Helsinki - In the wake of mobile giant Nokia's spectacular fall, another
pillar of the Finnish economy is struggling to adapt to the digital age: the
As the distribution of everything from magazines to airline tickets shifts
online, major Finnish paper suppliers are scrambling to find new sources of
The industry employs some 40 000 people, a figure that has dropped by more
than a third over the past decade, but which still accounts for between 1.5 and
two percent of employment in the country.
Paper plant closures have become commonplace across Europe as consumers use
the internet and digital devices for a growing range of services, sending
demand for printing paper tumbling.
Despite the fall in demand, the Finnish paper and forestry industry
maintains an advantage: an abundance of resources. Finland boasts four hectares
of forest per inhabitant, around 10 times more than the European average.
But companies still struggle to find ways to make this advantage work for it
in the global economy of today and tomorrow.
UPM-Kymmene, the world's biggest maker of magazine paper, in January
announced 850 000 tons in capacity cuts this year. The seven percent reduction
affected plants in Finland, Germany and France.
Another industry heavyweight, Stora Enso, in February lowered its capacity
for newsprint paper to 475 000 tons, resulting in the shutdown of two
facilities in Sweden.
A quick fix is unlikely to be around the corner. "There is no
significant change within sight," said Harri Taittonen, an analyst at
The industry is hoping growth in other market segments will offset the
inexorable decline in printing paper. Stora Enso and Metsae Board (formerly
M-Real) is betting on the packaging sector.
"There is still potential, because digital devices can't compete and
cardboard is a good alternative to plastic," said Taittonen, noting that
demand would rise in line with economic growth.
Stora Enso is focused on investing outside Europe. The group is pouring €1.6bn
into a combined pulp and cardboard plant in the Chinese region of Guangxi. In
Uruguay it's investing €1.3bn with Chilean partner Arauco in a giant pulp
The strategy will "increase the packaging and pulp sector as a part of
revenue, but not quickly," Taittonen said.
Industry observers doubt packaging will become a significant source of
China, for example, needs more packaging for its consumer products, but
"at the same time industrial production is moving to Asia, so it's a
question (for Finnish companies) of maintaining their production levels"
rather than growing them, said Lauri Hetemaeki, director of the European Forest
Institute in the eastern town of Joensuu.
Meanwhile, UPM has its sights set on bioenergy, combined with a strategy of
expanding into markets where paper demand is still growing.
The company has invested €400m to build a paper and labelling plant in the
Chinese city of Changshu. At home, it's spending €150m on the first refinery in
the world that produces biofuels from crude tall oil, a byproduct of pulping
Henri Parkkinen, an analyst at OP-Pohjola, sees energy and pulp as the two
sectors "with the biggest growth potential" for UPM.
Half their value
The global economic crisis has contributed to the sector's woes, wiping
billions off its value on the Helsinki stock exchange.
Since May 2007, shares in Stora Enso, UPM Kymmene and Metsae Board have lost
more than half their worth.
After posting mixed results in the first quarter, the stock has traded
sideways. Stora Enso is at its highest in more than a year since releasing its
results on 23 April, but the rise came against a backdrop of low expectations,
How to use the Finnish forestry resources and find the products of the
future are the two crucial questions facing the industry in the years ahead,
Hetemaeki of the European Forest Institute suggested it might follow a path
similar to Nokia, which once shed blue collar jobs as it moved away from manufacturing.
"Maybe Finland's strength will be in services linked to different
forestry products," he said.