(News from RISI) – Lee & Man Paper Manufacturing has announced the acquisition of a company called Guang Kai for HK $404 million ($52.1 million) to run its tissue business.
The Hong Kong-listed board giant’s wholly-owned subsidiary Able Advance International will get a 100% share of Guang Kai in the deal.
On 11 November, it reached an agreement with spouses Patrick Lee and Lee Wong Wai Kuen, which hold 25% and 75% stakes respectively in Guang Kai.
Patrick Lee is also Lee & Man’s ultimate controlling shareholder, as he indirectly holds approximately 54.3% of the shares in the firm.
Guang Kai currently runs two tissue PMs with a combined capacity of 30,000tpy within Lee & Man’s mill in China’s southwestern metropolis of Chongqing.
The two PMs, reportedly provided by a Japanese supplier, started up earlier this year.
At the same plant, a 60,000tpy tissue PM is expected to start up early next year.
And Lee & Man recently ordered a second 60,000tpy tissue machine for the Chongqing facility.
The Valmet PM, with a design speed of 2,000m/min and a width of 5.6m, will be fired up by late 2015.
Besides its tissue lines, the Chongqing mill presently runs several recycled containerboard PMs with a combined capacity of around 1.1 million tpy and a 165,000tpy bamboo pulp line.
Improving living standards and quick urbanisation have attracted huge investment to the Chinese tissue sector in recent years.
Producers of other pulp and paper grades aggressively joined the frenzy.
In addition to Lee & Man, Shandong Chenming Paper Holdings entered the tissue sector in late 2010 by starting up a 60,000tpy tissue PM at a site in Shouguang city, Shandong province.
A second 60,000tpy PM came online in 2013 at the firm’s mill in Wuhan city, Hubei province.
Sun Paper, another major paper and board producer, diversified into the tissue segment this year by firing up a 60,000tpy tissue PM at its mill in Yanzhou city, Shandong province. A second 60,000tpy unit will come online there in 2015.
In Zhejiang province, recycled containerboard maker Zhejiang Jingxing Paper started up a 12,000tpy tissue PM this year at a mill in Jiaxing city, and a 25,000tpy tissue unit will come on stream at the same plant early next year.
The huge investments in the tissue segment have resulted in oversupply pressures on the Chinese market.
Statistics from the China National Household Paper Industry Association (CNHPIA) indicated that the increasing supply pushed down market prices by around RMB 300/tonne ($49/tonne) in 2013, and machines operating rates have been reduced to below 80%.
The intensified competition has forced many small producers out of the industry. According to the CNHPIA, the number of mills decreased from 524 in 2011 to 426 in 2013.
In Dongguan city, Guangdong province, local authorities recently instructed tissue mills with a capacity below 50,000tpy to shut down by the end of 2015 to cut emissions.