SNC-Lavalin International has completed a techno-economic study of a proposed bamboo pulp mill in Fengshun county of Guangdong province of the People’s Republic of China. The main promoter of the proj…
SNC-Lavalin International has completed a techno-economic study of a proposed bamboo pulp mill in Fengshun county of Guangdong province of the People’s Republic of China. The main promoter of the project is Far East Pulp and Paper Limited, based in Hong Kong. SNC is a co-promoter and will maintain a minority equity position in the mill. Far East is looking for another equity partner with an established operating background.
The estimated capital cost of the project is about US$240 million for a 170 000-tonne-per-year (t/y) kraft pulp mill, using a batch process design. The pulp would be used as hardwood kraft substitute for fine papers. The species of bamboo that would be used do not contain any excessive silica and provide freeness similar to hardwood pulp. “Off-the-shelf” equipment would be used. Laboratory testing was done according to programs defined by SNC-Lavalin. Bamboo from Fengshun was pulped under typical kraft conditions. The pulp met the characteristics needed for fine paper. There are about 1000 species of bamboo and the four types growing in Fengshun are suitable for pulp and may be mixed in a furnish.
Paper consumption is expected to enjoy rapid growth in China. In 1998, per capita consumption of paper in China was 25 kg/y compared to a worldwide average of 55 kg and the western world’s consumption of 100 kg. This was the equivalent of 32.7 Mt of paper and board. However, the expected growth rate is 5% per year for the next 10 years. Despite the expected increased growth in consumption, the Chinese government has ordered the closing of approximately 4000 mills whose average capacity is less than 5000 t/y each. This opens the door for larger, modern facilities to be built.
This is the type of project that China has deemed “encouraged”, allowing it tax breaks and other incentives. Under Chinese law, the state would hold at least a 20% interest. Foreign firms could hold up to 80% equity in a joint venture. Hong Kong is considered as foreign.
Far East Pulp is headed by Sam Leung, who also owns a power generating facility in Fengshun County. Leung said Far East was established for the purpose of building the proposed pulp mill.
The power generating station is a joint venture between the Chinese government and Leung. In 1998, the Fengshun government approached Leung and asked his advice on helping to raise the standard of living of the local population. Fengshun is a remote, mountainous region that until recently had little infrastructure in the way of communication/transportation/power. Now, that situation is improving. “I asked what they had,” Leung recounted, “and they said a lot of bamboo.” There is a navigable waterway in the area, the Han River.
Leung said he contacted some Australian sources with knowledge of bamboo pulp. After visiting Fengshun, they said the area had good potential for a pulp mill.
A joint venture was signed between the Chinese and Far East Pulp and a license given in 1998. Although natural forests will be used to supply the mill’s fibre at first, the government made 50 000 ha available to Far East for the development of a bamboo plantation. Leung said that only 40 000 ha would be needed to produce enough fibre for the mill. Expected yield is 15 t/ha/y. Bamboo grows in a two-year cycle. After seven years, Leung said that plantation growth will supply the mill. The pulping yield is 45%. Lest anyone be concerned, the proposed harvesting area is far away from any panda bear habitats.
In spring 1999, Leung was introduced to SNC-Lavalin through the Canada China Business Council, Hong Kong Chapter. SNC’s Richard Campeau went to China in March 1999, liked what he saw, and the techno-economic study was done in January. This type of study is just short of a full feasibility study. The study was optimistic, predicting a 30% rate of return on equity based on a debt:equity ratio of 68:32.
Leung feels that local demand could account for the mill’s entire production, but added that: “We have to gear ourselves to sell overseas.” However, even if all production is sold domestically, pulp quality would be such that it could be sold offshore.
The next step in the process is a full feasibility study including an environmental impact assessment and market study. This should be complete by October 2000. Chinese environmental regulations and World Bank guidelines would be followed. This would allow investors to go to the World Bank for “soft” loans. If the project is successful, down the road it could lead to the installation of a paper machine. Other bamboo pulp mills are also a possibility.P&PC
A Pulp & Paper Canada Special Report
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