailer into boxcar
Attachment of trailer to platform .... ..... ....... ..
HOpper car with built—up sides .........................

Tal‘pa'Ulin-COVBI‘ed dm thk coco...0.000.000.0000000000

68
68
69
69
7O
70

71
72
72

73
73
7h
74
75
75

l.

2.

30

~- LIST OF APPENDICES

Effect of Variation in Density on Chip Yield per
TmusandBoam Feet 0......O........OOOOOOOOOOOOOOOOOOOOOOO 79
Relationship Between Chip Freight Rate and Distance . . . . . . . 80

Power Requirements in a Small Mill . ..... ....u........ 81

Introduction

The production of pulp chips from sawmill
residue in Eastern Canada is increasing rapidly. From
the small beginning of 29,000 o.d.t. (oven-dry tons) in
1951 the production of chips almost doubled every two
years until a production rate of 600,000 o.d.t. per annum
was reached by the middle of 1961. As expected, the rate
of increase has now begun to diminish; as of theiend of
1962, the production rate was approximately 700,000 o.d.t.
of softwood and 50,000 o.d.t. of hardwood chips. This
increase is due to the realization by pulpmills that
sawmill chips are a relatively cheap source of fibre; and
to the growing realization by sawmills of the great
economic benefit that may be obtained from material that
was largely an inefficient source of fuel, or an expensive
disposal problem, only ten years ago. Sawmill chips now
form about 6 per cent of all fibre pulped in Eastern Canada.

The purpose of this thesis is to provide sufficient
information concerning the sawmill chip industry in
Eastern Canada to permit prospective entrepreneurs to
evaluate the profit potential. Particular emphasis is

placed on the various cost factors and on the effect of a

 

One oven-dry ton of softwood chips is equivalent to
approximately 1.02 rough cords of 4—foot wooa (based on
85 cubic feet per cord). One o.d.t. of hardwood chips is
equivalent to approximately 0.72 cords of hardwood (based
on 83 cubic feet per cord).

volume change, in either daily or annual lumber production,
on total chip production cost. The material deals mainly
with the softwood chip industry but most of it is also
applicable to the production.of hardwood chips; one
section does deal specifically with the latter.

‘The information is based on a field survey
carried out by the author in Quebec and New Brunswick in
1961, plus additional material obtained from personal
correspondence and relevant publications.

The production and sale of chips increases the
recovery from 50 or 55 per cent to 80 or 85 per cent of
the cubic volume of the log. .The increased recovery absorbs
a portion of the fixed costs or overhead of the operation
and in effect lowers the cost of lumber production. For
a lumber exporting country which faces severe competition
from Scandinavia and Russia, such a reduction is very
important.

This cost reduction has also had an effect on
the internal structure of our lumber industry, due to the
fact that chipping is usually uneconomic at small sawmills.
These mills, sawing one to two million f.b.m. on a circular
headsaw, have been placed at an increased disadvantage in
relation to the well-equipped mills sawing 5 to 10 million
f.b.m. The small mills are being forced out of business.

Since the sewing accuracy at these mills is often relatively

poor, the replacement of many small mills by a few large
mills has increased the average accuracy with which
Canadian lumber is sewn. In addition, the increased
volume produced at the larger mills has reduced both the
production and marketing costs per thousand board feet.

The sawmill chip industry is assuming considerable
significance in forest management plans. The 750,000 o.d.t.
of chips are approximately equivalent to the allowable cut
on 5,100,000 acres of average productive forest land, based
on an annual allowable cut of 20 cubic feet per acre (7)..
In the four Eastern Provinces under discussion, 6 per cent
of all pulp chips are produced from sawmill residue.

Table 1 shows the approximate production of
chips by Provinces in Eastern Canada in 1962.

Table 1

Distribution of Sawmill Chip Production by Provinces
in 1962 (Oven-dry Tons)

 

 

N-S. N.B. P.Q. Ontario Total
Softwood 51,000 124,000 529,000 216,000 700,000
HardWOOd - 5,000 16,000 9,000 30,000

 

As the rough cord is the common unit of measurement,
the oven-dry ton figures of Table 1 have been converted to

cords in Table 2.

 

9 Numbers in parentheses refer to literature cited at the
end of this publication.

Table 2

Equivalent Cords of Rough Pulpwood by Provinces

 

Nos. NOB. PeQe Ontario T0138].

 

Softwood 52,000 127,000 557,000 221,000 717,000
Hardwood - 5,600 11,700 6,600 21,900

 

The wood fibre must be hauled from the stump to
the sawmill in order to produce lumber, so, from that point
of view, no extra cost is attached to the potential pulp
fibre until the log is barked.

Almost all these sawmill chips are used for
sulphite or sulphate pulping. However one new pulpmill
is using disc refiners and sawmill chips to produce
groundwood pulp. As this refining process becomes more
common it will appreciably enlarge the chip market. Not
only will some pulpmills replace grinding stones with
disc refiners but small, profitable groundwood pulpmills
will be built. Some pulpmills of this type will probably
be financed by groups of sawmills in areas where there is
either no chip market at present or where the going chip

price is considered unsatisfactory.

Chip Yield

Sawmill chips are manufactured from the normal
residue developed in the conversion of logs to lumber.

This residue consists of slabs, edgings and trim‘. It is
equal to approximately 55 per cent of the total log volume.
Approximately 0.75 o.d.t. of chips are produced by chipping
the residue which is developed in the sewing of a thousand
board feet of softwood lumber (11).

These figures are only estimates based on a variety
of industrial reports and tests, and on government field
studies. The chip yield in oven-dry tons per thousand
board feet of sawn lumber varies according to many factors
such as log diameter, type of sawmill equipment, average
nominal lumber thickness, species, log form, sawyer's skill
and log grade. The individual effect of these factors is
as follows:

1. Efifect of Variation in Log_Diameter
Figure 1 indicates that chip yield per
thousand board feet varies inversely with log
diameter. The deviation of the Bulletin No. 99
data from this rule in the small diameter classes

is due to factors other than log diameter (3).

 

9 In some mills trim pieces less than one foot in length
are not chipped.

Yield ln Oven-dry Tone per M fbfll at Lumber Sewn.

A

 

 

 

i

CHIP YIELD PER Mme. OF LUMBER

 

 

 

 

 

 

 

\(Adapted from Texas Bulletin No. 50

 

 

/

TGXOO

data

 

in ratio 47: 36

 

0.8

 

0.6

 

”IV

 

 

Canadian Bulletin
No. 99 data

 

0.4

a—Recent Canadiunw

\ .
Study conducted ot\\
\ Ottawa Laboratory \

 

 

 

0.2

 

\

 

 

 

 

 

 

0 l0 l2

Diameter (enroll end, lnelde bark)

 

All the reasons for the considerable
difference between the three curves are not clear.
The recent Canadian study, which involved 24 logs
and a circular headsaw with a i-inch kerf, indicates
chippable residue yield which is obtained when 16-foot
spruce logs are sewn-around to produce the maximum
lumber volume and grade yield without reference
to sawing cost. All lumber was sewn according to
the official spruce grading rules which permit
a minimum length of 8 feet in the top four grades
and 6 feet in the other 5 grades. Therefore this
curve is lower than would be expected in a commercial
operation. The residue volume was determined
separately for slabs, edgings and trim by the
submersion method, and was converted to a weight
measure by using the known oven-dry weight per
cubic foot.

The Bulletin No. 99 data were obtained during
1948 and 1949. The curve represents average results
from 50 sawmills, of 7 different types, and it is
based on 14,000 softwood logs with an average diameter
of 8.4 inches. The amount of residue was determined
as follows: the average log volume was obtained by
sealing both ends of log; the sawdust volume was
calculated using the sawing diagram for each log and

the known saw kerf; the trim volume was measured

at the trim saws; the remainder was slabs and
edgings. It is believed that the relative quantities
of slabs and edgings were apportioned on the basis

of the sewing diagram.

The Southern Pine data were first published
in Circular 56, Texas Forest Service, in 1957(21).
The information was gathered in one mill, sawing
50 M f.b.m. of l—inch and 2-inch lumber per day.

The 115 logs were separated into four diameter groups
and the residue was collected and weighed for each
log diameter group. The lowest diameter group was
4.6" to 7.5", and the lowest individual diameter
class listed was the 7-inch class, with a yield of
4800 pounds of green chips per thousand board feet.

These data were used in Research Note No. 21
(1958) in conjunction with the results from
additional studies(l)(5). This note indicates a
yield of 4600 pounds for the 7-inch class and 5540
pounds for the 6-inch class.

Similar information is presented in Texas
Forest Service Bulletin No. 50 (1960)(2). This
Bulletin indicates a yield of 4800 pounds for the
7-inch class, 5500 pounds for the 6-inch class and
6200 pounds for the 5-inch class.

The green weight chip yield figures fran

Circular 56 have been converted to oven-dry tons

2.

(using a moisture content of 106 per cent) and
plotted in Figure l. The specific gravity of
Southern Yellow Pine is about 0.47 and the average
softwood chip specific gravity for Eastern Canada
is about 0.56. To facilitate comparison between
the Texas and the Canadian chip yields, a second
Texas curve is shown in Figure 1. This curve
represents the Texas oven-dry ton yield after
reduction in the ratio 47:56 to compensate for

the difference in specific gravity. It intersects
the Bulletin No. 99 curve near the 8-inch ordinate,
corresponding to 0.77 ovenédry tons.

The reasons for the steeper elope in the Texas
curves are not clear. However this greater yield
variation according to diameter class indicates why
so much emphasis is placed on diameter by publications
dealing with sawmill chips in the South.

A previous Texas study indicated an average
yield of 0.78 o.d.t. for pine in the 7.6" to 10.5"

(20). After adjustment: for‘the

diameter range
specific gravity difference, this corresponds to
approximately 0.70 o.d.t. for the 8-inch diameter
class.
‘Effect of Variation in Sawmill Equipment

Both reduced kerf width and reduced actual

board thickness tend to reduce the cubic log volume

5.

4.

5.

-10-

required per thousand board feet, and hence to
reduce the cubic volume of chippable material, as
indicated in Table 5. (An increase in the accuracy
of the sawing equipment will permit a reduction in
the average actual lumber thickness).
Effect of Variation in Log Form

Log sweep increases the chip yield, and this
effect is illustrated in Figure 2.
Effect of Variation in §pecies

Since lumber is measured by volume, while
chips are measured by weight, the chip yield in
oven-dry tons per thousand board feet varies
directly with the specific gravity of the species.
The various softwood species commonly chipped in
eastern Canada are listed in Appendix I, along with
their respective oven-dry weights per cubic foot
and an estimate of the percentage chip production
by species.
Effect of Variation in Sawyer's Skill

For softwood logs of a given size, the greater
the skill of the sawyer, the greater the lumber

volume recovery* and hence the lower the chip yield

 

‘ However, due to price differentials between grades,
and between thicknesses, a skilful sawyer may be
able to increase the dollar recovery by sawing
premium products even though he may lose some

volume recovery.

