Sukhonsky CPM: on the wave of modernization

DEMAND GROWS

The coronavirus pandemic has affected all aspects of our lives. We have adapted to the new conditions — we wear masks in public places, we try to keep a social distance, we constantly wash our hands and disinfect all surfaces. Industrial enterprises have also had to adapt to the new conditions.

— The pandemic has changed many things in the economy, — says Dmitry Dulkin. — Among other things, the changes affected our paper industry as well. Yes, we managed to avoid production stoppages, but in summer 2020, there were problems with our main raw material — waste paper. This was due to the disruption of supply chains in waste management. We got a sharp, three- to fourfold increase in the price of raw materials. In addition, the quality of raw materials supplied to the SCPM has deteriorated significantly. The share of contaminants and impurities in the waste paper has increased several times! Previously, all cellophane, film, and metal were sorted at collection and pressing points. But because of the coronavirus, this work is practically nonexistent now.

Of course, we are engaged in sorting ourselves, but there is a related problem — the disposal of this waste. If a couple of years ago we took one dump truck to the landfill every day, now it comes to five or more cars. This situation has quite logically led to an increase in the cost of finished products. For two years it has almost doubled in price for consumers.

— The pandemic consumption market has also changed significantly, and this was a positive factor for us, — says Dmitry Alexandrovich. — We see that people began to actively use the delivery of goods. Many people, for the sake of their safety and to save time, gave up going to stores altogether. This trend has led to a multiple increase in the consumption of packaging, including paper and cardboard.

As experts say, these factors contributed to the fact that the last two years, the paper industry has developed at an accelerated pace. The last year was really successful for the main market players, including the OPF, both in terms of financial performance and production volumes.

— I am sure that this year will be exactly the same, — states the head of the company. — But it is clear that the growing trend is not forever — in 2023 we expect market saturation.

As for raw material security, there will also be a lot of work to be done in the coming years. The CPM is trying to solve this problem within the framework of the public organization League of Waste Paper Recyclers. Consultations between the business community and the federal authorities have resulted in the fact that in the near future the five percent duty on imports of waste paper from abroad may be abolished.

— They have been promising to solve this problem for three years. I hope that things will move from the dead point. This is necessary for stable and predictable development of the whole paper industry, because the necessary amount of raw materials is simply not available in Russia.

The second problem is the Basel agreement. According to it, waste paper is not excluded from the list of hazardous waste, so it is virtually impossible to bring waste paper into the country from Europe. Considering that waste paper accounts for 60% of the cost of containerboard, steps to saturate the market are long overdue, — Dmitry Alexandrovich is sure.

PLANNED MODERNIZATION

In 2019, the third paper-making machine was put into operation at the key enterprise of CPM — Sukhonsky Cardboard and Paper Mill. The large-scale investment project can be considered a success. Serious financial injections allowed to increase significantly the output of products. The equipment capacity is 162 thousand tons of containerboard a year. For comparison: the total production volume of the first two machines was about 147 thousand tons per year.

— In terms of quality and volume we have reached the figures that we had planned for the project, — Yury Blinushov, General Director of Sukhonsky CPM, joins the conversation. — But the paper industry is such that such expensive machines are in operation for 40-50 years. During this time, technologies, market needs, and demand change. Therefore, modernization of paper machines is a continuous process.

A major upgrade of paper machine № 3 is scheduled for April already. Due to this modernization, SCPM will shut down papermaking shop № 2 for a month. It is already estimated that the modernization will cost 470 million rubles. The reconstruction will result in outstripping the current 20-21 tonnes per hour output to 26 tonnes per hour.

— We have very strong technical specialists, who have been through many similar upgrades, so we are not waiting for any surprises, we are sure everything will go according to plan, — Yury Alexandrovich says.

— For this reconstruction, in fact, we’ve been preparing about two years, so it doesn’t scare us at all. After we finish all the work, the adjustment and attainment of the planned capacity will take about 6-9 months.

And after that the SCPM team will start preparing for the next modernization.

— In fact it will happen soon enough. We will be able to enter a new round of reconstruction already in 2024, — says the Head of SCPM.

It is clear that any investment in production capacity expansion is inseparable from the staff increase. In the near future up to 125 new jobs to the existing 1200 employees will appear at Sukhonsky plant.

— Launching of the third paper machine put us, as they say, in the highest league, — smiles Dmitry Dulkin. — We have taken a strong position in the segment of waste paperboard. The company has grown a lot during this time. We have almost doubled our revenues. We started a lot of investment projects.

