Pan Asia Paper to form joint venture in China

Norske Skogindustrier ASA’s half-owned joint venture in Singapore, Pan Asia Paper Co. Pte Ltd., announced on September 10 the creation of a 65-35 per cent joint venture with Hebei Longteng Paper Corporation of China to build and operate a newsprint mill in the industrially developed Hebei Province of China, 280 km southwest of Beijing.
     The name of the joint venture is Hebei Pan Asia Long-Teng Paper Co., Ltd. Construction of the mill will begin in the fourth quarter of 2003 and it is expected to start production during the third quarter of 2005 with a rated capacity of 330,000 tonnes per year. The newsprint will be produced from 100 per cent recycled fiber. The project represents an investment of approximately US$300 million.
     “This will be one of the most cost-competitive mills in the world, built at a cost of less than US$1,000 per tonne,” said PanAsia Paper’s President and CEO, Andre Van Hattum.
     “This project is completely in line with our strategy of expanding into a more local supplier. PanAsia Paper operates one of the world’s most modern fleets of newsprint machines,” added Van Hattum. “Its growth and profitability will enable PanAsia Paper to fund this project on its own, including its share of equity of around US$70 million, without any cash from its shareholders.”
     The project is ideally located in the greater Beijing metro area with its population of 100 million and high-anticipated growth rates. The creation of the joint venture in Hebei has strong support both from local and central authorities.
     “PanAsia Paper has been a success from the very beginning,” says Norske Skog’s President and CEO, Mr. Jan Reinas.
     “This new commitment in China gives us an even stronger position in the world’s most interesting growth region. The project has low investment cost, and we are convinced it will add value to our shareholders. PanAsia Paper has today a 25 per cent market share in non-Japan Asia and markets paper that was delivered from a number of different companies just a few years ago. PanAsia Paper has already a strong position in China through Shanghai PanAsia Potential Paper, and this position will be further enhanced by the Hebei mill.”
     China has seen a rapid growth in newsprint demand in recent years. According to the Pulp and Paper Products Council demand has risen from 1.15 million tonnes in 1998 to nearly 1.8 million tonnes in 2002. Market outlook estimates an annual growth at close to 8 per cent until 2010.
     “Abitibi-Consolidated has long viewed PanAsia Paper as our growth vehicle in the world’s most promising regions. The Hebei mill is expected to sell 70 per cent of its production within a 500 km radius of the mill. PanAsia Paper is extremely well positioned to capture its share of the Chinese newsprint consumption growth from just under 2 million tonnes today to 3 million tonnes in 2008, when Beijing hosts the summer Olympics,” said John W. Weaver, President and CEO of Abitibi-Consolidated, which owns the other 50 per cent in Pan Asia Paper.
     Pan Asia Paper currently has world-class production facilities operational in Jeonju and Chongwon in South Korea, Singburi in Thailand and Shanghai in China. The aggregated capacity of the mills amounts to 1,320,000 tonnes of newsprint and 135,000 tonnes of other publication paper. The company employs 2,100 people and supplies products to nearly 20 countries.


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