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A New Frontier
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China Metallurgical Group (MCC), one of China's top state-owned enterprises for resource development, aims to supply 2.6 million tons of pulp and paper to the Chinese market after 2010.

The pulp product, which is used to make paper, will come from a variety of plants in the western part of China as well as foreign countries like neighboring Russia and Myanmar.

MCC recently received approval from the State Council to develop pulp resources to meet surging demand in China, said Yang Changheng, chairman of the MCC group in an interview with China Business Weekly.

China, the world's most populous nation and the second biggest energy consumer after the United States, last year bought 8 million tons of pulp products from foreign markets, as domestic demand kept increasing.

The gap between market supply and demand for pulp is about 20 million tons in China, Yang said. "The domestic market is huge, and we see tremendous business opportunities in the sector," he added.

The company has already completed a US$100 million pulp project in Myanmar, its first pulp project. From this year, about 100,000 tons of pulp products will be transported back to China annually from the Myanmar plant.

Both sides have signed a further memorandum of understanding to expand the project to an annual capacity of 300,000 tons.

Besides economic returns, Yang said the Myanmar plant has also greatly enhanced bilateral ties between the two countries.

The local government in Myanmar regards the project as a model and requires officials and managers of local companies to visit and study the plant.

"The company holds the value of giving the first priority to the interests of our partners," Yang said. "We must be honest. It is our lifeline in the international market."

Drawing upon the successful experience in Myanmar, MCC recently clinched another milestone deal with its Russian counterparts to develop pulp resources there.

Both sides reached an agreement to jointly invest in a 2-billion-yuan (US$247-million) pulp project in Russia.

The Russian plant is designed with a first-phase annual capacity of 300,000 tons, Yang said. It will start construction in August, and begin production and operations two years later, the chairman told China Business Weekly.

Seeing the rich resources in Russia and the enormous market potential in China, Yang said they aims to ultimately produce 700,000 tons of pulp a year from the Russian plant.

"So in three years time, we will be able to get back about 1 million tons of pulp product from our foreign production bases," the chairman said.

MCC has laid much emphasis to develop the overseas market to reach its growth aims.

By 2010, the company expects its overseas business to account for 25 percent of its revenue compared with the current 5 percent.

Last year, MCC posted sales revenue of 69.1 billion yuan (US$8.5 billion).

Its overseas business includes the segments of metallurgical construction, resource development, mechanical equipment manufacturing as well as real estate.

In the domestic market, the Beijing-based State-owned company recently took over Meili Paper Co Ltd based in Northwest China's Ningxia Hui Autonomous Region.

The company is currently capable of producing 360,000 tons of paper annually. Its production is expected to reach 1 million tons to 1.6 million tons in a few years, according to a plan, Yang said.

The pulp project in Ningxia has good environmental prospects. It will be a project combining paper making and tree planting. The project is expected to provide pulp and paper resources on the one hand, and improve environment on the other hand. Resources will be used in recycle, the chairman added.

The company will grow trees in the desert areas of the autonomous region, and the trees will be used to make pulp products.

"We not only see good economic returns from the project, but more importantly, the significant impact on the environment and social image," Yang said.

Within the foreseeable future, MCC aims to be one of the biggest paper making companies not only in China, but also in the world.

(China Daily May 8, 2006)



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