Viscose Future Market Report

8/11/2019 Viscose Future Market Report

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1BRIGHT MARKET INSIGHT

No.1Spring 2013

INDEX & REPORT for theGLOBAL PULP & BIOREFINERY INDUSTRY

I N S I GHT

VISCOSETHE COMEBACK

Major CapacityIncreases CauseVolatility

GLOBAL MCKINSEYS ADVICE ABOUT THE PARADIGM SHIFT EUROPE FRANTIC ACTIVITY AT SCA ORTVIKEN

LATIN AMERICA BRIGHT FUTURE DESPITE RISING COSTS CHINA TIME FOR RECOVERY

NORTH AMERICA FORD FOCUSES ON NEW CE LLULOSE MATERIALS R&D&I THE CENTRE FOR WORLD-LEADING RESEARCHPROFILE MATS NORDLANDER, HEAD OF STORA ENSO RENEWABLE PACKAGING

PAGE47

MarketTrendsFORECAST

30MONTHS

MarketTrendsFORECAST

30MONTHS


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2 BRIGHT MARKET INSIGHT

CONTENT

PeterBerg,McKinsey:Advice to the forest industry

Volatitlity in the viscose market

CHAPTER 1

6

9

GLOBAL

Frantic acitivity at SCA Ortviken

SCA R&D:Full focus on new materials

SCA strand:Equipped for the future

Interview withUlfLarsson,President of SCAForestProducts

AdityaBirlaDomsj:Leading viscose manufacturer

CHAPTER 2

12

13

EUROPE

14

16

18

The hurricaneSandy givesResolute a boost

Ford devlops new cellulose materials

CHAPTER 4

30

32

NORTH AMERICA

Pressure from rising costs

Five companies five growth strategies

Fibria and Ensyn teams upto produce biofuels

TresLagoas the worldsforest industrial metropolis

CHAPTER 5

34

35

LATIN AMERICA

36

39

FSCN The centre ofworldleading research

Bonanza for the mills

Focus on energy efficiency

Fourth generation paper

CHAPTER 6

40

41

42

43

R&D&I

Chinas import boost the pulp price

CHAPTER 7

44

CHRONICLE

A strong market 2013 and 2014

CHAPTER 8

47

INDEX

INDEXPAGE 47

VISCOSEPAGE 9

STORA ENSO FOCUSES ON CHINAPAGE 24

Lumber demand: Time for recovery

New emission standards

Merger inTaiwan

Stora Enso investsEUR 1,6 billion inGuangxi

Interview withMatsNordlander,Stora EnsoRenewablePackaging

Russia and the

Angara paper project

CHAPTER 3

20

22

CHINA & ASIA

23

24

26

28

EDITORINCHEIF

EDITORIAL STAFF

DESIGN

PUBLISHER

SALES

WEBSITE

ADDRESS

PHONE

E-MAIL

CARL JOHARDPER ARONSSON, HENRIK BRANDO JNSSON, LEONARD JOHARD,

JAN HKERBERG, MIKAEL JFS, NILS LINDSTRAND, LENNART PEHRSON

JOAKIM KARLSSON (ART DIRECTOR) & TERSE LIND, SWEET WILLIAMS AND POP

CALEJO FUTURE INTELLIGENCE AB

HKAN FREUDENTHAL, SALES DIRECTOR

WWW.BRIGHTMARKETINSIGHT.COM

STRANDGATAN 4, 85231 SUNDSVALL, SWEDEN

+46 60159090

[email protected]


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Bright Market Insight is an exclusive, qualitative quarterly market report with coverage,interviews, news and analyses rom the international markets in Europe, North America,Latin America, China and the rest o Asia and Oceania. It is published our times a year

with an exclusive and up-to-date report on news and trends in the international biorefineryand pulp market as well as a unique long-term orecast (Bright Market Index) o pulp prices(NBSK) 30 months into the uture.

UNIQUE FORECAST MODELTe Index is a unique proprietary developed orecast model or (NBSK) pulp based on ar-

tificial neural networks (ANN). Te model distinguishes itsel by including a large amounto undamental data and taking into account the requencies o market fluctuations. Tismakes it unique in the commodity market.

Bright Market Index orecasts indicate the correct price directions more than 80%o the time or all time horizons longer than 6 months. Te model is also able to identiy

whether the price will increase or decrease in nearly 8085 percent o cases where long-range orecasts are made. In a 24-month range, the orecast is very close to the actual pricetrend. Te model predicted two years ahead the deep dip in 2009 and 2011 as well as theincrease during the autumn 2012.

PROFESSIONAL AND EXPERIENCED STAFFTe Bright Market Insight is produced in close collaboration with academia and the orest

products industry and its editorial board includes Anders Anders Luthbom, ormer BIDirector o SCA, Henrik Essn, BI Manager at Billerud and Mikael Js, Senior Analyst atCredit Agricole Chevreux in Stockholm.

Te editorial staff are very proessional and experienced business journalists around theworld. Tey each cover the ollowing areas:

Te international biorefinery market with analyses, inteviews and news about newcapacities and shut-down capacities as well as trend reports.

Downturn in the biorefinery and pulp markets in Europe, Latin America, NorthAmerica, and China and Asia.

Reports on prices, inventories, supply and demand with market analyses. R&D&I the latest research news rom leading international research centers.

DONT MISS THE WEBSITEIn addition, Bright Market Insight's website, which requires individual login credentials, isupdated with industry-specific news, interviews, market analyses and long-term orecasts12 months a year. Te package also enables subscribers to download key diagrams or theircompanies' internal powerpoint presentations via brightmarketinsight.com.

We hope you enjoy an insightful read

WELCOMETO A BRIGHT

FUTURE

BrightMarketInsight

CONTENT

CARL JOHARDEDITOR-IN-CHIEF


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MORE EFFICIENTAND FLEXIBLE PRODUCTION

WITH STRICTER CONTROLOF RAW MATERIALS

AND ENERGY

In this interview, Peter Berg,

forest industry expert at McKinsey

& Company describes four distinct,

major development trends currently

taking place in the forest industry:

1. Radical change in

consumption habits.

2. Geographic shift in production.

3. Competition for raw materials.

4. Greater demand for sustainability.

HOW IS GLOBAL CONSUMPTION OF PAPERPRODUCTS CHANGING?In the west were seeing a stagnating oralling market, with less paper being used(particularly graphic paper) than beore,

while consumption o paper is still growingstrongly in emerging economies. Reports in-dicate a decline o as much as 40-50 percent

per capita in the west in the past decade,

which is putting the industry under im-mense strain. In my view, the decline in theconsumption o print and writing paper willbe even aster than it has been in the past. Indeveloping countries, people tend to adopttechnological innovations aster and switchdirectly to reading newspapers on mobile

phones and the Internet, i.e. technologicalleap-rogging. I you look at where the

penetration o mobile subscriptions is thehighest, its in the emerging markets where

people have simply bypassed landline

telephony and its costly inrastructure. Onthe packaging side the picture is brighter,with growth more or less all over the world.However, growth in the west remains slowand hesitant.

HOW QUICKLY ARE CONSUMPTION HABITSCHANGING?We usually see a critical threshold oradopting new technology at around 20-25

percent. Above this level, the trend accele-rates. When the penetration o broadband

reaches around 25 percent, the Internet

has become a natural part o everydaylie. When 25 percent o employees use e-readers at work, the number o uses increaseand the spread rate accelerates, which hasa direct impact on paper consumption.echnology is constantly developing and inthe last two years the number o magazineapps or e-readers has increased twenty-old, while books and magazines have

gone digital and are now available online.Te one thing that has prevented e-bookreading rom spreading even aster are thecritical legal issues about rights and pricing.It now appears as though the big US

publishing firms and newspapers have ounda workable method or paid inormation.

WHAT PRODUCTION CHANGES DOYOU ANTICIPATE FROM THIS SHIFTIN TECHNOLOGY?Production is largely being built up where

the consumption is. Tis means that mucho the production is shifing to Asia, and inparticular China, which rom its previouslymodest levels has become the worldslargest market or paper consumption. Asia

previously accounted or one-third o theglobal production o graphic paper, today itaccounts or hal.

However, new question marks havearisen about uture pulp production inSouth America and Asia.

In South America, per-country prices

and payroll expenses have risen drastically

PeterBergs advice to the forest industry about the paradigm shift:

PARADIGM SH IFT

CONSUMERDECLINE PER CAPITAIN THE WEST IN THE PAST DECADE50%

Author: CarlJohard, Stockholm


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while in China the government has signal-led that it intends to limit the productiono paper in certain regions while stimula-ting domestic pulp production.

DO YOU THINK THAT MILLS WILL BECOMEMORE DIVERSIFIED, WITH MORE NEWPRODUCTS AND BROADER PRODUCTPORTFOLIOS?Yes. Were in the middle o a paradigmshif. Te problem or the orest industryis that it operates in markets mainly orthe production o commodities, whereinvestments are high, margins low and itsar too easy or competitors to build new,more efficient capacity. For uture success,the industry needs to develop unique, in-

demand and higher-value products in new,smaller segments and niche areas where noteveryone can or wants to get involved.

DO YOU EXPECT GREATERCOMPETITION FOR RAW MATERIALS?Yes. Its becoming absolutely vital to keepthe costs o raw materials and energy undercontrol. Expansion will take place wherethe prices o raw materials are at theirlowest.

