PanAsia Paper braces for the next business cycle: the worldwide imbalance of newsprint should hit the Asia Pacific region, but not with the same force as other regions. PanAsia Paper is ready to handle this global challenge.

PanAsia Paper Co. Pte. Ltd. expects newsprint demand in the Asia Pacific region (excluding Japan) to grow 3%-4% in 2003. Simultaneously, the largest newsprint supplier in the region acknowledges that global overcapacity still exists and that the market imbalance will significantly affect its operations.

PanAsia Paper is barely five years old. It began as a three-company joint venture to produce and market newsprint in the Far East region, outside of Japan. It became a 50-50 joint venture in 2001 when Abitibi-Consolidated of Canada and Norske Skog of Norway purchased the shares owned by South Korean Hansol Paper Co.

PanAsia Paper, the eighth largest newsprint producer in the world, has headquarters in Singapore. It operates four paper mills: Jeonju and Chongwon, South Korea; Shanghai, China; and Singburi, Thailand. The company employs 2100 people and supplies products to 20 countries. In 2001, the last year for which full year figures were available, the company had almost US$1 billion in sales.

PanAsia Paper produces 1.32 million metric tons/year of newsprint and 135,000 metric tons/year of other publication paper. The company also is the sole distributor in the Asia Pacific region for its shareholders and its affiliates. As a result, the company markets approximately 500,000 metric tons/year of newsprint and groundwood specialty papers from North America, Oceania, and Europe. PanAsia Paper currently has a 23% market share for newsprint in the non-Japan Far East region according to Paper Market Weekly.

MAJOR CHALLENGE

Faced with a projected increase in demand for newsprint in the Asia Pacific region, PanAsia Paper is not consolidating its operations or reducing individual mill capacity The company is embarking on new capital projects and completing old ones designed to increase capacity and improve product quality.

During the past year, PanAsia Paper installed a new 60,000 metric tons/day deinked pulp line at its Jeonju mill. The company also took steps to increase the machine speed of its four paper machines, resulting in an additional 70,000 metric tons/year of newsprint capacity.

At its Singburi mill, PanAsia Paper plans to rebuild the deinked pulp line, increase the machine speed, and upgrade the wrapping line for startup in 2004. The company also wants to add new capacity in China--a strong growth market in Asia.

Despite these activities, PanAsia Paper knows that global overcapacity of newsprint and market imbalances are lurking problems. The North American marketplace is mature, and producers want to extend their reach into the Asia Pacific region.

To counteract these challenges, PanAsia Paper has been focusing its efforts on improving operational efficiency and maintaining profit margins. The company is managing production capacity at its four mills, reducing manufacturing costs, and making productivity improvements to maintain its profit margins.

PanAsia Paper enters 2003 with a rising demand for its newsprint and higher production costs despite lower pulp prices. How it manages these variables will be its key to success as it braces for the next business cycle.

About the author. Jerome A. Koncel is a freelance writer who has covered the pulp end paper industry for more than 15 years, most recently with American Papermaker and PIMA's North American Papermaker. Contact him at 847-524-6210 or by email at: [e-mail].