-11-

Table}.

.Chip Production per Thousand Board Feet of Softwood Lumber

 

Type of
Sawmill.

Log Vol.
/M f .b.m.

(Cu. Ft.)

Lumber
Volume
[M f.b.m.

(Cu. Ft.)

Sawdust Vol.
/M f.b .m.

(Cu. Ft.)

Net Vol.
Chippable
Mate rial

(Cu. Ft.)

Net Chip

Production/M f.b.m.

 

Cu. Ft.* o.d.t.

 

f

 

Small
mill,
circular
headsaw

202

92

35

75

72

0.83

 

Mill
with
circular
headsaw

185

33

62

59

0.68"“

 

Average
mill
with
band
headsaw

165

89

55

53

0. 6l**

 

As above
but sawing
mainly

2" stock

M0

83

10

1+7

#5

0.52“”

 

Sawmill
sawing
large
pine
logs

1+8-57

0.55-0.66

 

Stud
mill

 

 

 

 

 

87

1.0

 

 

 

* After allowing for a l, per cent loss for chipper fines, short pieces of
trim, and other losses.

The actual chip production per thousand board feet is usually greater than

these figures indicate, due to the chipping of short or low grade boards.

Yield in Oven-dry Tone per M fbm of Lumber Scan

-12-

 

I

 

I I
EFFECT OF LOG LENGTH AND FORM ON CHIP YIELD

Recent lumber recovery study at the Ottawa Laboratory utilizing

l

I

I I

I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diameter (small end, inside bark)

Figure 2

\\ epruce loge and a circular headsaw with 'lc' llerl.
\
.7 \.
e \\
.e a r
. \\
.. '\ \
\\\\ \
\
\ \. ‘
\ \‘\.‘ ‘w—-——7 ——-- ----- “2' loge am. lost weep
\ .\wl.,\_n . I
3 \\ . ' "'~ l6 loge wltll 0" weep
\K '2. M.” ‘09.
.2 K e —'
l6 etrolgnt loge
.l
0
5 6 7 B 9 l0 ll l2 l3 l4

 

7.

-15-

per thousand board feet of lumber recovered. This

is also true in the case of the trim saw operator;

a skilful operator will usually trim back less,
decreasing the chip yield, than will a poor operator.

It has been demonstrated in many sawmills that,
when barking and chipping equipment is first installed,
the lumber volume recovery decreases initially due
to the cutting of excessively thick slabs, and
then gradually increases up to approximately the
original level. This fluctuation apparently occurs
because, at first, the sawyer feels that there is
no point in striving for the maximum lumber volume
recovery, since the slab wood will be chipped.

Later the skilful sawyer realizes that the relatively
clear sapwood is much more valuable as lumber than

as chips, and resumes his former sawing practice.
Effect of Variation in Log Grade.

In a spruce sawmill equipped with either a
horizontal band re-saw or a linebar re-saw, there
are two basic sawing methods: the small logs will
be sewn lengthwise near the middle and passed to

the re—saw (so that the entire log is sewn alive)

 

. Grade refers to formal log grade classifications
such as the hardwood grades developed by the U.S.
Forest Service and the pine log grades which are
being developed by the Canada Department of Forestry.

-14-

while the large logs will be sewn-around and only
the interior cant passed to the re-saw. The poor
quality, medium-sized logs (7" to 9" for example)
will be sewn-alive while the good quality logs in
the same diameter classes will be sewn-around,
because the increase in lumber grade and volume
recovery is greater than the increase in sawing
cost.

Since sawing around provides a greater lumber
volume recovery than live-sawing, then chip yield
(in this type of sawmill) varies inversely with log
grade for logs in the medium diameter class(4).

If it is assumed that 8" logs, sewn-alive,
will yield 0.60 oven-dry tons of chips and will
give a 50 per cent lumber recovery, than by sawing-
around (and increasing the volume recovery by 10
per cent) the chip yield would be reduced to 0.51
oven—dry tons. However, if logs in the 7" to 9"
diameter classes account for only 60 per cent of
all the sawlogs entering the mill, then the total
possible variation in chip yield due to log quality
at this mill would be only 0.06 oven-dry tons. If
we assume that spruce logs are sufficiently homogeneous
so that, at any mill, at least 25 per cent of the 7"
9" logs are worth sawing-around, and at least 25

per cent are not worth sawing-around, then the total

-15-

possible variation in chip yield from the intermediate
50 per cent of the logs at this type of sawmill, due
to changes in sawing method based on variations in

log quality, should be no more than 0.05 oven-dry

tons per thousand board feet.

The relative importance of slabs, edgings and
trim as a source of chippable material is illustrated
in Figure 5. The absolute volumes indicated in
this figure refer only to the Canada Department of
Forestry research sawmill. Due to equipment
limitations in this research sawmill all lumber was
trimmed before edging, which had the effect of
raising the percentage of trim and lowering the
percentage of edgings. The apparent reason for
the relatively high percentage of slabs, and the
low percentage of edgings in the small diameter
classes was as follows: In very small logs, e.g.,
the 5-inch diameter class, a single slab cut on
each of the four faces often produced a waney cent;
the boards or dimension from this cant required

little or no edging.

I4

5 r7)

Percentage of Total Log Volume
0

-15-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

| l | I I I I I - I
VARIATION IN THE RELATIVEJOLUME 0F SLABS,
games AND TRIM ACCORDING TMMETER CLASQ—
\ (Based on 3 straight logs and 8 logs with to per cent sweep.
.\ These l6' logs were trimmed prior to edging.)
.\
\.
\ Slabs
.\.,
\.
\\-
L\.\
\ N \ ~4~
\'\ ~ ~ ~_ ‘.~
./- ' \ '— 3"“ «1
”/F "'
l,r’ KT‘*-LL_\‘BmI
/"Edgings ' \\
5 s 7 e 9 I0 ll I2 I3 I4 I5

 

 

 

 

 

Diameter (small end, inside bark)

Chi ualit

A pulp chip, as produced from barked roundwood or
sawmill residue from barked logs, is a small piece of wood
with the following approximate dimensions: length a" to 1",
width %" to %”, thickness l/8" to 5/8". The exact optimum
size specified by any one pulpmill depends on both the
chemical process which it uses and the particular
characteristics of its equipment.

Pulp chip quality is assessed mainly on the basis
of size classification, cleanliness and bark content. Most
mills require that the chips be screened at the sawmill to
remove fines and oversize chips. The chips are sampled
upon arrival at the pulpmill and a certain percentage must
be within the specified size range as determined by a sieve
analysis. Short thin edgings, an abundance of knots, or
short pieces of trim, splintery slab surfaces, bark and many
other factors will increase the production of fines. However,
if the chip screens are functioning properly, many of these
fines will be removed.

Chips produced from small material such as short
trimmings, thin edgings and oversize chip rejects usually
vary much more in size than chips produced from relatively
large material. Some pulpmills prohibit both the chipping

of pieces of trim less than one foot in length and the

..18—

re-chipping of oversize chips, as this material tends to
reduce the average chip quality. The percentage of the
final chip production that is derived from the chipping

of this small material in a sawmill equipped with a circular
headsaw is perhaps 12 per cent and many sawmills using this
material produce good quality chips. Some operators claim
that the oversize chips which are returned to the chipper
for rechipping, continue to recirculate through the chipper-
screen circuit without any further reduction in size until
they have to be shovelled from the top of the screen at the
end of the day; this inability to re-chip oversize chips

may be characteristic of some chippers, but they are
successfully re-chipped in many cases. In addition to the
nature of the residue, chip quality depends upon performance
characteristics of the chipper, quality of the chipper
maintenance work, efficiency of the chip screen, etcetera.
It is probable that any reduction in quality due to chipping
small material is relatively unimportant.

The manner in which the chips are cut is also an
important quality factor. Dull chipper knives tend to crush
the cells and to cause "brooming" at the chip ends and both
of these factors are detrimental to pulp quality and yield.
Therefore, the maintenance program.must.provide for regular
grinding of the chipper knives.

The bark problem is more serious. After the

sieve analysis the screened chips, particularly the fines,

-19..

are examined visually and any bark or dirt is segregated
into separate piles for weighing. Some pulpmills specify

a maximum bark percentage of 2 per cent in the summer and

3 per cent in the winter, but most mills, particularly
sulphite mills, specify a maximum of l per cent throughout
the year. To attain this low level, it is often necessary
to have a man inspect the barked logs individually to remove
any small pieces of bark which may have been left by the
barker. This can raise the production cost of the chips
appreciably.

In some mills the slabs are inspected before they
reach the operator who feeds the chipper and stubborn bark
Opatches are removed on a buzz barker, or with an axe.

Approximately 12 per cent of all sawmill chips
come from small mills that are equipped with one of three
main brands of’rosser barkers. Among the 36 sawmills involved,
there are considerable variations in chip quality which
cannot be correlated with the machine make or with the
characteristics of the sawlogs. Sixty-two per cent of all
sawmill chips come from mills equipped with one particular
make of ring barker. .Aside from the tendency for rosser
barkers to produce more slivers than do ring'barkers, there
is no visible correlation between barking and chipping equipment

and the quality of chips produced.
If it were possible to conduct a controlled

experiment, using a variety of machine makes and performing

maintenance work of equal calibre on each machine, it is
almost certain that the "best make" could be determined for
both barkers and shippers. However, such an experiment
would be very costly. Also, it would probably be of very
little value because it has been proven in many sawmills
that there is a very strong correlation between the quality
of the chips produced and the calibre of the machine
maintenance work. The latter factor is much more important
than inherent differences in machine performance. This point
was demonstrated very clearly at a small mill visited by the
author during a recent survey of barking and chipping
installations. Equipped with a very old rosser barker, a
fairly old chipper and no chip screen whatsoever, the mill
was sawing large, knotty logs and was producing chips of
excellent quality. An examination of the equipment and

a discussion with the mechanic indicated that skilful

maintenance work was responsible.

Chip Transportation

The transportation of sawmill chips is mainly
by railway or truck; 47 per cent of the chips go by rail,
35 per cent by truck, 17 per cent by a combination of rail
and truck, and l per cent by air pipe. However, rail hauls
are usually much longer than the truck hauls, as shown in
Table 4. Where the chips are moved to the railroad by
truck, the truck haul is usually relatively short, which
reduces the length of the average truck haul.

In the Northeast hopper cars are usually used for
chips, but in Eastern Canada the chips may travel by hopper
car, or open-top boxcar with built-up sides, or by closed
boxcar. The latter type must be loaded pneumatically. In
the hopper cars, the chips are often built up to a height
of 24 inches above the sides of the car, and shipped un-
covered, without appreciable chip loss. Usually, it is
necessary to cover open-top trucks with a tarpaulin to
prevent excessive quantities of chips from blowing off.

