TALLINN - The Estonian Cell cellulose plant is grappling with production costs that turned out to be much higher than projected, the business daily Aripaev reported on Oct. 6. The plant began operations on Sept. 8.
When compared to the budget drawn up in 2001 and 2002, the prices of Estonian Cell's main expenses have risen significantly. The price of aspen, the main raw material used by the plant, increased by 62 percent, payroll was up by 43 percent, transport costs by 20 percent and electricity by 12.5 percent.
The cost of chemical inputs was the only thing that did not change. The company also has the benefit of having signed a contract, which gives them a fixed gas bill until 2008. At the moment, world market prices for cellulose have been decreasing by about one percent per year.
"Our situation is poorer than envisioned in the business plan, but we're not any worse off than our competitors," manager Margus Kohava told the paper. The cost of wood and wages are still lower in Estonia than in Canada or Sweden, for example.
Kohava said the pulp plant, which is presently working at 70 percent capacity, will be able to cover current costs by the end of the year. "It is not necessary to plow in extra money, but when the investment will start paying us back is hard to tell," he said.
To stay competitive, Estonian Cell has considered increasing production volumes closer to full capacity. At full capacity, the pulp mill produces about 140,000 tons of aspen pulp, which is used in the production of high-quality paper and tissue.
The owners of the Kunda plant 's Norway's Larvik Cell, Heinzel Group of Austria, and the European Bank for Reconstruction and Development 's have invested a total of 2.4 billion kroons (153.4 million euros) in Estonia Cell.
Estonian Cell's largest costs are electric power and raw material. The company consumes about 2.5-5 percent of the energy produced annually by Estonian Energy, or about 240 GW. The plant uses about 380,000 cubic meters of locally chopped aspens annually.