In the mid-1990s, the South East Asian panel manufacturing industry was growing at an unprecedented rate.
Led by the rush to manufacture MDF for a seemingly insatiable and, at that time, very profitable market, mills were springing up in Malaysia, Indonesia and Thailand at an almost alarming rate.
The biggest, boldest and most diverse ofthese new ventures was STA Group.Between 1990 and 1995, this publicly listed company built two particleboard lines, two MDF lines, a plywood line, six furniture lines, a 12-line finger-jointing factory and a sawmill on its one square kilometre site in Hat Yai in southern Thailand.
Not all those projects were complete when the company’s then owner,Mr Supotphong Vilaipun, who bought the company after the first particleboard line had been built, and who planned the massive growth of STA, died in a car accident in August 1995. Investor confidence evaporated and STA went into receivership in 1996 with debts variously stated at between US$450m to US$1bn; the actual amount seems almost academic.
In receivership, one MDF and one particleboard line were run intermittently and at low capacity levels as potential buyers for the business came and went, failing to reach agreement with the creditors.
Then, in November 2000, the factory was flooded, along with the city of Hat Yai. However, there was one Thai company which was already in particleboard manufacture and which saw STA’s panel businesses as an opportunity.
That company was M P Particleboard, a subsidiary of Thailand’s biggest sugar producer, Mitr Phol Sugar Group.
It was in 1991 that Mitr Phol, searching for a solution to the problem of its growing mountain of sugar cane waste, or bagasse, built a particleboard mill in Khon Kaen to utilise bagasse as the raw material. This was the first time that particleboard had been made from bagasse in Thailand, although K K Wood of Thailand was already making MDF from the same raw material.
M P Particleboard’s production went from an initial 60,000m3 to 100,000m3 a year. The balance of the bagasse from Mitr Phol’s five sugar factories is used in energy production, including two 40MW power generation plants supplying electricity to the national grid, which started up this year.
Managing director of MP Particleboard Ms Amporn Kanjanakumnerd explained why the company decided to invest in the STA factory.
“Our bagasse-based particleboard was not enough to meet the demand and we had been buying in up to 36,000m3 of panel a year from other producers,she explained. “Thus we saw an opportunity for particleboard with a good growth potential in Thailand and the region.We started [producing panels] to solve a problem but now we see it as a good business opportunity.”
The company first considered buying a complete new continuous production line from one of the European suppliers, but the directors decided it would be better for STA – and Thailand – if they could buy the existing plant rather than importing new machinery. “It was also better for the creditors if they could sell the factory to a Thai company,added Ms Amporn.
So it was that MP started what turned out to be long and convoluted negotiations with the creditors of STA in June 2002.
“One of the requirements was that we should take over all the panel production facilities at Hat Yai and we knew the MDF line needed a lot of work,said Ms Amporn. So Mitr Phol Sugar Group and M P Particleboard got together with JC Kuo, whose family own and run Evergreen MDF and Allgreen Particleboard of Malaysia, as well as a large panel-based furniture making operation, and Evergreen agreed to take on the two MDF lines, setting up Siam Fibreboard for the purpose.
“We had to convince the creditors that we were strong and Mitr Phol gave us credibility and Evergreen was a partner whom we had known for a long time, having both had Bison lines in the past,said Ms Amporn.
The negotiations with the creditors were finally completed on February 27, 2004 – 20 long months after they had begun.
M P Particleboard as the lead company, together with Evergreen for the MDF lines, became the proud owner of two particleboard lines, the plywood and veneer factories and a panel-based furniture factory.
It was not required to buy either the sawmills or the state-of-the-art (when it was built) training centre which is also on the Hat Yai site; or the undeveloped land.
It is M P’s intention to sell the plywood and veneer factory machinery and keep the land on which they stand. This involves one complete Cremona plywood line and a complete Cremona veneer slicing line, Fisher + Rückle composer and two Wemhöner short-cycle press lines; M P particleboard already has 25 million m2 of surfacing capacity.
The plywood line only ever ran for one year, in 1995, and has not run since.
But the ‘fickle finger of fate’ which had dealt so many hard blows to the old STA Group had not finished with the Hat Yai dream/nightmare yet.
“I was in a meeting with lawyers, creditors and plan administrators in Bangkok at 4pm on February 27, having just completed a very complicated deal with title and so on and the factory was finally ours,said Ms Amporn. “Then, at two o’clock the following morning a fire struck particleboard line two.That was the only line which was in working order, the other particleboard line having been mothballed some years ago.