One large company using hopper cars reports
an average load of 55.3 green tons. The capacity of open-top
steel boxcars with built-up sides varies from 53 to 40 green
tons. One large company using closed boxcars reports an
average load of 35 green tons at 56 per cent moisture

content (green base).

Although there are several types of trucks in use
for hauling chips, the dump truck, with a capacity ranging
from 4 to 12 green tons (2 to 6 oven-dry tons), is most
common. This type of truck is particularly suited to
short hauls, due to its ability to unload very quickly.
There are a small number of self—unloading vans in use;
the unloading time for these vehicles is about thirty
minutes and they carry about twenty-two green tons. Most
trucks are owned by the chip producer and are gravity-loaded
from chip storage bins.

A shipping bill, with all the relevant infonnation
such as chip size classification, bark content, moisture
content, total green weight, etcetera, is made out at the
pulpmill for each shipment received and the weekly report
from the pulpmill to the chip supplier is accompanied by a

copy of each shipping bill.

Table 4

Comparative Lengths of Truck and Rail Hauls
by Provinces in Miles

 

NOS. NOB. Per Ont.

 

Truck Rail Truck Rail Truck Rail Truck Rail

 

 

verage ..... 5 170 15 148 49 207 21
811mm 0 a a o a 5 250 80 400 100 417 50

167
316

 

 

-23-

The Woodlands Research Department of the Pulp and
Paper Research Institute of Canada recently completed a
pilot plant study of the hydraulic transportation of chips
through an eight-inch diameter aluminum pipe(9). While this
project was based on the movement of a large annual volume,
it may eventually have an application to the transportation
of chipped residue.

For any given distance and mode of transport, the
cost of moving chips varies directly with moisture content
and inversely with compaction. Based on the assumption that
the chips are shipped 150 miles by rail at a cost of 16 cents
per cwt., Table 5 indicates the effect of variations in
moisture content on the transportation cost. Since the
lumber industry calculates moisture content percentage on
the oven-dry weight base, and the pulp industry uses the
green weight base, both figures are indicated in the table.

Railroad freight rates for a given distance
usually vary according to the minimum load specified, e.g.,
16 cents per cwt. for a 60,000 lb. minimum, or 15%; cents
per cwt. for a 70,000 lb. minimum load. Sawmill chips must
usually be loaded pneumatically into railroad cars in order

to secure the lowest possible rate. The effect of various

loading methods on chip compaction is indicated in Table 6.

-24-

.Table 5

. Effect of Variation in Moisture Content
on Transgortation Cost per Oven-2g Ton

 

 

 

 

11.0. t M.C. z Green Transportation Cost
(dry base) (green base) Height (lb.) per Oven-Dry Ton
111. 53.3 1,280 $6.85
116 53.8 #320 6.91
118 54.2 £660 6.98
120 51+.6 14400 7.010
122* 55.0““ (III-(+0 7.10
121+ 55.15 M80 7.17
126 55 .8 A5 20 7 . 23
128 56.2 14.560 7.30
130 56.5 1.600 7.36

 

* This figure is the average 11.0. assumed in this thesis for illustrative
purposes.

Table 6

The Approximate Volume Cecupied by an Oven-dry ton of Red
Spruce Chips Under Various Conditions of Compaction

(Specific gravity of chips 8 0.38; original solid volume a 81; cubic feet)

 

Elqiansion Volume Occ ied
Method of Feed Factor“ (cu. ft.

 

Chips gravity fed from a height of h' into
shallow piles ............ ....... .. 3.1 261

Chips gravity fed in a steady stream from
a height of 12' and built-up to a depth
Of10' ......OOOOOOOOOO .......... 00...... 2.7 227

Chips blown into a boxcar or scow by means
ofapnemnatic system . 2.1; 202

Chips blown into large piles and compacted
byabulldozer . ......... . ..... 2.2 185

* These factors are based on a collection of reports from various sources
rather than on precise eiqieriments.

Production Cost

The various costs which should be charged against
chips are listed below, and are then discussed individually.
A. Eixed Costs
1. Machine depreciation and interest charges
2. Building depreciation and interest charges
5. Insurance and taxes
B. variable Costs
1. Direct labour, including Workmen's
Compensation Board levy, Unemployment
Insurance Commission levy, and fringe
benefits.
2. Electricity
3. Raw material
4. Machine maintenance, including parts and labour
C. Transportation
In the above classification, supervisory
and office overhead have been excluded. Although it may be
considered inconsistent to include a portion of the log
costs and to exclude all the overhead, yet this has been
done in order to simplify the dalculations. The chips do
require proportionately less office work than lumber, and
the same is possibly true of supervision. In any case, the
effect of this decision is to reduce the costs which are

applied against chips.

‘25—

-25-

The cost figures used in this chapter are based
on information obtained by the author during a field survey
carried out in 1961 in the Eastern Townships of Quebec and
New Brunswick. All sawmills in this area, that were engaged
in the production of chips or barked slabs forchipping,
were visited. Usable information was obtained from twenty-one
of the forty sawmills involved. However, due to the nature
of the cost records in many mills, it was usually impossible
to obtain more than ten or fifteen sourcesfbr any particular
piece of information. The other nineteen mills, in most
cases, had virtually no cost records; a few mills were so
large (cutting over 12 million board feet per annum) that
their operation was not applicable to-the objective of the
survey.

Information on any particular question often
varied widely from mill to mill for no apparent reason.
However, since the cost records were often incomplete, and
often the author had to rely on the owner's memory, this
variation was to be expected. As a result a considerable
amount of judgement was involved in arriving at the cost

figures used in this thesis.

Fixed Costs
Machine depreciation is usually treated as a
constant annual expense which occurs irrespective of the

degree to which the machine is utilized. Although the

-27-

amount of wear and tear does depend to a considerable extent
upon the degree to which it is used, the value of a machine
is reduced continuously by deterioration and obsolescence.
Therefore, machine depreciation has been treated as an
annual expense equal to the purchase cost plus installation
cost of the machine, divided by the expected number of years
of productive life; a life span of 5 years has been assumed
in these calculations in accordance with reasonable management
policy. The following example will illustrate the method:
Purchase cost of barker $30,000
Installation cost 5,000
Annual depreciation = $55,000/5 = 7,000
Machine interest charges represent the income
forfeited through spending capital on machinery rather than
investing it in securities. Since the annual depreciation
charges in effect reduce the amount of invested capital,
the interest must be calculated on the average investment.
This latter figure is equal to the total cost plus the
annual depreciation for one year, divided by two. Using
the figures quoted above, and an interest rate of 6 per cent,
the interestfbr each of the five annual periods is:

Annual Interest ='§§’000 ; 7000 x .06 = $1,260

A rosser barker installation costs between $12,000
and $17,000 and is suitable for’mills cutting 2 to 5 million

fhm.annually. A ring barker installation costs between

-28—

$40,000 and $55,000 and is suitable for mills cutting

5 million fhm.or more. These costs include the barker,
motor, wiring, building and foundation and include varying
amounts of infeed and outfeed equipment associated with
the barking process<12).

Sawmill chippers are almost invariably small
models of standard pulpmill chippers. Their actual size
depends on the daily volume of the sawmill and on the
average density of the wood being chipped. Sawmills in
the 5 to 5 millions fhm.class may spend from $15,000 to
$23,000 on a chipping installation including screens and
storage bins, where electric power is available. Mills in
the 5 to 12 million fhm.class may spend from $18,000 to
$50,000 on their chipping installation.

Building depreciation and interest charges are
calculated in a manner similar to the machine charge
calculations. In some cases the building will have a longer
potential useful life than the machinery in the building,
and the building will be depreciated over a longer period,
say ten years, for example.

The average rate for insurance is approximately
4 per cent, although it may range from 2% per cent to 5%
per cent. Taxes vary considerably according to the location
of the mill but they are usually a minor item and will be

omitted from these calculations.

..29-

Direct Labour

The direct labour cost per oven-dry ton varies
according to the daily production, rather than the annual
production. The actual daily rate changes according to
geographic regions but in these calculations a base rate of
$1.50 per hour will be assumed for machine operators and
mechanics and $1.25 per hour for helpers. Workmen's Compensa-
tion Board charges average about 5 per cent of the wage
rate and Unemployment Insurance Commission charges average
about two cents per hour. The cost of fringe benefits such
as statutory holidays with pay, sick leave, etcetera, varies
widely but an average cost of 5 per cent will be assumed.
This means total wage rates of $1.67 and $1.59 per hour
or $15.03 and $12.51 for a nine hour day.

Electricity

The electric power rates reported on the survey
varied from 1.8 cents to 3.9 cents per kwh, and the average
was about 2.4 cents. In this publication total daily power
costs are calculated by multiplying the probable total
rated horsepower of the barker, chipper, screen and conveyor
motors by the following factors:

1) 9 hours

2) 0.746 (to convert to kwh)

5) 10/9 (where an average motor efficiency of
90 per cent is assumed).

4) 2.4 cent»

This leads to a cost of 17.9 cents per rated horsepower
per day‘.‘

In medium or large mills all the barking and
chipping equipment motors are usually running all the time
that the sawmill is operating. In some mills with a very
high daily production the barker*may have to be operated
during the night in order to have a sufficient supply of
barked logs ahead for the next day.

In small mills the barker may be operated only
intermittently, as required. Further information on this

subject is presented in Appendix I.

Raw Material Cost

In the early stages of the development of the
sawmill chip industry, no consideration was given to sound
accounting procedures relative to the allocation of raw
material costs. This omission occurred because the chippable
material had, for many years, either been relegated to the
refuse burner or, at the best, sold as fuelwood. However,
now that chips are one of the two main products of the
sawmill, the allocation of raw material costs on a logical
basis is necessary for the determination of the true

production costs of each product.

 

’ However, the correct method of calculating power costs

. varies considerably according to the type of electrical
installation in a particular mill and to the power rate
structure in the area. In some cases the power cost should
be based on the maximum demand horsepower, which may be
only 60 per cent of the installed horsepower.

-31-

In spruce and jack pine sawmills in Eastern Canada,
the sewing of a thousand board feet of lumber is usually
accompanied by the chipping of 0.75 oven-dry ton of chips(ll).
Since the oven-dry weight of a thousand board feet of softwood
logs would be approximately 4250 pounds, the chippable
residue represents about 55 per cent of the original 10g
volume exclusive of bark. The cost of sawlogs in the mill
yard varies considerably according to many factors; however,

a cost of $50.00 per M f.b.m. will be assumed. This leads
to a raw material cost of $17.50 per oven-dry ton of
softwood chips.

However, in consideration of the fact that the present
market price for chips is usually determined with little or
no allowance for raw material cost., a ”Total Cost Not
Including Raw Material" has been shown for Tables 7 to 15.
This cost is only validif the chip raw material cost is
charged against the cost of producing lumber, whichiwas the
only possible method in the past before the pulpmills turned
to sawmill chips.

