IP Acquires Paper and Board Interests in Russian Svetogorsk Mill; SCA Buys Tissue
By Ken L. Patrick
International Paper Co. (IP) has announced its agreement to purchase the Tetra Laval (Sweden) interest in the OAO Svetogorsk pulp and paper combine in northwest Russia. Specific terms of the agreement, to be completed within the next two months, have not been disclosed. Tetra Laval had reportedly invested some $25 million in the mill during its three years of ownership, with a commitment to spend up to $175 million.
Another Swedish paper company, Svenska Cellulosa Aktiebollaget (SCA), will retain its interest in the Svetogorsk mill, and has acquired all of Tetra Laval's shares in the Svetogorask Tissue operations there, in effect making it a partner with IP in the operations. Purchase price of the tissue mill, one of the most economically advanced in Russia, was reported to be slightly more than SEK 200 million, with no assumption of debt. In a contractual arrangement, SCA will purchase electricity, water and waste treatment services from IP.
Located about 85 miles northwest of St. Petersburg near the Finnish border, the Svetogorsk combine has a total pulp capacity of around 280,000 metric tons per year (mtpy), and more than 160,000 mtpy of paper and paperboard capacity. Most of the mill's pulp output is kraft (204,000 mtpy), with the reminder being sulfite pulp (almost 76,000 mtpy). Some 65,000 mtpy of the mill's softwood kraft pulp production is available as market pulp. The sulfite portion consists of 54,000 mtpy dedicated to viscous dissolving pulp, along with 22,000 mtpy of acetate dissolving pulp output.
The Svetogorsk mill was one of the first major combines in Russia to erect an oxygen delignification system, a 450-metric-tpd Ahlstrom-Kamyr unit installed in the bleached birch sulfate line following a two-vessel Kamyr digester. After the oxygen reactor, the pulp produced in this line is washed in twin diffusion washers, screened, and washed again in vacuum filter units (four hours total washing), and then bleached in a DEDED displacement tower.
Paper and paperboard grades at Svetogorsk include 61,000 mtpy of printing and writing (freesheet) papers, 33,000 mtpy of packaging and industrial grades (cable paper, electrical insulating paper, etc.), 28,000 mtpy of offset (news), 25,000 mtpy of wrapping papers, and approximately 14,000 mtpy of miscellaneous paperboards (liquid packaging). The combine has three paper/paperboard machines--an 8.4-meter twin wire unit (810 m/min.), a 4.2-meter fourdrinier machine (200 m/min.), and a 4.2-meter fourdrinier capable of speeds up to 1,200 m/min.
Tissue Operations
Svetogorsk's one tissue machine was installed in 1989 and is Russia's most modern. It has a capacity of about 30,000 mtpy, which can fulfill some 25% of the total Russian domestic demand for tissue grades. Production from the machine could be increased to 40,000 tons with limited investment, according to mill sources. Tissue converting is done offsite at a nearby plant in Kamenogorsk, which currently has a conversion capacity of approximately 50,000 mtpy.
The Svetogorsk tissue products will be marketed under the Zewa brand name by SCA's Hygiene Products sales organization, which operates with a staff of more than 70 at this time. Sales will be aimed at the total Russian market, but SCA is said to be considering an expansion of the tissue product range, with an eye on markets in Belorussia and the Baltic States.
SCA has been involved in the Russian hygiene market since 1994 with fluff products--mainly baby diapers and feminine hygiene products, and maintains a market share today of 30% and 20%, respectively. Not including Svetogorsk, SCA's hygiene operations anticipates sales in Russia of about SEK 450 million in 1998.
IP Acquisition Leverages Polish Mill
Robert Amen, president of IP-Europe, reports that IP will be making incremental investments at Svetogorsk, to better take advantage of its low production costs and to broaden its product offerings. As quoted in recent reports, Amen explained that the Svetogorsk mill complements IP's leading European position in business papers. "It leverages the Kwidzyn mill in Poland," he stated, "and it enhances our ability to profitably serve growing market demands in Russia and Eastern Europe."
IP acquired the Kwidzyn mill in 1992, with a commitment to rebuild its four paper machines, which it has now done. Capacity at the Polish mill has been increased from slightly more than 200,000 mtpy when IP took control, to around 400,000 mtpy of uncoated free sheet, newsprint and uncoated boxboards.
International Paper, in its 100th year of operation, is a global producer of printing papers, packaging grades, and forest products, with 1997 sales of $20 billion. Headquartered in Purchase, N.Y., IP has operations in 31 countries and employs more than 80,000 people.
SCA is an integrated paper company, producing hygiene products, transport packagings, and graphic papers. The company's total annual sales are in the range of SEK 59 billion. Hygiene Products sales are currently around SEK 26 billion, including tissue and fluff products (incontinence care products, feminine hygiene products and baby diapers).