NEWS

PRINTING/WRITING

Avenor shareholders reject Repap deal

The future of Repap Enterprises Inc. remained in doubt as of early April following defeat of a proposal to merge with fellow Canadian papermaker Avenor Inc. Shareholders of Avenor voted 74% to 24% Mar. 27 against the all-stock transaction that was valued at about C$2.6 billion. The assumption of C$2.26 billion of Repap's debt was a major reason the deal fell through.

The stunning defeat raised the possibility that Avenor might reconsider a proposal made earlier by Domtar Inc. for a three-way merger including Repap. Paul Gagne, Avenor president and CEO, said the company is willing to talk to Domtar now, but seemed to rule out a combination involving Repap.

There was also speculation that Repap might reconsider its reluctance to sell a portion of its holdings. Finnish papermaker UPM-Kymmene was among those who confirmed it had earlier approached Repap about buying certain parts of the company. Executive vice president Martin Granholm said in the Finnish press that UPM could possibly bid again if the opportunity presents itself. Other U.S. companies that could be considered potential bidders include coated papermakers Consolidated Papers Inc., Mead Corp., and International Paper Co.

Repap's operations include the Kimberly, Wis., coated paper mill; the Newcastle, N.B., pulp and paper mill; a kraft paper mill The Pas, Man.; a pulp mill in Prince Rupert, B.C.; and sawmills in British Columbia. Repap had amended the deal to exclude the British Columbia operations, which in March filed for protection from creditors.

Gagne said his company will proceed with plans to seek buyers for its 53% owned Pacific Forest Products Ltd. unit and the Gold River pulp mill in British Columbia. Those moves had been intended to pay down debt under the proposed acquisition.

UPM-Kymmene Corp., Finland, has announced it has entered into a coating technology transfer agreement with Domtar Inc., Montreal, to help the Canadian company develop expertise in the manufacture of coated free-sheet. n

NEWSPRINT

Abitibi-Consolidated plans Montreal base

Montreal, Que., has been chosen for the headquarters of the new Abitibi-Consolidated Inc. if the C$4.1 billion megamerger of Abitibi-Price Inc. and Stone-Consolidated Corp. is approved by the companies' shareholders. Abitibi-Price chairman and CEO Ron Oberlander and Stone-Consolidated president and CEO Jim Doughan made the announcement to employees after six executives from the two companies compared Toronto and Montreal. They decided Montreal offered the best business and economic opportunity. The new company, which would be a world powerhouse in newsprint and uncoated groundwood papers, would have eight paper mills and seven sawmills in Quebec. The operating cost for doing business in Montreal is about 10% less than in Toronto, where Abitibi-Price is headquartered.

The Stone-Consolidated headquarters at 800 Rene-Levesque Blvd. West in downtown Montreal will not be the home for the planned new company, an Abitibi-Price official said. Executives will find another office in the city.

With one headquarters, some of the about 400 employees at the two main offices will lose their jobs. The decision on who remains has not been made. n

FOREST RESOURCES

James River to sell timberlands

James River Corp. (JR) announced in late February it had signed a definitive agreement with Hancock Timber Resource Group for the sale of approximately 95,000 acres of timberlands in southern Alabama and Mississippi for $110 million or about $1,160/acre. The deal was expected to close in April.

JR said it signed a long-term wood supply agreement giving it certain cutting rights on the lands to provide pulpwood to the company's Naheola mill in Pennington, Ala., one of its largest manufacturing facilities.

Naheola has total capacity for about 245,000 tpy of tissue and 225,000 tpy of bleached paperboard used in making Dixie cups and plates and folding cartons.

The majority of the timberlands being sold is located within 35 miles of the mill and currently provides a small percentage of annual wood requirements. "This transaction provides an opportunity to improve our financial flexibility, while assuring a long-term supply of wood to the Naheola mill," said CEO Miles L. Marsh.

HTRG is an investment unit of Boston, Mass.-based John Hancock Mutual Life Insurance Co. The company recently said it planned on investing in quality southern timberland to "round out" its most recent timberland investment fund.

TimberWest Forest Ltd. in Vancouver, B.C., a unit of Fletcher Challenge Canada Ltd., said in March it reached an agreement with TAL Acquisition Ltd., to acquire TimberWest for C$674 million. British Columbia-based Slocan Forest Products Ltd. will then acquire TimberWest's Mackenzie and Williams Lake wood products operations for C$200 million, according to announcements by the companies. Mackenzie includes two facilities.