The control room and the press of line two were very seriously damaged.
“It was obviously a carefully planned arson attack and was designed to put us out of business but fortunately the fire was stopped before the line was a total loss, and as the line was stopped at the time, it had been cleaned,said the managing director.
“It was at about that time that the market price for particleboard sky-rocketed and we couldn’t produce a board, and now of course the price has gone down,said Ms Amporn. “We didn’t expect the negotiations to take more than six months, let alone 20!”
“The people at the [STA] factory had been in an unclear situation for more than eight years and then there was the fire,she continued. “They thought MP would walk away but we reassured them that we were in for the long term.We have kept the staff which were there and only brought in two of our own staff and we will look after them all – that is MP’s way, as well as being a commitment we made to the creditors.”
There is also no intention on the part of M P Particleboard to forget about STA.
“The employees loved their company and they have respect for STA, and its new owner.We are relocating the office closer to our production lines and we will move the signature of the princess who performed the original opening ceremony to the new one, with an explanation of the history of the factory,said Ms Amporn.
The addition of the new production facility has also meant a change of name for the products. From this January, the panels are known under the overall registered brand of Panel Plus, while Hat Yai Panel and M P Particleboard will remain as legal entities. Panel Plus will cover all products, whether made from bagasse or wood, and will also cover the value-added products such as melamine faced panels.
The two particleboard lines at Hat Yai are Siempelkamp ContiRoll continuous lines. Line one dates from 1992/3 and is six feet wide and 18m long, while line two, dating from 1995, is eight feet wide and 28m long.
Line two was seriously damaged by that fire and has been restored with many new parts from Siempelkamp in Germany, including a complete new control system as the control room was gutted, even requiring a new floor. This restarted last September.
“We had a lot of experts in from Siempelkamp and ATR,said technical development director Dr Kitti Terana-Sthiarphan, who has been involved with STA since its inception. “The press was repairable but the belts had gone and the infeed and outfeed areas were seriously damaged.
We also changed the glue dosing from gravimetric to a pump metering system to give more accurate control, using an Imal system, and took the opportunity to upgrade the wood preparation area to increase the capacity.Thus a new chipper, a double stream mill and a new screen were added.
“Our target capacity today for line two is 800m3 per day [around 270,000m3 per year] against an original design capacity of 630m3 per day,said Dr Kitti.
Line one had not run for some years before the takeover and required extensive refurbishment. The anticipated capacity for this line is 400m3 per day. At the time of my visit in early December, the press was stripped to its skeleton and full of men cleaning and repairing it. “All the sensors and controls have been changed and all the seals replaced, as well as the chains and sprockets. We will start up the press using an old belt and then fit a new one,said Dr Kitti.
“We started to renovate line one around June last year and hope to have it on-stream by April this year.We have changed the control system to a Siemens S7 because the original S5 is now obsolete. It will be like having two new lines in the end.”
The existing chippers for line one were renovated and given larger motors, while two new Maier knife-ring flakers were added. The dryer and burner were up-graded with a Körting sawdust burner added. Each line has a Steinemann six-head sander.
The Schelling angular cut-to-size system, originally installed after line one to cut panels for the STA furniture factory, is not now required and will be sold.
The original Ferrocontrol in-line sawing to produce 6ft x 8ft, 6ft x 4ft and 6ft x 5ft panels on line one has been replaced by an SHS system to increase capacity. Line two has a similar panel sizing system.
As a consequence of the way in which STA laid out the site, the two particleboard lines are in separate buildings, some distance apart, and this has meant some duplication. Thus each line has two short-cycle lines by Siempelkamp for melamine lamination, supplied when the panel lines were built.
The whole STA operation was a very large contract for Siempelkamp, which supplied all four panel production lines (MDF and particleboard) as well as the value adding facilities. It has had to wait many years to see these doing what they were intended to do–only with more capacity now.
I first visited the STA site at Hat Yai in May 1996 and was over-awed by the scale of the development and the short timescale in which it was executed. Unfortunately, before we could publish the story in WBPI, the company went into liquidation. I kept my notes and kept checking on progress until in 2001, I was able to report on a meeting with STA’s management, who were trying to steer the group out of receivership and keep some production going.
Finally, there is real progress and the future for the particleboard and MDF production at Hat Yai seems secure. In spite of the nightmares of bankruptcy, floods, theft of materials and components during the factories’ inoperative phases and a devastating fire, at least part of the STA dream of an integrated wood products site has survived and is now in good hands.
