Vladimir Krupchak: «Pulp Mill Holding’s strategic plans to build a new testliner plant in the Southern region of Russia»

Following the policy priority of the Russian state in deep wood processing, Pulp Mill Holding reduces export of pulp and containerboard producing products with high added value. On November 29, 2017, Vladimir Krupchak, Investment Advisor to Pulp Mill Holding, made a report at the Third International Conference «Russian Pulp and Paper Industry– New realities, New opportunities» in Vienna (Austria) in which he told that for the past years Arkhangelsk Pulp and Paper Mill had participated in building of two corrugated cardboard and containers plants in Podolsk and Istra districts of the Moscow region, where the mill supplied containerboard and fluting. In 2018 after commissioning of the second stage on the Istra production site, the output of corrugated products of Podolskiy and Istra plants will grow up to 600 million square meters per year.

The strategic plans of the Pulp Mill Holding’s development, in addition to previously announced projects, such as the construction of tissue plant in the Kaluga Region, where Arkhangelsk Pulp and Paper Mill will supply pulp, include building of testliner plant in the Southern region of Russia. According to Vladimir Krupchak, currently the holding is choosing an acceptable site for plant construction and estimating the purchase of 5 m cardboard machine. Besides, Pulp Mill Holding is considering a possibility to build one more corrugated cardboard plant.

Speaking about the Strategic Development Program of Arkhangelsk Pulp and Paper Mill, Vladimir Krupchak noted that successful implementation of the priority investment project (PIP) “Reconstruction of Cardboard Production” with the investments about 11 billion rubles was realized only due to close cooperation with the partners. Today Arkhangelsk PPM being in tight connection with its subsidiary Arkhbum and Titan Group of companies is one of the largest vertically-integrated entities in the Russian timber industry, confirming the effectiveness of this approach of business organization by the evident success.

“Undoubtedly, the growth of production with high added value directly depends on the full and stable timber supply, but today increasing capacities of timber enterprises in the Arkhangelsk region faced the growing shortage of raw materials for deep wood processing,” he stressed. Vladimir Krupchak announced that at the beginning of 2017 the total estimated cutting area in the region amounted to 24.5 million cubic meters, the volume of logging – 12.7 million cubic meters, it means that the utilization of the estimated cutting area does not exceed 52%.

He told that within the framework of the priority investment project Arkhangelsk Pulp and Paper Mill leased forest fund on the preferential basis in the amount of 1,06 million cubic meters while the stated demand was 1,67 million cubic meters. Thus, the plant’s demand for wood raw materials was not fully satisfied, the deficit of pulpwood exceeded 600 thousand cubic meters.

“If we look at the long-term demand in forest resources necessary for modernization and development of such leading timber enterprises as Arkhangelsk Pulp and Paper Mill and Sawmill 25, then the deficit of hardwood and softwood pulpwood harvested in the Arkhangelsk region will amount to nearly 3 million cubic meters by 2025, sawn timber – 900 thousand cubic meters,” – the speaker said.

Proposing a mechanism to solve the problem with the wood deficit for realization of the PIP, Vladimir Krupchak mentioned the existing legislative norms. In particular, he explained that in the Regulation of the Government of Russia No. 419 (clause 10.1), there was a rule that if two or more applications for one and the same forest plot for realization PIP are received, the regional authority selects an applicant in accordance with approved evaluation criteria of investment projects. At the same time, this list should include criteria of rational use of the harvested wood, energy consumption reduction and increasing output of import-substituting products.

Vladimir Krupchak noted that nowadays the amendments to the “Regulation on preparing and approval of the list of priority investment projects in the field of forest development” are under discussion. However, no amendments to clause 10.1 of the Regulation has yet been made, therefore, the criteria adopted at the regional level were not specific, that in the situation of the forest resources deficit and intense competition hinders the justified distribution of the forest resources among the leaseholders.

Nevertheless, according to him, the leaseholders and forest users have the objective indices of contribution/investments into the forest plots development, such as costs on forest road construction and maintenance, acquisition of logging equipment, expenses for forest management and reforestation, etc.

In addition, as a result of the investment projects realization, the products with various depth of processing level, different added value, which should be taken into account along the whole technological chain, are manufactured, the taxes are paid to the budget.

Vladimir Krupchak illustrated his thesis on the example of Arkhangelsk Pulp and Paper Mill, which pays the largest amounts of taxes into the Russian budget while implementing the priority investment projects in the Arkhangelsk region. If calculated per 1 cubic meter of wood, in 2015 the taxes paid by the mill amounted to more than 2 thousand rubles. It exceeds the average indices of tax payments at PIP realization in Russia by 760 rubles per cubic meter.

“I believe that at the regional level more specific and justified criteria for the assessment of PIP should be developed and approved, which will allow to lease the forest fund to the most efficient and responsible investors,” he said.

Vladimir Krupchak proposed to take into account such criteria as the level of deep wood processing, which should be measured by the total added value along the technological chain, the number of created highly productive working places, the improvement of ecological state of industrial production (reduction of harmful emissions into the atmosphere and discharges into water), investments into social and transport infrastructure.

“In this case, effective and, certainly, efficient state support in realization of the priority investment projects will allow us to be successful in solving economic and environmental problems aimed at GDP growth in the forest complex and increase of tax payments,” – Vladimir Krupchak summed up.