By Graeme Rodden, Mark Rushton, Annie Zhu and Marina Faleiros, PPI Magazine
BRUSSELS,
Jan. 3, 2012
(RISI) -
As the New Year kicks off, what better place to start than to highlight the companies we at PPI think will be the ones the watch over the coming 12 months.
Eldorado Brasil
A newcomer to the industry, Eldorado Brasil's office at São Paulo city, in Brazil, is running at full speed, expecting the startup of the company's 1.5 million tonnes/yr bleached eucalyptus kraft (BEK) pulp mill in November 2012. The working team has grown so much that Eldorado has now to find a new place to fit everyone and the new employees that will be hired within the next few months. Meanwhile, sales executives are scheduling trips to Asia, Europe and North America. At the meeting rooms, a live cam gives full access to the mill construction underway in Três Lagoas city, Mato Grosso do Sul state, in the central-west region of Brazil, as a final proof that the project is real. "Eldorado aims to start up as the 5th largest BEK producer in the world and its site has space for another two lines, one planned for 2017 and other for 2021" the company's sales and logistics director, Reginaldo Gomes, disclosed.
Eldorado Brasil is part of a much larger conglomerate, as Gomes explains, "The revenues of just one of the group's companies, JBS Friboi [meat producer] moved from $300 million in the 2000s to $31.3 billion in 2010. That is an astronomic growth, and the same positive perspective is expected for Eldorado," he said. In Eldorado's plans, the company will reach a capacity of 4.5 million tonnes/yr of pulp by 2021.
Eldorado's projections show that the world will need an extra 25 million tonnes/yr of pulp by 2023, and the company will follow the market demand. "Eldorado's mill will start up in the best period possible, as all the other pulp projects are expected to start up after it. Even with the current economic crisis threat, the growth trend for the pulp market exists," Gomes added.
Eldorado's first pulp bale is expected to be produced in November 2012. By September 2011, construction was 40% complete and 4,200 people were working at the construction site. The peak should happen in April 2012, when around 8,000 workers will be there.
The main pulp market eyed by Eldorado is China, which should absorb 45% of the company's sales, followed by Europe with 40-45% and North America and other countries with 10-20%. "China needs virgin fiber, as even the recycled fiber has high costs there now. We know the country doesn't make steady purchases, sometimes holding inventories when prices go down, but they will need more pulp in the future and big paper producers there can't work only with the spot market," Gomes said.
One of the controversies involving the Eldorado project was how the company would manage wood supply. Competitors used to say that Eldorado didn't have all the raw material needed for such a big mill. Eldorado's merger with Florestal Brasil was also considered by many as essential to prove that the company would have a safer wood supply through the years. "We already have 65,000 ha of planted forests and until the end of this year we will reach 80,000 ha. We will begin operations buying around 40% of the wood from third parties, at leased lands, but that is what other pulp producers also do," Gomes detailed. According to him, as the years pass, Eldorado will have a higher percentage of plantations on its own lands.
The company has a forestry plan to invest $1 billion until 2016 to have 210,000 ha of planted forests. "Eldorado will plant around 30,000 ha per year to reach that number," the executive stated. Productivity of current eucalyptus plantations reach 40-45m³/ha/yr, but Gomes believes that the next plantation cycle will reach 50 m³/ha/yr.
Like other pulp producers, the environmental care is also taken into consideration and part of the wood to be used in Eldorado at its startup will be certified with FSC. In 2017, Eldorado projects that 100% of its raw material will be certified.
Shandong Bohui
Shandong Bohui Paper Industry, a newcomer of the PPI Top 100 2010-- came in at 94 after just missing the 2009 list - is definitely worth watching for the year of 2012, mainly for its new eye catching new installation.
The listed Chinese company is splashing out RMB 3.1 billion ($470 million) to build a 1 million tonne/yr cartonboard machine at a greenfield mill in Dafeng, Yancheng city, Jiangsu province. The unit provided by Voith Paper, is scheduled to come online by the end of 2012. The PM is likely to be one of the world's largest cartonboard machine when it comes on stream in 2012.
However, the coated ivory board market's competition is fierce. Nine Dragons, Lee & Man Paper Manufacturing and Sun Paper have started or have planned to expand into the sector. In addition, a major producer APP has already build up a strong foothold in southern and eastern part of the country.
To supply for the new board machine, the company has ordered a bleached chemi-thermomechanical pulp (BCTMP) line early this year. The rest of furnish for the board machine, including bleached softwood and hardwood kraft pulp, will be sourced from the market. To secure fiber recourses at a reasonable prices will be another challenge for the company.
Currently, Shandong Bohui Paper Industry, founded in 1994, boasts an annual capacity of 1.25 million tones at its existing Zibo mill, which includes 700,000 tonnes/yr of cartonboard, 150,000 tonnes/yr of gypsum paper, 150,000 tonnes/yr of containerboard and 250,000 tonnes/yr of printing and writing paper.
Hengan
One of the fast growing areas in China in recent times is tissue -- to take advantage of the nation's improving living standards. Hengan International, a leading tissue maker founded in 1985, has been growing fast and will expand ambitiously in the year of 2012.