TimberWest had been on the auction block since late last year and earlier decided to sell 500,000 acres of privately owned timberland in B.C. to an investment fund. That deal has been scrapped in favor of the TAL cash offer.

Louisiana-Pacific Corp.'s Ketchikan Pulp Co. (KPC) in Ketchikan, Alaska, closed on Mar. 24. The decision was made last fall after last-ditch efforts to extend its federal timber rights. KPC did manage to reach an agreement that will keep its two sawmills in southeast Alaska operating for another three years. L-P announced a 1996 net loss of $201 million including a $215 million after-tax writedown of the KPC mill. n

DISSOLVING PULP

Rayonier's Port Angeles mill shuts

The northern hemispheric move toward specialty products came home twice in late February. The last roll of pulp came off the line late one morning at Rayonier Inc.'s mill in Port Angeles, Wash., marking the closure of the 150,000 mtpy sulfite dissolving pulp/fluff pulp mill.

With the shutdown, Rayonier ends production of rayon viscose grades, having shifted its focus to more specialized grades of dissolving pulp. In its report on Rayonier, Dean Witter noted that the company's just-completed rebuild and expansion of its mill in Jesup, Ga., would somewhat offset the effects on capacity of the Port Angeles closure; total Rayonier shipments are expected to drop from the 760,000-785,000 mtpy range to about 700,000 mtpy. Fluff pulp production may be reduced slightly.

Dean Witter said that the company's $79 million write-down is effectively non-cash because severance costs are expected to be covered by funds obtained from the liquidation of working capital (inventories and accounts receivable). n

Courtaulds reduces viscose capacity

In response to the changing market, Courtaulds plc is reducing its viscose capacity by about 20%. The restructuring, which will reduce current viscose fibers capacity at its Grimsby, England, site by 25,000 mtpy, or 45% of the present 55,000 mtpy, does not affect capacity plans at its Tencel plant under construction there. The company said most employees will be absorbed into existing operations or the solvent-spun lyocell (Tencel brand) plant. Courtaulds' two other viscose plants, at Mobile, Ala., and Kelheim, Germany, are not affected.

Courtaulds said it is taking the action in response to weak market conditions and overcapacity due to new operations in the Far East. In a Reuters story, Courtaulds CEO Gordon Campbell noted that a price rise of about 5% "won't really work through until the next quarter." Competitor Lenzing also announced a viscose price increase earlier this year.

Courtaulds said it has decided to reduce its exposure to the commodity textiles market (such as rayon) and to focus instead on its expertise in specialty fibers, which now account for 25% of the company's viscose fibers sales. Viscose is produced from dissolving pulp.

CONTAINERBOARD

Stone/Four M to close linerboard mill

Florida Coast Paper Co. L.L.C.-a joint venture operation between Stone Container Corp. and Four M Corp.-announced in March it will shut down its 1,500 tpd kraft linerboard and mottled white liner mill in April due to high operating costs and current market conditions. The length of the shutdown is uncertain, according to the company, and it will last until market conditions improve. "The company could no longer ignore their high cost of operations in such a prolonged depressed market," said Harold Wright, chairman of Florida Coast. The mill's general manager said in a statement that the 568 employees "will have to be put on hold."

Stone and Four M acquired the mill from St. Joe Forest Products Co. in May 1996 for $185 million, plus working capital. During the 1992-93 period, St. Joe invested $207 million to modernize the mill, although industry analysts questioned the mill's efficiency at the time of the purchase. The owners continue to tout the mill's potential and value, although conceded that the expected cost savings achieved by the mill failed to offset the fall in linerboard prices.

The downtime announced for the Port St. Joe linerboard mill is in addition to the previously reported 100,000 tons of containerboard downtime planned by Stone in the coming months. The company said it will continue to serve its indebtedness during the curtailment and that company bond holders will not be adversely affected. n

Visy starts up containerboard mill

Despite the snowstorm in the Northeast, Visy Industries Inc. confirmed that its 100% recycled containerboard mill on Staten Island, N.Y., experienced a smooth startup, as planned, April 2. "It was a good and straight-forward startup," said Deputy CEO Mike Harwood. Although the machine's containerboard capacity is set at 800 tpd, it will begin by running about 400 tpd of recycled medium for a number of months and then ramp up to 100% recycled liner, again making about 400 tpd. Harwood said the machine should begin making liner late this month. He said the machine will run a modest amount of paper-about 400 tpd-for the first six months. "That may be our way of controlling inventories without taking downtime," he said.