I Europe and other regions and

countries are to meet their environmentalgoals, the use o biomass or heating andpower will rise sharply. Meanwhile wereseeing the quality o recycled fibres go down,

which will result in the price o recycledfibre, and consequently also resh fibre, goup. Were also seeing rising demand orstronger material and reinorcement pulp,

which is good news or long-fibre pulpmills in the Nordic region and North Ame-rica. Tis all means that locally there maybe fierce competition or wood materials.

PARADIGM SH IFT

GLOBAL

You mustbelighter on your feet and ableto respond quickly to structural changes,says Peter Berg, McKinsey.

The varioussegment of the pulp market.

Wood demandwill increase in Europe, with the main driver beingenergy source applications.

800

750

700

650

600

550

500

450

400

350

300

2010 2015 2020 2025 2030

m3million

Paper & Board

392 million t

Pulp

167 million t

Recycled Fibre

224 million t

43%57%

80%20%

34 %66 %

54 %46 %

64 %36 %

Chemical

134 million t

Mechanical

33 million t

Market Pulp

46 million t

Integrated Mills

85 million t

Hardwood

24 million t

Softwood / Other

22 million t

Eucalyptus

16 million t

Acacia / Other

8 million t

PULP MARKET STRUCTURE

EUROPEAN DEMAND FOR WOOD BIOENERGY TRADITIONAL WOOD USAGE

SOURCE: EU WOOD

SOURCE: FIBRIA


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The viscose market is experiencing

global growth. All the plans for new

capacity for dissolving pulp in China,

South-East Asia, Latin America and

North America entail an imminent

risk of a drop in price.

You need to have a clear and

distinct market for your products,

otherwise you risk ending up in anopen, less attractive spot market

where prices could fluctuate con-

siderably, says Peter Berg, forest

industry expert at McKinsey in

Stockholm.

In the first hal o the 20th century, theviscose fibre industry had a period o stronggrowth, but this was ollowed by an equallydramatic decline in the second hal o thecentury because o the success o the oil

industrys newer synthetic fibres. However,in recent years the industry has been show-ing signs o recovery.

oday, 60 percent o the worlds textilesare oil-based synthetic abrics, around 30

percent are cotton-based while around 5percent are viscose-based, depending on thesub-segment.

RISING TEXTILE CONSUMPTIONWith a growing global population, theconsumption o textiles will continue to

increase. Cotton production, on the otherhand, has reached its ceiling and will strugg-le to keep up with demand. More agricul-tural land is needed or ood products,

while countries such as India and Pakistanrecently introduced export restrictions oncotton.

Despite shrinking crop areas, greaterefficiency in cotton harvests is expected tohelp keep cotton production at todays sales

MAJOR CAPACITY INCREASESCAUSE VOLATILITY IN THE

VISCOSE MARKET

that the price differential in relation toregular pulp will decrease with time, saysPeter Berg, orest industry expert atMcKinsey in Stockholm.

NORMAL PRICE DIFFERENCESTe price o dissolving pulp has recentlybeen hit by short-term dynamic changes.

Te rise in the price o dissolving pulp

in 2007, and most recently in 2010, wascaused by an increase in the price o oil and thereore also the price o polyester

while the price o cotton also rose as a resulto years o poor harvests. Te market hassubsequently adjusted and prices havedropped. Te difference in price between

paper pulp and dissolving pulp is now, asbeore, USD 200-250 over the long term.

levels, which are equivalent to 26-28 mil-lion tonnes per year. In a growing market,the natural alternative will instead be viscoseand oil-based fibre, says Lars Winter, CEOo Aditya Birla Domsj.

GROWING INTEREST INDISSOLVING PULPTis market trend has precipitated a gro-

wing interest in dissolving pulp. Te viscosemarket is experiencing global growth. Newgreenfield plants are being built in South-East Asia, while in Europe and in NorthAmerica, older pulp mills are being conver-ted or dissolving pulp production.

Te volume trend or regular paperpulp and rising prices are persuading morepeople to switch to dissolving pulp. Butwhen the capacity increases, there is a risk

Author: CarlJohard, Stockholm

GLOBAL

In a growingmarket, the natural alternative to cotton will be viscose fibre, says Lars Winter,CEO of Aditya Birla Domsj.

VISCOSE


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Tis means that when pulp prices go up, so do dissolving pulpprices, and vice versa, says Peter Berg.

IMPORTANCE OF STRONG MARKET POSITIONPeter Berg says that mills in the Nordic region and North Americathat are considering converting to the production o dissolving

pulp will not necessarily hit the jackpot.It will be hard or them to compete with low-cost companies,

so they'll need to find their own unique position in the marketwhere they can manuacture some orm o specialised dissolving

pulp or find a collaboration partner urther along the refinementchain. You need to have a clear and distinct market or yourproducts, otherwise you risk ending up in an open, less attractivespot market, where prices can fluctuate considerably, saysPeter Berg.

FOCUS ON GREEN PROCESSESTere is one cloud on the horizon or viscose: like its competingfibres: polyester polyester and cotton, it is associated with certainenvironmental problems.

Te viscose process contains carbon disulphide, a chemicalwhich is hard to eliminate and which makes the product less eco-riendly. From an environmental perspective, its better than cottonand polyester, but today there is considerable interest in otherchemical processes such as Lyocell, which does not contain thischemical, says Peter Berg.

Viscose has been refined in recent years, which has resulted firstand oremost in greater comort, a superior fit and higher quality.But to succeed in the highly competitive textile market, the

orest industry needs to develop a material that is ar superior tocotton and also cheaper, greener and stronger. Te research-driventrend o developing new fibre variants will continue, says Peter Berg.

You need tohave a clear and distinct market for your products, otherwise you risk ending up in an open, less attractive spot market,

where prices can fluctuate considerably, says Peter Berg, McKinsey.

VISCOSE


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Global production of viscose staple

goods is currently dominated by

China, South and South-East Asia

and Western Europe.

By ar the largest producer is China, whichis also the worlds largest textile market. Tecountry accounts or 58 percent o globalcapacity, compared with 8 percent just 20

years ago. China today has 27 plants boas-ting an average annual capacity o 75,000tonnes. Te biggest plant has a capacityo 230,000 tonnes. Te rapid increasein capacity in the last ew years has been

driven by a strong demand or viscose romthe ast-growing, export-oriented domestictextile industry. Tis increase in capacity hasbeen insufficient, however, and imports tothe country have thereore also increased.

Afer China, the rest o South andSouth-East Asia is the second-largest produ-cing region, and has tripled its capacity inthe last decade.

New capacity expansions o 800,000annual tonnes are planned in China. BothLenzing and Birla have announced plans to

increase the size o their plants in Nanjingand Xiangan. Xinjiang Faluda has an-nounced that capacity will be tripled to300,000 annual tonnes, Shandong Yamei isreported to have plans to increase capacityby 200,000 to 260,000 annual tonnes intotal, while Anhui Shumeite and Saterihave announced plans to build completelynew plants with a capacity o 180,000 and200,000 annual tonnes respectively.

Domestic growth in China is beingundermined by lack o capacity and long

delivery times. extile mills have struggledto keep up with demands or rapid deliverytimes rom the western ashion industry,

which plays into the hands o suppliers incloser locations, such as urkey, EasternEurope and North Arica.

Lenzings fifth viscose production

line at its Indonesian subsidiary,

South Pacific Viscose, is now in

operation. The plant, with a capaci-

ty of 320,000 annual tonnes, is the

worlds largest manufacturer of

textile fibre.

According to Lenzing Asia is the mostimportant market or the Lenzing group.

Tis is where the company generatemore than hal o its fibre revenue, andso its logical that Lenzings biggest plantshould be in Indonesia, he explains.

PRODUCTION IN CZECH REPUBLICMeanwhile, Lenzing has taken ull control

o the Czech pulp manuacturer, BiocelPaskov, by acquiring the remaining 25

percent o the outstanding shares in thecompany rom the Heinzel group.

Afer conversion, Biocel Paskov willproduce both paper pulp and 260,000annual tonnes o refined grades o dissol-

ving pulp. Te pulp will mainly be used byLenzing or its own needs.

Lenzing is also preparing or theproduction o 80,000 annual tonnes at itsplant in Patalganga in India.

GLOBAL

WORLDS BIGGEST

VISCOSE FIBRE PRODUCING PLANT

CHINA: THE WORLDS

LEADING REGION

VISCOSE

Fine paper

21%

Viscose and

other

4%

Tissue

8%

Publication

paper

16%

Packaging paper

and board

51%

CHANGING TIMES IN GLOBAL MARKET

Viscose is stilla small but growing part of the the global forest industry, while publicationpaper is decreasing in an overall growing market.

SOURCE: RISI INDUSTRY STATISTICS 2009


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SCA Ortviken has stepped up its product development work to findnew products to succeed publication paper.

We have a bright outlook on our future. Ten years from now

we will remain strong, we will have wider product portfolio, a skilled

staff and be well-positioned in terms of the raw material,

says Kristina Enander, Mill Manager at SCA Ortviken.

FRANTIC ACTIVITY AT ORTVIKEN

Ortviken paper mill, just outside Sundsvall,manuactures 880,000 tonnes o coated pub-lication paper, LWC, and uncoated papergrades on our machines. Te raw materialis resh spruce pulpwood, mainly rom

SCA's own orests in northern Sweden.As the global market or publication pa-per is shrinking, SCA Ortviken is reviewingits uture strategy. Te strategy review hasled to two parallel development lines.

In the short term we need to developand refine the products we already have.In the slightly longer term we also need tofind alternative products or our productionmachinery, which in due time can succeedthe production o publication paper," saysKristina Enander, Mill Manager at SCA

Ortviken.

