Finnish Papermakers Embrace Online World as Production Slump Ends

 

According to a report this past week by Bloomberg Business Magazine, New York City, N.Y., USA, Finland’s paper industry is making a comeback after a decade-long decline. But it won’t be by making paper. 

The industry is reinventing itself—140 years after the first pulp factory gave birth to Finland’s chemical forest industry. Paperboard boxes and wood-based chemicals now stand to become staples as the industry crippled by the emergence of the Internet embraces opportunities brought by online shopping and renewable fuels. 

The companies are starting to invest after years of cutbacks. Stora Enso Oyj and Metsa Board Oyj are betting on renewable packaging as online shopping grows. Stora is building a consumer-packaging mill in Guangxi, southern China, to cater to a growing middle class in the world’s second-largest economy. 

"We’re exploring possibilities to expand the top line," Stora Enso CFO Seppo Parvi said in an interview on February 25. "The more people order online, the more they need packaging." 

Paper production declined 39% over the past decade, prompting the country’s largest forest companies—Stora Enso, UPM-Kymmene Oyj, and Metsa Group—to jettison almost half their employees. Forestry’s contribution to the northernmost euro member’s industry shrank to 11% in 2014 from 17% in 1990. Finland now has just one newsprint machine still in operation—one run by UPM in Kaipola. 

These woes, coupled with Nokia Oyj’s struggles, contributed to a drop in Finland’s economic output, which still remains below its 2008 level. Gross domestic product shrank for a third consecutive year in 2014 and now Russia’s slowdown is adding to the pain. 

In one of the most dramatic turnarounds, Metsa Board is exiting paper production after 133 years. At Stora Enso, paper’s share of revenue fell to 38% in 2014 from 62% in 2006. It will drop to 30% in the next two or three years, according to Parvi. "Paper demand will fall about 3% each year, which "is slower than before" and "manageable," he said. 

Metsa Group is set to confirm the industry’s biggest single investment in coming months, a EUR 1.1 billion ($1.2 billion) wood-fueled mill in central Finland to make pulp, other bio-products, and generate energy. UPM is also expanding into energy, using tree stumps, bark, and branches to produce biofuels. In neighboring Sweden, Svenska Cellulosa AB has found a niche in selling tissue products to consumers. 

Stora Enso is already generating new revenue. Its renewable packaging unit contributed a third of its sales last year, compared with about a fifth in 2006. At UPM, bio-refining accounts for about a fifth of revenue. 

While future business may include using pulp-extracted sugars as sweeteners or making car-parts from hardened biomass, for now paper, carton, sawmill goods, and pulp will remain the export backbones. 

"There are yet few volume products among the new innovations," said Jyrki Kangas, professor of forest bioeconomy at the University of Eastern Finland. While it’s difficult to pinpoint which products will emerge as new mainstays, Finland is set to benefit from a global drive to replace oil-based products with renewables, Kangas said. 

"The long-term trend is clear," he said. "Wood use will increase."