The new machine is a 1997 version of Visy's Conyers, Ga., machine.Crews training now at Conyers will be brought to New York to run the Staten Island machine, built by Voith (Brazil). It is billed as a kraft alternative, 100% post-consumer linerboard and medium machine, with a capacity of 800 tpd or roughly 286,000 tpy. The machine will ultimately run various containerboard grades including 47 lb-17 lb lightweight high-performance linerboard and a variety of brown box packaging associated with Rule 41 or alternate Rule 41. The machine is 200 in. wide, has a trim of 196 in., and is capable of running at 3200 fpm. The cost of the project was not specified last week, but it has been allotted $150 million.

The fiber furnish will be old corrugated containers and mixed waste and the machine needs about 350,000 tpy. The city of New York has contracted to supply 150,000 tpy of wastepaper for what was originally billed as a 10 year contract, although the length of the contract was not disclosed. Visy Recycling will collect another 100,000 tpy from the four-state area, Harwood said, and the remaining balance of fiber will be obtained from paper merchants. Tonnage has been presold, Harwood said; the operation targets independents and about 35 have signed agreements or committed to tonnage, "which shows we are well received in the Northeast market by independents who have been let down by integrateds in the past." n

Weyco closes mill, consolidates

Weyerhaeuser Co. (Weyco) has decided to permanently close its 375 tpd corrugating medium machine in Longview, Wash., as well as consolidate or dispose of some of its 40 recycling facilities as part of an after-tax charge of $25 million against first quarter 1997 earnings. The semichemical medium machine has been mothballed since 1995 and therefore should have no effect on current conditions in the U.S. containerboard market.

"Our corrugating medium machine at Longview is not large enough to be a cost competitive operation," said Weyco CEO and president John W. Creighton in a statement released in late February. The closure also reflects Weyco efforts to narrow its business focus at that mill, which makes uncoated free-sheet and bleached paperboard.

In addition to permanently closing the medium machine and eliminating some recycling facilities, the after-tax charge of $0.12/share also reflects the anticipated sale of Shermin Nurseries, a Connecticut-based wholesale nursery business, and an interest income refund due as a result of a recent favorable federal tax decision relating to large timber losses caused by the 1980 eruption of Mt. St. Helens.

The Longview corrugating medium machine was shut down "indefinitely" between September and October 1995, when the company said high box plant inventories and a sluggish market triggered the closure, which included the layoff of 44 workers. Regarding the elimination of some of its 40 recycling collection and sorting facilities, a company source said Weyco has not yet decided how many or which centers to dispose of, close or consolidate. n

PAPERBOARD

Gulf States, G-P set marketing agreement

Georgia-Pacific Corp. (G-P) and privately held Gulf States Paper Corp. announced they have signed a letter of intent to negotiate a joint venture to sell and market solid bleached sulfate (SBS) paperboard. Under the terms of the proposed venture, G-P's Crossett, Ark., mill will produce SBS board to the same specifications as bleached board produced at Gulf States' Demopolis, Ala., mill. Production from both mills will be marketed and sold by Gulf States as part of its CartonMate product line. A final agreement is expected to be completed by May 1, said a spokesman for Gulf States.

Each mill produces a wide range of coated and uncoated board grades ranging from .014-pt to .024-pt for the general folding carton industry. In addition, the Crossett mill has polyethylene extrusion capability to produce folding carton board for frozen and wet foods. Together, the two companies produce approximately 465,000 tons of SBS board annually. G-P's Brunswick, Ga., mill is not included in the proposed venture as it mainly produces bleached board for cups and plates.

Gulf States said it is reviewing its previously announced plans to add a second paper machine at the Demopolis mill. During 1993-94, the mill expanded its bleached pulping capacity to approximately 1,500 tpd with plans to integrate production with a new 850 tpd SBS board machine. "Our prospective agreement with G-P would eliminate any immediate need to expand our production of bleached paperboard and gives us the opportunity to explore other for additional fiber from our mill," said Michael Case, Gulf States' executive vice president for pulp and paperboard. n

