SCG PAPER TURNS TO ALTERNATIVE PULP MATERIALS

       SCG Paper is resorting to other materials for paper pulp-making, to ease the expected increase in global waste paper prices due to higher demand from China.
       President Chaovalit Ekabut said that the other materials for pulp-making, would offer the same quality as waste paper. Importantly, the production cost should be lower than when using waste paper to be imported from the United States.
       The paper unit of the Siam Cement Group expects the global demand for waste paper next year to increase due to the business resumption of paper manufacturers in China.
       Chaovalit said several Chinese paper manufacturers have resumed their operations after suspensions during the economic crisis. Those companies will have to order waste paper from the US, which is the largest supplier.
       The move of Chinese paper-makers might affect other paper manufacturers including SCG Paper because the company is one of those that purchases scrap paper from the US to be made into new paper products.
       Chinese paper manufacturers are expected to order a lot of scrap paper. They are expected to produce 2 million tonnes next year.
       Chavalit said the company has to reduce risk from the expected shortage of scrap paper by considering using another material that is not made from scrap paper, such as weeds.
       Other material prices should be lower than scrap paper, he said.
       He said that the resumption of Chinese paper manufacturing has driven scrap paper prices up from the current level of between US$160 (Bt5,350) and $170 per tonne.
       However, the scrap paper price is not expected to increase to $250 like in 2008, because of the low paper consumption of the US. The low consumption in the US is in line with the country's economic crisis. The consumption of paper this year dropped by 30 per cent.
       In addition, the company believes the economic situation has bottomed out because sales revenue and net profit in the third quarter improved from the second quarter, he said.
       SCG paper earned sales revenue of Bt11.23 billion, up 6 per cent from the second quarter while net |profit increased by 10 per cent to Bt701 million from the last quarter and increased 13 per cent year on year.
       Chavalit noted that the pick up of sales revenue in the third quarter might help the total sales revenue this year meet flat growth or drop a little from last year's Bt47 billion. The company earlier predicted a plunge in sales in 2009 due to the crisis.
       He said that the company outlook next year should be brighter because it will realise full revenue from a new paper craft plant in Vietnam. The company expected the plant in Vietnam would contribute Bt2.5 billion in sales revenue next year.
       Chavalit added that besides the new plant in Vietnam, the company is ready for new investment. One of SCG Paper's investments is the merger and acquisition of paper plants in Thailand and overseas.
       He could not reveal the investment budget for M&A, but said the M&As should be seen soon.