In deciding whether the installation of barking
and chipping equipment would be economic, it is irrelevant
whether the chip raw material cost is charged against chips
or lumber; the sawmill owner must calculate the total net
profit per thousand board feet of logs for each of the

following systems -

 

* This subject is discussed in the next section.

-52.—

(a) produce lumber only, burn the residue or sell
it for fuelwood;

(b) install a barker and produce lumber plus clean
slabs for a slabwood concentration yard;

(c) install a barker and chipper; produce lumber,
plus pulp chips

-- and must make his decision accordingly.

Machine Maintenance

The average cost of machine maintenance, including
parts and labour, is difficult to determine because it varies
so widely, and the reasons for this variation are often
obscure. In addition, most sawmills do not keep detailed
maintenance cost records.

In this thesis a maintenance labour cost of
$0.40 per M f.b.m. or $0.50 per oven-dry ton will be used
and a parts cost of $0.20 per M f.b.m. or $0.15 per oven-dry
ton will be used. These figures are based on the results

of the recent survey.

Transportation

Sawmill chips are usually sold f.o.b. pulpmill.
The actual cost of delivery varies widely according to
the distance involved and the mode of transportation. A
prospective entrepreneur could add his expected delivery
costs to the "Total Cost f.o.b. Sawmill" figures in

Tables 7 to 12, but for illustrative purposes it has been

...55-

assumed that the chips are shipped 150 miles by rail at

a cost of 16 cents per cwt. or $7.10 for that quantity of
green chips (at 122 per cent moisture content based on the
dry weight or 55 per cent moisture content based on the
green weight) which is equivalent to one oven-dry ton. No
allowance is made for the cost of wooden door covers (which
must be supplied when boxcars are used). The relationship
between freight rate and distance is illustrated in

Appendix II.

Bark Disposal

The cost of bark disposal has not been heretofore
mentioned. Some companies burn their bark in either boilers
or refuse burners while other dompanies truck and dump it.
Other sawmills, located fairly close to pulpmills, creameries,
etcetera, sell their bark for fuel at a price equivalent to
the transportation cost. Bark has a very low fuel value,
particularly if the logs have been in water for a prolonged
period.

Those sawmills, which bark their logs and which
dump or burn the bark in refuse burners, do have a disposal
cost. However, since this cost is minor, and quite variable,
no allowance is made for it in the following chip production
cost Tables. Anyone making use of these figures can adjust

them accordingly where the circumstances so warrant.

-34-

Fibre Loss Due to Barkigg

The relative quantity of wood fibre removed from
the log during the barking process depends on the type and
condition of the barker, and on the nature of the logs.
Water-driven spruce and jack pine, barked on a ring barker,
suffer practically no fibre loss; whereas logs that are
dry or knotty are more difficult to bark, and do suffer
some fibre loss.

If the barker is well-maintained and the operator
is competent, there is usually no decrease in lumber

recovery due to lost fibre.

Summation of Chiprroduction Costs
For any particular installation, these costs

vary according to both the daily and the annual mill
production, and the effect of these factors will be

illustrated in Tables 7 to 15. The figures used for
illustrative purposes are consistent with the previous
discussion of the various factors involved.

(a) Rosser Barker Installations

For mills equipped with a rosser barker, the

following capital costs will be assumed(12):
Barker Installation $14,000
Chipper Installation $19,000

w

Then the annual depreciation (based on a five-year period)
is $6,600 and the annual interest charge (based on a six
per cent interest rate) is $1,188. The insurance charge
(based on a four per cent rate) is 51,520.
As a sawmill increases its annual production
from 2 million to 4 million board feet without changing
its daily rate of production, the fixed costs per oven-dry
ton will decrease and the variable costs will remain constant.
At a daily rate of 15 thousand board feet, it will require
155 days to saw 2 million board feet, 200 days to saw 5
million board feet, and 267 days to saw 4 million board feet.
In practice, cold weather prevents most small mills from
operating for a season as long as 267 working days but this
point is not relevant to the analysis.
Most small mills require both a barker operator
and an additional man who cleans the last traces of bark
from either the logs or the slabs. In some mills this
man also helps to load the logs on to the carriage but often
a third man, such as the edger tailer, spends some time
looking after temporary blockages on the slab conveyor or
at the infeed spout of the chipper. For this reason, the
»daily labour charge is assumed to be $27.54 ($15.05 + $12.51).
The total rated horsepower for a rosser barker, 100 hp.
chipper, screen and conveyor motors, etcetera, would be about
150 horsepower. Therefore, the daily power cost would be

about $23.27.

-55-

A mill sawing 15 thousand board feet per day
will produce about 11.25 oven-dry tons of chips. As
indicated earlier, a raw material cost of $17.50 per oven-

dry ton and a maintenance cost of $0.45 per oven-dry ton

will be used.

- 37-
Table :2

The Effect on Chip Production Costs of Raising the Daily Production Rate
from 15 M f.b.m. to 25 M f.b.m. while the Annual Rate Remains Constant
at 2 milli° 'on f.b.m.

 

Cost per Oven-dry Ton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15 M f.b.m. 20 M f.b.m. 25 M f.b.m.
MILL EQUIPPED WITH ROSSER BARKER per day per day per day*
(11.25 (15.00 (18.75
o.d.t.) o.d.t.) o.d.t.)
Number of Operating Days Required 133 100 80
W
Fixed Costs
Machine and Bldg. Deprec.... $6600 5 4.1.0 3 4.40 3 4.1.0
Interest Charge . ........ . . . 1188 .79 .79 .79
Insurance ............... 1120 .88 .88 .88
Total Fixed Costs ... ...... . $9108 5 6.07 0 6.07 3 6.07
Daily Cost
Variable Costs
Direct Labour . ........... .. $27.51. 3 2.1.5 3 1.81. 3 1.1.7
Power...................... 23.27 2.07 1.55 1.2+
Raw Material ....... . 17.50 17.50 17.50
Machine Maintenance . . . . . . . . .h5 .h5 .h5
Total Variable Costs . ...... $22.47 $21.31. $20.66
Total Cost per Oven-dry Ton
f.o.b. Sawmill ............................ . . . $28.54 $27.“. $26.73
Transportation Cost . $7.10 $7.10 87.10
Total Cost per Oven-dry Ton
f.o.b. Pulpmill ......................... .. $35.64 $315.51 $33.33
Total Cost f.o.b. Pulpmill
Not Including Raw Material ........... . $13.11. $17.01 $16.33

 

* This production rate can be obtained with a rosser barker only under very favourable

conditions .

Table 8

The Effect on Chip Production Costs of Raising the Daily Production
Rate from 15 M f.b.m. to 25 M f.b.m. while the Annual Rate Remains
Constant at A. million f.b.m.

 

Cost per Oven-dry Ton

 

 

 

 

 

 

 

 

 

 

 

15 M f.b.m. 20 M f.b.m. 25 M f.b.m.
MILL EQUTPPED WITH ROSSER BARKER per day per day per day"
(1.1.25 (15.00 (18.75
o.d.t.) o.d.t.) o.d.t.)
Number of Operating Days Required 267 200 160
Annual Cost
Fixed Costs
Machine & Bldg. Deprec. $6600 5 2.20 t 2.20 3 2.20
Interest Charge ....... 1188 .A0 .A0 .40
Insurance . . . ....... 31.320 ._l,_1L .44 .111.
Total Fixed Costs ..... $9108 8 3.01. 3 3.01. 3 3.01.
Daily Cost
Variable Costs
Direct Labour .. ....... $27.51. 3 2.1.5 8 1.81. a 1.1.7
Power................. 23.27 2.07 1.55 1.21..
Raw Material .......... 17.50 17.50 17.50
Machine Maintenance .h5 .45 .45
Total Variable Costs .. 822.1.7 $21.31. - $20.66
Total Cost per Oven-dry Ton
f.o.b. Sawmill .......... $25.51 $24.18 $23.70
Transportation Cost ...... ........ 7.10 7.10 7.10
Total Cost per Oven—dry Ton
f.o.b. Pulpmill $32.61 $31.48 $30.80
Total Cost f.o.b. Pulpmill
Not Including Raw Material $15.11 $13.98 $13.30

 

* This production rate can be obtained with a rosser barker only under very

favourable conditions.

-39-

Table 2

The Effect on Chip Production Costs of Raising the Annual Production

from 2 million to 1. million f.b.m. , while the Daily Production Remains
Constant at 15 M f.b.m.

 

Cost per Oven-dry Ton

 

 

 

 

 

 

 

 

 

 

2‘MM 3 MM 4 MM
1 f.b.m. tub.m. rgbim.
mummmmnmmawmnmmm ammny ammuy ammuy
(1500 ‘(2250 (3000
o.d.t.) o.d.t.) o.d.t.)
Number of Operating Days Reguired 133 200 267*
Annual Cost
Fixed Costs
Machine & Bldg. Deprec. $6,600 3 4.40 s 2.93 t 2.20
Interest Cost .. .. 1,188 .79 .53 .40
Insurance ........... 1,320 .88 .59 .44
Total.Fixed.Costs ..... $9,108 3 6.07 t 4.05 t 3.04
Daily Cost
Variable Costs
Direct Labour ....... .. $27.54 3 2.45 3 2.45 3 2.45
Power ................. 23.27 2.07 2.07 2.07
Raw Material 17.50 17.50 17.50
Machine Maintenance .. . .45 .45 .45
Total Variable Costs .. $22.47 822.1.7 $22.10
Total Cost per Oven-dry Ton
rto.b. Sawmill ........... ......... ... $28.54 $26.52 $25.51
Transportation Cost £1.10 $7.10 $7.10
Total Cost per Oven-dry Ton
f.o.b. Pulpmili $35.61. $33.62 $32.61

 

Total Cost f.o.b. Pulpmill
Not Including Raw Material

. $18.14

w

816.12 815.11

 

* Very few small mills Operate as long as 267 days per year.

-40-

(b) Ring Barker Installations

For mills equipped with a ring barker, the

(12):

Barker Installation......847,000

following capital costs are assumed

Chipper Installation.....§24,000
M
Then the annual depreciation (based on a 5-year period) is
$14,200.

The annual interest charge (based on a 6 per cent
interest rate) is $2556 and the insurance charge (based on
a 4 per cent rate) is $2840.

Most large mills require both a barker operator
and an additional man who is stationed somewhere between the
barker and the chipper. Some mills have a third man in the
mill who is chargeable to chipping and some mills have two
boom men who are chargeable to chipping. This occurs where
the barked logs are returned to the log pond in order to
maintain a reserve of barked logs in case of a barker
breakdown. Since the survey indicated an average labour
requirement of two and a half men, a labour charge of
$55.79 ($15.03 + $12.51 +to.25) is assumed in the following
Tables.

The total rated horsepower for a ring barker, 100
hp. chipper, screen and conveyor motors, etcetera, would be
about 170 horsepower. Therefore, the daily power cost would

be approximately $50.45.