In particular, we adopted a maximally detailed development plan for the next seven years. During this time about 35 billion rubles will be invested into the production facilities. Due to the increased volume and quality, CPM is actively mastering the foreign market. Speaking about the products of Sukhonsky CPM, 40% of them are exported.

— This figure could be much more, but we have obligations to our long-term partners in the country, so we cannot expose the domestic market, — Dmitriy Alexandrovich explains.

We started exporting the dry containerboard to China and the African market. In just a couple of years, the geography of the countries where the Vologda paper makers’ products are delivered has increased many times over.

DIVERSIFICATION IS JUST AROUND THE CORNER

New investment projects do not only concern the production of containerboard, even though it remains one of the iconic products of the Sokol plant. In the near future the mill will significantly expand the production of corrugated packaging.

— Earlier the production was based on the leftover principle, but now we have decided to increase our production capacities by two and a half times in terms of market growth, — Yury Blinushov explains. In fact, we are going to build a new shop with the most advanced equipment, modern lines have already been purchased, and the corrugator will undergo profound modernization. We are striving for maximum automation of all processes in this project: the crate will leave the line for packing, and then be transported to the warehouse automatically, almost without any involvement of workers. In reality investments into corrugated packaging production by Sukhonsky CPM are quite a predictable and economically sound decision. Last year was really phenomenal for this market. In the first half of 2021, despite all the difficulties that the pandemic brought to the production processes, the market grew by 18% — absolutely record figures! Experts say that this has not happened since the collapse of the Soviet Union.

— In Russian times, the maximum growth rate was 8-9 percent, — says Dmitry Dulkin. — If we talk about recent years, the results were even weaker — an average of about 5 percent. This year we expect market growth of about 10%, which is also a very good mark for all manufacturers. We have set an ambitious goal — in the future we are going to process 30-40% of cardboard into corrugated products at our own production facilities. Such policy will allow Consolidated Paper Mills to diversify its production and become less dependent on the market situation of containerboard.

One more breakthrough project for the mill is the production of wood-fiber boards by the dry pressing method. Now the enterprise takes the leading position in the production of boards by the wet method.

— This technology is completely different, — says Yuri Blinushov. — We are absolute beginners in this matter. We do not know much yet, but we are quickly learning. The decision to enter this market is due to the fact that we already have our own consumers, including in Europe, so we should have no problems with orders. At first we are planning to produce products 3 to 6 mm thick, then we will also enter the market of thicker boards. Fiberboard is used in construction and furniture industry. The demand for fiberboard is now as high as ever. In Russia alone, furniture production has increased by 70% since the beginning of the pandemic.

Dmitry Dulkin stresses that so far the company is not rushing the implementation of this financially intensive project. The new shop will be built in a year, and the production itself is planned to be launched by the summer of 2023.

— The capacity of the fiberboard plant will be up to 20 million square meters per year, — continues Dmitry Alexandrovich. — In fact, we will increase board production by 60%. But apart from that, I would like to emphasize that the project will allow CPM to enter new related markets, again diversifying its production portfolio.

ENERGY AND THE ENVIRONMENT ARE A PRIORITY

The growth of capacity forces SCPM to invest in the plant’s energy security as well. Thus, last year a 4.3 MW gas-piston unit (GPU) was put into operation. The company explains that this is a pilot project for the CPM. This year and the beginning of the next year another four gas-fired power units will be put into operation at the other plants of the holding. Two in Sokol, one in Kaluga, and one in Nizhniy Novgorod.

— We are building a large energy complex. The volume of investments will be over 1.3 billion rubles. This expenditure is a necessity. Given the growth of production in the last two years, our sites are working at the limit of capacity in terms of energy. If nothing is done, any accident can cause production to stop. We plan to complete our entire energy project as soon as possible — this year, — says Dmitry Alexandrovich.

In addition to the energy sector, environmental protection also requires continuous investment. Serious money is being invested in water treatment.

— From year to year we are improving the water and wastewater treatment system at Sukhonsky Cardboard and Paper Mill. This work will continue in the future, — Yuri Blinushov is sure.

NEW MARKET SEGMENT

Advanced production will also appear at the company’s Kaluga site, at the Polotnyano-Zavodskaya Paper Manufactory. A shop for the production of paper bags from waste paper will start operating here in autumn. The number of employees will increase to 500 people.

— This is a completely new prospective type of business for us, — the General Director of Consolidated Paper Mill explains. — Paper bags will gradually replace cellophane that we are used to. They are more environmentally friendly. Some countries have already banned cellophane packaging, many (including Russia) are actively moving in this direction. Therefore the demand for paper bags in the medium term will be enormous! What can I say — it is already high: in 2021 the market growth is 70%. And this is without any bans on plastic packaging in our country.