The company's capacity is 540,000 by the end 2010 in its three sites in Weifang, Changde and Jinjiang, according to the company's 2010 annual report. With the start up of a new tissue paper unit in January, 2012 at a greenfield mill in the southwestern municipality of Chongqing, the company's capacity will reach 600,000 tonnes/yr.
Of course it is not the end. The company will bring another five more big tissue machines, each with a capacity of 60,000 tonnes/yr, online at three sites in China in 2012, including new sites at Chongqing and Wuhu. The company's capacity will reach 900,000 by the end of 2012.
Hengan aims to tap into inland China, where demand for good quality tissue products is growing on the back of the country's rapid urbanization and improving living standards.
In a world picture, the Hengan International will jump from its twelfth position to seventh among the global suppliers in 2012, according to Esko Uutela, Principal, Tissue, RISI, in a recent Viewpoint.
However the market's competition is fierce and the biggest competitor is by no means APP. The company will clearly take the number four global tissue supplier position from P&G by 2013, according to the committed investment plans (not including some more investments still in the planning stage), according to Uutela. The two other main Chinese players, Vinda Paper (where SCA has a less than a 20% minority shareholding) and the C&S Group (formerly Zhongshun), will also improve their relative positions in terms of capacity in the world picture.
Hengan International is a fully owned subsidiary of HengAn Group, whose shares are listed on the Hong Kong stock exchange. The company ranked 54 in PPI's Top 100 for 2010, jumping from its position at 60 in the previous year.
International Paper
Often, we look at smaller companies, those flying under the radar so to speak, to fill out this list. It's a given that the larger companies are almost always in the spotlight. However, this year PPI's long-time Number One in the Top 100 listings (PPI, September 2011) merits special attention and not only because its CEO, John Faraci, also was named Number One in the RISI Top 50 Power List (PPI, July 2011). And, Paul Herbert, CEO of Ilim Group, in which IP holds a 50% stake, was recently named Global CEO of the Year at the recent PPI Awards gala held in November.
Ilim Group's $700-million project to build a 720,000-tonne/yr bleached softwood kraft pulp mill at Bratsk in eastern Russia is well underway with completion expected in 2012.The Group has also outlined plans for a $1.4-billion capital program to begin in 2013 that will include various projects in Russia as well as a possible jv with a Chinese partner for a BCTMP mill.
Meanwhile, in December, Temple-Inland stockholders overwhelmingly approved (98%+) the merger with IP. First announced in mid-2011, the merger combines North America's Number 1 and 3 containerboard producers with a capacity of more than 14 million tons/yr and a North American market share of more than 35%.
The $4 billion plus deal (including the assumption of Temple-Inland's debt) means IP has more than double the containerboard capacity of No. 2 RockTenn, which acquired Smurfit-Stone Container earlier.
That's not the only acquisition for IP. In late 2011, it wrapped up its acquisition of a 75% stake in Indian papermaker Andra Pradesh Paper Mills (APPM). This gives IP a toehold in the Indian market. One of the attractions for IP was said to be APPM's relatively high degree of integration compared with the rest of the Indian paper industry. Although APPM is known more as a P&W producer, IP is believed to be more interested in the packaging market. APPM does also produce packaging grades
Finally, IP and Sun Paper registered a new jv to build and operate a 400,000-tonne/yr cartonboard machine in Yanzhou city, Shandong province, China. IP holds a 55% stake in the jv. Plans call for the new machine to produce high quality ivory coated board grades such as packaging for liquid, food and cigarettes.
UPM
Europe finds itself right under the hammer presently in the financial and currency markets as the Euro goes through earthquake-like calamities. Unfortunately one of the first manufacturing losers when there is uncertainty around is the graphic paper industry as large and small groups, businesses and companies batten down their hatches in a bid to ride out the storm and stop spending on print and marketing.
UPM is big in graphic papers in Europe, but it is also making huge progress elsewhere and away from the commodities based end of the paper industry. And this is why the Finnish giant appears on list of Five to Watch for 2012. UPM has garnered a reputation as being one of the most innovative in the global industry and it continues to pursue its "Biofore" strategy which it devised in recent years, which of which it says : "Bio stands for future orientation, sustainable solutions and good environmental performance. Fore stands for forest and the company's position at the forefront of development".
Of course paper and added value products such as labels are still central to the company's revenue stream, but other results of the Biofore philosophy are beginning to be borne out with products such as fibril cellulose for which UPM has started up production at its site in Otaniemi, just outside Helsinki in Finland, and UPM ForMi, a composite product which is made in Lahti, also in Finland. Fibril cellulose can be made to make a product tougher, lighter or thinner depending on the application, simply by adding water, and ForMi is a composite, made from pulp fiber and plastic polymers that can be colored and injection molded in the same way as plastic.
UPM's high level executives are also revered in the European industry, with Jussi Pesonen, CEO of the company, and RISI's CEO of the Year for 2011, being recently appointed as the new chairman of the Confederation of European Paper Industries (CEPI) and Jyrki Ovaska, president of UPM's paper business group heading up a newly formed association, Euro-Graph, which is a merger between CEPIPRINT and CEPIFINE.
One of the factors the industry will be watching UPM closely for in 2012 is the way it approaches CEPI's 2050 Roadmap to a low carbon bio-economy which will be one of Pesonen's key progress monitoring roles in the year ahead for both the company and the European confederation.
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