Sappi: Water levels ‘threaten production’

SAPPI, the world’s biggest producer of dissolving wood pulp, was struggling to maintain cellulose production at its main South African plant because of a water shortage, a person with knowledge of the matter said yesterday. The situation was reaching a critical stage, said the person, who asked not to be identified because the news had not been made public. The Saiccor plant, 50km south of the port of Durban on the east coast, pumps water from the Umkomaas River estuary that flows into the Indian Ocean. Below-average rainfall and the absence of a snow melt in the Drakensberg mountains had lowered water volumes in the river, the person said. Sappi did not “anticipate any disruption to production”, Andre Oberholzer, a spokesman, said. The Saiccor mill had contingency arrangements for the low flow experienced in KwaZulu-Natal rivers before summer rains started in about a month, he said. Saiccor can produce 800 000 tons a year of dissolving wood pulp and is increasing its focus on the material which is used to make luxury clothing, sportswear and pharmaceuticals, as these carry a higher profit margin than paper. Sappi is scheduled to report fiscal third-quarter results this morning. Shares dropped 1.33 percent to close at R43 on the JSE yesterday. – Bloomberg