Modernisation and export opportunities propel South Korea’s Samjung Pulp to success
With a Toscotec Steel Yankee recently signed for, TW visits the company’s Pyungtaek city site to get the latest
Samjung Pulp, one of South Korea’s top three independent tissue producers, has set a benchmark for the South Korean tissue industry. In an advanced manufacturing economy where social and economic progress continues to underpin growth, Samjung has responded and invested in a Steel Yankee for their new machine. “We have been able to step up our game to meet demand through modernisation, and our new Toscotec Steel Yankee will be up and running next year,” says managing director Ahn Chan Kyu. “Living standards in South Korea are constantly improving. Richer families want to use more and more products such as kitchen towels and napkins, so the challenge for the tissue industry is to respond to that demand and produce quality products at the right price.”
Chan Kyu is a softly spoken but energetic man demonstrating obvious pride in the company’s advancement. The business has three mills, and TW met Chan Kyu at its expansive, 35-year old mill in Pyungtaek city, one hour from Seoul. It’s an integrated site with converting and paper making facilities, and where the new Steel Yankee will be based. “We have made the investment in order to stay competitive,” he adds. “There are many strong independent players as well as big multinationals in the South Korean marketplace, so it is vital to invest so we can stay ahead of the game. We need to be competitive, in terms of technology, but also in terms of quality and pricing.” The heavy presence of outside competition in the market includes multinational corporations such as Yuhan Kimberly as well as established local and independent players. There are no signs that the fierce competition will slow down – a fact confirmed by the number of Steel Yankees coming on stream in the next year.
The Samjung site produces kitchen towel, hand towels, toilet paper, napkins and paper towels. The market strategy is to produce relatively high quality products at an affordable price. It produces largely twoply products, but some of its toilet tissue is also three-ply.
Some 50% of its products are sold through its own brand, while the remaining 50% is sold as private label. In the Away from Home (AfH) market, Chan Kyu has plans to increase sales and volume quantities, as well as profit. “AfH is a big growth sector here, every year AfH demand is growing so it is important for us to be a part of that and stay competitive. In terms of quality and production costs, we are continuously developing. We want to be the best.”
Tissue demand in South Korea is relatively flat, and total tissue consumption is generally increasing between 3-5% year on year. Chan Kyu says however that Samjung is growing 15% year on year, a result of its investments that makes sure it is competitive in quality and production costs. “The facial and toilet market here is a little stale,” he says. “But we are seeing increasing growth in napkin and kitchen towel, so these areas are big opportunities for us.”
The new Steel Yankee will enhance the tissue machines’ runnability, boosting capacity by at least 20% whilst also reducing energy consumption by more than 10%. Output quality will also be improved as a result of the rebuild.
The tissue industry in South Korea faces strict environmental regulations from the authorities, for example over waste water, and it is now subjected to control water tests as well as air pollution tests. “We keep high environmental regulations,” he adds. “But as yet our customers aren’t asking for products with environmental certifications.” A waste generator incinerator was built at the plant and has been scheduled to start operating this September. He adds that producing steam using the existing incinerator, which will be used in the SYD, is cheaper than using a boiler fed by diesel oil. “This is the best source for us as a company to reduce costs,” he says.
Another key initiative is its export business. The company has diversified its product offering over the past five years and now produces the raw material for the production of diapers, which it exports throughout the world. It also exports final tissue converted products and jumbo rolls to countries such as the US, Japan and the Middle East. “It is a high transport cost, but there are ways for us to be competitive with this,” Chan Kyu adds.
One reason for the increasing need to export tissue products and jumbo rolls is the overcapacity in the marketplace. Additionally, countries neighbouring South Korea, such as China, are also in a state of overcapacity, and this additional threat could see excess product go into the South Korean market.
For the wider economy in the country, Chan Kyu says South Korea has been a little affected by the financial crisis hitting large parts of the rest of the world, but “not heavily”. “Tissue has not been especially hit here on the back of the financial crisis, certainly no more than any other sectors,” he says. As for the near future, his aim is for the company to become bigger than Kimberly Clark in South Korea. There are also plans to invest in another machine in order to “speed up and reduce energy costs” for the production of tissue and towel. Watch this space.