Pulp and Paper Canada

Pan Asia Paper forms Chinese joint venture

September 16, 2003  By Pulp & Paper Canada

Pan Asia Paper Co. Pte Ltd, a 50-50% joint venture between Norske Skogindustrier ASA and Abitibi-Consolidated Inc.,…

Pan Asia Paper Co. Pte Ltd, a 50-50% joint venture between Norske Skogindustrier ASA and Abitibi-Consolidated Inc., announced the creation of a 65-35% 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 during 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 percent recycled fiber. The project represents an investment of approximately $300 million US.
“This will be one of the most cost-competitive mills in the world, built at a cost of less than US$1000 per tonne,” said Pan Asia Paper’s president and CEO, Andre Van Hattum. “This project is completely in line with our strategy of expanding as a more local supplier. Pan Asia Paper operates one of the world’s most modern fleets of newsprint machines,” added Van Hattum. “Its growth and profitability will enable Pan Asia Paper to fund this project on its own, including its share of equity of around $70 million US, 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. Alain Croisetiere, formerly the senior VP, Special Projects for Pan Asia Paper, is project/managing director for the new company.
“Pan Asia Paper has been a success from the very beginning,” says Norske Skog’s president and CEO, 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. Pan Asia Paper has today a 25% market share in non-Japan Asia and markets paper that was delivered from a number of different companies just a few years ago. Pan Asia Paper has already a strong position in China through Shanghai Pan Asia 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 annual growth at close to 8 percent until 2010.
“Abitibi-Consolidated has long viewed Pan Asia Paper as our growth vehicle in the world’s most promising regions. The Hebei mill is expected to sell 70% of its production within a 500 km radius of the mill. Pan Asia 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.


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