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Nippon Paper bounces back after the tsunami - Part II

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Nippon Paper bounces back after the tsunami - Part II

August 19, 2012 - 23:34

BRUSSELS, Aug. 20, 2012 (RISI) -One of Japan's giant pulp and paper companies, the Nippon Paper Group (NPG) has made a quick recovery after being hit hard when the devastating earthquake struck in the north of the country in March 2011. Read Part Ihere.

Energy, environmental achievements

The Ishinomaki mill received power in mid-June 2011 and power generation restarted at the mill two months later, with a fuel oil boiler followed by a biomass boiler. Both are privately owned, which is an asset to NPG at a time when the Japanese national grid is strapped for power due to the crippling of the northeastern Fukushima Daiichi nuclear plant.

The power facilities in Ishinomaki include three oil boilers, one coal boiler, two recovery boilers and one biomass boiler. Total capacity of the boilers, turbine and generators have been recovered, with power generation now at 90% of capacity.

"The capacity for generating electricity is 220,000 kWh but cable capacity so far is 66,000 kWh,thus Nippon Paper supplies 58,000 kWh," explains Uchida.

In addition, NPG is supplying electricty to the grid on request from the electric companies -- Tokyo Electric Power Company (TEPCO) and Tohoku Electric Power Company -- from its facilities in Akita, Iwanuma, Nakoso, Soka and Yoshinaga.

While large integrated paper and board mills, for example Nippon Paper, in Japan are often relatively energy self-sufficient, smaller facilities and processing plants are not, and both they and downstream paper and board consumers were affected by regional energy usage reduction plans and by high energy costs.

The tsunami engendered energy shortages over the summer months especially, as the national grid suffered the loss of the Fukushima nuclear plant, which was knocked out of action by the wave.

Toward the beginning of 2011, before the shutdown of Fukushima, nuclear plants had been supplying around 18% of the country's energy needs. The government's original plans were to increase the power supply by nuclear plants to around 40% by 2019.

Summer 2012 also promises to be problematic in terms of the price and availability of energy from the grid, as all of Japan's nuclear power plants have now been decommissioned in the wake of safety concerns set off by the Fukushima incident, without a restart date set.

The energy sector in Japan may take some time to return to normality. "Most paper producers in Japan prefer to restart the nuclear plants," says Kiyoshi Kamikawa, managing director of Japan Paper Association when the press group visited the office during the trip.

As to other environmental issues of the Ishimomaki mill, it has an excellent water supply from the Kitakami River and is well positioned by the Pacific Ocean. It gets water from the mouth of Kitakami River.

Nippon Paper Group put its extraordinary losses from the tsunami at more than ¥19 billion ($240.2 million). This is the main gate area after the tsunami hit

Capacity closure program and overseas growth

Before the earthquake, 23% of the products produced by Ishinomaki were destined for export while the rest were for the domestic market, taking advantages of various means of transportations, including ship containers (12%), trucks (31%), railway (45%) and ferry (12%).

"The railway which was damaged by the tsunami in March last year will come back to normal by March 2013," says Uchida.

“We expect that the mill will resume full production in August this year with a total capacity near to 850,000 tonnes/yr, says Yoshiaki (Johnny) Uchida, General Manager of Production Dept. of Ishinomaki Mill

NPG's target capacity for Ishinomaki is close to 850,000 tonnes/yr as the decision was taken to keep some tsunami-struck PMs offline as part of a nationwide capacity closure program.

The firm is trying to address poor demand in the domestic market by shutting down around 800,000 tonnes/yr of capacity, mainly in graphic paper grades, equivalent to approximately 15% of the group's domestic paper production capacity.

Despite signs of finally bottoming out in 2010, the business environment for the paper business in Japan remains very cloudy and large-scale measures have been taken to reduce capacity in response to the decline in demand since the financial crisis in 2008.

Profitability remains sluggish due to a deteriorating business environment, including further erosion of demand, a steep rise in the cost of raw materials and fuels, and intensified competition from imported paper backed by a strong yen.

The NPG's profit figures for the year were at the bottom of the table after it turned a loss of almost ¥42 billion ($529 million).

The management of NPG has risen to meet the challenges and has outlined ambitious strategic goals for the group. The top priority is to undertake a restructuring of the domestic paper business and, at the same time, to aim for overseas business growth.

NPG's list of partnerships and/or acquisitions in the pulp and paper sector include: Yuen Foong Yu of Taiwan, SCG of Thailand and Lee & Man of China, to name but a few.

NPG hopes that it can become one of the world's top five papermakers by 2015. The company ranked the 5th inPPI's Top 100 ranking (PPI, September 2011) based on the sales revenue of pulp, paper, converting and merchanting operations for fiscal year 2010.

Table 1 - Facilities in Ishinomaki mill, Nippon Paper Group
Paper machine Capacity (1000 tonne/yr) Products Conditions/Restart time Recovery projects provided by Metso
PM 4 40 Recycled paper, Wood free printing paper Closed
PM 7 108 Uncoated/coated fine paper Restarted in April, 2012 Soft calendar, winder, oil unit
PM 8 112 Coated mechanical paper Restarted in September, 2011 Press, dryer, oil unit, control
PM N2 89 Coated woodfree Will restart in August 2012 Forming, press, dryer, oil unit, control
PM N3 88 Newsprint, Telephone book Closed
PM N4 12 Coated woodfree Restarted in November, 2011 Press, oil unit
PM N5 150 Lightweight coated paper Restarted in February, 2012 Dryer, oil unit
PM N6 272 Lightweight coated paper Restarted in March 2012 Forming, dryer, sizer, reel, winder, oil unit, control
No. 1 coater 112 Various coated paper Closed
No. 2 coater 89 Various coated paper Will restart in August, 2012 Winder, control
No. 4 coater 125 Various coated paper Restarted in November 2011 Winder, control
*More than 100 projects were done (or going on) for the Ishinomaki mill by the Metso group in Japan. Metso facilities include Mitsubishi Heavy Industry, which was merged with the company in 2008.

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