-41-

Table 10

The Effect on Chip Production Costs of Raising the Annual Production
from 5 million f.b.m. to 8 million f.b.m. while the Daily Rate Remains
Constant at 30 M f.b.m.

Cost per Ovena-dry Ton

 

 

 

 

 

 

 

 

 

 

 

 

5 MM 6 MM 7 MM 8 MM
MILL EQUIPPED WITH RING BARKER f.b.m. f.b.m. f.b.m. f.b.m.
ann annually annually ann
(3750 (1.500 (5250 (6000
o.d.t.) o.d.t.) o.d.t.) o.d.t.)
Number of Operating Days Required 167 200 233 267
Annual Cost.
Fixed Costs
Machine 3. Bldg. Deprec. $14,200 5 3.79 3 3.16 S 2.70 t 2.37
Interest Cost ooooooooo 2,556 .68 057 0&9 oil-3
Insurance .. ......... .. 2,840 .76 .63 .54 .47
Total Fixed Costs ..... 319,596 3 5.23 3 4.36 5 3.73 0 3.27
Daily Cost
Variable Costs
Direct Labour ...... $33.79 8 1.50 t 1.50 S 1.50 8 1.50
Power ................. 30.43 1.35 1.35 1.35 1.35
Raw Material .......... 17 .50 17.50 17.50 17 .50
Machine Maintenance ... .45 .45 £45 .45
Total Variable Costs .. 320.80 320.80 $20.80 $20.80
Total Cost per Oven-dry Ton
f.o.b. Sawmill ............. .......... 52633 $25.16 $21.53 $24.07
Transportation Cost ................... 5 7.10 3 7.10 5 7.10 $ 7.10
Total Cost per Oven-dry Ton
f.o.b. Pulpmfll .......... . ........... $33.13 $32.26 $31.63 $31.17
Total Cost f.o.b. Pulpnill
Not Including Raw Material . ......... . $15.63 $14.76 $14.13 $13.67

 

-42-

Table 11

The Effect on Chip Production Costs of Raising the Daily Production
from 30 M f.b.m. to 45 M f.b.m., while the Annual Rate Remains Constant

at 7 million f.b.m.

 

Cost per Oven-dry Ton

 

 

 

 

 

 

 

 

 

30 M 35 M 40 M 45 M
. f.b.m. f.b.m. f.b.m. f.b.m.
MILL EQUIPPED WITH RING BARKER per day per day per day per day
(22.50 (26.25 (30.00 (33.75
o.d.t.) o.d.t.) o.d.t.) o.d.t.)
Number of Operating Days Required 233 200 175 156
Annual Cost
Fixed Costs
Machine & Bldg. Deprec. $14,200 a 2.70 t 2.70 t 2.70 s 2.70
Interest Charge ....... 2,556 .49 .49 .49 .49
Insurance ............. 2,840 .54 .54 .54 .54
Total Fixed Costs $19,596 3 3.73 t 3.73 8 3.73 3 3.73
Daily Cost
Variable Costs
Direct Labour ......... $33.79 3 1.50 3 1.29 3 1.13 3 1.00
Power ................. 30.73 1.35 1.17 1.02 .91
Raw Material . ......... 17.50 17.50 17.50 17.50
Machine Maintenance .45 .45 .45 .45
Total Variable Costs .. $20.80 $20.41 $20.10 $19.86
Total Cost per Oven-dry Ton
f.o.b. Sawmill ....................... $24.53 $24.14 $23.83 $23.59
Transportation Cost ................... 3; 7.10 5 L19 £149 5 7.10
Total Cost per Oven-dry Ton
f.o.b. Pulpmill ..... . ................ $31.63 $31.21. $30.93 $30.69
Total Cost f.o.b. Pulpmill
Not Including Raw Material ........... $14.13 $13.71. $13 .43 $13 .19

 

 

—a--—‘

 

-43_-

Table 12

The Effect on Chip Production Costs of Raising the Daily Production from
50 M f.b.m. to 70 M f.b.m., while the Annual Rate Remains Constant at
12 million f.b.m.

 

Cost per Oven-dry Ton

 

50 M f.b.m. 60 M f.b.m. 70 M f.b.m.

 

 

 

 

 

 

 

 

 

 

MILL EQUIPPED WITH RING BARKER per day per day per day
o.d.t.) o.d.t.) o.d.t.)
Number of Operating Days Required 21.0 200 171
Annual Cost
Fined Costs
Machine 8 Bldg. Deprec. $14,200 6 1.58 s 1.58 6 1.58
Interest Charge . ...... 2,556 .28 .28 .28
Insurance . ...... ...... 2.840 .32 _ 322““ J2
Total Fixed Costs 319,596 8 2.18 s 2.18 8 2.18
Dailz Cost
Variable Costs
Direct Labour $33.79 3 .90 3 .75 . 3 .64
Power................. 30.73 .82 .68 .59
Raw Material . . . . . . .... 17.50 17.50 17.50
Machine Maintenance ... .45 .45 .45
Total Variable Costs .. $19.67 $19.38 $19.18
Total Cost per Oven-dry Ton -

f.o.b. Sawmill $21.85 $21.56 $21.36
TranSportation Cost ....... 81.10 s 1.10 i 7.10 _
Total Cost per Oven-dry Ton

f.o.b. Pul ' .. ..... $28.95 $28.66 $28.46

 
 
 

          

Total Cost f.o.b. Pulpmill
Not including Raw Material . . . . . . . . . . . . . $11.45 $11.16 $10.96

Market Ericg

The price paid by pulpmills for sawmill chips increases
rapidly from east to west across Eastern Canada, approximately parallel
to the increase in wage rates and in the price for farmers' pulpwood.
The most easterly mill in Nova Scotia pays $16.75 per oven-dry ton,
f.o.b. pulpmill; the other'mill in Nova Scotia pays the equivalent of
$19.45. Pulpmills in New Brunswick pay $18.50 to $19.50 per oven-dry
ton; pulpmills in Quebec pay $25.00 to $27.00 and mills in Ontario pay
$25.00 to $28.00.

While the price of chips increases by 50 per cent from.east
to west, it is interesting to note (in Figure 4) that the retail food
price index decreases slightly from east to west (aside from the
relatively high figure for Saint John, New Brunswick)(25)' This
obviously indicates a substantially higher standard of living in Ontario
than in the Maritimes. Since the market price for pulp and paper is
largely independent of the particular province from which the product
originates and since the cost of both chips and labour is substantially
lower in the Maritimes than in Ontario, it would appear that the resources
are available to raise the chip and/pr the labour price in the Maritimes.
There are presently seven pulpmills in New Brunswick, with two more under
construction; this province is half as large as Wisconsin and it produces
60 per cent as much wood pulp.

The low chip price per oven-dry ton in the Maritimes is related
to the low market price for farmers' pulpwood. Farmers' 4-foot spruce

pulpwood, cut on their own land and piled on the side of the concession

.45-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

:50
l A
//
//
'45 PRICE RELATIONSHIP / f’
BETWEEN CHIPS. LABOUR AND FOOD /’/
..o IN EASTERN CANADA ’
/
I/

use /
3» Z
2 '3° / /
§ /
8 :25 /
° /
3 Chips / /d)our
3:20 1
8 /
5 /
3 us 1
E /

/
no ”,1/
/ /
I05 ’
’,,»” ...... ea
IOO ''''''' _ r .........
95
Nova New . .
Scotia Brunswick Quebec Ontono

 

~46-

road is sold for $10.00 to $12.50 per cord (approximately equal in solid
content to one oven-dry ton). In Northern Ontario, unionized piece-work
cutters, cutting and piling 4-foot spruce pulpwood in strips (66 feet
‘wide) on Crown land, are paid approximately $12.80 (flat rate plus

bonuses) per cord for their labour only. The underblying reasons for
these variations across Eastern Canada are beyond the scape of this thesis.

Since most pulp is manufactured from company-produced pulpwood
cut on Crown land (as distinct from farmers' pulpwood and sawmill chips),
it might be expected that the market price for sawmill chips would be
closely related to the delivered cost of company-produced wood. However,
this is not the case. The cost of company wood varies according to the
local labour rate and many other factors, and this cost is not public
knowledge. A reasonable estimate for Northern Ontario would be $35.00
per cord, in comparison to $26.00 per oven-dry ton for chips and $22.00
per cord for farmers' wood.

The pulpmills claim that there is no reason why they should
pay the raw material cost of the sawmill chips. In the six examples
illustrated in the previous section, chip production plus transportation
costs (exclusive of the $17.50 raw material charge) ranged from $18.14
in the smallest mill to $10.96 in the largest mill. Where the chip
price is $25.00 per oven-dry ton, this leaves a balance of $6.86 to
$14.04 to cover raw'material and profit. Where the chip price is $18.50
per oven-dry ton, this leaves $0.36 to $7.54 to cover raw'material and
profit. In a ”nonmal" market the question as to whether the pulpmills
should pay the raw material charge would be quite academic; the fair

price would be determined by SUpply and demand. However, in the chip

market we have a few very large canpanies on one side and many small
companies on the other side. The strength of the large companies lies
not only in their capital but also in the immense areas of forested
Crown land which they control. Under these circumstances the laws of
supply and demand do not function effectively.

The cost of chip receiving and storage facilities at a pulp-
mill usually ranges upward from.$25,000. This capital cost was often
cited as.a reason for either not purchasing sawmill chips or for paying
only a low price. However, recent experience at dozens of pulpmills
has indicated that the cost of storing and handling chips is substan-
tially lower than the cost of handling and storing roundwood. More and
more mills in Canada and the U.S.A. are switching entirely to chip
storage (i.e. all roundwood is barked and chipped upon arrival), even
though their roundwood facilities may be fairly new and efficient (28).
Therefore the capital cost of chip handling facilities should no longer
be considered as an abnormal eXpenditure for a pulpmill.

Some pulpmills will buy only a certain maximum quantity of
sawmill chips per year, say 15 per cent of their total fibre require-
ments; this may be due to the need to depreciate large woodlands invest-
ments over a certain.minimum number of cords, or to a fear of becoming
too dependent on the sawmill industry for chips, or to other reasons.

In some areas pulpwood is being cut from Crown land while nearby sawmills
are unable to sell their total chip production. Chips are being shipped
over 700 miles from one large sawmill in Ontario to a pulpmill in Quebec,
at a freight cost of $17.00 per oven-dry ton, in spite of the fact that
there are four large pulpmills within 200 miles of the sawmill. This is

a temporary eXpedient, not apaying preposition.

.48-

If the pulpmills'were cutting on freehold land, then these
expensive, wasteful practices could be condoned under the label of free
enterprise; but since the pulpwood is coming from Crown land, it appears
that government guidance might reduce the waste of wood and money.