Te latest product in the amily is Grapho-Invent, a new 90-gramme uncoated offset

paper. It is part o the Bright Future project,where last year PM5 was rebuilt to producehigher-quality uncoated paper. Te project,

which was completed in the autumn o2012, included the expansion o the plantsbleaching capacity and the rebuilding oboth PM5 and the water treatment plant.

STRUCTURAL CHANGESTe structural change o the last ew years,

with ewer people reading newspapers,has prompted SCA to begin probing oralternative products.We are seeing dramatic changes in themarket and we need to do something about

our situation. We need to find new pro-

ducts or Ortviken. It is a process we havealready begun and will be stepping up in thenear uture. We will be raising the tempo othis development work significantly, saysEnander.

INCREASED EFFICIENCYIn other respects the plant is continuing itsendeavour o increasing productivity andreducing costs.

We can hold our own in the industrywhen it comes to actors such as develop-

ment, lower costs and increased producti-vity, but we will not rest on our laurels. Weare now ocusing on making our mainte-nance work more efficient, says Enander.

SCA will invest some USD 57 millionin expanded cooperation between its ope-rations in Sundsvall SCA Ortviken andSCA strand and the energy companySundsvall Energi, increasing its deliveries oenergy to Sundsvall's district heating grid.

STRONG OUTLOOK FOR THE FUTURE

Over its 150-year history, Ortviken hascompleted several successul productrenewals and the plant has every possibilityo being a strong and successul industry inthe uture.

We have access to a antastic resh fib-re; we have an industry that inrastructural-ly-speaking is located near our raw materialand we have our own port. It is also a good

position to be in when it comes to otherdeveloped products, and we will continue

producing publication paper at Ortviken

or a long time to come, says Enander.Te energy extracted rom Ortviken'sflue gas condenser provides surplus heat tothe district heating network correspondingto the heating requirements o 5,000 single-amily houses per year. And three years agoa new mechanical pulp line was opened,

which paves the way or significant qualityimprovements and increased capacity.

"en years rom now we will remainstrong, we will have a broader product port-olio, a skilled staff and be well-positioned

in terms o the raw material, says Enander.

Author: CarlJohard, Sundsvall

We are seeing dramatic changes in the market and we need to find new products forOrtviken, says Kristina Enander, Mill Manager at SCA Ortviken.

SCA


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The winds of change are blowing

through the SCA R&D Centre in

Sundsvall, Sweden. Alongside the

traditional product development

work, more and more time is

being spent on researching new

materials and new business. And

this research has already come a

long way in some areas.

FULL FOCUS ONNEW MATERIALS AND NEW BUSINESS

Major changes have taken place on the

research ront over the past year, due to thecontinuing dip in the market or publica-tion paper and the sale o SCAs packagingbusiness. Tis has prompted SCA torestructure its research operations.

"We are now set to urther develop theorganisation, making it more business-oriented and more closely tailored to gene-rating new innovations and new business.Our task or the uture will be to developand propose new products, materials and

processes. We need to find new applications

or the antastic orest raw material thatwe have, says rjan Petterson, adding thatSCA R&D Centre will increasingly work

with the whole o SCA, including thehygiene business, the new energy divisionand also SCA imber.

NEW R&D AGENDATe research centre has been working on ahandul o transormation projects over the

past two years.Weve identified a number o transor-

mation areas that were now working on. Inmany cases, these are areas that weve neverresearched beore.

Te areas identified include packaging,construction materials, composites, chemi-cals, microfibrillated (nano)cellulose and

pharmaceuticals.Packaging is an interesting area o

research, and a field in which both the SCAR&D Centre and Mid Sweden Universityhave material and design expertise.

Future Packaging products. Our strengthat SCA is that our resh fibre raw materialis not only renewable, but also recyclable

and biodegradable. We are one o ewEuropean producers o krafliner romresh wood fibre.

BELIEF IN BIOREFINERIESOn the chemical ront, Ortviken has beendelivering extremely high-quality turpen-tine at a rate o 300 cubic metres per yearsince 1984.

We are the only orest industrymanuacturer in the world to produceturpentine o such high quality.

ogether with Mid Sweden Universityand the Fibre Science and CommunicationNetwork (FSCN), SCA R&D Centre isnow investigating the potential tomanuacture other chemicals.

Tere are a number o substancesthat we can make use o, both rom the

wood and the wastewater. Tis is set tobe a growth area o the uture, saysrjan Petterson.

MICROFIBRILLATED CELLULOSEMicrofibrillated cellulose, or nanocellulose,is another research area that is helping to

develop stronger fibres and materials. Tiscellulose is o specific interest when it comesto construction and composite materials.

Composite materials are particularlyinteresting to us, especially i they can bemanuactured on a large scale on existing

paper machines. Many o the paper pro-ducts that we already produce are a kind ocomposite material, comprising as they do fibre, pigments and various surace layers,says rjan Petterson.


EUROPE

OF HIGH QUALITY TURPENTINESINCE 1984

300

The SCA R&DCentre has been working on a handful of transformation projects over thepast two years.

SCA

PER YEAR

CUBIC METRES


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SCA strand produces different pulp grades, energy

and chemicals. With a modern, efficient and flexible production

apparatus in place, new products and expansion are on

the agenda.

SCA strand is already a ully-unctional

biorefinery with a capacity o 430,000 ton-nes o totally chlorine ree (CF) bleachedkraf pulp, 95,000 tonnes o chemicalthermo-mechanical (CMP) pulp and 450GWh o green electricity, while also ma-nuacturing and selling district heating andchemicals, such as turpentine and tall oil.

We have gradually increased ourcapacity over the last 20 years and refinedthis concept even urther. It is an integral

part o the sulphate process, where hal thewood is turned into pulp and the other

hal is processed into energy and chemicals.We invest substantial research resources increating new and developing existing

pulp business with our raw material, usingour processes as the starting point. Being

part o a company with such a broad, deepexpertise about the whole product and

production chain is a huge competitive ad-vantage or us, says Ingela Ekebro, CEO oSCA strand and Pulp Division Manager.

Te development o new products isclosely interlinked with SCA strands his-

torical growth and uture expansion plans.Our long-term goal is to double ourproduction capacity to 800,000 tonnes okraf pulp, 110,000 tonnes o CMP pulpand 500 GWh o energy plus additional bi-

products. It is necessary in order or us to havea strong production economy in the uture.

HALF INTERNALLYApproximately hal o the produced kraf

pulp is used in the production o SCAsown hygiene and printing paper. Te rema-

inder is sold to external customers. CMP

pulp is used in products such as sanitary

towels, printing paper, board productsand tissue.

GOOD AT PROMOTIONAL BATCHESBut what makes SCA strand truly uniqueis the mills long experience o alternating

production.When we stopped producing short-

fibre pulp, we were quick off the mark toproduce alternating batches o sofwoodkraf pulp. oday we manuacture severaldifferent grades o sofwood pulp so that

we can customise the fibre properties orthe end-products they are intended or,says Ekebro.

Switching between campaigns, whichinvolves the whole production chain romchoice o wood raw material to finished

product is based on customer orders and acareully timed delivery plan.

Here we have the help o our processdesign, which can handle these rapidswitches. Tis has been a major successactor or us, says Ekebro.

PRODUCTSSCA strand has developed special pulpgrades with properties tailored or printingand tissue paper. oday the plant has anumber o different kraf pulp productsand even more on the CMP side.

We are striving to find good pulpproducts or highly dedicated end-users.Our hallmark is developing and being ableoffer customised grades or tissue, krafboard and printing products, says Ekebro

and continues:

In recent years we have also been ocu-sing on our own brand names and in thiscontext, our strong environmental profilehas been particularly significant or ourcustomers. Our brand name work hashelped us create knowledge in the organisa-

tion and a clarity in the communication toour customers.Accordingly, SCA strand recently

presented some o its latest grades such asLuna and Celeste Filter, which is a kraf

pulp particularly suitable or filter products.

EFFICIENCY ENHANCEMENT A CHALLENGEIn order to reach its uture capacity targetsand to be profitable in long term perspec-tive and continue being a strong player inthe orest industry, SCA strand ocuses

firmly on efficiency enhancement.

We are srivingto find good pulp productsfor highly dedicated end-users, says IngelaEkebro, Mill Manager at SCA strand.

SCA

EQUIPPED FOR

THEFUTUREAuthor: CarlJohard, Sundsvall


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Tese are turbulent times or theindustry. Products vanish and new onesappear. Whatever we do really well todaymay not be good enough tomorrow. Tisis why we need to be supremely efficientin everything we do. We are extremelycommitted to maintaining a high produc-

tivity level and optimising the fibre or theright end-product, says Ingela Ekebro andcontinues:

We are working hard on our Leanimplementation and are becoming skilledin making day-to-day improvements. Tisincludes a more strategic and structuredskills development or our 360 employees.Processes and technology can all be bought,but our competitive advantage is our

personnel.

RESEARCH AND DEVELOPMENTResearch and development initiatives areequally as important.

We need to be even more flexible andbetter at solving problems or our existingcustomers. We work closely with SCAR&D Centre and Mid-Sweden Universityand we have our own development unit

which serves as a link between the researchand our mills. We also have a productgroup, headed by our Marketing Manager

where we combine resources rom marke-

ting, R&D and production, which decideswhich products we should ocus on. It isan approach that we see as our competitiveadvantage.

But SCA strand does not limit itsinnovation work to products. It is equallyimportant to be innovative in processdevelopment.

We pursue both product and processdevelopment and we ocus on developingefficient processes as well as good products.Energy efficiency enhancement is also part

o the process work, i.e. consuming as littleenergy as possible and selling the energy wedo not use.