INTERNATIONAL

Arjo Wiggins, Sappi merger nixed

Talks between Arjo Wiggins Appleton plc and South Africa's Sappi Ltd. on a 2 billion ($3.2 billion) merger have collapsed, according to The Sunday Telegraph in London. Under the terms of the deal, Sappi would have merged its international business, which includes S.D. Warren Co. in the U.S., with Arjo's paper manufacturing operations, including Appleton Papers Inc., in return for a 45% stake in the combined business. At the same time, Arjo would have sold off its European paper distribution business to management. The Telegraph said Arjo was keen to merge with another company due to harsher conditions in the paper market. Arjo's European carbonless and thermal papers business recorded a significant loss in 1996. Total operating profit for the European paper manufacturing unit fell to 9.9 million from 19.2 million in 1995. Total corporate pre-tax profit fell to 134 million from 192 million before restructuring expenses of 121 million in the European paper unit.

New management. Arjo Wiggins is 40% controlled by St. Louis Arjomori-Prioux SA, which is being absorbed by the French holding company Worms SA. The two main shareholders of both Worms and St. Louis are the Worms family of France and the Ifil holding company, representing Italy's Agnelli family. The merger will give Worms direct control of St. Louis' sugar refining and paper manufacturing operations, eliminating St. Louis as an unnecessary intermediary. Following the announced merger, Arjo's managing director Daniel Melin resigned. He is to be replaced by Jean-Philippe Thierry, a member of the Worms family and at present head of Worms' Athen Insurance subsidiary. n

Oji Paper downsizing workforce

Oji Paper Co., Japan's largest paper company, said it plans to eliminate 1,600 jobs, or 20% of its workforce, over the next three years. As part of its cost-cutting effort, the company will also examine its production and distribution system. A spokesman said a task force was working on an "ultimate goal" of 2,600 fewer jobs by the year 2000, pushing the head count below 10,000 employees as part of a strategic plan to raise profitability by reducing personnel costs. The reductions follow the merger last October of New Oji Paper Co. and Honshu Paper Industries Co. to form the third-largest paper manufacturer in the world with consolidated sales of approximately $11.7 billion.

The major objective of the job cuts is to increase the company's international competitiveness. Japan's paper manufacturers are generally not cost-competitive in international markets, while their domestic markets are heavily protected. Japanese domestic paper production rose by about 5% last year, but is expected to be flat this year as manufacturers lose market share to exports from southeast Asia, where prices fell more than 40% in 1996, said analysts. Dresdner Kleinwort Benson, the securities firm, said average recurring profits in Japan's paper sector will fall about 20% in the first quarter of 1997 and up to 50% in 1997-98. n

Itochu, APP alliance will aid sourcing

A possible strategic alliance between Singapore-based Asia Pulp & Paper Co. (APP) and Japanese trading company Itochu Corp., announced in March, would strengthen APP in key pulp and paper industry areas. The two companies signed a nonbinding memorandum of understanding; an inside source described the potential arrangement as "a very big deal," and said it was expected to close in April.

Under the plan, Itochu would assist APP in areas where the Japanese company has complementary strengths, such as raw materials procurement and marketing and distribution in markets not fully exploited by the APP Group, the statement said. According to the source, Itochu will obtain softwood kraft pulp and old corrugated containers (OCC) from around the world for APP's mills in Asia. He said Itochu will assist APP in getting financing for new projects in such countries as China and India, with Itochu eventually marketing pulp and paper for APP-mainly in Asia. He added that Itochu will also provide management personnel.

The strategic alliance would be conditioned on the purchase by Itochu of $100 million of mandatorily exchangeable preference shares to be issued by a finance subsidiary of APP, according to a company press release. The preference shares would be exchanged for APP ordinary shares within five years from the purchase date. As part of the strategic alliance, Itochu would also have the right to nominate one director to the APP board of directors.

Nippon Paper loses in fax paper appeal

Nippon Paper Industries Co. could face criminal charges for conspiring to raise fax paper prices in the U.S. after a federal appeals court in Boston, Mass., in March, reversed a lower court decision which ruled that U.S. antitrust laws did not apply to the Japanese company. Nippon Paper and other Japanese fax paper suppliers were indicted in December 1995 as part of a joint U.S.-Canada probe of price fixing in the fax paper market between 1990 and 1992. Nippon Paper challenged the prosecution, arguing that the alleged criminal activity occurred overseas. The ruling is believed to be the first time the Sherman Act, the key U.S. antitrust statute, has been applied to foreign business activity.