Although there is a considerable variation in chip quality
among different sawmills, the pulpmills pay the same price per ton
regardless of quality. This applies to all accepted chips even though
the shipment is below the published quality specifications. It is
believed that the average quality of sawmill chips is gradually improving,
due to eXperience and improved equipment.

Information concerning the relative value of an oven-dry ton
of sawmill chips vs. an oven-dry ton of chips produced at a pulpmill is
not necessary for chip production cost calculations, although it is
necessary for pulpmill ”afford to pay" calculations. However, in this
discussion of the economics of barking and chipping, all figures refer
to the cost of producing sawmill chips which are comparable in value to
chips produced from roundwood.

This question of comparable value is the subject of some
controversy. One kraft mill in Eastern Canada published the results of
an Operational study which indicated that its purchased chips were of
lower value than its own roundwood chips, due to lower yield and higher
steam and chemical costs (24). Another kraft mill reported that sawmill
chips are equal in yield and quality to roundwood chips and a third mill,
using pine and hemlock chips and a soda process, reported an eight to
ten per cent increase in yield with sawmill chips and a 16 per cent

increase in strength.* A fourth kraft mill, in British Columbia, recently

 

* Unpublished correspondence.

-49-

published the results of a detailed study (2). In comparison to round-
wood chips the authors found that spruce sawmill chips gave a higher
yield and produced paper of equal strength; these chips required less
cooking time but required a longer beating time. The white pine chip
tests gave similar results except that the pine sawmill chips produced
paper that was slightly inferior in strength.

At the present time, therefore, it is reasonable to assume
that average sawmill chips are at least equal in intrinsic value to
chips produced at pulpmills from roundwood; however they do not obtain

an equivalent price.

O 1‘ 0

Initially, chips were produced only at the larger sawmills,
sawing 5 million f.b.m. or more annually. The gradual deveIOpment of
equipment scaled to'meet the requirements of smaller'mills has brought
about a progressive reduction in the minimum lumber production necessary
for the econanic production of chips. Competition has also provided the
necessary impetus for sawmill Operators, with a lumber production above
this new minimum level, to enter the chip business.

The level differs from mill to mill since it depends on such
variable factors as transportation costs from sawmill to pulpmill, and
eXpected life span of the Operation. However, many of the smaller'mills,
cutting perhaps 1% to 2 million f.b.m., are still below this minimum
level of production and cannot afford to purchase a barker and chipper.
Consequently, they have had to either resign themselves to a loss in
competitive position, or find a way to increase the quantity of material
to be chipped per annum.

This situation has led directly to the formation of co-Operative
chipping ventures of various types in cases where the relative geographic
location of the sawmills is suitable.

Chips are usually sold f.o.b. pulpmill. This means that,
other things being equal, the closer the sawmill is to the pulpmill, the
more it can afford to spend on chipping, and therefore, the lower is the
minimum level of lumber production necessary for the profitable production
of chips. In some cases, the pulpmills vary their price for individual
sawmills according to chip transportation cost, which has the same effect

as a constant price f.o.b. sawmill.

-50-

-51-

If two mills, neither one of which can afford its own chipper,
are situated twenty miles apart and one hundred miles from a pulpmill by
railroad, one can probably bark its logs and send the barked slabs and
edgings by truck to the second mill for chipping. From here all the
chips from both mills would be shipped to the pulpmill. However, if the
two mills are each one hundred miles fran the pulpmill, but also seventy
miles fran each other, then co-Operative chipping would probably be
impractical.

Type§ of gonggntrgtion Xardg

Two common types of slabwood concentration yards have developed.
Perhaps the most common type in the Northeastern United States is the
central chipping yard which is entirely supplied by barked slabs and
edgings which have been brought in by truck from surrounding sawmills.
Each of these mills is equipped with a rosser type barker and a fork lift
truck for loading the strapped bundles of barked slabs and edgings on to
a stake truck.

In the Northeast these yards are usually located beside a
railroad, because rail transportation is generally less eXpensive than
truck transportation for long hauls. However, yards with short hauls
often use trucks. Central chipping yards in the Northeast are usually
supplied by 6 to 10 sawmills, with an average individual production of
2 million f.b.m.

The second type of concentration yard - the one that may become
common in Eastern Canada - is the combined sawmill and chip yard
installation. A typical sawmill chipping centre involves a sawmill in

the 5 to 8 million f.b.m. class, with good transportation facilities,

-52..

and several small sawmills in the l to 3 million f.b.m. class which
truck barked slabs and edgings to the large mill for chipping (13).

The sawmill chipping centre has the volume advantage possessed
by the slabwood concentration yard, plus the additional advantage that
very little capital investment is required beyond the amount which would
be required for a normal sawmill barking and chipping Operation.
W

Central chipping yards Operated by three men may produce
60 cords per 8-hour day, and yards with four men around 80 cords per day.
In a three-man plant the crew organization is usually as follows; two
men feeding the chipper and one man Operating the fork lift truck. me
of the men also acts as foreman and tallyman, and one does the necessary
maintenance. In a four-man plant the additional man does all the
maintenance and lends assistance where necessary.

In a sawmill chipping centre the only additional manpower
required is one man with a picaroon to pull slabs and edgings fro: the
broken bundles on the live deck, into the conveyor leading to the chipper.
This must be done in such a way that the slabs do not jam in front of the
chipper infeed Opening. This feeding of the conveyor is fairly easy
where a large vertical chipper with "hold-down" rolls is used, but where
a relatively small horizontal chipper is used, "jams" can occur so two
men may be required for feeding the chipper. The daily capacity depends
mainly on the size of the chipper and the type of feed.

Capital Cost of Slgbwood Concentrgtion Yard

The central chipping yard requires a fork lift truck for off-

loading the bundled slabs. These bundles, which vary in weight frail

four thousand to seven thousand pounds, can be stockpiled in the yard,

-53-

or placed directly on a four-chain elevated live deck leading to the
chipper. Naturally, the arrangement of the equipment will be different
for the two types of concentration yards.

The total cost of the building and all equipment (excluding a
truck) for a slabwood chipping centre will often be $35,000 or'more (13).
However, the slabwood chipping centres in the Northeast range in cost
from $42,000 to more than $70,000, depending on daily production capacity,
storage capacity required, and intended life of the installation.

The combined sawmill and chipping centre requires, in addition
to its regular equipment, only a live deck for receiving slabs, and,
in some cases, an integral weighing device on the fork lift truck for
weighing the incoming slabs. If there is a public weigh scale on the
route between the small sawmill and the chipping sawmill, the weighing
device is not necessary.

If a central chipping yard is supplied by ten relatively small
sawmills, and the cost of equipping each one of these mills individually
with a chipper, screen, knife grinder, conveyors, chip storage bins,
etc., is $19,000, it can be seen that the central yard makes a tremendous
saving in capital. But the saving in labour is even more important.

The central yard requires only three men while each small mill requires
one. Thus the central yard cuts the labour cost per oven-dry ton to
three-tenths of the individual labour requirement of the small mills.

Another important consideration is the improved bargaining
position of the central yard, which represents 9,000 to 12,000 o.d.t.
annually, rather than 1,000 to 2,000 o.d.t., in regard to the price per

oven-dry ton paid by the pulpmill. The central yard is a more dependable

-m-

source of supply than individual sawmills, and it simplifies accounting
and liaison between the pulpmill and its suppliers.
odu t 0 Co t fo B rked b nd E n

Each satellite sawmill requires, in addition to its regular
equipment, a barker, a slab and edging conveyor leading to the
bundling frame, and equipment for applying steel straps. Therefore a
capital cost of $14,000 is assumed in Table 13. The barkers may be
rented or purchased outright. The fork lift truck may be equipped with
an integral weighing device but usually the sawmill Operator depends on
the concentration yard, or on a set of public truck scales, to weigh
the slabs.

A barker Operator and one other*man are usually required. In
a small mill the barker operator usually has sufficient time to clean
residual bark from either the logs or the slabs with an axe, and the
second man piles and bundles the slabs. The total daily labour charge
is assumed to be $27.54 ($15.03 + $12.51). A third man may be required
if the logs are large and knotty, or during certain portions of the
year when the bark is very tight. The daily power cost for 20 horse-
power would be $3.58.

As barked slabs are generally sold f.o.b. sawmill on a green
ton basis, tranSportation charges are not included in Table 13, and the
equivalent green ton figures are shown, based on an average moisture

content of 122 per cent dry base or 55 per cent green base.

-55-
Table 1

The Cost of Producing Barked Slabs in a Mill with a Daily Production of
10 M f.b.m. and an Annual Production of 2 Million f.b.m.

 

Cost per

SMALL MILL EQUIPPED WITH ROSSER BARKER Oven-dry ton

 

2 MM f.b.m. annually
2 (1320 o.d.t.)*

 

 

 

Annual Cost
Fixed Costs
Machine&Bldg. Deprec $2,800.00 $2.12
Interest Cost .. 504.00 .38
Insurance . 560.00 41432
Total Fixed Cost ........................ $3,864.00 8 2.92
Daily Cost
Variable Costs
Direct Labour........................... 3 27.54 34.17
Power 0.000.000.coo...00000000000000.0000 3.58 05h
Raniaterjal cooooooeooooooeoeoooeooooeoo oooooo 000000 15050*
Machine Maintenance .................... . ........ . .25
Steel Strapping ......... .. .4Q
Total variable Costs ................... ......... ............. $20.86

 

Total Cost per Oven-dry Ton f.o.b. Sawmill . $23.78

Total Cost per o.d.t., f.o.b. Sawmill,
Not Including Raw Material . ...... S 8.28

Total Cost per Green Ton, f.o.b. Sawmill,
NOt InClUdiIlg Raw lhterial OOOOOOOOOO0.0...OOOOOOOOOOOOOOOOOOOO g 3073

 

* Since the trim is not usually transported to the chipng centre, the yield
of chippable residue is reduced to approximately 31% of the log volume or
0.66 o.d.t. per thousand board feet.

The Hardwood Chi Indust

Only five pulpmills in Eastern Canada purchase hardwood chips,
and these chips amount to only 4 per cent of the total sawmill chip
production.in.this area. Because the supply of hardwood (either as
chips or roundwood) is large in relation to demand, the price is low.
Hardwood chips are usually sold on a green ton basis, for no apparent
reason. In areas where softwood chips sell for $25.00 per o.d.t.,
hardwood chips are commonly sold fOr’$l0.00 per green ton f.o.b. pulp-
mill, which is equivalent to $15.60 per o.d.t. (at 56 per cent moisture
content, dry base); in areas where softwood chips sell for $18.50 per
o.d.t., hardwood chips may sell for $5.00 per green ton f.o.b. sawmill
or $12.80 per>ovenpdry'ton f.o.b. pulpmill. In the first case the
hardwood price per oven-dry'ton delivered to the pulpmill is 62 per cent

of the softwood price, and in the second case 69 per cent.