BRIGHT FUTUREIngela Ekebro believes in a bright uture orSCA strand.

We have high level o competence,a well-invested mill with dynamic plansor the uture and demand or wood-fibrebased pulp is only getting stronger. It is amarket where we should be competing in

earnest, says Ekebro.

EUROPE

The wind farmswill contribute to around 3,000 GWh of energy per year.

SCA

HEAVY INVESTMENTS

IN WIND POWERSCA Energy develops renewable energy and produces refined and unre-fined orest-based biouels, in addition to managing SCAs wind-powerassets. SCA is one o Europes largest suppliers o orest-based biouels.

SCA Energy also includes SCAs ventures regarding wind power,whether they are set up as land leases, joint ventures or owndevelopment projects.

HEAVILY INVESTMENTSStatkraf and SCA are jointly planning the construction o 360 wind

turbines in northern Sweden. Planning has also begun on a urther 300wind turbines together with Norwegian company Fred Olsen Renewab-le and 270 turbines are being planned presently in collaboration withE.ON. In total the investments may amount to around SEK 30 billionor more than 900 wind turbines.

With all our projects we can achieve close to 5 percent oSwedens electricity consumption today. In the wind park areas, onlya ew per cent o the land is actually used or roads and wind turbineoundations. Te rest o the land in the area is managed or orestryas elsewhere. We are thrilled about being able to combine two lines obusiness energy production and orest management, where we amongother things get access to good roads or timber transports. Tis increases

the value o our orest, says Head o SCA Energy ke Westberg.


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WE ARE IN THE

MIDDLE OF A SEVERESTORM BUT THE ENDIS IN SIGHT

In these difficult economic times,

SCA Forest Products continues withunwavering commitment to innova-

tion work.

Were not seeing any growth in

demand for publication paper, so to

keep production moving forward,

we need to put all the major invest-

ments weve already made at our

plants into use for developing the

next generation of products,says

Ulf Larsson, President of SCA Forest

Products, in this interview.

WHAT KIND OF SHAPE IS TODAYSFOREST INDUSTRY IN?Were going through tough times and thisis affecting every business that is export-led.Te Western orest industry is currently inthe middle o a severe storm caused by loweconomic activity, combined with a struc-tural downturn, particularly in publication

paper. In Sweden, were also suffering theconsequences o a very strong domesticcurrency, which has a negative impact on all

the Swedish exporting industries. Althoughthere are strong indications that the end isin sight, its going to take a long time beore

we see any significant recovery.

HOW ARE YOU DEALING WITH THIS?Were working on it constantly. We

want to avoid the big gestures. A healthyorganisation has a constantly ongoing de-

velopment process. We always try to workconsistently on our rationalisation andimprovement work.

HOW ROBUST ARE SCA FOREST PRODUCTS

INDUSTRIAL PLANTS?We have large and robust productionplants and access to resh fibre raw materialo antastic quality. Tanks to our orward-thinking energy investments, weve beenable to build up a cost-efficient internalenergy supply, which has given a huge boostto the competitiveness o the actories. Temills in Sweden are located close to thesupply o raw material, but they have toug-her conditions to contend with in terms olong distribution routes to their customers.

YOU HAVE CHOSEN TO FOCUS STRONGLYON INNOVATIONS...Yes. Whatever our circumstances, and ir-respective o any other decisions, we need tocome up with the products o tomorrow inorder to maintain production and put themajor investments weve already made atour plants to best use. Since were not seeingany growth in demand or publication pa-

per, weve launched an innovation processaimed at developing the next generation o

products.Te important thing is or us to take aclearly innovative approach to our business,constantly reviewing it in a drive to improveefficiency and profitability. Innovationalways involves hard work with a long-termocus. Successul innovation work leads todifferentiation and added value or SCAscustomers and consumers, which in turnestablishes strong, market-leading and

value-creating products and brands.

HOW ARE YOU HANDLING THE STRUCTURAL

DOWNTURN IN PUBLICATION PAPER?For one thing, weve sold off our Laakir-chen paper mill in Austria and our Ayles-ord paper mill in the UK, which has re-duced our exposure to standard newsprint.At the same time, were working intensivelyat Ortviken to gradually reposition our

product portolio.We have several exciting projects in

the pipeline, where were working with anumber o strategic customers. In somecases, were even at the point o test runs

with customers.In parallel with this, weve invested

a massive SEK 350 million in PM5 toincrease its capacity and manuacturebrand new grades o publication paper withhigher grammages.

HOW IS THE INNOVATION PROCESSGOING FOR SCAS PUBLICATION PAPERFACILITIES?Te large industrial sites have previouslyenjoyed antastic margins and stable market

trends. However, we can no longer takecontinued market growth or granted, soIve asked the organisation to review thecore processes and look into the possibilityo generating revenue rom supplemen-tary product flows. Alongside this, weveestablished an organisation and a processor developing products that may cometo replace the existing ones. Te aim is toensure that our plants remain robust in theuture.

UlfLarsson,President of SCAForestProducts:


SCA


15/56


Were taking a short, medium and long-term approach to our development work.

We have skilled and committedpeople who know our business inside outand its important to draw on all the greatideas and resources that we have internally.

WILL WE SEE CONTINUED INVESTMENT

IN ENERGY?Absolutely. Were currently sharpeningour strategic ocus on energy. Demand orrenewable energy is bound to rise, and thedesire to switch to greener technology isexpected to remain strong. Weve set up thenew business unit SCA Energy to run anddevelop our business in renewable energy.

Were planning a large number o wind tur-bines. On top o this, well be looking at arange o other processes through the prism

o our strong position as a major Europeanowner o production acilities with surplusheat, orests and watercourses.

WHAT OTHER AREAS ARE IN THESPOTLIGHT?Were taking a very open-minded ap-

proach to identiying new products or

the uture, based on our relative strengthscompared with our competitors. Packagingis, o course, an area o interest. We havea competitive raw material structure, wehave existing production processes and wehave an in-house organisation and expertisein research and marketing with a ocus on

packaging. As a group, SCA has a long-termocus on developing its leading positionsin advanced packaging in segments with ahigh degree o refinement. Tese segments

have a more stable rate o growth and offerus uture expansion prospects with goodgrowth. Were also reviewing the potentialin complementary product flows.

WHAT IS THE TIME HORIZON HERE WHEN WILL ORTVIKEN CHANGE ITSPRODUCTION STRATEGY?

Publication paper will remain at Ortvikenor a good while yet. In terms o higherquality publication paper, weve beensuccessul in developing popular productseven in a weak market and that work willcontinue. Well also be continuing our movetowards more value-added products.Tese things tend not to involve abruptswitch-overs. SCA Ortviken will see acautious and gradual change and transitionto other products.

EUROPE

We will continueour move towards more value-added products, says Ulf Larssson,President of SCA Forest Products.

SCA

SCA ORTVIKENWILL SEE ACAUTIOUS ANDGRADUALCHANGE ANDTRANSITIONTO OTHERPRODUCTS

PHOTO:SCA


16/56


ADITYA BIRLA HAS BIG

PLANS FOR THE DOMSJBIOREFINERYAditya Birla Group has big plans for the Domsj Fabriker Biorefinery in

rnskldsvik in Sweden. The Birla group has acquired Domsj to develop

the company and its products, opening up new possibilities for the future.

Since 2011, Domsj Fabriker has been apart o the Aditya Birla Group, which isone o Indias leading commercial spheres.Te group is also the worlds largest manu-acturers o viscose staple fibre. In additionto Domsj Fabriker, the Pulp and Fiberbusiness area runs three plants in Canada o which the latest addition, errace Bay,

was acquired this year and one in Chinawith similar manuacturing o viscose staplefibres and viscose filaments.

SIGNIFICANT INVESTMENTSIn the last ten years Domsj Fabriker hasinvested more than EUR 180 million in theexpansion o one o Swedens first bio-refi-neries which produces specialty cellulose,lignin, bioethanol, biogas, bioresins andcarbon dioxide.

Te latest expansion programmeincludes investments in a new wood room,a second lignin dryer and a capacity increasein the manuacturing process o specialty

cellulose. says Lars Winter, CEO oDomsj Fabriker. He adds: We are nowcontinuing an investment plan that wasbegun by the previous owners.

LEADING MANUFACTURER OFSPECIALTY CELLULOSETe development programme will increaseDomsj Fabrikers cellulose annual capacityrom todays figure o around 200,000 to255,000 tonnes.

Tis means we can grow alongside ourcustomers in the expanding textile market.

We will also be able to increase ourproducts refinement value, Winter says.

Specialty cellulose is today Domsj


Specialty celluloseis today Domsj Fabrikers main product.

ADITYA BIRLA


17/56


Fabrikers main product.We are one o the worlds leading ma-

nuacturers o viscose, with a seven percentshare o the world market, he says.

Specialty cellulose is used mainly inviscose abrics and in hygiene products,where it serves as an alternative to cotton.

But it can also be ound in pharmaceuticals,as a binding agent in ood products andhas long been used in the heat shields oNASAs space capsules.

INCREASED MARKET PRESENCEWith Aditya Birla, the companys marketpresence has increased.

We now have access to market chan-nels that benefit us greatly, and also acompetent organisation that is enormouslystrong on resources.

As well as being a strategic suppliero specialty cellulose to the Aditya Birlagroups globally expanding viscose fibre

production, Domsj also supplies the openand growing global viscose market.

Cotton production is reported to havereached its ceiling and will have difficultykeeping up with rising demand. Viscose isthe natural alternative, says Winter.

