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Kodak Closing Paper Plant in China; Lucky U.S. Future Is Unanswered

Kodak has made a decision to close its photo paper coating facility in Xiamen, China, sometime in April or May it was confirmed by Charles Smith, the firm's director of communications, film products group.

The plant has been in operation for about 10 years, according to Smith, and the shutdown "reflects overall lower industry volume and the need to adjust capacity." Employees were notified of the closing in late February.

The facility, located in the coastal province of Fujian, will continue to be used to slit and package paper being shipped in on master rolls from either of Kodak's two other paper facilities in Ft. Collins, Colo., and Harrow, England. The plant was also utilized as a film coating facility but that operation was discontinued some time ago.

It has been rumored that negotiations were taking place for China Lucky Film Corp. to purchase the Xiamen plant but Kodak has denied that there were discussions for a sale. Lucky is China's largest producer of photosensitive materials, according to its website, and in 2003 signed a $100 million, 20-year cooperative agreement with Kodak whereby Kodak would provide technical and manufacturing technology support.

The relationship between Lucky and Kodak has not been without its problems. Last Fall it was made known that the two firms were in dispute over the back-printed watermark on Lucky paper being sold in China in that it was similar to Kodak's and could confuse customers. It is understood that this matter has now been resolved.

More recently, it was made known that Royal Marketing, Chatsworth, CA., would be importing Lucky paper from China for sale in the United States which meant it would be competing with Kodak in this market. According to Smith, Lucky did not have the license to sell silver halide paper in the U.S. that had been made using Kodak technology. He said, "We believe that Lucky may be in violation of our intellectual property and licensing agreement."

It has been learned from separate sources that Lucky had shipped a supply of SA-5 digital paper to Royal Marketing for distribution here but that a decision had been made that it was not in compliance with the Kodak license and it was shipped out of the country, possibly back to China.

A spokesperson at Royal refused to make any comments at this time concerning any matters involving Lucky.