Jiangxi Chenming drives Chinese LWC market.

Jiangxi Chenming Paper Co. is a true greenfield mill--or more accurately, a red clay field mill. The mill is built on a treeless, barren-looking hillside several kilometers from downtown Nanchang, China, in the Nanchang Economic & Technology Development Zone. It houses a brand new Metso OptiConcept paper machine with a capacity of 350,000 metric tons/yr of 48-70 gsm lightweight coated (LWC) paper.

The mill--a partnership involving Chenming Paper Co., Sappi, Shinmoorim, and an investment firm--is a good example of the joint ventures common in the Chinese paper industry that bring in foreign capital while maintaining control in Chinese hands. It is significant that the mill is located in Nanchang, a relatively underdeveloped city southwest of Shanghai. China's ability to develop inland areas like Nanchang (the capital of Jiangxi province) is critical to bringing the headlong Chinese economic expansion--now focused largely on coastal areas--to the rest of China.

As a result, the Chinese government is offering incentives for companies to invest more in inland China, and the Jiangxi Chenming mill is a good example. The mill's workers are well-educated but inexperienced; the nearest paper mill is 350 kilometers away; and Chenming is selling LWC into a Chinese market that is not entirely familiar with the grade.

WORK IN PROGRESS

The Jiangxi Chenming mill, built in about 18 months, is still a work in progress. Construction on the mill started in September 2003 and the paper machine began producing uncoated paper in March 2005. On May 18, 2005, Jiangxi Chenming began making LWC.

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Signs of recent and continuing construction are everywhere. The pulp mill runs only half the time because it has enough capacity to supply two paper machines. The mill does not plan to install a pulp dryer and ship market pulp, so the logical conclusion would be to add a paper machine in the future. In September, the mill had three months worth of slash pine and Masson pine on hand as well as three months worth of recycled fiber, much more than it needed. The vast amount of pulp wood was meticulously stacked--by hand.

The mill continues to train its new and inexperienced workforce. Jiangxi Chenming supplies most of its own power through coal-fired power boilers, and a gigantic roofed coal storage area is sited next to the woodyard. Still, it needs to purchase power to supply the balance of its energy needs.

MULTIPLE OWNERS

Chris Matthews, CFO for Jiangxi Chenming, explained that the mill has a total capitalization of about US$ 437 million. The mill's LWC is sold by three of the mill's investors: Chenming Paper Co. (China) owns 51% of the mill, Sappi (South Africa) 34%, and Shinmoorim (Korea) 7.5%. The remaining 7.5% is owned by IFC, an investment firm. Matthews, who comes from Sappi, reported that most of the paper is sold domestically, partly because exporting from China is prohibitively expensive at the moment. Congestion at the ports is "monumental" and shipping rates have skyrocketed, he said.

While the goal for the mill is to produce about 29,000 metrics tons/day at an efficiency rate of 92%, in September Jiangxi Chenming was still in the startup range of 20,000 to 23,000 metric tons/yr. The Andritz bleached thermo-mechanical pulp (BTMP) mill produces 187,000 metric tons of pulp/yr, and the mill uses 136,000 metric tons/yr of deinked pulp (DIP).

BUILDING THE LWC MARKET

Currently, most of the mill's LWC is sold in the Chinese markets, but Jiangxi Chenming has big plans for export, according to Matthews. "We will build volume in the Chinese market and are developing export markets, where we hope to eventually export about 60% of our production," he said. "We are already seeing export sales to the west coast of the United States, Australia, Venezuela, Argentina, as well as to Korea, Japan, and other Asian markets."

Jiangxi Chenming is also doing missionary work in introducing LWC grades to China, said Matthews. "LWC is a new market in China, so it's hard to say what the exact size of the market is. Estimates range from 350,000 to 700,000 metric tons/yr, but it is growing."

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The mill is still working to improve its paper quality, according to Matthews. "We are not at the level of quality we want yet, but we have reached an acceptable level," he said. Customers in the domestic Chinese market tends to demand higher brightness LWC paper, while the international market wants lower brightness and higher opacity, said Matthews. Chenming Paper Co. has another LWC machine at a different mill that is selling into the Chinese market at 81-83 ISO brightness, while the international market tends to demand 78-79 brightness, he noted.