RANKED NUMBER TWO GLOBALLY INDRIED LIGNIN

Domsj Fabrikers other main product islignin, which is primarily used as an additi-

ve or concrete. Lignin improves the liquidproperties o concrete and thereby reducesthe need or cement. Tis is beneficial orthe environment since the manuacture ocement causes considerable emissions ocarbon dioxide.

A single kilo o lignin added to amixture o concrete is calculated to reducecarbon emissions caused by the manuactu-re o cement by 20 kg. Te manuacturing

capacity o dried lignin will double to some120,000 tonnes with the investment in asecond lignin dryer.

Consequently, we will have a 10% shareo the world market and become the secondlargest supplier in the world or dried lig-nin, says Lars Winter. During the autumno 2012 we launched a new product on themarket. It is the first lignin product to bebased on a proprietary and patent-pendingtechnology and it provides Domsj withaccess to a new market segment.

PROGRESS AT THE ETHANOL PANTBioethanol is the Domsj biorefinerysthird business area and it is currently being

produced at unprecedented levels in theethanol plant.

In past years, the process has been fine-tuned, which has led to capacity increases.Te goal is to increase annual production to14,000 tonnes. With the planned increase

in the manuacture o specialty cellulose,a continued positive trend is expected orthe ethanol plant, which has an absolutemaximum annual capacity o 20,000 tonneso ethanol.

SWEDENS LARGEST PRODUCER OF BIOGAS

In addition to the three products, Domsjalso produces methane gas rom the bio-treatment o effluents and smaller volumeso bioresin and carbon dioxide. Biogas romthe biological treatment plant uels thetwo own lignin dr yers and supplies heating

which covers 20 percent o the plantsenergy needs.

Domsj is also planning to manuacturecellulose nanofibre rom the plants cellulosesludge.

Te proportion o recovered sludge

rom the manuacturing o cellulose nano-fibre is 95 percent. Specialty cellulose romDomsj is very pure, which means thatthe fibre does not need be treated beoremanuacturing. Te goal is to create newmaterial made rom residual products, the-reby increasing the value across the whole

production chain.All combined, these actors give us

good cause or our motto, We make morerom the tree, says Lars Winter.

EUROPE

The India-based Aditya Birla Group is a leading multinationalconglomerate, comprising some 50 companies and 120 produc-tion units on six continents and in 36 countries. It is also theworlds largest manufacturer of viscose fibre. Group sales totalUSD 35 billion and the Group has 133,000 employees.

Aditya Birla manufactures viscose staple fibre in India, China,

Laos, Domsj Fabriker in Sweden and at three plants in Ca-nada: Nackawic, AV Cell in New Brunswick and Terrace Bay.

Domsj Fabriker occupies an unique position among Adi-

tya Birlas pulp mills, being the only mill to have an advanced

research operation.

The Group plans to expand capacity by the equivalent of

120,000 annual tonnes in India and 142,000 annual tonnes in

South-East Asia.

NUMBER ONE IN THE WORLD

Domsj Fabrikeroccupies an uniqueposition among Aditya Birlas pulp mills,being the only mill to have an advanced

research operation.

ADITYA BIRLA


18/56


STEADY INCREASE

IN WOOD GROWINGCOSTS IN SOUTHERNCHINA

China has temporarily lost itsappetite for Western logs due to the

economic slowdown. But there are

signs that a recovery is on its way.

Te slowdown o the Chinese economy,combined with worries about a bubble inthe big cities housing markets, led to a cont-raction in construction activities in Chinaduring 2012. Tis caused reduced demandor lumber, and a sharp decline in importso sofwood logs and lumber to the country.

TIME FOR RECOVERYWith reduced demand or logs in thelumber industry in China, log prices ellthroughout most o 2012. According

to Wood Resources Quarterly (WRQ),

Author:JanHkerberg, Shanghai

120

100

80

60

40

20

0

2000 2005 2010 2015e

tonnes m

CHINESE FIBRE USAGE WASTE PAPER NON-WOOD PULP WOOD PULP

China will continue to see rising wood pulp production along with rising imports ofwood chips to make that pulp.

LUMBER DEMAND

SOURCE: CHINA PAPER ASSOCIATION, MIIT


19/56


Steelmakers, cement producers and con-struction machinery manuacturers sawtheir sales soar as the stimulus plan opened

the spigots on unding or roads, railways,ports, airports and power plants, amongother things.

In the spring o 2009, the collapse othe US housing market orced log prices inthe states o Oregon and Washington totheir lowest levels since the early 1980s.

When Chinese traders discoveredthat US logs were a bargain, they startedto aggressively buy them to support theconstruction boom in China. Prices wentup or 18 months and peaked in May 2011,

afer more than a 100 per cent increase.In 2011, China used almost 10 per cento the sofwood lumber produced globally.Canada and Russia are the two dominantsuppliers o sofwood lumber to China,together accounting or 84 per cent ototal imports, with the US, Chile and NewZealand comprise most o the remainingimport volume.

RISING PULP PRODUCTIONChina will continue to see rising wood

pulp production along with rising imports

average import sofwood log prices in thethird quarter o 2012 were down 13 percent rom a year ago, and domestic Chine-

se-fir log prices have allen about 6 per centin 12 months.

WRQ also reported that Chinas im-ports o logs and lumber ell by 19 per centin the first eight months in 2012 comparedto the same period a year earlier. By volume,log imports were down 17 per cent andlumber imports down 5 per cent.

However, the Wood Markets ChinaBulletin has reported that Chinas wood

product sector is expanding again, aferhitting bottom in the first quarter o 2012,

and predicts that China is working its wayout o its housing construction slowdown.

TEN PERCENT OF THE GLOBAL SOFTWOODLUMBER

When the global financial crisis hit boththe US and Europes economies in theourth quarter o 2008, Chinas centralgovernment launched an enormous stimu-lus package o RMB4 trillion (US$586billion) to boost domestic demand in bothinrastructure investment and consumption

during 2009 and 2010.

o wood chips to make that pulp. A newstudy released by RISI concludes that,large-scale papergrade market pulp produc-

tion in China is not a sustainable businessover time.

A steady upward trend in wood growingcosts in southern China will keep China's

pulp producers purchasing ever-increasingvolumes o wood chips rom greater distan-ces, including North and South America, at

very high costs.Wood costs in China are already almost

the highest in the world, and account oras much as 70% o cash costs or bleachedhardwood kraf (BHK) market pulp produ-

cers in China. Market BHK producers inChina have some o the newest and largestpulp lines in the world, and yet are stillthe high cost producers, even in their ownmarket.

Te RISI report indicates that woodgrowing costs in southern China will pro-bably outpace growing costs in Brazil by a

wide margin over the next decade, and thissuggests that large-scale papergrade market

pulp production in China is not a sustaina-ble business over time.

CHINA&

ASIA

LUMBER DEMAND

Wood costs in China are already almost the highest in the world.

PHOTO:JULIANAYONDT


20/56


NEW EMISSIONSTANDARDS SET FORCHINAS PAPERMAKERSChinas pulp and paper industry is

one of the governments five tar-

geted sectors for stricter policies to

save energy and cut emissions.

Historically, Chinas pulp and paperindustry has been plagued by environmen-tal problems, traditionally caused by the

widespread use o outdated technology andlack o environmental awareness.

However, in recent years, China has

worked hard to modernise the industryin an effort to achieve its overall environ-mental goals. Te country has launchedcampaigns to close old machines nation-

wide to reduce pollution and realise cleanerproduction.

20 MILLION TONNES TO BE PHASED OUTFrom 2006 to 2010, China shut downaltogether more than 2,000 pulp and paperenterprises, and eliminated outdated pro-duction capacity o over 10 million tonnes.

In the 12th Five-Year Plan, or 2011-2015,China plans to phase out another 10 mil-lion tonnes o backward capacity.

Te most modern machines are instal-led here in China. Actually, you have two

kinds o pulp and paper companies. Youhave the old ones that might be challengingregarding energy efficiency and pollution.But you have also got the ones that havebeen installed with acilities that are state-o-the-art. Tey are more modern than theones in Europe or North America, PasiLaine, Metso's President o Pulp, Paper andPower, told the China Daily recently.

KEY COMPONENT OF THE CHINESE

ECONOMYChinas paper industrys total output in2010 stood at nearly RMB600 billion (US$95 billion) in value. Even i the market hasslowed down since then, the industry isclearly one o the key components o theChinese national economy.

Tis was reflected in the act that thepapermaking industry was one o fivetargeted sectors when Chinas State Councilissued specific energy-saving and emission-cutting policies in conjunction with the

12th Five-Year Plan in early August 2012.Local media said that it was the first

time the government had set such detailedgoals or an individual industry.

HAND-IN-HAND WITH ENVIRONMENTALPROTECTION

For pulp and paper producers, con-sumption o standard coal or making atonne o paper and board will be slashed to0.53 tonnes in 2015, compared with 0.68tonnes in 2010, according to the plan.

Similarly or the production o a tonneo pulp, the plan is or 0.37 tonnes o stan-dard coal to be used in 2015, down rom0.45 tonnes in 2010.

Regarding pollutants in waste water,the pulp and paper sector will have to cutrates o both chemical oxygen demand(COD), a water emission actor describingthe amount o oxygen consumed when dis-solved matter in effluent water oxidises, andammonia nitrogen emissions by 10 per cent.

Te industry-wide discharge o CODemissions will be lowered rom 720,000tonnes in 2010 to 648,000 tonnes in 2015.

