The company, in the Siam Cement Group, has also forecast a 5-per-cent increase in the price of paper around Chinese New Year or later in the first quarter of next year, to reflect the rising cost of raw materials.

Of the Bt18 billion, the company will spend Bt5.2 billion to establish a new Kraft paper plant in Vietnam. The plant is expected to start operating in mid-2009 with a production capacity of 220,000 tonnes per year.

Chaovalit said the company expects it to break even within two years.

The company has signed a 50-year property leasing contract for 240 rai for the plant in Vietnam. Apart from this, SCG Paper could double production capacity there.

As part of its domestic investment plans, SCG Paper will invest Bt1.77 billion to expand the production capacity of coated duplex board by an additional 100,000 tonnes per year.

The company has also invested Bt400 million to boost production of sheet boards at its Ratchaburi plant by 40,000 tonnes per year, and corrugated containers by 10,000 tonnes per year.

Meanwhile, the company will invest Bt700 million to boost its production of sheet boards by 25,000 tonnes per year at the Navanakorn plant and by 55,000 tonnes per year at its Khon Kaen plant.

For printing and writing paper, SCG Paper plans to expand production capacity by adding 200,000 tonnes per annum at the Khon Kaen plant in the first quarter of 2008.

Following that, the company's production capacity for industrial paper will rise to 1.75 million tonnes in 2008 from 1.43 million tonnes at present, while its capacity for printing paper will rise to 564,000 tonnes from 364,000 tonnes currently, Chaovalit said.

Local demand for paper will grow by 5 per cent next year, he believes. The size of the local market for industrial paper is about 2 million tonnes, while for printing paper it's about 700,000-800,000 tonnes.

About 20 per cent of the company's paper products will be exported to regional markets and the United States. During the first nine months of this year, sales of Siam Cement's paper business amounted to Bt32 billion, Chaovalit said.

He added the company also spent around Bt2.5 billion to install a boiler that uses coal instead of oil as fuel at the plant in the Philippines and other energy-saving projects in Thailand following increase in energy costs.

Chaovalit said these projects aim at reducing the energy cost and using natural resources efficiently.

Following the company's investment next year, SCG paper expects its sales to grow more than 5 per cent, he said.

In the first nine months SCG Paper posted Bt32.06 billion in sales, up 7 per cent from last year, due to higher demand, but net profit was down 3 per cent on year as a result of the higher costs of fuel and raw materials.

He added that the paper industry in Asean is tending towards increased prices in the first quarter of next year because of the rising price of pulp in the global market.

The price of short pulp has been up from about US$560 (Bt19,700) per tonne in the beginning of this year to $630 per tonne last month. The price of long pulp has increased from $560 per tonne to $720 per tonne in the same period.

Other countries such as the US or Japan have already increased the price this year while Asean countries have been slow in lifting prices this year due to high production capacity in the region.

However, he said the price in the world market would not increase too rapidly in the next two or three years because of more supply from new plants in South America.

Chaovalit predicted that the country's paper industry will grow by 5 per cent next year in line with the growth of Gross Domestic Product (GDP). However, the company expects to grow more than the GDP.       

Twenty per cent of total revenue comes from exports. SCG Paper exports 22 per cent of total packaging paper to Vietnam, Malaysia, Singapore, China and Hong Kong. It exports 17 per cent of total printing and writing paper to the US, Vietnam, Hong Kong, Singapore and Malaysia.

SCG Paper is also launching a new company, InfoZafe Co Ltd, which offers shredding services and document storage. It will commence services at the beginning of next year.

Besides the revenue from services, the company will also gather more used paper to recycle within the industry, he said.

Chalida Ekvitthayavechnukul

The Nation