By Greg Grishchenko
With a population a little short of 10 million, Belarus borders Poland, Latvia,
Lithuania, Russia and Ukraine. It was one of the most technologically advanced
regions of the former USSR with an educated and skilled work force. Belarus
is a really ‘green’ country. According to the Belarus Investment Agency, the
country’s forest resources per capita are 144 m3, about 2.2 times the world
average. However, only 2% of it is processed by the Belarus pulp and paper
industry.
Economic and political reforms began after independence in 1991 but were
hindered in 1994 when current President Alexander Lukashenko was elected. About
80% of all industry is currently under state control with government jurisdiction
over product pricing, asset ownership and business practices. Belarus today
is the lowest recipient of foreign investment among the countries of the former
USSR.
Visit to Paperka Group Mill
Two of the Paperka Group companies are presently tissue product manufacturers:
Munix makes jumbo rolls from secondary fibres and Solterom converts virgin
and recycled tissue into toilet rolls, kitchen towels and napkins under the
brand name Solte. In Belarus, where the Cyrillic alphabet is used, a large
number of locally-made consumer goods, including Solte, use Latin for product
labeling to boost their image by presenting themselves as imports.
Paperka Group was founded in 1996 when the current owners came up with the
idea of making toilet rolls from paper waste. The initiative, spurred by the
country’s demand for toilet paper, seemed a good alternative to low-cost toilet
tissue imported from Russia. Paperka introduced its first manufactured toilet
rolls in the following year after purchasing a small low-cost Polish made converting
line Krystian and core-forming machine. It rented production space from a defunct
machine-building factory in the small town of Smolevichi in the Minsk Region
about 40 km from the Belarus capital and sold a first batch of toilet rolls
in March 1997.
The decision to acquire its own paper machine came after Paperka encountered
difficulties procuring parent rolls from different sources and trying to increase
productivity and improve product quality. A partner to build the first tissue
machine was found across the border in Poland, a country with much more experience
in both paper machine building and business practice. The crescent type TM1
of 2.4 m working width was built from parts acquired at liquidation sales across
Europe, from Italy to the Russian Far East. Production began in December 1998
with 100-120 tons per month output. However, six months later the machine was
shut down for major repair and upgrades. The wet-end overhaul was combined
with replacement of shafts and bearings and helped to almost double production
speed. At the same time Paperka modernized the existing converting lines and
even built its own using commercial components. By 2001 the company purchased
new napkin converting lines from Turkish supplier Khalif-M and started construction
of the second TM in cooperation with Polish company Nelba.
For the next seven years the company continued to follow its mission statement:
self-reliance, sustainability and professionalism. In 2005, after hiring current
Munix’s Quality and Development Manager Sergey Krivopusk, who holds a degree
in paper making, the company began its strategy of continuous improvement which
made Paperka Group the leader in the country’s tissue sector. Committed to
this strategy Paperka’s Munix installed new waste paper processing equipment
from Czech supplier Papcel in 2006 and a Supercell™ Zero velocity water distribution/recovery
system SPC-18 from Austrian company KWI in 2008. In 2006 and 2008 TM1 was upgraded
with the replacement of wire, dewatering and steam box parts. After modernizing
the press part of the machine and introducing moisture and basis weight gauges
from Akvar Systems, a paper control system supplier from Belarus, TM1 now operates
at 225 m/min with 350 tons/month of tissue output.
TM2 is a more technologically advanced production line and in 2006-2008 went
through numerous improvements in the filtration, deinking flotation, chemical
stream, wire and felt units and anti-adhesion yankee drum treatment. This machine
also has a more advanced moisture and basis weight scanning system from Akvar.
Today TM2 produces 1000 tons/month of 30 g/m2 white or coloured tissue from
recycled pulp at 430 m/min operating speed.
Solterom, the converting part of Paperka Group, has also improved performance
for the last three years either by upgrading existing lines or purchasing new
ones mostly from low-cost sources. Currently Solterom operates the following
production lines with combined capacity of 400 tons/month.
- Automatic toilet roll and kitchen towel converting line Integra (Ukraine).
- Automatic toilet roll / kitchen towel converting line (virgin tissue)
from Kardesler (Turkey).
- Z-fold towel line for commercial dispensers.
- Automatic folder for the continuous production of 1 / 4 folded napkins
made of single or multi-ply tissue.
Dmitry Frenkel, Solterom director, talks about how the company operation
was affected by the crisis. “Our advantage in the quite competitive and oversaturated
tissue market could be attributed to professional teamwork, self-reliance and
low production cost.”
Another Paperka advantage is its energy policy. “In 2005 we built our own
power sub-station at Munix supplying heat and steam to the process. Also, by
purchasing two Jenbacher JMS 316 piston engines using natural gas and cogeneration
concept, we managed to satisfy our power demands and use our existing boiler
room for process steam only. One of the power units works autonomously and
the other in synchronous mode, so excess power is sold to the country’s power
net. This way we have reduced our energy cost almost three times. Especially
important now, thanks to the country’s union agreements with Russia, when the
cost of natural gas in Belarus is a fraction of what Europeans pay,” says Frenkel.
At the Solterom and Munix production sites, where both tissue machines were
operating at full capacity. Paperka Group is currently building a spacious
new office building in Minsk suburb. Frenkel is planning to move his office
staff there from the old and small downtown office at the end of 2009.