The production of hardwood chips is virtually identical in.method
to the production of softwood chips. It is more difficult to bark frozen
hardwood but fortunately the hardwood pulping process is more tolerant of

bark. Almost all hardwood species are acceptable to the pulpmills.

At the present time the pulp market is very competitive, and as
long as this situation exists there is little likelihood of an appreciable
increase in the demand fer hardwood chips. In fact some mills have had to

reduce the percentage of hardwood fibre in their paper.

-56-

The Investment Decision

Several factors govern the decision of the owner of an existing
sawmill on whether to invest in barking and chipping equipment. Some of
the more important factors are:

l. The present value of slabs and edgings as they leave

the headsaw and edger. '

2. The cost of producing sawmill chips (exclusive of raw

material).

3. The optimum.chip market available (i.e., the market where

price f.o.b. pulpmill minus transportation cost is a
maximum).

4. Stability of this market.

5. The estimated reduction in sawing costs per thousand board

feet due to barking prior to sawing.

As sawmilling becomes concentrated in a decreasing number of mills,
of larger individual size, the marketing of slabs for fuel becomes more
difficult; as the average distance from sawmill to consumer increases, so
does the transportation cost. In addition, the use of furnace oil is
becoming increasingly common in sawmill communities. Such mills can usually
sell only a small percentage of their slabs and edgings for fuel; the
remainder is a liability which must be conveyed to a refuse burner (with the
exception of the very few sawmills that are close to central chipping facili—
ties). Therefore, in making the decision to chip or not to chip it is
assumed that slabs and edgings have a zero value as they leave the sawmill,

if there are no chipping facilities.

-57-

-58-

The stability of the chip market must be considered but this
stability cannot be expressed as a dollar value (aside from.its influence
on the length of the depreciation period and on the rate of profit used
in the investment analysis). Some sawmills that installed barking and
chipping equipment several years ago based their calculations on the
assumption that the pulpmill would always buy at least as many tons of
chips in the future as in the initial two year contract but this assump-
tion was ill-advised in some cases. Other sawmills expanded their lumber
production on the assumption that the pulpmills would purchase the
additional chip production (since sawmill chips are relatively inexpensive).
Again the assumption was ill-advised and several sawmills are either
shipping the additional chips long distances to a second pulpmill or
stockpiling them in the sawmill yard in the hOpe that they can find a

purchaser before the chips rot.

Therefore, the investment analysis depends primarily on three
factors, viz:

1. Chip production cost.

2. Potential reduction in sawing costs.

3. Chip value f.o.b. sawmill.

1. Production cost: as a basis for discussion, the chip production cost
data from.Tab1es 7 to 12 are presented graphically in Figure 5. The
cost data are adjusted to exclude raw’material and tranSportation
cost, and they include a 10 per cent mark-up for minimum.profit; some

Operators may feel that this percentage is too low.

~l o to 5 :

Chip Production Cost per Oven-dry Ton-8
0

--59 ..

 

I I l l l I I

 

 

 

l

T

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RELATIONSHIP TW EN CHIP PR TI T
AND ANNUAL LUMBER PRODUCTION
'5" Note: I. Raw material cost Is excluded.
:\ 2. This Figure is based on Tables 7-l3.
: . 3. Ten per cent has been added as a
5 minimum profit allowance.
2°"? 4. The notations beside the curves refer
to the dain productlan in tact board measure.
ZSMII '
Ion
\\
.\\ «\{OM
When ‘-\
: \!K§OM
: \‘\
I \‘ 30 M
O20" \,
: 0353'»,
eon
" dream
050M
0600!
070M
2 4 o s 7 a 9 IO N I2

Annual Lumber Production in Million Board Feet

.Figtu'eS

 

~60-

Potential reduction in sawing costs: if an existing sawmill installs

a barker, the mill downtime for saw maintenance will usually be con-
siderably reduced, and the daily production will usually be increased
appreciably, say by 10 per cent. There may be a slight increase in
either yield or grade, or there may be a slight decrease in yield,

due to a tendency to slab more heavily.

In order to estimate the reduction in sawing cost per thousand board
feet, which is directly attributable to a 10 per cent increase in

daily production, it is necessary to differentiate between a mill which
increases its daily production and reduces the number of operating days,
the annual production remaining constant, and a mill which increases
both its daily and its annual production, the number of Operating days
remaining Constant.

In Tables 14 and 15, which are based on a sawmill sawing spruce and jack
pine, with a daily production of 20 M f.b.m. and an annual production of
five million f.b.m. before installation of a barker, it is assmned that
daily production is increased 10 per cent to 22 M f.b.m. daily. In
Table 1h the number of operating days is reduced from 250 to 227, and in
Table 15 the annual production is increased 10 per cent to 5.5 million
f.b.m.

Tables, similar to Table 15, were constructed for mills sawing 3 million
and 7 million board feet. The "reduction in sawing costs per thousand
board feet" was converted into "additional gross return per oven-dry ton"
and plotted in Figure 6 as an addition to the $25.00 chip price. This
Figure indicates the relationship between production cost, selling price,

and annual volume .

-61-
Table _l_.l*

The Reduction in Sawing Costs per M f.b.m. Attributable to the 10 per
cent Increase in Daily Production Due to Barking-- No Change inAnnual

 

 

 

 

 

 

 

 

 

 

Production.
Number of Operating Days Required 250 227
Daily Production 20 M f.b.m. 22 M f.b.m.
Cost per M f.b.m.
____.__Amua1 Co.__st 22:22 $2.1:
Fixed Costs
Machine and Bldg. Deprec ........ $15,000 8 3.00 S 3.00
Interest Cost ..................... . 5,000 1.00 1.00
Insurance Cost .................... . 5,000 l.00 1.00
Total Fixed Costs .. ........ 325.000 $ 2.00 i 5.00 ______
Dail Cost
Variable Costs
Paw Material .. ........ . ........ .... ‘ 31.0.00 “$.00
Laban eee eeeeeee eeeeeeeeeeeeeeeoooo sROQm 60m 50h5
Pomr ....OOOOOOOOOOO0.0.00.00.00.00 200w 10m .91
Maintenance .. 20.00 1.00 .91 ...a
Total Variable Costs Mam MLZL

 

 

Total Cost per M f.b.m. on the Green Chain $53.00 $52.27*

 

v m

* At the rate of 0.75 oven-dry ton per M f.b.m. sewn, this reduction of $0.73 is
equivalent to $0.97 per oven-dry ton. In addition, the mill can close down
for one winter month when sawmill efficiency is usually below average.

-62-
Table 15

The Reduction in Sawing Costs per M f.b.m. Attributable to the
10 per cent Increase in Daily and Annual Production Due to Barking.

 

 

 

 

 

 

 

 

Number of Operating Days Required 250 250
Daily Production 20 M f.b.m. 22 M f.b.m.
0081': merobomo
Annual Cost 22.2229. £129.:
Fixed Costs
Machine and Bldg. Deprec............. $15,000 a 3.00 3 2.73
IntemSt mat ......OCOOOOOOOOOOCOOO. S’mo I’m .91
Insumnce cost oeoeeeeeeeeeeeeeeeeeee 5,000 i000 OL-
TOtal Md 008133 e eeeeeee eeeeeeeeeoo $25Lm $50m 3 1L055
Dail Cost
Variable Costs
Raw mterm ......OOOOOOOOOOOOOOOOOO mom $hoom
mbour ....0.0.0.0....OOOOOOOOOOOOOO. $1200m 60m 5‘h5
Power eeooeeeeeeeeeooeooooooooooeoooo 20000 10m 091
mmtenance .eeeeeeeeeeeeeeeeeeeeooee ZOem Lm O91
TOtaJ. Variable was oeeeoooeeeoeeeee . . jwom @7027
Total Cost perM f.b.m. on the Green Chain $53.00 $51.82*

 

 

 

* At the rate of 0.75 oven-dry ten per M f.b.m. sawn, this reduction of $1.18 is
equivalent to $1.57 per oven-dry ton. In addition, the raw material cost may
be reduced if the sawmill owner conducts his own logging operation.

-63-

 

I I I I I I
ANALY IS F R0 T R

 

Based on 0 Selling Price of 3 25.00 per Oven-dry Ton.

 

 

Reduction in sowing cost converted into

 

 

 

7 additional gross return per oven-dry ton.

 

 

 

 

 

8_..”.'°°.’.:;.‘3;I.' , af/ ////; ,gf/ V / , »__
eawaaaaaaa

 

 

ross Return -

i ‘%/ 3% %//

 

 

 

 

 

 

 

 

. °:::‘::.:' %7 %//z///%////://///

production cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1?

Annual Lumber Production in Million tum.

 

Ilmmuel6

3.

-64-

Chip value f.o.b. sawmill: this value is equal to the price f.o.b.
pulpmill minus the tranSportation cost. The price f.o.b. pulpmill
varies considerably as indicated in a previous chapter. However,
for illustrative purposes a figure of $25.00 per oven-dry ton is
used in Figure 6. TranSportation cost is primarily a function of
distance, as shown by the rail freight rate curve, Appendix II; for
hauls of 60 miles or less truck tranSport is usually cheaper than
rail, and there is a different rate curve for each type of truck.
Since chip tranSpor’tation cost is not a function of sawmill annual

production, it cannot be shown in the Figure.

Figure 6 does not deal with mills cutting less than 2 million f.b.m.
per annum. It is obvious that very small mills can profitably

produce chips under some circumstances. The Figure indicates that,

at the 2 million f.b.m. annual production level, almost $15.00 per
o.d.t. is available to cover tranSportation, raw material cost, and
additional profit (over the 10 per cent minimum). However, these

mills are rapidly vanishing from the scene because they cannot compete
with large softwood mills in lumber production and marketing efficiency.
If they are situated in a relatively isolated location with a captive
market, there is usually a long haul to a chip market. In either case
the installation of a barker and chipper is a questionable investment.
As indicated in a previous Section, the installation of a barker and
the production of barked slabs is often profitable where the small mill

is located close to a market for clean slabs.

—€)5-

Once the chip freight rate between the sawmill and the prOSpective
purchaser has been ascertained, the sawmill Operator can determine the
amount that would be available to cover raw material and to provide profit
in excess of 10 per cent. Since the raw material cost is incurred irres-
pective of whether or not he produces chips, in one sense both these items
are profit.

If the investment analysis indicates that insufficient money would be
available to cover raw material and additional profit, Obviously chipping
would not be undertaken. However, there is a much more important conclusion
to be reached at this point. If chipping would be uneconomic at the existing
sawmill with the current annual lumber production, the Operator should
immediately consider how to alter the situation so that chipping would be
profitable. In some cases, where low annual lumber volume means high produc-

_ tion costs, the answer is to merge with one or more other lumber companies in
the area in order to form one large company with sufficient timber supply and
capital to Operate one large, modern sawmill complete with chipping facilities.
In other cases, where high chip tranSpOrtation costs make chip production
unprofitable, the only solution that will allow him to remain competitive is
to move to a new site where timber supply is assured and where chip transpor-
tation distances are reasonable.

