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Decades and multibillion-dollar investments from donors – according to the EBRD assessment, within the first five years of post-war reconstruction, Ukraine will need more than USD 50 billion of additional investments per year.

The focus should be primarily on industries and enterprises that are drivers of the national economy, in particular, the cardboard and paper industry.

On the eve of the new year, UkrPapir, the Association of Ukrainian Pulp and Paper Industry, published statistics on the industry`s performance in the period from January to November, and at first sight, the figures give grounds for cautious optimism.

Thus, as of the end of November this year, production of paper and cardboard in Ukraine is up by 11.8% comparing to the same period in 2022, packaging cardboard by over 20% and corrugated boxes by 18.9%. This is despite import constituted a significant share of consumption because of the large-scale invasion and rapid decline in domestic production last year.

Although, this is not even the pre-war level, but the tendency is quite optimistic. A significant contribution to these figures was made by one of the largest specialized companies in Europe, PJSC Kyiv Cardboard and Paper Mill, which for 11 months of this year has increased its commercial production by over 3.3% compared to 2022 (including corrugated boxes – by 20.5%).

Why is it impossible to postpone investments in the reconstruction and modernization of enterprises producing sanitary and packaging products made of paper and cardboard until “after the victory”? How do western partners (in particular, the Austrian Pulp Mill Holding GmbH) contribute to the reconstruction of the domestic pulp and paper industry under martial law? Iurii Golovchenko, Chairman of the Board of PJSC Kyiv CPM, clarified this issue.

How has the work of the domestic pulp and paper industry changed in general and Kyiv CPM in particular since the start of the full-scale invasion? What are the main trends?

The war has had a great impact on the economic situation in general and on our industry in particular. First of all, the market environment has changed dramatically – some production facilities have been damaged by shelling, and some have been occupied. There are Rubizhne Cardboard and Packaging Mill, Rogan Cardboard Factory, Dunapack Tavria, Zmiivska Paper Factory and others among them. As a result, some of the major players suspended operations, while others were forced to relocate their facilities.

Definitely, all these factors has affected the industry in general, as, for example, Rubizhne Paper Mill produced about a third of all corrugated packaging in Ukraine before the war. Overall, according to UkrPapir Association, the aggressor`s actions reduced cardboard and paper production in Ukraine by 45% in the first quarter of last year. This year the situation with domestic production has been levelled in quantitative terms. Our Mill made a significant contribution to the industry reconstruction. However, to be honest, it is not easy.

After all, the second factor that is significantly changing the work of cardboard and paper enterprises is logistics. It has been changed significantly since the beginning of the invasion and has become more expensive. There is no pulp production in Ukraine, and our own waste paper collection is not enough to meet the demand. Accordingly, import covers lack of raw materials.

Traditional transportation chains from Scandinavia, Turkey, and Brazil, which used to go through domestic Black Sea ports, are no longer in operation. We have to use the port infrastructure of other European countries and continue to transport raw materials to Ukraine by land. It leads to additional logistics costs. Blocking of the borders by Polish and Slovak carriers also causes delays in deliveries and the overall picture is not so bright.

Why is the reconstruction of this particular sector so important for Ukraine`s economy? How does the cardboard industry affect other industries and logistics chains?

In this context, two key aspects should be highlighted. The first aspect is the impact of the cardboard and paper industry on related industries. In my opinion, the development of the corrugated board and packaging segment is now the key to the sustainable operation of many sectors of the Ukrainian economy. Let me express my vision.

Kyiv Cardboard and Paper Mill produces a wide range of packaging components for various product groups, including dairy, confectionery, bakery, alcoholic and non-alcoholic beverages, fruit and vegetables, pharmaceuticals, household chemicals, and many others. Without packaging, it is impossible to transport and store goods, so retailers, large online trading networks, logistics companies and postal operators depend on our continuous operation. After all, proper packaging is necessary for maintaining the steady flow of humanitarian aid to different regions of Ukraine.

Certainly, cardboard and paper products for these segments can be imported, but it will extend the shipment distance significantly, increase the cost of commercial products, additional cost will be borne by ultimate consumers. In addition, we have already mentioned the current problems with logistics.

The second important aspect is that our company is a budget- and city-forming enterprise. The team of Kyiv CPM currently employs 2,320 people, and including its subsidiaries, the total number of employees is 3,500.  Among them are twenty internally displaced persons who were forced to leave their homes and move to Obukhivskyi district because of the war. More than 250 employees of the mill are now defending Ukraine.

In this difficult period for the country, the Group of companies is trying to support the community as much as possible by providing jobs and competitive salaries. In addition, in the first nine months of this year, the company has paid more than a billion UAH to the budgets of all levels and donated almost UAH 100 million to humanitarian projects.

Therefore, I am convinced that the state should now focus on supporting industries and business units that fill the budget, which create workplaces and enhance the development of other related businesses and sectors of the economy.

Unfortunately, the situation today differs. Due to external pressure (it is referring to the unjustified reopening of a criminal case dating back several years and attempts to block the assets of the group of companies – ed.), today, our mill continues to operate and modernize not in support, but in contrary to the current situation.

Do you agree with the opinion that it is necessary to start investing in the reconstruction and modernization of the domestic cardboard and paper industry not only (and not so) after the victory, but already now, during the war? After all, the development of this industry is not standing still in the world, new technologies and trends are being introduced, and we need to stay competitive?

Yes, because Western and Asian competitors are on the alert. Our consumer market is a large and attractive target for them. When the domestic business faced a number of challenges because of the war, many foreign manufacturers turned the situation to their advantage. They are dumping, expanding their product range, and pursuing an aggressive commercial policy. In short, they are looking for ways to drive domestic brands out of the Ukrainian market, regarding packaging materials and sanitary products.

Therefore, it is necessary to invest in the reconstruction and development of our own production now, despite unfavorable conditions and external factors. The war with the aggressor is not a reason to give up the fight for customers and markets.

How much time will it take for the country`s production of cardboard and paper products to return to pre-war levels? Are European partners ready to invest in the reconstruction and modernization of cardboard mills in Ukraine? Under what conditions?

As for the timeframe, this is a rhetorical question now. No one knows condition of all companies. In addition, too many external factors affect the ability to resume operations. Unfortunately, the threats of shelling, blackouts, blocking of roads, and information attacks on Ukrainian enterprises are still pressing issues. Therefore, it is inappropriate to set any deadlines in the context of the entire industry.

As for our mill in particular, we are planning to modernize our manufacturing facilities in 2024. The Austrian investor Pulp Mill Holding has already invested over EUR 360 million in the development of Kyiv CPM. Despite the ongoing war and all the negative external challenges we have mentioned, the investor plans to continue the investment program – in the autumn we approved plans to modernize equipment for EUR 12 million.

However, the specific timeframe depends on transportation options. I will give a specific example of the purchase of a new Yankee cylinder (a key unit that is part of the drying group of the paper machine – ed.) Previously, such equipment used to be shipped to us by sea and the Dnipro River, but now it is a challenge for our specialists and partners to transport oversized cargo from Europe.

Obviously, it would be reasonable to hope for some institutional support for these processes from the Ukrainian authorities or at least that the state would not create additional obstacles for national producers and investors. However, current situation is different. Therefore, we rely only on our own efforts.

Source: korrespondent.net

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