The U.S. Justice Department said the decision upholding the indictment of Nippon Paper will help protect consumers and businesses from the influence of international cartels that conspire to raise prices in the U.S. "We need to be able to reach such cartels no matter where the cartel activity takes place," said acting assistant attorney general Joel Klein.

Several Japanese companies, including Mitsubishi Paper Mills Ltd. and Kanzaki Paper Manufacturing Co. have pleaded guilty to the price fixing charges and paid criminal fines totaling more than $10 million. Appleton Papers Inc., the largest U.S. producer of fax paper, was found not guilty of the same charges by a federal jury in Milwaukee, Wis., in January. n

AssiDomän to upgrade kraft mill

Swedish paper and packaging group AssiDomän AB has approved an investment of SEK476 million (US$64 million) for improvements at its Skarblacka kraft paper mill, and a new pilot coating plant at the Frovi board mill. Skarblacka's No. 9 sack paper machine will be rebuilt at a cost of SEK235 million to raise productivity and improve paper quality, but the improvements will not increase capacity. The mill's soda recovery boiler will also be rebuilt at a cost of SEK144 million to improve reliability of the unit, which has previously caused two production stoppages at the mill. The work at Skarblacka will be carried out in November.

At the end of 1997, a coating plant will be installed at the new technical center at the Frovi board mill. The new coating plant will further the development of coated paper and board products for the entire group, the company said. n

TISSUE

Kruger to buy Scott Canada for $C451 million

Almost a year after announcing its intention to find a buyer for Scott Paper Ltd., Kimberly-Clark Corp. (K-C) has given the green light to the sale of the Canadian tissue producer to Kruger Inc., a privately owned Canadian newsprint and groundwood producer, for C$451 million. In acquiring Scott's four Canadian tissue mills, the Kruger family will become the seventh-largest North American tissue producer and have a worldwide tissue capacity of more than 450,000 tons.

The sale is one of the last major divestments of tissue operations by K-C following its 1995 merger with Scott Paper Co. After the merger, K-C gained a 50.1% stake in Scott Paper Ltd., but opted not to buy the remainder of the business due to the complexity of integrating it with other K-C tissue operations in Canada.

The offer of C$15.50 in cash and C$7.50 in bonds for each Scott Paper common share was below some analysts' expectations. It could lead to some institutional investors taking losses following the recent rapid increase in Scott Paper's share price to a peak of C$26 this year in anticipation of a bid.

In addition to the cash and bonds bid, Kruger will take over Scott's estimated C$100 million debt. Scott describes the acquisition as "fair from a financial point of view to our shareholders," and in the best interests of the company. Scott Paper shares fell to around C$22 after the announced acquisition.

In a further demonstration of its intent to focus on consumer products, K-C in March said it will sell off three pulp mills in Canada and Spain. The company said it intends to move out of the highly cyclical, capital-intensive pulp business by selling its operations and related woodlands in Terrace Bay, Ont., New Glasgow, N.S., and Miranda, Spain, by mid-1998.

The move was not unexpected, as K-C has been making moves to divest noncore assets that do not directly relate to the manufacture of tissue, baby, and sanitary products. Prior to its acquisition by K-C in late 1995, Scott Paper Co. had planned to sell some of the same pulp mills and timberlands.

Household products focus. "We are implementing the final phase of our full transition from a diversified paper company to a global consumer products company," said Chairman and CEO Wayne R. Sanders, in a news release. He added that the move is part of a strategy to double 1995 earnings from $3.86/share to $7.72/share in the year 2000.

"This is a strategic change at a company that is in transit into a consumer marketer," said Goldman, Sachs & Co. analyst Amy Low. "I think generally we'll see a more consistent rate of earnings growth." K-C in February reported 1996 fiscal year net income of $1.4 billion, or $4.98/share, compared with $33.2 million, or $0.12/share in 1995. n

PRINTING/WRITING

Plainwell sold to investor group

An investor group will buy Simpson Paper Co.'s. Plainwell, Mich., coated paper mill. The mill had been on the block for more than a year as a result of Simpson restructuring. The buyer is The New Group Inc., which will operate the 100,000 tpy mill as Plainwell Paper Co.

Terms were not disclosed. Both Simpson and The New Group are privately held. Plainwell was purchased by Simpson from the Chesapeake Corp. in 1985. The mill itself was first established in 1886 as the Michigan Paper Co. of Plainwell. Francis J. Fitzpatrick, formerly president of Westfield River Paper Co., has been named executive vice president and COO.