For ammonia nitrogen, emissions willbe reduced rom 21,400 tonnes in 2010 to

19,300 tonnes in 2015."We should always bear in mind that

economic growth should go hand-in-handwith environmental protection. Envi-ronmental protection policies should be

Author:JanHkerberg, Shanghai

SEVEN FOCUSED AREAS IN CHINAS FIVE-YEAR PLAN

Chinas12th Five-Year Plan (FYP) for the pulp and paper industry was released on 30 December, 2011. The ambitious plan

targets balanced growth of total paper and board consumption and production, putting an emphasis on rebalancing demand and

supply. The FYP identifies seven focused areas for the industry:

Improve the raw material supply.

Increase indigenous innovation, improve technological structure.

Optimize regional development, allocate resources properly.

Conduct clean production, protect environment.

Optimise enterprise structure, promote mergers and acquisitions and implement efforts to improve industrial consolidation.

Improve product structure and product quality. Develop new and environment-friendly products,

speed up the upgrading of low-end products.

Establish saving mechanisms, promote appropriate consumption.

In addition, the FYP also identifies three key projects and nine support policies.

NEW EMIS SION STANDARDS


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MERGER BETWEENTAIWANESE PULP ANDPAPERMAKERSYFY Paper spins off its printing paper business to Chung Hwa Pulp.

Te merger o the fine-paper businessunit o Yuen Foong Yu Paper Manuac-turing Company (YFY Paper), the largest

papermaker in aiwan by revenue, into theChung Hwa Pulp Corporation came intoeffect in the end o 2012.

Te merger was announced in March2012, with Yuen Foong Yu spinning off

its printing paper business unit to ChungHwa Pulp in exchange or 640 million newshares worth ND 6.68 billion (USD 230million) to boost its ownership o ChungHwa to 55 per cent.

SAFEGUARD AGAINST PRICEFLUCTUATIONSTe deal will help to uel revenue growth oboth companies, according to analysts.

Institutional investors told the aiwan-based China Economic News Service

(CENS) that acquiring the fine-paperbusiness unit would enable Chung HwaPulp to enhance sel-efficiency in supplyo the material as a saeguard against pricefluctuations, while heavily utilising wet pulpin papermaking to cut energy costs used inevaporating o secondary condensates. Tecompany could see its sales revenue increase

to ND 20 billion in 2013 and its profitsdouble.

A LEADING POSITIONYFY Paper was ounded in 1950 and roseto a leading position in the domestic papermanuacturing industry. Te company hasintroduced a number o different productsto the market, including fine paper, indust-rial paper, paper container and household

paper products.Besides being the owner o many mills

in aiwan, YFY Paper has also investedin pulp and paper mills abroad in Chinaand Vietnam. YFY Paper also exports its

products to other parts o Asia as well asto the Middle East and Central and SouthAmerica.

A RENEWED ATTEMPTChung Hwa Pulp engages in the manuac-ture and sale o paper products or cultural,sanitation, and industrial uses in aiwan.

It provides picking pulp, bulky pulp, andhigh-opacity pulp products. Te companywas ounded in 1968 and is headquarteredin Hualien, aiwan.

YFY Paper and Chung Hwa Pulp origi-nally tried to merge operations in 2001, buthad to cancel the plan. In a statement at thetime, the two companies attributed inapp-ropriate political intererence and disagre-ements over labour issues as the reasons orthe decision to end the planned merger.

Author:JanHkerberg, Hongkong

CHINA&

ASIA

implemented in the context o promotingconsumption, investment and exports,"said Environmental Protection MinisterZhou Shengxian.

A COMPLETE TRANSFORMATIONIt is not only government initiatives that

are helping to consolidate and modernisethe Chinese paper industry. Te companiesthemselves are also upgrading their acilities.

In a China report by Asia Pulp & Paper(APP), one o the worlds leading pulp and

paper producers, the company concludes:odays paper industry has undertaken acomplete transormation. Amid techno-logical advances, as well as rising nationalstandards and increased awareness ocorporate responsibility, Chinas modern

paper enterprises are taking active measures

to modernise the industry by employingrenewable resources within a cleaner

production process. Chan Hwa Pulpengages in the manufacture and sale of paper products for cultural,sanitation and industrial uses in Taiwan.

CHANG HWA PULP


22/56


Today 700 people work at the Stora Ensos plantation schools and eucalyptus forests in China.

STORA ENSO

PHOTO:JULIANAYONDT


23/56


Countdown toStora EnsosInvestment in

Stora Enso will be investing around

EUR 1,6 billion in a greenfield pulp

mill for the production of pulp and

paperboard in the city of Beihai in

Guangxi province in southern China.

Further expansions are in the pipe-line and China is well on the way to

becoming one of the groups largest

and most important markets.

Stora Enso began operations in Guangxi in2002 and, since then has invested EUR 200million in building up its 120,000 hectareso eucalyptus plantations in the province.oday 700 people work at the plantationschools and in the Chinese eucalyptusorests.

Tis is land ideally suited or growingeucalyptus, says Mats Nordlander, Executi-

ve Vice President o Stora Ensos RenewablePackaging business area.

PAPERBOARD PRODUCTION AND CAPACITYTe orests are now ready or harvesting.Stora Ensos management and boardrecently continued the Chinese initiativeby investing EUR 1.6 billion in a newgreenfield mill in Beihai in Guangxi. Temill will produce 900,000 annual tonnes o

pulp, and will include a new, state-o-the-art paperboard machine with a capacity o450,000 annual tonnes. Te mill is expectedto deliver liquid packaging board and va-rious types o consumer product packagingto the whole o China.

In 2007 we signed a letter o intent tobuild the mill, and we have spent the lastfive years planning the project and nego-tiating the terms. Its a gigantic investment one o the largest that a Nordic company

has ever made outside the Nordic region,says Mats Nordlander.

Te operation will be conducted in theorm o a joint-venture company, o which85 percent will be owned by Stora Enso

and 15 percent by the state-owned GuangxiForestry Group.

CHINA GROWING IN IMPORTANCEWith the current investment, Chinasimportance or the group will increasesignificantly. China including Hong Kongaccounted or around five percent o StoraEnsos total turnover o around EUR 11billion in 2011.

We are already one o the market-leading orest industry players in the count-

ry and we have ambitious growth plans inChina. I the Chinese market continues togrow until 2020 at the rate that we expect,there will be opportunities or urtherexpansion, says Mats Nordlander.

In the uture, when the market allows,the ultimate objective is to increase capacityat the new mill to 900,000 annual tonnes.

STRONG GROWTHTe global packaging market is currentlygrowing by 3 to 8 percent a year. Te astest

growth is being recorded in countries suchas China, India and Pakistan.All these countries, which are emerging

rom poverty, need packaging. We antici-pate that 50 percent o the global growthin our key paperboard segment by 2020

will be in China. Te number o amilies inChina that are eating hygienically packagedood is rising by 25 percent per year. Tisis the driving orce behind our operationhere. With this project we will significantly

increase our sales in the Chinese market,says Mats Nordlander.

RECRUITMENT CAMPAIGN UNDER WAYoday, Stora Enso has 4,500 employees

in China. When the mill in Guangxi iscompleted, the number o employees inthe country will rise to 6,500. Tis can becompared with the groups total workorceo 30,000, o which 6,000 are in Sweden.

We anticipate that in five years time,China will be one o the countries where

we have the most employees. And thatsnot including the 10,000 people who willbe working there during the construction

phase. In all, we expect that the investmentin Guanxi, with contractors, suppliers and

auxiliary operations, will create 30,000 newjob opportunities in the province, saysMats Nordlander.

Te first recruitment drive or the mill isunder way, with vacancies or 300 universitygraduates to be filled, and 500 more to jointhem in the spring o 2013.

Te great majority o them will belearning the ropes rom scratch and willstart off as operators, he says.

ALL SYSTEMS GO IN 2014

Construction work on the plant will beginas soon as the ormalities are complete.All the preliminary decisions have been

made but we have yet to receive the finalramework decision. Work will commenceas soon as the permit arrives. Te construc-tion phase is expected to take two years andthe company plans to start production atthe end o 2014, he concludes.

CHINA&

ASIACHINAAuthor: Carl Johard

STORA ENSO


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WHAT IS YOUR VIEW OF THE FOREST INDUSTRYS FUTURE,

GIVEN THE STRONG PRESSURE FOR CHANGE THATCHARACTERISES THE INDUSTRY?Tere is undoubtedly a lot o pressure or change, and it is beingdriven by two strong trends. Firstly, some o our products, parti-cularly newsprint, have passed their sell-by date and have reachedthe end o their product liecycles. Sooner or later all productseventually reach maturity in their respective liecycles. Te time hascome or some o ours. Despite this, I believe were still airly ortu-nate in having slow, relatively lengthy liecycles compared with, say,the electronics and mobile phone industries.

Te second trend is the rising global population and growingmiddle class, which is shifing the ocus o consumption away rom

North America and Europe to the emerging countries.

SCANDINAVIAN FORESTS TAKE BETWEEN 50 TO 60 YEARS TOGROW. ISNT THE FOREST INDUSTRY BY TRADITION A SLOW-MOVING AND CONSERVATIVE PLAYER AMONG MORE LIGHT-FOOTEDMARKETS, WITH LONG PLANNING HORIZONS AND LONGINVESTMENTS DECISIONS?Not really. For one thing, the orest industrys investment deci-sions are not dictated by the pace o tree growth. Te orest is a baseo raw materials. When our industry invests were talking abouthuge investments and long liecycles. Te orest industrys speciallytargeted capital investments have a very long maturity time. Flexi-

bility is low and capital sizeable, so you need to be very careul andthe investments are only made possible by a relatively slow productliecycle. Tis means big machines, where the capital cost per unitgets high priority. With a aster cycle, investments as large as these

would not be possible, and instead the investments would be inmuch smaller, more numerous machines.

