Mon, May 13, 2013 - Page 15 News List

Paper cuts hurting Finnish economy in digital age

AFP, HELSINKI

In the wake of mobile giant Nokia Oyj’s spectacular fall, another pillar of the Finnish economy is struggling to adapt to the digital age: the paper industry.

As the distribution of everything from magazines to airline tickets shifts online, major Finnish paper suppliers are scrambling to find new sources of revenue.

The industry employs about 40,000 people, a figure that has dropped by more than one-third over the past decade, but which still accounts for between 1.5 and 2 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, about 10 times more than the European average.

However, companies still struggle to find ways to make this advantage work for it in the global economy of today and tomorrow.

UPM-Kymmene Corp, the world’s biggest magazine paper maker, in January announced 850,000 tonnes in capacity cuts this year. The 7 percent reduction affected plants in Finland, Germany and France.

Another industry heavyweight, Stora Enso Oyj, in February lowered its capacity for newsprint paper to 475,000 tonnes, resulting in the closure of two Swedish plants.

A quick fix is unlikely to be around the corner.

“There is no significant change within sight,” Nordea Bank AB analyst Harri Taittonen said.

The industry is hoping growth in other market segments will offset the inexorable decline in printing paper. Stora Enso and Metsae Board Corp (formerly known as M-Real) are betting on packaging.

Stora Enso is focused on investing outside Europe. The group is pouring 1.6 billion euros (US$2.1 billion) into a pulp and cardboard plant in the Chinese region of Guangxi. In Uruguay, it is investing 1.3 billion euros with Chilean partner Celulosa Arauco y Constitucion SA in a giant pulp plant.

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 400 million euros to build a paper and labeling plant in the Chinese city of Changshu. At home, it is spending 150 million euros on the first refinery in the world that produces biofuels from crude tall oil, a byproduct of pulping coniferous trees.

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 and Metsae Board have lost more than half their worth.

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