PPI (PULP & PAPER INTERNATIONAL) MAGAZINE: Neman's nine lives

North-West Timber Company has revived the fortunes of the mill in the Russian exclave of Kaliningrad

March 2007
By Justin Toland, Editor

Neman Pulp and Paper Mill (NPPM), Kaliningrad, Russia, has perhaps experienced more geopolitical turbulence in its 95-year history than any other facility in the industry over the same time period.

Founded in 1912 as Zellstoffabrik Ragnit AG in what was then Ragnit, East Prussia, Germany, the mill made containerboard and 'grey wrapping paper' on two machines with a combined capacity of 50,000 tonnes/yr. In the latter stages of the Second World War, the mill was partly destroyed and equipment dismantled and hidden in a nearby forest. The end of the war saw East Prussia became part of Russia and the USSR as Kaliningrad Oblast. The Soviet government decided in 1945 to rebuild the mill, which like the town, was renamed Neman. Thanks to the efforts of German and Russian engineers, the plant successfully restarted the following year, making the same grades as before the war. A third PM was soon added to produce printing papers.

During the Soviet era (1945 to 1991), NPPM was regularly expanded and rebuilt, with houses, a laundry and other facilities for the workers being added on-site.

By 1991, there were two machine houses at Neman. Paper Mill 1 contained PM 1, PM 2, PM 7 and PM 8, while Paper Mill 2 housed PM 3, PM 4, PM 5 and PM 6 (the latter is now dismantled).

However, Perestroika and the transition to free enterprise did not sit well with the mill's management, schooled in the ways of a planned economy. In 1997, NPPM was declared bankrupt, an event that hit the surrounding town hard. Unemployment in Neman reached 97% at this time: People were working for food rather than money; there was no heat, no water and an irregular power supply.

The 60,000-tonne/yr PM 9 was bought from a UK manufacturer

In new hands

After this very difficult period, hope returned in 1999 when North-West Timber Company (NWTC), a timber trading house based in St. Petersburg, bought the mill in Neman and restarted production. One of the first decisions of the new owners was to close a distillery at the mill "for the health of the employees".

NWTC started renovating the somewhat decrepit facility in 2000, when the first work began on the installation of KWI closed loop water systems for Paper Mill 1 and Paper Mill 2 (this work was completed in 2003). "We tried to improve and widen output taking environmental factors into consideration," explains general director, NPPM, Sergey Udelov.

NWTC agreed to rebuild NPPM in accordance with the recommendations of Helcom (The Helsinki Committee), a transnational body concerned with the preservation of the ecology of the Baltic Sea. As well as closed water circulation, this meant using other best available techniques (BAT) such as chlorine-free bleaching and bark boilers.

Since 2000, NPPM has significantly reduced emissions to air and water. One sign of the mill's improved environmental profile is the fact that it has reduced the amount it has to pay the Russian government in eco taxes from Rouble 12 million/yr ($450,000/yr) to Rouble 4 million/yr.

As part of its commitment to good practices, NWTC started issuing annual environmental reports in 2002. "This shows we are open for discussion and open in operations and improvements," says Udelov. NWTC's approach won it the award for best Annual Report in Russia in 2005, a prize handed out by Expert magazine in association with PricewaterhouseCoopers.

Three mills, nine machines

In 2003, following a feasibility study carried out by the Canadian engineering firm, Sandwell, NWTC chose to invest in a modern, second-hand printing/writing papers machine, for a double benefit: "Our new PM 9 will help us reduce freshwater consumption -- half the amount per tonne of paper - and to increase output," explains Udelov.

With financing from the North-West Bank of the Savings Bank of Russia, project implementation commenced in April 2004.

NWTC decided to house PM 9 in a brand new machine house: Paper Mill 3. Groundbreaking took place in December 2004 and construction of the mill started the following March. Installation commenced in July 2005, with mechanical and automation installation starting two months later (supervised by Voith Paper). PM 9 started up in July 2006. Total project cost was $50 million.

Voith's scope of supply included DCS and QCS systems and on-line scanners for measuring properties such as caliper, moisture and basis weight. Other suppliers included Consys (drives and winder control), Lamb (packing line), Siemens (compact drives), Papcel (pulpers), Exxon Mobil (lubrication), L&W (lab equipment) and Lang-Regler (steam and condensate and heat recovery systems).

At its original site at a mill in the UK, the paper machine and associated equipment was located on one floor; Paper Mill 3 at NPPM has two floors with the refiners, stock chest, repulpers and DCS room in the basement.

PM 9 is capable of producing 60,000 tonnes/yr of uncoated woodfree paper in a basis weight range of 30-200 g/m2, including offset paper for art books and children's literature, A and B+ class office paper, moisture-resistant grades and wallpaper base paper. Most output is in the 50-120 g/m2 range, says Udelov.