Globally I also believe that company size is significant. In achanging world, bigger companies are more competitive and havea better survival rate than smaller ones. Tis is because they canoperate on several continents, have a large assortment o machineryand can thereore add flexibility to the structure. Our newsprintoperation has been good at creating a network o paper machines,

THE FOREST IS OUR

All players should agree on a common view and

conviction that the forest industry is vitally important

to worlds prosperity, economy and development. It is

our green oil, says Mats Nordlander, Executive Vice

President of Stora Ensos most important business area,

Renewable Packaging.

where it is possible to shif production to the unit which at the timeis most cost-efficient or is otherwise more flexible in its production.

LARGE COMPANIES ALSO HAVE THE RESOURCES TO BE MOREEFFICIENT IN THEIR PRODUCTION.Yes, this is the logical outcome o a more flexible organisation.Generally in our industry, production is calibrated on a plant-by-

plant basis. Stora Enso is trying to build a network o machines and

plants instead, where we create flexibility between plants and try totake advantage o a brutal benchmarking between individual units.

IN EUROPE, STORA ENSO HAS DIFFERENT MAINTENANCESTRATEGIES. WHICH STRATEGY IS BEST?Maintenance is an area that we have chosen to develop on the basiso geography. Were constantly striving to expose all our externaland internal processes to competition not just maintenance.

Were convinced that exposure to competition is healthy. We conti-nuously benchmark and monitor our systems, on the maintenanceside too. Its a question o flexibility and we cannot rule anythingout in the uture. Its important to have a philosophy o continuous

Author: CarlJohard

GREEN OIL

Stora Ensois trying to build a network of machines and plants andtake advantage of a brutal benchmark, says Mats Nordlander,Executive Vice President Stora Enso Renewable Packaging.

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improvement. Getting bogged down in philosophical discussionsand principle-based deadlock on certain decisions would be atal.Tis is not a religion and in this respect we are strict non-believersin all political currents. Our philosophy is total flexibility.

Were constantly striving to expose all our external and internalprocesses to competition not just maintenance. Were convincedthat exposure to competition is healthy.

HOW HIGH IS SAFETY ON STORA ENSOS LIST OF PRIORITIESTODAY?Protection, saety and the work environment are all top o our listo priorities and our agenda. It is discussed first at all our meetings,and it is our most important KPI that we use to measure our own

perormance. We implement the same approach all over the worldand we have produced a toolbox with ten tools that we are currentlyimplementing across the group.

IN OTHER WORDS, YOU HAVE THE SAME APPROACH TOSAFETY AT ALL YOUR PLANTS AROUND THE WORLD?

Yes. We emphasise it in all situations. Our policy is that this isnot a cultural issue: a Chinese, Pakistani, or Finnish worker is nodifferent to a Brazilian worker in our saety culture. Protection andsaety is one area where we are slightly undamentalist in our ap-

proach here, we make no compromises. Our employees must eelconfident that they will come home unharmed.

DOES SUSTAINABILITY HAVE THE SAME PRIORITY ONTHE AGENDA?Yes I think so. We are a company that is shifing towards theemerging countries and high-risk markets. Tis makes sustainability

work increasingly important. It always did have high priority, but

the current shif has brought new dimensions and is moving newitems up the agenda.

CHINA&

ASIA

"We continuouslybenchmark andmonitor our systems.Our philosophy istotal flexibility.

STORA ENSOS NEW STRATEGY

Stora Ensois one of the worlds leading manufacturers of

paperboard and paper.

The group has 30,000 employees in 35 countries all

over the world, and annually produces 4.9 million tonnes ofchemical pulp, 11.8 million tonnes of paper and paper-

board, 1.3 billion square metres of corrugated board and

6 billion cubic metres of sawn wood products. Sales

totalled EUR 11 billion in 2011.

Stora Ensos operations are now divided into four

business areas:

Printing and Reading newsprint, magazine and

book paper and fine paper.

Biomaterials production of fibre-based pulp and

bi-products from pulp production.

Stora Enso Building and Living wood products forconstruction and interiors, and bio-fuels.

Stora Enso Renewable Packaging fibre-based

packaging and innovative packaging solutions for

consumer products and industrial applications.

In its new strategy, Stora Enso has decided to invest in

fibre-based packaging and plantation-based pulp produc-

tion in emerging markets such as China and Latin America.

By offering sustainable new solutions for customers,

fibre-based packaging ensures steady, long-term growth in

most segments and has considerable innovation potential.

Plantation-based pulp is based on fibres that grow tentimes faster than trees in the northern hemisphere. Planta-

tions will allow Stora Enso to secure costs and efficiency

in order to meet future needs for paper and paperboard

production.

The Printing and Reading business area will remain

part of Stora Enso, even if the group will become more

concentrated with fewer production lines. Focus will be

oriented towards manufacturing top grades with the

help of investments and initiatives to promote cost and

energy efficiency.

Our overarching strategy is to continue growing in

growth areas. Packaging and bio-materials are two suchareas we are investing in. Business areas such as Printing

& Reading and Building & Living generate sufficient cash

flow to allow us to generate growth in other areas, says

Mats Nordlander, Executive Vice President of Stora Ensos

Renewable Packaging business area.

Given that we ofen tend to act quickly and have earned thereputation o being a pathfinder in new markets, we also break newground and ace new challenges. Its always easier to be second orthird in a new market, leaving someone else to plough the urrows,make the mistakes and go through the learning curve. Our strategyis to be first.

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AFTER THE

MARUBENIAGREEMENT

Russia is strengthening its commercial ties with

Asia in the forestry industry. Recently, Japans

Marubeni Corporation signed an agreement to build

the gigantic Angara Paper pulp mill in Siberia and

a Chinese wealth fund has invested in a Siberian

timber company. With this new deal the initialpartner Sodra leaves the project.

Angara Paper, a massive Russian pulp mill project in Siberia,got a much-needed welcomed boost in September 2012,

when the Japanese trading company Marubeni Corporationsigned an agreement with the Russians, taking responsibilityor machinery, procurement as well as overseeing the construc-tion o a production acility in Lesnosibirsk in the region oKrasnoyarsk, Sibiria.

Te contract was signed in conjunction with the summitmeeting o the Asia-Pacific Economic Cooperation (APEC)

in Vladivostok, where the leaders o the 21 member econo-mies met to discuss uture trade and cooperation issues.

ONE OF THE WORLD'S LARGEST PULP MILLSAngara Paper is intended to become one o the worlds largest

pulp mills. Angara Paper was ounded in 2006 to implementthe pulp mill project. In 2008, Russias Industry and radeMinistry included the project in the list o priority investment

projects but construction was halted because o the globalfinancial crisis.

According to initial plans, the mill will produce 1.2million tonnes pulp per year, comprising 900,000 tonnes o

northern bleached sofwood kraf pulp (NBSK) based onbirch and aspen and 300,000 tonnes o dissolving pulp (textilepulp), in addition to 380,000 cubic metres o sawn timber.

About 80 per cent o the output is earmarked or exportto China, Japan, and other Asian regions. Te partners put thecost o the investment project at JPY 280 billion (USD 3.5billion).

Japan currently imports most o its sofwood pulp romNorth America and northern Europe. Japanese and otherAsian paper companies will be able to cut transportation costsby switching to supplies rom Russia.

Author:JanHkerberg, Hongkong

IF YOU WERE TO START UP THE SAME GREENFIELD PLANT INEUROPE AS YOU ARE DOING TODAY IN CHINA AND PREVIOUSLYIN BRAZIL, WOULD IT BE DIFFICULT TO RECRUIT THE SAMEEXPERTISE FROM THE UNIVERSITIES? WHAT DOES THE FORESTINDUSTRY NEED TO DO IN ORDER TO ATTRACT YOUNG PEOPLE?Tis is what makes China the successul and ast-growing countryit is today. We cant compete on the same pitch, let alone in thesame sport. Our challenge is to make our industry appealing enoughto attract the very best university graduates. Tis is a big issue or

the uture. How can we get the sharpest minds at the universities tocontinue developing in our industry? In this regard weve observedan unsettling trend. In general terms we need to learn to present ourindustry in terms o its opportunities. Ours is an industry with abright uture.

Te economic realities will work to our advantage. Industry andgovernments share the same platorm and have a common vision andconviction that this industry is absolutely vital to worlds prosperity,economy and development. Tis is our green oil.

WHERE DO YOU PICTURE STORA ENSO IN 20 YEARS?Globally, Stora Enso in 20 years will have a presence in many emer-

ging markets and have an even bigger presence than today in Asiaand Latin America and in the global packaging market.

WHAT IS THE BIGGEST CHALLENGE FACING THE FORESTRYINDUSTRY TODAY?Te strongest motivation is that the resources on our planet arelimited. Te world population will be nine billion in 2050. Wethereore need to be smarter in the way we use both finite oil-basedresources and renewable resources, to make them last longer. One

way is to maximise the productivity o each square metre and everytree. Tat trend will be very strong. Tis is an area we also ocus on.

SDRA LEAVES ANGARA PAPER PROJECT

Stora Ensohas decided to invest in fibre-based packaging andplantation-based pulp production in emerging markets such as China.

