Asian paper giant sees growth opportunity in Canada

VANCOUVER – After quietly establishing a beachhead in the Canadian paper market 15 years ago, Indonesian forestry giant Asia Pulp & Paper is launching an aggressive campaign aimed at becoming Canada’s largest paper supplier.

APP is already the world’s third largest pulp and paper company with aspirations to become the biggest. An affiliate of the Indonesian-owned and Shanghai based Sinar Mas group of companies, APP says it sees opportunity in Canada, where products from its modern Indonesian and Chinese mills can readily compete with North American-made papers.

“We see growth in Canada; we see opportunity,” Ian Lifshitz, APP’s sustainability and public outreach manager for the Americas, said in an interview.

The Asian papermaker’s move to capture a larger share of the Canadian printing paper business comes at a time when another Sinar Mas company, Paper Excellence, is buying up pulp and paper mills around the world to secure a source of fibre. Within the last year Paper Excellence, has bought four mills in Canada and three in Europe, expanding the privately owned Sinar Mas conglomerate into a global pulp and paper player. Two of those mills are in B.C.

“They have come on the scene suddenly and snapped up mills; they have come from nowhere to become a major supplier of Canadian fibre,” David Elstone, an analyst with Equity Research Associates, said of Paper Excellence. Although the two Sinar Mas entities are corporately separate, APP’s paper mills in Indonesia and China buy 80 per cent of Paper Excellence pulp giving them a strong commercial link.

Up until now, Lifshitz said, APP has deliberately kept a low profile in Canada. It’s a different corporate culture, he said in describing the reason for the Indonesian company’s relative obscurity here. That’s going to change, he said.

However, APP has a few “legacy issues” that still dog it, according to Equity Research Associate’s Kevin Mason. Its environmental reputation has made it a target for eco-groups who have successfully convinced some American companies to boycott its products. Further, American tariffs on Asian paper imports, coupled with APP’s default in 2001 on $13 billion US debt, have limited APP’s presence in the U.S. market. That makes the relatively smaller Canadian market more desirable.

“They have gone a significant way to clean up not just their image but to clean up their operations,” Mason said. He noted that “they always haven’t been squeaky clean.”

He said the mills bought by Paper Excellence are providing APP with a more environmentally acceptable source of fibre. But right now, Asian paper mills are producing more paper than even the growing Asian economies can absorb, prompting the search for new markets.

“From their point of view, Canada is a market for their paper. It’s not a big market, but it’s a market.”

APP is the target of the environmental lobby, but so far, Paper Excellence has attracted most of the attention in Canada, and that’s mostly been positive.

Paper Excellence has gained support from labour unions and civic officials in the Canadian towns where it has bought and re-started old mills. A Nova Scotia local of the Communications, Energy and Paperworkers union praised Paper Excellence for the jobs it has restored there.

“Paper Excellence Group has an excellent track record in Canada in terms of business leadership, labour and first nations partnerships, and environmental stewardship,” the CEP local stated in a letter after signing a labour contract with Paper Excellence.

In B.C., however, where Paper Excellence bought the Mackenzie pulp mill and Howe Sound Pulp and Paper on the Sunshine Coast last year, environmental groups are eager to exploit the Sinar Mas link between the two companies. Eco-groups, including Greenpeace and ForestEthics, said that Sinar Mas, in particular its pulp and paper arm APP, “is known globally for massive environmental destruction for palm oil and pulp and paper, including logging intact rainforests and peatland, wiping out orangutan habitat, human rights violations and financial scandals in Indonesia.”

Lifshitz does not agree with that characterization. But silence on behalf of APP has meant that environmental groups have defined the company, he said.

Lifshitz said he is telling APP customers – printers in Canada and distributors in the U.S. – that the eco-groups are unjustly and unfairly attacking the company with allegations that are unwarranted. His story strikes a familiar chord in B.C., where it took a decade of companies and eco-groups fighting the war in the woods before both sides signed a peace pact.

On this trip across Canada, Lifshitz is singling out one example, a recent report by the Rainforest Action Network that quoted villagers in video clips saying an APP contractor stole their land. APP, Lifshitz said, can prove the report is not true.

APP responded to the RAN report by sending speedboats and helicopters to the remote community in Sumatra to question villagers.

“We went out and spoke to those villagers and we have video footage in their own words,” Lifshitz said. “Those allegations are completely false.”

However, RAN campaigner Lafcadio Cortesi said in a telephone interview from California that RAN stands behind its report, which was based on a trip to the village in November 2009.

“What we represented in our case study was true. Circumstances may have changed. We have not been back. But we have grave concerns for the safety of community members and for their livelihoods.”

He said he is not surprised the villagers told a different story to the company officials. The arrival of officials by speedboats and helicopters in a remote village “can be very intimidating.”

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