Board chairman of Solombala pulpmill: “We need a new mill and have a ready project of it”

The management of Solombala pulpmill notified the Employment Centre and the trade union organization of the forthcoming reduction of staff numbers. On July 10, 2013, the company will cut 974 employees.

The department for biological treatment of industrial waste water, fire and rescue service, communications department, as well as local electricity transmission workers will go on working.

Earlier it was reported that Solombala pulpmill stopped due to low market prices, technical problems and lack of working capital. Currently part of the mill team, 523 people, are idled, while 776 workers continue working.

Meanwhile, Chairman of the Board of Directors of Solombala pulpmill Alexander Plastinin answered the questions of the Arkhangelsk regional newspaper, Pravda Severa.

“In fact, the company does not make any products for more than three months, since the end of 2012, and has no source of income. All the while, workers receive their wages; idled workers are paid two thirds of the average wage. We were putting off the difficult decision to reduce staff for as much as we could, understanding its social consequences. But today, there is an understanding that we will not be able to provide them with work in the near future, and the situation forces us to go to the staff reduction”, said Plastinin.

“Today, there is a clear trend in the pulp and paper industry: large holdings with foreign capital that produce a variety of products, show satisfactory results and have enough funds to invest in development. The situation is quite different when we talk about the enterprises of regional scale comparable to Solombala, usually single-product mills. In Karelia, Kondopoga pulpmill is under bankruptcy procedure, there is information about upcoming redundancies. Segezha PPM, manufacturer of sack paper, is still experiencing considerable difficulties. Decision to close Baikal pulp and paper mill was announced. Everything shows a serious crisis in the industry. All the middle-scale mills have heavy problems in attracting investments in modernization. This business can’t grow organically at his own expense”, continues Mr. Plastinin.

Chairman of the Board notes that today it is easier to obtain bank loans for greenfield projects. “If we are talking about the modernization of the existing production, bank analysts are haggling, like “what is its current profitability, why is it so poor?” But gentlemen, that’s why we’re taking loans – for improving profitability! (…) Our group negotiated the financing of the construction of a new sawmill in the framework of the priority investment project with one of the state banks for more than three years. The project was approved at all levels, there was a special governor’s appeal on the matter. The result was none. So it turns out that there is no connection between the state bank and the project recognized as top priority by the state”.

The current level of pulp prices does not cover the cost of its production, says Plastinin. “In fact, we need a new mill, and we have a ready project of it recognized as top priority by the state. It can be implemented with the help of a strategic investor. Now it’s still possible to do that, because Solombala pulpmill has enough personnel so far. (…) In order to get out of this situation, the mill needs real support in the form of opening a credit line for the construction of a new mill under government guarantee”.

It is to note that such a step was made by the administration of the neighbouring Karelia: the governor helped sign a loan agreement between Kondopoga pulpmill and Bank Sankt Peterburg. The new CEO of Kondopoga Dmitry Turkevich announced that the mill will be converted for pulp production within a few years.