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Big Koryazhma

Ilim launches cut-size

01.07.2010

The Company explores a new market segment. Ilim Group invests USD 270 million to start up a new paper machine (PM) at its Koryazhma Mill in the Arkhangelsk Oblast. This is the first attempt of the Group to enter the cut-size market. However, with OAO Svetogorsk (the Mill in the Leningrad Oblast owned by International Paper (IP), the co-owner of Ilim Group and key player in the market), the aim is to significantly increase IP's share in the market. Cut-size demand is gradually restoring.

According to Artyom Savko, PR Director of Ilim Group, the paper machine will be used to produce over 150,000 tons of cut-size paper of most popular sizes (А3 and А4) and 70,000 tons of coated offset papers per year. "Currently there are no coated paper capacities in Russia and the market is filled with import", he says. PM start-up is expected in 2012. Artyom Savko says that the debt-to-equity ratio under the project will make 70:30 accordingly, however he refused to disclose the name of the lending bank.

According to Paul Herbert, Ilim Group's CEO, the project will facilitate more intensive use of pulp to manufacture value-added products. The Company is new in the cut-size market, though. "The industry is still going through the recession but we expect the cut-size and offset markets to recover by the time we start up our paper machine", says Artyom Savko.

"During the recession, the Russian offset market has gone down by about 20% but is gradually rebounding", mentions Olga Deulina, Industry Analyst. "We can see the projects, frozen up during the economic slump in the industry, gradually reviving. Also the government supports all projects aimed to substitute imports or launch new products." Olga believes that with a highly consolidated market as we have now, Ilim Group has a real chance of becoming one of TOP 3 cut-size manufacturers.

Yuri Murashko, Svetoch General Manager, believes it to be IP's step to increase its share in the cut-size market. "The Company leads in volume among all other paper manufacturers in Russia" (IP is the owner of OAO Svetogorsk in the Leningrad Oblast). The Company, jointly with Mondi-Syktyvkarsky LPK (Mondi Group) and Nemansky PPM, owns 25% of the cut-size market, the remaining demand being satisfied with imports. Therefore, the Company's potential to produce more will enhance its opportunity to take a larger market share by driving out import," Yury Murashko says.

Kommersant