To date, Simpson has sold all but one of the five mills it put up for sale in January 1996. Fox River Paper Co. last spring bought two text and cover mills in Ripon, Calif., and Vicksburg, Mich. The West Linn, Ore., coated free-sheet mill was bought by a subsidiary of Belgravia Investments Ltd., which planned to reopen it in late March or early April. Still unsold is a third text and cover mill in Pomona, Calif. n

NEWSPRINT

Kenaf mill has site, pre-sold tonnage

Kenaf Paper Manufacturing has leased 50 acres in south Texas as the planned home for a mill that would make newsprint completely out of the plant fiber kenaf. In addition, the company said it has commitments from 28 Texas newspapers to buy nearly 900,000 metric tons of newsprint over the first 10 years that the mill operates. These commitments are for tonnage only, with the pricing to be worked out based on market conditions, said Charles Taylor, president of Kenaf Paper.

The tonnage commitments would generate enough money to service the debt needed for most of the cost of building the $100 million, 90,000 mtpy mill, the company said. Taylor expected financing to be completed in three to six months and construction to begin later this year. The mill is planned near Raymondville in Willis County.

The company has permits for building on the property as well as hookups to water, sewer, and power. The mill would be surrounded by properties that grow kenaf. The plant has been growing in the area since 1981. Long-term contracts for supplying kenaf to the mill, as well as design and engineering plans, are nearly completed. n

REGULATIONS

AF&PA critical of European tariffs

Exports of pulp, paper and paperboard have played an important role in the growth of the U.S. paper industry, but international tariffs continue to impede further growth, W. Henson Moore, president of the American Forest & Paper Assn. (AF&PA) said at a press conference during Paper Week in New York, N.Y. The U.S. and Canadian paper industries have pushed for an accelerated timetable to eliminate international tariffs, setting a goal of January 1998, instead of the year 2004 as agreed during the Uruguay Round of the General Agreement on Tariffs and Trade in 1994.

Moore said the forest products industry was concerned about tariffs because exports have helped U.S. companies offset the impact of slower domestic growth. U.S. exports rose an estimated 10.2% in 1996 to reach 12 million tons, while imports fell by 8.4% to a level of 14.2 mtons. In Europe, U.S. exports could increase by an additional $1.0-$1.5 billion if tariffs were eliminated, said Moore. He named Finland as the major obstacle to achieving the tariff-free goal. Finnish tariffs are as high as 7% on certain paper products. While Finland sells about $700 million of mostly high value-added printing papers and board in the U.S., "We sell almost zip in Finland," said Moore. Finland is the principal obstacle to reducing tariffs in other European Union countries, where Finnish paper companies have enjoyed tariff-free access since 1984, he added.

Moore said Finnish tariffs were unjustified because Finland's paper companies are competitive in international markets. "They're just as good as we are, in some cases better," he said, adding that Finland had some of the most advanced paper mills and paper machines in the world. Moore said the tariff issue could be addressed by any European country on a unilateral basis. Moore also said that the industry would have to push the U.S government to press the tariff issue in future trade negotiations, similar to the industry's efforts in recent trade talks with Japan. n

INTERNATIONAL

APRIL, KNP enter into China joint venture

KNP Leykam, the subsidiary of Dutch giant KNP BT, said in March it will move two paper machines and a coater from its Gratkorn, Austria, site to China as part of a joint venture to produce fine paper there. Asia Pacific Resources International Holdings Ltd. (APRIL) will be the 50-50 partner in the mill near Shanghai.

KNP Leykam is in the process of replacing existing paper machines with a single, 470,000 mtpy paper machine in Gratkorn. The old machines will go to the eastern China mill that will have an estimated capacity of 140,000 mtpy.

APRIL said the two companies also plan to establish a jointly owned and managed marketing and sales organization in China to sell products from KNP Leykam's European mills, as well as from the Shanghai mill.

APRIL already has an operation in China, at Changshu, and is in the process of installing a third paper machine for startup in fourth quarter 1998.

Hansol alliance off. In related news, APRIL's planned joint venture with Hansol Paper Co. of South Korea is reportedly off. The alliance would have meant Hansol would buy a 30% stake in Riaupaper, APRIL's uncoated free-sheet paper mill in Sumatra, Indonesia. In a briefing to clients, Morgan Stanley said APRIL may be forced to return to the capital markets to help finance the 600,000 mtpy project.