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RAW MATERIAL CHALLENGES

As of September, Jiangxi Chenming was grappling with several raw material issues. For one, the BTMP fiberline was only running half the time, so making consistent quality pulp was a challenge. Also, the imported Number 8 and Number 10 DIP from the United States was of very poor quality, with about 20-30% rejects. At startup, the quality of its pulpwood was poor, though Matthews noted that quality had improved. "We are working on quality standards," he said. "A lot of the wood is not mature, and the weather conditions create a fair amount of fungus on the wood, but the situation is improving," he said. Wood initially came from 300 km out, but today it is being sourced closer to the mill, primarily from tree plantations.

Costs are also an issue, though the mill does enjoy substantial cost advantages in several areas, according to Matthews. "Raw material costs in China are not as low as some people think they are, but they are at least not higher than in other regions of the world. There are high duties on many imported raw materials, and that can drive your costs up. Overall there is not a not a big difference with the rest of the world in prices of raw materials."

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Matthews noted that purchased power is expensive in China (though cheaper than in Western countries), which is why the mill is two-thirds self sufficient in energy. Through two coal-fired boilers, the mill produces 100,000 KWH of electricity, while using 140,000 KWH when running at full capacity.

Matthews said that fixed costs for operating the mill are much lower in China, providing an important advantage--if the paper stays in China. "At the moment, export freight is very expensive, but shipping within China is not," he said.

TRAINING UP

While the mill has brought in experts from Chenming's other paper mills to get the mill up and running, Jiangxi Chenming is still training its mostly inexperienced staff. The mill spends an hour every day training employees across all areas and job categories in the mill. Currently, the mill employs about 1200 workers on a four-shift system. Of that total, about 780 workers live on site in a company dormitory.

The maintenance department is a good example of experience levels in the mill; of the 75 people in maintenance, only 12 have more than one year of experience. However, with four universities in the area, the education level of incoming workers is high and they are adapting well to the extensive training program.

Matthews noted that Jiangxi Chenming is Sappi's first investment in China, and that Sappi expects it to be a successful one. "Yes, this is a brand new greenfield site, but we have cost advantages on our side and good incentives that will help us grow." With burgeoning demand in the Chinese market and a relatively new grade--LWC--on the way up, the future looks bright, he concluded.

ALAN ROOKS, EDITORIAL DIRECTOR

WHAT YOU WILL LEARN:

* Why Jiangxi Chenming built a new coated paper mill in a relatively undeveloped region of China.

* How the mill is expanding the Chinese market for LWC, an unfamiliar grade for China.

* How the mill is dealing with raw material and training challenges.

ADDITIONAL RESOURCES:

* "China: Beyond the Boom," by Alan Rooks, Solutions!, September 2005. To access this article, type in the following product code in the search field on www.tappi.org: 05SEPSO25. Or call TAPPI Member Connection at 1 800 332-8686 (US); 1 800 446-9431 (Canada); [phone] (International).

* "A Glimpse of the Future in China: Two New APP Mills," by Nie Xiaorong, Solutions!, April 2005. Product Code: 05APRS021.

* "Zhongzhu Group and Yueyang Group: Building for the Future," by Hannu Oinonen and Nie Xiaorong, Solutions!, July 2004. Product Code: 04JULS039.

RELATED ARTICLE: JIANGXI CHENMING PAPER FIBERLINE AND PAPER MACHINE

The BTMP fiberline for Jiangxi Chenming Paper Co. Ltd. was supplied by Andritz. The mill uses peroxide bleaching. Metso Paper supplied the approach and stock prep systems, including pulpers and wet end chemical system.

The Metso Paper LWC papermaking line includes:

* Paper machine

* Coating and coating color system

* Calendering 

* Reeling

* Winding

* Roll handling

The paper machine's design production rate is 340,000 metric tons/yr; design speed is 2000 m/min; wire width is 8600 mm with a maximum trim of 7800 mm; and the LWC basis weight range is 45-70 gsm. One of the main grades produced by the mill is 45 gsm base paper, with 13 gsm of coating (6.5 gsm per side). The mill uses ground calcium carbonate (GCC) as filler. It is produced by an independent onsite producer led by Omya.

Other details include:

* Metso Automation supplied the mill's MCS, QCS and PCS systems.

* Incoming water is pumped from a barge on the Ganjiang River. The mill pays a flat fee for the use of the water.

* The mill operates two coal fired boilers and two turbines. It is considering putting in a third boiler and generator to burn bark and mill waste, which would make the mill 100% self sufficient.

* The mill has received permission to install a rail link for deliveries of wood and coal; currently, all of its raw materials arrive by truck.