Kronospan accelerates expansion in Belarus

According to Peter Kaindl, chairman of Kronospan, the company plans to invest around US$140m in the construction of the OSB plant in the Mogilev free economic zone. According to Mr Kaindl, the new plant will be the only producer of OSB in Belarus and its commissioning is scheduled for September 2014. No other details of the project have so far been disclosed.

In addition to the OSB plant, Kronospan is considering the possibility of building a plant for the production of urea formaldehyde resins at the premises of Mogilevkhimvolokno, one of Belarus' largest producers of chemical fibres, with the total volume of investment in the project said to be US$33m.

According to Mr Kaindl, the implementation of this project will provide sufficient localisation of the company's production in Belarus and will help to reduce the import of certain raw materials. According to Alex Zvertovsky, head of Kronospan Belarus, funding for the projects will be provided by banks, and in particular by the European Bank for Reconstruction and Development (EBRD).

According to Mr Zvertovsky, it is planned that up to 80% of the future production of the plant will be exported, mainly to Russia, while the remaining 20% will go to the local Belarusian market, which should help the country to reduce its imports.

Mr Zvertovsky, commented: "At present, the Russian OSB market is steadily growing and our competitors are planning to build similar enterprises near the border of Belarus. Therefore, we are planning to overtake our rivals and be the first company to build such a plant in the region, which will find its niche in the market".

As for the second project, according to Mr Zvertovsky, currently Belarus experiences a lack of quality resins for the production of boards. Mr Zvertovsky also said that, using the capacities of Mogilevkhimvolokno, the company plans to establish such production, with the aim of supplying these products, not only for its own plants, but also for the facilities of Bellesbumprom, Belarus' largest pulp and paper producer.

However, these are not the only projects which Kronospan plans in Belarus.

At the end of 2012 the company commissioned a plant for the production of particleboard in Smorgon (Grodno region) at the premises of a local aggregate plant. This line is expected to reach its design capacity of 340,000m3 in the spring of 2013.

As part of the second stage of the plant, Kronospan has plans to launch the production of MDF and this is expected to take place in the third quarter of 2013 at the Smorgon site.

The capacity of the second line will amount to 300,000m3. It will specialise in the production of laminate flooring and paper impregnation for the top layer of laminated fibreboard.

It is planned that up to 70% of the production of the Smorgon plant will be exported, in particular to European countries and Russia, while the remaining 30% will be supplied to the domestic market.

Smorgon was chosen by Kronospan as a production site for its plants, not by coincidence, but as a result of careful examination. According to Mr Zvertovsky, the main reason was its proximity to the markets of the Customs Union and western Europe, as well as good railway and auto service, the availability of gas and electricity and its proximity to the nuclear power plant currently under construction.

In the meantime, the Belarus government supports the Kronospan projects, whose implementation is personally monitored by the prime minister of Belarus, Mikhail Myasnikovich, as well as the country's president, Alexander Lukashenko.

According to the Belarus Ministry of Economy, the implementation of the projects will help to inject about US$530m into the Belarusian economy.

Local analysts believe that Kronospan has chosen the right time for the implementation of its projects in Belarus, taking into account the fact that the local markets for MDF, OSB and particleboard are steadily developing amid the ever-growing demand from the furniture industry of Belarus and neighbouring Russia.

In addition to attracting foreign investment, the government of Belarus plans the development of domestic enterprises that specialise in board production. In accordance with the recently announced plans of the Belarus government, up to seven plants for the production of particleboard and MDF will be built in Belarus in the coming years.

For example, by November this year a new plant for the production of fibreboard will be commissioned in the city of Borisov. The project will be implemented by a local company, Borisovdrev, which is one of the oldest woodworking enterprises in Belarus. Total cost is estimated at €80.6m. The capacity of the new plant has not been disclosed.

According to the initial plans of Borisovdrev and the Belarus government, the commissioning of the new plant was scheduled for December 2009, however, due to certain problems, its implementation was suspended.

In addition to the Borisovdrev project, it is planned that another project, which involves building a plant for the production of MDF/HDF, will be launched by the end of the current year in the city of Vitebsk by Vitebskdrev, another Belarus development of a major woodworking enterprise.

The design capacity of the new plant is expected to reach 140,000m3 per year. Total cost of the project, which will be funded via bank loans, is around 500 billion rubles.

According to Nikolai Kuznetsov, deputy director general of Vitebskdrev, the new plant will specialise in the production of fibreboards with improved quality, while among the major markets for the production will be the local, as well as the Russian, market.

Implementation of all of these projects is personally monitored by the president of Belarus, Alexander Lukashenko, who recently spoke about the importance of establishing new woodworking production of this kind in the country.

According to him, this will also allow the country to reduce the import of boards into Belarus, currently estimated at US$120m annually. The establishment of new enterprises should help to fully meet the needs of local furniture manufacturers in boards during the next several years.

This will also allow them to increase their exports. According to state plans, by 2015 up to 50% of total production of boards in the country will be exported.