18 January 2022
Sergey Pondar: 2022 will be the year of further development for Volga JSC
Sergey Pondar, CEO of Volga JSC, told PPI Europe (Fastmarkets RISI, Belgium) in an interview about the project of repurposing paper machine No. 6, diversification of the product portfolio and the Company's development strategy until 2023.
PPIE: Today Volga is one of the few companies that have successfully made the transition from the newsprint business to a wide multi-product portfolio. How is the project of repurposing your paper machine No. 6, which previously produced newsprint, progressing?
SP: We are simultaneously working in three directions – on a project to repurposing the paper machine, on a project to build a waste paper recycling line and on improving the infrastructure of our energy complex. The main supplier of equipment for paper machine No. 6 is Andritz, but Giprobum design Institute based in St. Petersburg will adapt the equipment to Russian standards and perform installation work. In August 2022, we expect the delivery of the main elements of the equipment. Preparations for the commissioning of the paper machine will begin at the end of the 2nd quarter of 2022, and the start-up in the 1st quarter of 2023. The capacity of the repurposed paper machine will be 140,000 tons per year: the machine should reach its design capacity within 10–12 months after launch.
PPIE: What types of packaging paper will you produce?
SP: First of all, packaging types of paper based on thermomechanical pulp and waste paper: lightweight and ultralight fluting, as well as lightweight and ultralight testliner for corrugated packaging weighing 65–120 g/m2.
PPIE: Which sales markets will be key for you?
SP: We have three priority markets – Russia, where we already sell our packaging paper made on other machines (and we will continue to supply products with repurposed paper machine No. 6 to the Russian market), Europe, where we already sell testliner and fluting, and, of course, China. In Europe, the most interesting markets for us are Scandinavia and Eastern Europe, up to Germany. Italy, forexample, is too far away.
From the point of view of logistics, Eastern and Central Europe are the most accessible for us. We could supply paper anywhere, but we focus on the markets where we are most competitive. We also export our products to Mexico, China, Vietnam, and Indonesia.
PPIE: What percentage of your total production is packaging paper, and what percentage is newsprint?
SP: Currently it's about 50/50, but all the new capacities will be focused on the production of packaging, so there will definitely be a "preponderance" in the direction of packaging paper. The production of newsprint will depend on market conditions. The market is strong enough now, so we produce quite a lot of it.
PPIE: Are you planning to modernize other production facilities available at the plant?
SP: Currently, paper machines No. 8 and No. 5 are working at Volga, the sixth machine will be launched in 2023, and we have not yet decided how to re-design paper machine No. 7, which was stopped a few years ago. Now we are conducting a technical audit of paper machines No. 5 and No. 8, so the modernization of these two machines is a priority. We will this task before moving on to paper machine No. 7: this will be a very large project, since it will require a larger-scale re-equipment than for the sixth machine.
PPIE: When will the decision on the modernization of paper machines No. 5 and No. 8 be made?
SP: In 2022. As the repurposing of paper machine No. 6 progresses, we will better understand the situation and also assess the development of the market – it is unstable, but at the moment conditions are favorable. We will observe how it will develop over the next six months, and based on this we will take the next steps.
PPIE: Volga does not produce corrugated packaging yet, does it?
SP: No, but the key word is "yet". We have plans for this. There is a project to integrate our own paper into the production of corrugated packaging, its implementation is quite possible in the future. It is not part of the development strategy until 2023, but rather the next step after its completion. As in the case of the modernization projects of paper machines No. 5 and No. 8, after the launch of the redesigned sixth machine and the achievement of design indicators, we will think about new projects, among which will be the development of the production of corrugated packaging.
PPIE: Do you plan to develop your forestry assets as part of the creation of a vertically integrated company?
SP: We are in the process of organizing negotiations on additional lease of forest land and have already developed the infrastructure for this. Volga has been leasing forest lands for three years, and we are responsible for roads, forest planting and fire protection in these areas.
PPIE: Do you expect an increase in demand for interliner and lighter grades of packaging paper?
SP: The main driving force for new products is usually the United States, from where trends come to Western Europe, but with the interliner everything is different. For light and ultra-light paper, the main driving force is China, due to the rapid development of E-commerce. You order something online and the item should arrive to you undamaged. The requirements for protective paper are different – it should be of good quality, but more cost-saving, without printing or drawings. The most important thing is the safety of goods. For parcels distributed inside China, a large amount of light and ultra-light packaging paper is required. Russia follows this trend, as does Europe. The COVID-19 pandemic led to the fact that people began to order more things without leaving home, which contributed to this trend.
PPIE: Do these new types of paper, in your opinion, affect the cost of cardboard packaging?
SP: They increase the supply of paper on the market, but demand is also growing, as is E-commerce. Previously, corrugated packaging was used more for industrial packaging, but now there is a great demand from the consumer market.
PPIE: Have you experienced any problems with exports recently?
SP: Logistics is very volatile and chaotic now, much more than in the period prior COVID-19. Ports or borders may be closed or behind schedule, which really makes it difficult to export. Meanwhile, other opportunities are emerging, such as the possibility of railroad delivery to China. China subsidizes rail transportation, which is why we have diversified our export methods.
PPIE: Who are your main competitors in the packaging market – manufacturers ofinterliner?
SP: Many large companies have the interliner in their assortment, but the ultra-light type is not profitable for production at paper machines, which can produce high-quality cardboard containers. For such companies, switching to lighter products can lead to losses, so it's better to have a professional interliner manufacturer on the market, which we have taken advantage of. Two years ago, we could not even dream of our large investment projects, and now we plan to increase the production of packaging paper by about 50% in the near future and thereby increase our profit.
PPIE: Is IPO an option for Volga?
SP: It's too early to talk about it. For example, for the Segezha Group holding, which recently successfully entered IPO, it was a long way. Volga today has serious growth plans aimed at expanding the production of packaging types of paper and cardboard, the introduction of new quality products with the ability to control the properties of the product depending on customer requirements, the commissioning of new production facilities and the implementation of a large-scale environmental program, the further introduction of "green technologies".
Press Centre of Volga JSC
