Wednesday 5/12/21
BUSINESS

Loss of competitiveness ruins the Finnish pulp and paper industry

Stora Enso announces the closure of its plant in Kemi, 670 direct jobs destroyed. Another mill will be closed in Sweden.
The Veitsiluoto paper mill in Kemi. Photo: Stora Enso.
The Veitsiluoto paper mill in Kemi. Photo: Stora Enso.

Finland's pulp and paper industry continues to deliver bad news for the country's economy and its workers.

After the closure announced in August 2020 by UPM of a large paper mill in Jämsä, it is now Stora Enso, one of the largest Finnish companies and a world reference for the sector, which announces the closure of two of its factories, one of them located in Kemi (Finland) and the other in Borlänge (Sweden), with the loss of more than 1,100 jobs in total. However, since both are located in small cities (around 20.00 inhabitants for the Finnish, 50,000 for the Swedish), the negative impact on the local economy is likely to be much greater.

Behind the closure is, once again, the loss of competitiveness of Finnish plants in a sector in which they were once leaders.

The company headquartered in Helsinki released a statement Tuesday morning saying that "Stora Enso will start co-determination negotiations with employees at its Kvarnsveden Mill in Sweden and Veitsiluoto Mill in Finland regarding a plan to permanently close down pulp and paper production at both mills."

According to the company, the planned closures would take place during the third quarter of 2021 (July to September). They will affect directly 670 people in Finland (530 in Paper Division and 140 at the maintenance company Efora) and 440 people in Sweden.

The company points to the drop in demand for paper in Europe, which has "accelerated" due to the coronavirus pandemic, as the cause of the closure.

"As a result, there is a significant overcapacity in the European paper market, which has resulted in historically low price levels and challenged the cost-competitiveness of many paper mills," the company says.

Loss-making plants

According to the company, currently both Veitsiluoto (Kemi) and Kvarnsveden mills are loss-making, and "their profitability is expected to remain unsatisfactory also going forward."

Stora Enso's President and CEO Annica Bresky says: "Unfortunately, in the rapidly declining paper market, we need to adjust our production capacity to improve the competitiveness of our total paper business. This sadly means the closure of unprofitable assets. As communicated last year, we have reviewed our strategy and are shaping our business for accelerated growth and value. We are focusing on packaging, building solutions and biomaterials innovations, where we see strong growth potential."

The head of the Stora Enso Paper Division, Kati ter Horst, explains that the company has "examined several options" in an attempt to improve the financial situation for Veitsiluoto and Kvarnsveden mills. "However, none of these options have proved feasible in ensuring a cost-competitive future for the mills."

The Kvarnsveden paper mill. Photo: Stora Enso.

The Kvarnsveden paper mill, in Borlänge (Sweden). Photo: Stora Enso.

Improve earnings by 35 million

The planned mill closures would reduce Stora Enso’s paper production capacity by 35% to 2.6 million tonnes per year. Stora Enso’s annual paper sales would decrease by approximately 600 million euros, and the operational EBITDA (Earnings before interest, taxes, depreciation, and amortization) is expected to improve by approximately 35 million euros annually.

The share of Paper division of the group sales would be reduced to slightly above 10% after these planned closures.

Founded in 1922, Veitsiluoto Mill in Kemi, Finland has a total annual capacity of 790 000 tonnes on three paper machines. Two machines produce woodfree uncoated paper (WFU) for office use and one machine produces coated paper grades, mainly for magazines but also for packaging applications. In addition, the mill has an integrated chemical pulp mill (360,000 t/a), groundwood mill and a sheeting plant.

Kvarnsveden Mill in Borlänge, Sweden has two paper machines with a combined annual capacity of 565 000 tonnes of supercalendered (SC) magazine papers and improved newsprint, used in magazines, newspapers, catalogues, supplements and retail advertising. The mill has also an integrated softwood thermomechanical pulp (TMP) mill with an annual capacity of 900 000 tonnes.

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