29 October 2020
Aleksei Vdovin: “Diversification of the product portfolio will allow us to confidently look forward”
JSC Volga is one of the largest exporters in the Nizhny Novgorod region. In 2019 and in 2020 so far, the company supplied customers in more than 80 countries around the world. Aleksei Vdovin, Deputy General Director, Paper Sales, talked to the Russian Association of Pulp and Paper Industry Organizations and Enterprises (RAO “Bumprom”) about what is happening in the domestic and international paper market and shared the plans for JSC Volga product portfolio expansion.
- Aleksei Anatolievich, what is the current competitive environment in the newspaper market in Russia and around the world? How do you assess the prospects of the industry taking into consideration the influence of the digital technologies development and the COVID-19 pandemic?
- The coronavirus pandemic has taken its toll on the every country’s economy. If we’re talking specifically about JSC Volga’s area of activity, which is, first and foremost, the production of newsprint paper, the market situation became extremely unfavorable after the introduction of harsh restrictions by the majority of countries in the second quarter of 2020. Various social, cultural and sporting events were mostly cancelled, the advertising budgets got reduced, and, consequently, the distribution of newspapers began to decline. For instance, In India, the world’s largest newsprint paper market by consumption volume, the demand dropped by 70-80% and we don’t observe any signs of the trend reversal.
If we describe the situation in numbers the utilization of newsprint production capacity around the world decreased just above 60% of available (data provided by a reputable organization). Papermakers need to increase it to at least 90% for production to work effectively. Hence, in order to be able to fully utilize the production capacities the manufacturers began to fight for orders, often through price dumping.
However, any situation has a positive side to it. For example, after seeing extremely low levels of paper consumption in the second quarter of 2020 in Russia, we can finally see that printed media publication resumed at its usual level. This is the reason why we are optimistic about the domestic market.
Returning to the subject of export markets, it is worth noting that the situation differs greatly by specific region and country. For instance, China’s market recovered relatively fast. European countries are also going back to their normal lifestyles and consumption levels after lifting harsh restrictions that were imposed due to the spread of coronavirus (though in October-November more restrictions can be expected/imposed). The newsprint paper market in Africa is far from stable, but there has been some recovery in consumption in last months.
I would also like to note that JSC Volga was prepared for the current situation better that its competitors. At the end of 2019, we were already diversifying our product offerings (which was one of the elements of our company's development strategy). In particular, we started producing various types (grades) of packaging paper. This packaging paper is used to produce corrugated board, which in turn is used to produce corrugated boxes that are widely used in e-commerce. It’s no secret that not only did this segment withstand the market fluctuations, but also grew during the pandemic.
Currently more that 50% of the papermill’s production is exported in the form of packaging grades. The presence of the second base product (“second leg”) in the portfolio allows us to confidently look forward. Despite it all, we understand that we can’t stop there: our competitors do not sit idly by.
- In your opinion, what are the advantages of JSC Volga in comparison to the key paper producers in Russia?
- First of all, JSC Volga should only be compared to the other newsprint paper producers. We are closer to the main centers of consumption in Russia – Moscow and Moscow Region, The Central Federal district, than any other newsprint paper producer. Our company produces paper from 100% thermomechanical pulp (TMP), which makes us stand out from the competition: our production is more eco-friendly since it doesn’t have sulfite pulping. The printing properties of JSC Volga’s paper also differ from our competitors in a positive way: the dustiness is lower due to the absence of wood pulp in its composition and the whiteness of paper can be controlled by producing a whiter fiber in the TMP production process.
- What are the priority export markets for JSC Volga today and in the near future?
- The strategic priorities of JSC Volga did not change. When it comes to newsprint paper, our main priority is the European market, which is less volatile in price and stable in consumption (though we do observe a downward trend). Other focus markets are African countries, where paper is actively used to print textbooks and manuals and produce notebooks and, of course, the countries of Southeast Asia.
If we talk about the packaging segment so far we are focusing primarily on China and its closest neighbors. Though, there are already certain prospects for us in other regions, in the Middle East in particular.
- Does Volga JSC plan to expand its product portfolio, and if so, what new products will appear in the near future?
- Our technological capabilities and production flexibility have expanded this year due to the launch of the new TMP production line as well as the flows separation of the paper machines 8 and 5.
Currently we can simultaneously produce different products on these two machines. While we do have plans to expand our product portfolio and are actively working on that, we don’t want to get ahead of ourselves and announce unfinished (“half-baked”) developments.
In addition, we have ample opportunities to work directly with consumers of our products all around the world since we have tools to effectively compete with the services of both our competitors and European trading companies.
Volga Press Centre