Although the competition in this segment promises to be hot, CPM clearly understands its strengths.

— We want to segment ourselves in an original way — we will produce bags from recycled paper. Now many consumers prioritize environmental friendliness of the products they buy. I am sure that they will be glad to see packaging made of recycled materials, — says Dmitry Dulkin. — Our second advantage, I would even call it a chip, is high-quality printing. We have one of the largest notebook productions in the country in Kaluga at the site of PZPM. We plan to make maximum use of our many years of printing experience in the production of paper bags. I am sure we will be able to give the market one of the best options in terms of the price-quality ratio.

According to Dmitry Alexandrovich, the company is preparing to present another interesting project — the construction of a new paper-making machine in Kondrovo, Kaluga region.

— The machine will be the same in productivity and basic technical characteristics as the paper machine №3 in Sokol. This is due to the fact that we made a standard project in the Vologda region, which was tested and showed its effectiveness. Now it’s time to replicate it in other company divisions," continues our interviewee.

This kind of practice is not new to the paper industry. The main expenses of papermakers when implementing capital-intensive investment projects are just related to design and selection of the right technology. They take up both time and money. By replicating the case, which has already proven its effectiveness, you can greatly reduce the investment, both financial and time.

— We will be able to save about three years, which would have been spent on all the preparatory stages, — emphasizes Dmitry Dulkin. — We plan to finish the construction in Kondrov by 2026. Then similar production facilities may appear at other plants of CPM.

Also at the Polotnyano-Zavodskaya paper manufactory in Kaluga an innovative project for waste recycling will be implemented. Due to the peculiarities of the territorial scheme of MSW disposal, all garbage has to be taken to a landfill more than 200 kilometers away from the plant. In order to minimize disposal costs a high temperature incineration project is going to be implemented. This will not only solve the problem of residue, but also allow the company to obtain additional marketable products that are in demand on the domestic and European markets now.

AND MOST IMPORTANTLY, PEOPLE

Behind tons of output and figures of financial statements the company does not forget about those who with their hard work, high professionalism and dedication achieve all these, sometimes surprising, results — the employees. And there are more than two thousand of them at all the enterprises of CPM.

— Numerous programs have been launched in the company, connected with the increase of productivity and with the improvement of working conditions. All of them in one way or another are aimed at making work as comfortable as possible and salaries significantly higher than the market level, — says Dmitry Dulkin.

But even in all this variety of projects, we want to single out one that has become a real landmark for United Paper Mills. We are talking about organizing free meals for employees at all company enterprises. The project is already working.

— SCPM launched a new canteen, which uses the latest cooking technology and its interior is not inferior to modern cafes. Balakhna will join the project in March, and by summer we will finish construction of the canteen at the Kaluga plant, — says the head of CPM.

— Speaking about Sokol, as far as I know, none of the city’s major employers provides free meals. This is our know-how, which, I hope, will be appreciated by all the plant’s personnel, — smiles Yury Blinushov.

It should be reminded that SCPM is an enterprise with a rich heritage — in August 2022 it will be 105 years old. On the territory of the mill modernity is closely intertwined with history. The first shops, built of red brick at the beginning of the last century, are combined with the bright spacious workshops of modern paper machines. The aesthetic component catches the eye from the entrance area. In front of the administrative building there is a fountain with decorative lighting, beautiful lanterns, benches, and in summer the entire area is buried in flowers. The atmosphere sets a positive mood from the very beginning of the working day, and it is possible to finish it with sport activities. SCPM has its own gym, which is daily visited by the plant’s employees.

— Employees can play mini-football, volleyball, basketball in the gym at any time. We develop the basics of hand-to-hand combat, cultivate classical and aerobatics, shaping, tennis and even chess. Our employees attend our classes very actively. The gym is also very popular with us. Both men and women take part in the gym, and whole families attend the classes. We have well organised teams in team sports which take part in different regional competitions and work collectives competitions. And our level is high enough — almost always we take one of the prize-winning places, — says Dmitry Ivanov, the specialist in the organization of physical culture and sports work.

— We are very attentive to the needs and wishes of the team. The average salary at the plant in 2022 will reach 60 thousand rubles, and we are also the regional leader in this respect. We are in a constant dialogue with all subdivisions of the plant. Recently we have conducted a survey of all the personnel. People expressed their opinions about working conditions, salaries, social projects of the mill, their vision of the development of SKBK. This allowed us to see our weaknesses, although we have done a lot, but they still exist. But nothing — we will make up for them. We have already started to analyze the results of the monitoring, and after that we will start working on making the working conditions at our enterprise even more comfortable and modern, — Yuri Blinushov is sure.