At the present time approximately 50 per cent of all softwood lumber
produced in Eastern Canada comes from sawmills that chip their residue, and by
1970 it will probably reach 75 per cent. Average annual sawmill production is
rising steadily; almost no new mills are built to produce less than 5 million
board feet per annum and many new mills produce 10 to 15 million. These mills
are efficient. They have relatively low unit lumber sawing costs and they also
have an additional income from chips which is often as high as $12.00 per
thousand board feet.

Summary

The production of pulp chips from sawmill residue in Eastern
Canada is increasing rapidly. The present annual production is approxi-
mately 800,000 o.d.t. and a total production of 1,200,000 o.d.t. is
predicted for 1970. This increase will be due to both the replacement
of additional small sawmills by large mills, and the increased use of
disc refiners to produce groundwood pulp.' In a few cases the utilization
of residue from small sawmills will be made possible by the establishnent
of slabwood concentration yards.

The average chip yield per thousand board feet of Spruce and balsam
lumber production is 0.75 o.d.t.; in efficient bandsaw mills the yield may
drop to 0.65 o.d.t. The average spruce log diameter in this area is
probably about 8 inches. In Texas the chip yield is quite similar for
pine logs in the same diameter range, after adjustment for the difference
in Specific gravity.

Chips are now one of the two main products of the sawmill, and it is
logical to allocate a portion of the log raw material cost to chip produc-
tion cost. Since chips account for approximately 35 per cent of the original
log volume, the allocation of a similar percentage of the leg cost to chips
seems reasonable. The market price for chips increases appreciably from east
to west across Eastern Canada. In all areas, however, this price is consider—
ably below the comparable cost of counpany produced pulpwood from Crown land.
The present published information concerning the relative value of sawmill
chips vs. chips from roundwood is inconclusive; however it is reasonable to

assume that sawmill chips are at least equal in intrinsic value to chips
produced at a pulpmill.

-66..

f-
—O {—

The decision of a sawmill owner or prospective owner who is
considering the production of chips depends primarily on three factors:
estimated production cost, potential reduction in sawing costs, and chip
selling price f.o.b. sawmill. If an analysis of these factors indicates
that chipping would not be profitable at the existing or prOposed mill,
then the owner must make a further decision. Can a one product sawmill
compete on the lumber market and still yield an adequate profit or should
consideration be given to building a sawmill in another area where chipping
is profitable? Recent investment in the sawmill industry has been concen-

trated almost entirely in two product Operations.

-68..

 

 

 

 

 

Plate 2. bases- bsrhe with inline teed.

 

 

Plate 4.. Outfeed end of ring barber.

-70-

. ‘ ...,4'3"
...-”

 

Plate 5. Infoed side of rosser barker installation.

 

Plate 6. Outfeed side of rosser barker installation.

-71-

. ..!|
'llll 1'

. lamina“...

 

 

Plate 7. Ring barker installation; note
concrete base for‘banker.

_ x
”m

,"."‘ ti -1
:Itlg i" M L

 

 

_ EDflNIB. lkmblsrflfipfiuhlandimmdwfl;bin.

-72-

 

Plate 9. Chipper with inspection plate removed.

 

Plate 10.0 Chipper infeed at small central chipping yard.

-73-

 

 

Plate 11. Sawmill chipping centre; slab receiving
deck is behind chipper and screen.

W.

 

 

Plate 12. Truckeload of Slabs.

-74-

 

 

 

IPlate 13. Side dumping of trailer into box car.

 

.o

 

 

A r" f ... ‘e‘;

W14: *Etichmenw To: treifir to platto—nn.

-75-

 

 

Plate 15. Hopper car with built-up sides.

a:
!

 

Plate 16. Tarpanlin-covered dlmp truck.

1.

2.

3.

4.

5.

9.

10.

11.

13.

BIBLIOG

Applefield, M. The Marginal Sawlo g for Southern Yellow Pine.
Texas Forest Service Research Note No. 21, 1958.

Applefield, M. The Production and Marketing of Pine wood
Residues by Small Sawmills. Tamas Forest Service Bulletin
No. 50, 1960.

Bell, G.E. Factors Influencing the Manufacture of Sawlogs
Into Lumber in Eastern Canada. Canada Department of Resources
and Development, Forestry Branch Bulletin No. 99, 1951.

Bradner, M. Sawmill Efficiency Not Measured by Volume of
Production. The Timberman, Volume 28, No. 8, 9, and 10, 1927.

Childs, M.R. A Method for Estimating Residue Pine Pulp Chip
Yields. Tamas Forest Service Circular No. 59, 1957.

Dahn, H.P., and F. Loschbrandt. Chip Quality and Chipping.
Norsk Skogindustri, November, 1960. (Translation No. 11. of
the Columbia Cellulose Comparv, Limited, Prince Rupert, 13.0.)

Davis, J. et al. The Qitlook for Canadian Forest Industries.
Royal Commission on Canada's Economic Prospects. Queen's
Printer, Ottawa, 1957e .

Dowdle, B., and R. Bain. Lumber or Chips. 11.8. Department
of Agriculture, Forest Service, Northeast Forest kperiment
Station Paper NO. 150, 1961e , .

Elliott, D.R. The Transportation of Pulpwood Chips in Pipelines.
Pulp an! Paper Magazine of Canada, May, 1960.

Feiner, J.H., and W. Galley. The Effect of Chip Thickness
on Sulphite Pulp Yield and Qualiw. Pulp and Paper Magazine
of Canada, 39pm”, 1962e

Flam, 1.8. Some Conversion Factors and Related Intonation
for Use in the Primary Forest Industries of Eastern Canada.
Canada Depath of Forestry, Forest Products Research Branch
Technical Note No. 26, 1962.

nann, LB. An Outline of Barking and Chipping Equipment
Available in Eastern Canada. Timber of Canada, January, 1962.

Flann, I.B. Slabuood Concentration Yards. Canada Lunbernan,
December, 1961.

-76-

'\

 

14.

15.

16.

17.

18.

19.

20.

23.

25o

26.

27.

28.

”I?

Fogh, I.F. An Evaluation of the Economics of Supplying Sawmill
Chips to Pulp and Paper Mills. Pulp and Paper Magazine of
Canada, February, 1961.

Guttenberg, S. , and J.D. Perry. Weight-Conscious Lumbereen.
southfirn mmn’ my 1, 1957a

Hall, O.J'. Cost of Making Pulp Chips. University of Arkansas.
Publication D-S, 1960.

Hawkensen, LJI. Problems of the Chip Producer. Paper Trades
Journal, August 6, 1962.

Hawkensen, LN. Pulp Chip Production. Northeastern Logger,
February, 1961.

Jessop, A. The Chip Trickle Becomes a Flood. Canada Lmbeman,
April, 1961.

King, WJI. Survey of Sawmill Residues in East Tamas. Texas
Forest Service Technical Report No. 3, 1952.

Kramer, P.R. The Yield of Sawmill Residue Pine Pulp Chips
by Sawlog Size. Texas Forest Service Circular No. 56, 1957.

Lightfoot, 3.6., and P. Premont. The Influence of Size of
Anglo Chips in Pulping. Pulp and Paper Magazine of Canada,
Convention Issue, 1962.

Montmorency, v.11. do. Chip ibisture as a Factor in the Mamfacture
of Mechanical Pulp from Chips. Pulp and Paper Magazine of
Canada, OCtObOr, 1962e

Paavila, H.D. An Evaluation of Sawmill Chips in a Kraft Pulping
Operation. Pulp and Paper Magazine of Canada, June, 1962.

Prices and Price Indexes, January, 1963. Canada Deparinent
of Trade and Comoros, Dominion Bureau of Statistics, Catalogue
NO. 62.m2, 1963.

Simone, F.C. Advantages of Log Barker to the Sawmill Operator.
Northeastern Logger, November, 1961.

Taras, 14.1. Buying Pulpvood by Weight. 11.8. Department of
Agrictnture, Forest Service, Southeastern Forest Experiment
Station Paper No. 71., 1956.

weatherly, J. Improved Handling Justifies the System. Pulp
and Paper Magazine, May 13, 1963.

"crater, B., and 3.x. Sugiyami. Comparative Kraft Pulping

of Sawmill and Pulpmill Chips. Paper presented at the Annual
Mgzting, Technical Section, Canadian Pulp and Paper Association,
1 3.

30. Yorstcn, F.H., and N. Liebergott. Comparative Evaluation
of Fibre Damage Due to Chipping. Pulp and Paper Magazine
of Canada, November, 1961.

Effect of Variation in Density on
Y n F t

 

 

Species Oven-dry Chip Yield Estimated
Weight for a Band- Percentage
per 611.1%. saw Mill of Total

Requiring Sawmill
165 cuefte Chip

of Logs per Production
M fhm. (o.dt/

12ml

Fir, balsam 20.6 .51. 11

P1115, 130k 26.2 e70 6

Pine, white 23.1 .61 12

Spruce, black 25.0 .66 3)

Spruce, red 23.7 .63 6

Spruce, white 21.8 .58 21

Rate per cwt. (cents)

-80-

 

 

 

 

W
a, ,
| I I I I . /
u RELATIONSHIP BETIggEN CHIP /
FREIGHT RATE AND DISTANCE ° //
Q
28

 

\

 

 

\

«L

 

 

B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40 60 I20 ISO 200 240 280
Distance in Miles

320

300400440400

 

In one small mill, sawing 10 thousand board feet per
day and 1 million board feet per year, a unique, interesting and
very successful production system is used. The rosser barker
is operated intermittently as required. A11 the slabs and edgings
produced during the day are piled at the end of a conveyor beside
a chute leading to the chipper. For 20 minutes each day, the
sawmill operation is shut down and the entire 6-man crew swings
into chip production. The chipper is put into operation, the
slabs and edgings are chipped, and the chips are blown through
the cyclone into a truck, without screening. The chipping and
loading operation takes 20 minutes, during which time one of the
6 crewman inspects the chips as they enter the truck in order
to pick out any conspicuous over-size chips. When all the slabs
are chipped, the same crewmn drives the truck to the pulpmill,
and is back at the sawmill about 1.0 minutes later. During his
absence the mill operates with 5 men. The quality of the chips
produced at this mill is high, due particularly to the excellent
maintenance work conducted on the chipper.

it first glance this system of stoclqailing the slabs
and edgings may appear laborious and expensive, but in this mill
it is very efficient. when the barker and chipper were first
installed, the chipper (with a 75 . motor) ran all day, and
the power cost Jumped from $145 to 275 per month. Now, running
only 20 minutes per day, while the rest of the sawmill machinery
is shut down, the total power cost is only $138 per month. The
reasons for the additional reduction from the original 811.5 to
$138 are not clear.

23:

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M'CHL'GAN STATE UNIVERSITYL |

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