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Construction work on the pulp mill isscheduled to start in 2013 and the millis supposed to be ully unctional in late2017. Te Angara project has cutting rights

to 6 million cubic metres o sofwood peryear in the Krasnoyarsk area.

SDRA DECIDES TO PULL OUT OF THEPROJECTMarubeni is a global trading companyoperating in numerous industries such asood, energy and metals as well as paperand pulp. In May 2012, Marubeni sealed aUSD 5.6 billion deal to buy the US grainmerchant Gavilon. In the pulp sector, thecompany has a capacity o approximately

1 million tonnes o market pulp, which ismanuactured at two acilities in Canadaand Indonesia. It also owns majorityshares in several Japanese paper andboard producers.

In 2011 Sdra Cell o Sweden becamethe first oreign partner to sign a letter ointent with Angara Paper and the Russianbank Vnesheconombank (VEB). Sdra'srole in the project was to be an industrial

partner with responsibilities or sales,marketing and distribution o uture

CHINA&

ASIA

pulp production.Under the terms o the agreement, Sdra

could hold up to a 10 per cent stake in thecompany or be paid in cash or its services.

Sdra Cell is the worlds third largestmarket pulp supplier with a total annual

production o more than 2 million tonnes.In January 2013, Sdra decided to pull

out o the collaborative project or the newplanned pulp mill.

Te scope o the project has changedcompared with the original plan. From our

perspective, the project no longer fits inwith our uture strategy and we havethere-ore decided to withdraw, saysGunilla Saltin, Acting CEO and President

o Sdra Cell.

THE RFP PROJECTAnother recent Russian-Asian orest indust-ry deal was announced in 2012. In June,the Chinese state-owned sovereign wealthund, China Investment Corporation,established a joint private-equity und withits Russian counterpart, the Russian DirectInvestment Fund. In September 2012, theymade it public that their first investment

was a minority stake in the Russian Forest

Products (RFP) Group, an investment oUSD 200 million.

Te RFP Group is Russias second-biggest orestry company. It has operationsin Siberia and ocuses on the export o rawtimber and sawn goods, but also plans to

construct a large pulp mill in RussiasFar East.

I realised, the RFP and Angara pulpmill projects will represent the first majorgreenfield investments in the Russian pulpand paper industry in decades, accordingto Bank o Finlands newsletter BOFI

Weekly.

In September 2012the Japanese trading company Marubeni Corporation signed anagreement with the Russians in Vladivostok.

Will be one

of the worldslargest pulpmills

A MODERNISED AND EXPANDED FORESTINDUSTRYPulp and paper production accounts or lessthan 1 per cent o Russian GDP. wo-thirds

o Russias current pulp production comesrom the Ilim Groups acilities in Irkutskand Arkhangelsk. Paper, containerboardand corrugated paper production is concen-trated in north-western Russia.

About a fifh o the paper and contai-nerboard used in Russia is imported, butthe aim is to replace imports with domesti-cally produced paper and containerboard.

In recent years, some o the existingpulp and paper acilities in Russia have beenmodernised and expanded. For example,

US-based International Paper and theEuropean Mondi Group have modernisedtheir production acilities in Svetogorskand Syktyvkar. Te Ilim Group, which hasInternational Paper as a strategic owner, hasannounced that it is completing a five-yearinvestment programme valued at nearlyUSD 2 billion. Te companys most recent

projects included construction o a pulpline in Siberia and starting production ooffice and printing paper at its Arkhangelsk

pulp and paper mill.

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CHINA ANDHURRICANE SANDYGIVE RESOLUTEA BOOSTResolute is counting on China, Hurricane Sandy and

increased diversification to give the company a much-

needed boost in 2013. The Canadian forest giant has

struggled to meet its profit targets and profitability

has been put under even greater pressure by the

drawn-out dispute over pulp manufacturer Fibrek.

Author:LennartPehrson, New York

When Resolute Forest Products ormerly AbitibiBowater announced a hostile takeover bid at the end o 2011, it turned outto be the start o a long, drawn-out legal battle. Its rival Mercer,

which had initially outbid the company, tried to take the disputeto Canadas Supreme Court beore Resolute was finally able totake ull control o Fibrek.

However, at least in the short term, this would weigh down onthe companys profit. Upgrading and modernising Fibreks mainasset the Saint-Flicien pulp mill in Quebec has been a costlyaffair. Te plant needed both environmental investments and

measures to improve production efficiency, and production hadto be shut down completely or a period.

BITTER CONFLICTo some extent, Fibrek, now a wholly-owned subsidiary, hasreturned home. AbitibiBowater built and initially owned Saint-Flicien but divested the mill some ten years ago. Later, in 2010,Saint-Flicien became the base o pulp manuacturer Fibrek,

while AbitibiBowater changed its name toResolute in a new start-up, afer requesting

protection rom its creditors.Te bitter nature o the dispute is

surprising considering the earlier close ties

between the two companies. Fibreks mana-gement did what it could to attract anotherbuyer. When a settlement was finallyreached, Resolute replaced all the memberso Fibreks board o directors and manage-ment team. Given the introduction o newtree-elling regulations, there was also anunderlying threat that Resolute would nolonger be able to deliver fibre to Saint-Flicien and Fibreks other pulp plants.

MANAGEMENT LOOKS TO CHINA

Resolute operates more than twentypulp and paper mills and as many woodprocessing plants in Canada, USA andSouth Korea. Te company now hopesthat Fibreks pulp manuacturing will helpstrengthen its profitability prospects and

HURRICANESANDY

Resolutes own forecstssuggest thattimber prices will strengthen in 2013because of hurricane Sandys devastationof the New York region.

$ 50 BILLIONCOST MORE THAN

THE COSTS OF RECONSTRUCTIONWILL BE SUBSTANTIAL AND WOODPRODUCTS WILL BE IN GREATDEMAND

RESOLUTE

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HUKOVSKY/SHUTTERSTOCK.C

OM


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thereby help boost its share price, whichhas been in a constant state o decline. Se-

veral industry analysts consider the sharesto be undervalued despite a clear risk thatthe price will continue to be exposed todownward pressure.

Even i all the orecasts about thegrowth o the global economy are taintedby considerable uncertainty, Resolutes ma-nagement is confident that pulp prices willrise in the latter part o 2013. In that case,the driving orce would be rising demand

rom China. It is the prospect o increasedsales to China that is the main motivationbehind Resolutes interest in Fibrek.

A stronger paper pulp market is o crucialsignificance as Resolute needs to compensateor the inevitable decline in demand ornewsprint. Tere is currently overcapacity inthe North American market and all indi-cations suggest that demand will continueto all newspaper readers are expected toabandon physical newspapers when theincreased use o sur tablets and other mobile

devices digitalise the dissemination o news.

NORTH

AMERICA

DIVERSIFICATION AWAY FROM NEWSPRINTPossible silver linings include increaseddemand rom Brazil and other LatinAmerican countries, and markets in Asia.But it has long been evident that a diversifi-cation away rom newsprint, which was thecompanys core business, is necessary.

Dependence on the weakeningnewsprint market was the main reason orAbitibiBowater previously having deaultedon its payments.

Diversification away rom newsprint is

not just based on the acquired pulp mills,which have increased capacity to 1.8 milliontonnes per year. Resolute also has strongaith in the wood processing market.

SANDY LIFTS HOUSING CONSTRUCTIONTe new acquisitions also include severalsawmills. Te companys own orecastssuggest that timber prices will strengthenin 2013 due partly to the increase inconstruction in the recovering housingmarket in the USA and also because o

hurricane Sandys devastation o the

Resolute has strong faith in the wood processing market.

New York region on the US east coast.When the storm subsided at the end o

October, the cost o damage was estimatedto be more than USD 50 billion. Regard-less o the final damage tab, the costs oreconstruction will be substantial and wood

products will be in great demand. ResolutesCEO, Richard Garneau, has said that theeffects o Sandy on the wood processingindustry are unlikely to maniest themselvesin increased demand and higher timber

prices until the second and third quarters

o 2013.I pulp and paper prices go up, thisshould improve profitability afer severaltough years marked by financial crisis,deep recession and structural problemsor newsprint. Te problems have neces-sitated cost savings programmes and othermeasures that may now have improved theindustrys prospects.

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FORD AND WEYERHAEUSERTEAM

UP TO DEVELOP NEW MATERIALSThe quest for greener and recyclab-

le products has now brought previ-

ously improbable partners together.

Cellulose gains new applications

as Weyerhaeuser, one of the worlds

largest pulp and paper manufactur-

ers, teams up with the Ford car giant

to develop new materials.

Te deep crisis that has hit the US autoindustry has roused Detroit. Former oppo-nents to investments in economical andeco-riendly cars have been silenced. Tereason is not only the success o Japanesecompetitors such as Nissan and oyota;Fords own customers are demanding carsthat are manuactured with greener techno-

logy. In simple terms, consumer demand istaking over the drivers seat.

GREEN ATTITUDE SHIFTAccording to Ford, a green attitude shifamong car buyers has made it necessary orthe company to change the production pro-cess in order to compete or market shares.Eco-riendlier bio-plastic in manuacturingthereore has the potential to be a successulcompetitive weapon.

Te 2013 Ford Fusion is due to be

launched in the USA. In its marketing, thecompany is emphasising that the new carhas more components made rom recyclab-le materials. Recycled plastic bottles, orinstance, have gone into the seats, old car-

pets have been turned into cylinder guards,while the soya bean continues to be used, asmaterial or seat cushions.

UNLIMITED CREATIVITYTe creativity involved seems to be unlimi-ted. Some o the more unconventional raw

materials used in car components includeold bank

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