For the future, Paperka’s has big plans. A new slitter-rewinder for cutting
parent rolls to standard napkin sizes is a possibility. The company is also
contemplating adding new products in toilet paper and napkins using virgin
tissue and continuation of the process stream improvements for the both TMs.
SATURATED MARKET
Belarus did not follow the example of Russia and Ukraine, which went through
Wild-West-style corrupt privatization. On the contrary, the country’s industrial
base is still quite strong despite outdated capital assets. Belarus does not
have billionaire tycoons and retirees’ benefits are better than in the rest
of the former Soviet domain. Private ownership is growing for small and medium
size businesses and dominates the tissue manufacturing sector of the country’s
paper industry.
According to market research company Greol Engineering, 97% of the country’s
$36 million tissue market is toilet paper, with other tissue products making
up 1%. Tissue consumption in Belarus is similar to that in Russia but still
remains below the average for the developed world (Figure 1). Tissue imports
to Belarus in the form of higher quality virgin toilet rolls, kitchen towels
and napkins from Russian mills make up less than 4% of the whole tissue market
in the country and presently play an insignificant role there. About half of
parent roll production volume in Belarus is exported to Russia, Latvia, Lithuania,
Kazakhstan, Georgia and Turkmenistan. The other half is sold internally for
domestic converting. Belarus exports about 10% of its converted tissue products
to Russia. Belarus produced about 25,000 tons of tissue products in 2008. There
are four domestic manufacturers of tissue paper and finished products in the
country (Figure 2). The leading tissue producer and converter Paperka Group
produced about 12,000 tons of tissue paper in jumbo rolls and toilet paper
rolls in 2008, as well as kitchen towels and napkins. Paperka Group uses recovered
fiber for toilet paper from local quality sources and buys virgin parent rolls
from Russia for its napkin product line. This company is dedicated to tissue
manufacturing, while its competitors also produce containerboard and corrugated
packaging. Paperka employs 200 people and is a major producer of jumbo rolls
in Belarus (about 75% of domestic consumption). Quality wise, Paperka’s Solte
toilet paper is better than any other similar local brand, coming quite close
to recovered fibre Western European standards. The company tries its best to
be ‘green’, investing in modern energy supply and recovery equipment from Western
Europe (see TW visit to Paperka).
The number two player, SP Exclusive, is a small Belarus-Polish joint venture
with the activity in tissue making and cargo shipping. Located in the regional
capital town of Grodno, this mill with 130 employees is behind Paperka in production
volume, but is an important new player in the Belarus consumer tissue market.
The company was founded in 1997 and in two years had built a modern processing
plant turning high quality waste paper from Russian sources into tissue jumbo
rolls using Swedish and German made equipment. SP Exclusive is probably the
only company in tissue making that employs disabled persons as 50% of its workforce.
The company makes 600 tons per month of 33-35 g/m2 tissue in parent rolls and
converts full line of tissue goods from toilet rolls to pocket hankies.
One of the largest and the oldest paper mills in the country, Albertin (approx.
13.5 million rolls of toilet paper in 2008, according to the company website),
has been owned by the company’s workers since privatization and employs nearly
1200 people in Slonim, a small town in Grodno Region. Established in 1806 in
the Western part of the Russian Empire, the mill grew into a diversified paperboard
and coated paper supplier, and currently uses one of its five PMs for tissue
production. This almost 50-year-old Polish made yankee TM makes about 3000
tons/yr of tissue. Albertin makes its own brand of toilet paper, kitchen towels
and napkins from virgin and secondary fibre using converting lines made in
Russia and Poland.
Spartak Paper Mill (current production nearly 1 million rolls of toilet paper
per month) makes toilet tissue in Shklov (Mogilev Region). With monthly output
of 200 tons, this mill is far behind Paperka Group in tissue production volume
but has ambitious expansion plans for the next five years. Spartak was founded
in 1898, incorporated in 1993 with 75% government share and currently employs
500 people, offering 30 products in paperboard and corrugated packaging in
addition to tissue. Spartak plans to install a tissue machine and a converting
line to produce toilet paper and napkins with capacity of 50 tons/day in addition
to a new corrugator and cogeneration plant. This $35 million project is still
in the planning stage and may be affected by the ongoing economic crisis.
Of the estimated dozen tissue converters in Belarus, the strongest companies,
such as Sipto, Loriplus, and Adelak, were founded in the 1990s, when economic
reforms helped them to find low-cost converting equipment.
The largest share of tissue products in Belarus (about 95%) is still sold
through traditional state owned supermarkets, small independent groceries and
kiosks. Away from Home segment is very small and growing slowly with the developing
restaurant business. If compared with its neighbors, Belarus still looks a
lot like the Soviet Union especially in retail trade. So far the major international
supermarket chains like Metro, Tesco, Auchan, Carrefour or Spar have not set
foot in Belarus. Several retail chains from Poland and Baltic Republics are
in the process of setting up joint ventures with local partners. Recently privately
owned Russian supermarket chains Sedmoi Continent opened several stores in
major Belarus cities introducing modern retail approach to the rather undeveloped
domain, however, in crisis time everyone is holding back expansion plans.
Almost all major tissue producers in Belarus currently plan to improve productivity
and add volume. According to the government forecast, with Spartak mill’s
new PM at full capacity the country’s tissue output will be four times
more than now. Adding imports from Russia and Poland to the equation makes
this market oversaturated, export oriented and largely outpacing consumption
growth tied to purchasing power of population. TW