With the new machine up and running, NWTC has been able to launch a new brand of cut-size office paper, Master, which is made exclusively on PM 9. A customized Bielomatik P 32-02 cutting line processes up to 1,500 tonnes/month of the Class B office paper. This is the second Bielomatik line at NPPM -- the first, for exercise books, was installed in March 2003. The mill also owns a Masson Scott sheeter (added in October 2002). These units produce the other NWTC office paper brands, Grand and Multi-Grand.

Some 100 people work on the new machine and the mill employs 1,400 people in total. 'We have no trouble finding skilled employees," says Kochnev. "Some families have worked here for generations," he adds. During Soviet times, more than 3,000 people worked at NPPM. To ensure the workforce is well trained, NWTC has inked long-term contracts with local technical colleges, which provide relevant training.

Utilities

NPPM has five boilers, two of which are spare. All three regular boilers run on gas (as of January 2007). In July 2005, NPPM was connected to the Sovetsk-Neman branch of the Minsk-Vilnius-Kalinin gas pipeline in a $3 million project. Russian energy giant, Gazprom, supplies the mill with natural gas (equivalent to 22,700 tonnes/yr of standard coal). Switching over to gas has helped the mill cut SO2 emissions and reduce the amount of wood residue it burns.

Gazprombank has helped NWTC out financially, providing a loan of $22.385 million (repayable by August 2012) to help cover the cost of a new TCF pulp line, including equipment from GL&V. With a total cost of $40 million, this line has a capacity of 130,000 tonnes/yr of 100% softwood pulp (raw material will mainly be spruce, delivered by truck or train). The pulp line, which is due to be started up in early 2007, features totally chlorine free (TCF) bleaching, with oxygen delignification using peroxide, the first mill in Russia to have this technology. It completely replaces the existing 70,000-tonne/yr bleaching line, which is now being shutdown.

By the end of 2008, NWTC aims to have installed a new biological water treatment plant, which will also handle effluent from Neman municipality. Discussions with suppliers are ongoing. The budget for the project is $12 million, although Kochnev believes the final cost may be lower.

Other planned investments at NPPM from 2007 to 2010 include a rebuild of the woodyard (to automate the process), and the addition of a magnesium regeneration boiler to take sulfur out of the pulp cooking process and recirculate to the mill.

Alexander Kochnev: "Our short-term aim is full productivity of PM 9"

Getting to the customer

The mill's main market is of course, Russia. As, NWTC chair, Irina Bitkova comments, "We hope that with our contribution, Russia will be able to reduce the volume of paper imports and stop being a source of raw materials for foreign countries just selling pulpwood."

Some 50% of NPPM's output is sold domestically, with 17% going to other CIS nations, 13% to Asia, 12% to Europe, 5% to Africa and 3% to the Americas. Among the final destinations are customers in the Czech Republic, Sweden, Austria, Germany, Cyprus, Italy, Egypt, South Africa, Panama, Costa Rica, Canada, and Vietnam. The mill ships via two nearby ports: Kaliningrad and Klaipeda (Lithuania).

Order sizes, pricing and sales are the responsibility of the NWTC head office in St. Petersburg -- NPPM produces the paper and ships it. There is a daily exchange of data between the head office (where 40 people work), NPPM and NWTC's other mill in Kammenogorsk.

One problem unique to mills in Kaliningrad is the transit tax that is imposed by the Lithuanian government on wood and paper (among other goods) passing from the province to 'Big Russia'. Today, this transit tax is set at Euro 7/tonne of paper. The process of sending paper across the border is also much more time-consuming for NPPM than for most European mills. "On average it takes 30 hours to get a shipment through customs." For established customers, the process can be expedited, but a shipment for a new customer could be delayed for 48 hours or more.

The fact that Kaliningrad has been granted Special Economic Zone (SEZ) status by the Russian government has led some observers to describe the province as "The Hong Kong of Europe". Yet, while it is true that businesses there do not have to pay tax on imported heavy machinery or for wood processing, the transit tax and shipment costs more or less cancel out these savings. "If the government took SEZ status away it would kill our business," says Kochnev. However, he believes this is not likely to happen.

Branching out

The PM 9 experience has been so positive for NWTC that the firm is already drawing up plans for PM 10, another uncoated woodfree machine (size still to be determined), which would be housed in another new machine house at NPPM, Paper Mill 4.

In addition, one of the two high-quality greaseproof and imitation parchment paper machines (PM 7 or PM 8) will be upgraded to meet ISEGA food contact standards and to boost output by some 20,000 tonnes/yr.

The new GL&V pulping line would supply a new or rebuilt machine, as well as PM 9.

NWTC also plans to follow the recent trend of Russian investors buying assets in the West (whether Roman Abramovich and Chelsea Football Club or Segezha Pulp and Paper Mill and Körsnas Packaging). The firm is considering acquiring a paper mill in western Europe with a capacity of at least 100,000 tonnes/yr. "It will probably be printing/writing or greaseproof paper; definitely not newsprint or containerboard," explains Kochnev. The acquisition could even take place as early as this year, he adds.

"Our company is constantly developing. Our aim is to reach the highest position in 2009," says NWTC's environment and public relations director, Yury Murashko.

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