Paper mill undaunted by market pressures and mounting environmental concerns

By Ni Tao
0 Comment(s)Print E-mail Shanghai Daily, September 22, 2016
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Through a pair of safety glasses, I watched as our guide Lao Jin (Old Jin) sweated in his uniform and shouted into a microphone, trying to cut through the noise echoing through the factory.

Lao Jin is an engineer working for the Finnish papermaker UPM's mill in Changshu City, Jiangsu Province, which I visited recently as a member of a press delegation. The moment we stepped onto the factory floor, we were greeted by a gigantic, rumbling machine. Old Jin explained that this is Paper Machine 2, which separates fiber from wooden pulp, before drying, pressing and processing it into finished paper.

Since UPM's first investment in China in 1998, it has emerged as a leading supplier of high-end paper for offices and industrial users in China. Although Paper Asia is only one part of the company's six business portfolio — the interests include bio-refining, energies, for example — it remains its key asset.

According to Pentti Putkinen, general manager of the Changshu mill, UPM's Paper Asia operations reported annual sales of 1.2 billion euros (US$1.07 billion) in 2015, equaling about a tenth of total revenue. However, world economic vagaries have compelled the firm to adjust its strategy, which now includes more of a focus on the emerging Asian market.

There are pitfalls, though. Urbanization and migration in China and Southeast Asia have been a major force behind the growing demand for office-use paper, but many traditional industries like cement, steel, glass — and, of course, papermaking — are plagued by overcapacity. Over the past year, amid calls for supply-side reforms promoted by the Chinese government, these industries have been busy cutting the fat. Worse still, digitalization has changed people's reading habits and drastically reduced demand for newsprint and graphic papers, thereby exacerbating the oversupply problem.

At a time of industrial overhauling, papermaking doesn't seem to be a wise target for investment. UPM thinks differently. Last year its new, state-of-the-art Paper Machine 3 was installed in the Changshu factory with much fanfare. The machine is a prime symbol of efforts to free up pent-up productivity and tap real market needs.

The machine's staple product — a type of label paper called Glassine that can be affixed to, among other things, bottles of wine or shampoo — is benefiting from a Chinese boom in packaged product sales. Putkinen thus foresees growth in this area for several years to come.

Historically, papermaking carries a stigma, as it is thought to be a heavily polluting industry. Media reports abound with stories about paper mills caught dumping unprocessed waste and sewage directly into rivers and seas.

With enhanced public environmental awareness, and with the Chinese government getting genuinely serious about tackling pollution, do foreign businesses like UPM also feel the same pressures in spite of the usually more stringent standards they hold themselves to?

Smiling, Putkinen claimed that UPM does occasionally feel the heat. "We need to be always careful," he said. "Anything can happen."

Notwithstanding pressure from government injunctions against pollution, Putkinen is confident that the company's vision is well aligned with China's Thirteenth Five-Year Plan (2016-2020), with its emphasis on encouraging innovation, fostering coordination as well as building a green, open and sharing economy. His confidence is buttressed by a corporate strategy known as Biofore, whose core tenet is to encourage sustainable forest management and responsible timber sourcing and harvesting.

Since 1998, UPM has spent a total of 450 million yuan (US$67 million) upgrading equipment and hiring staff to better treat sewage and other forms of waste. For every ton of paper produced, the firm managed to cut consumption of water and energy by 60 percent and 25 percent respectively in the decade from 2005 to 2015.

Continued environmental efforts also helped to reduce major pollutants such as COD (chemical oxygen demand) — a measure of the amount of organic compounds found in waste water — and sulfur dioxide emissions — by a whopping 75 percent and 90 percent.

Efforts like these do not yield immediate returns, but in the long run they will pay off because they underline companies' bid to be good corporate citizens, which makes perfect economic sense, said Putkinen.

He added that environmental protection and corporate profits aren't necessarily trade-offs, because businesses that fail to clean up their environmental act will shut down in the long run.

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