Declining demand continues to hit Finnish paper industry

The shrinking demand for graphic papers claimed another major industrial victim on Tuesday, as Helsinki-based forest industry giant Stora Enso announced plans to close one of its main plants in northwest Finland.

Mika Lintila, minister for economic affairs, said the termination is the largest in the Finnish forest industrial history.

The closing of the Veitsiluoto plant in the town of Kemi will reduce the paper production capacity of Stora Enso by a third to 2.6 million tons per year.

The Veitsiluoto plant, which started production in 1922, was one of the largest paper mills in Finland. With its closure, Kemi will lose more than 700 jobs directly.

Stora Enso also announced the closing of a paper mill in Sweden.

Prime Minister Sanna Marin said the government will launch a support program to alleviate the impact.

Analyst Antti Viljakainen of the Finnish analysis company Inderes told Finnish news agency STT that some other major paper producers in Europe had already reacted to the latest decline in demand for paper.

The company had no other alternative, said President and CEO of Stora Enso Annika Bresky in a press release. "We must accommodate to the market situation."

Last summer, another Finnish paper giant United Paper Mills closed its Saynatsalo plywood plant, which had been in production since 1914, in the city of Jyvaskyla in central Finland. It also shut its Chapelle paper plant in France.

In January this year, Stora Enso posted a slump in sales and profits for the fourth quarter and the whole year of 2020.

Sales in 2020 declined to 8.55 billion euros (10.29 billion U.S. dollars), from 10.06 billion euros (12.11 billion dollars) in 2019.

Operational earnings before interest and taxes in 2020 decreased to 650 million euros (783 million dollars) from 1.003 billion euros (1.207 billion dollars) in 2019.

"The accelerated structural decline persists in the paper business, leading to overcapacity and severe price pressure", Bresky said back then.

Stora Enso's decision was not surprising and might not be the last of its kind.

With the replacement of paper by electronic means, the global demand for graphic paper has kept declining at an annual rate of 5 percent for several years, and the COVID-19 pandemic accelerated the drop, according to Finnish analysts.

Pellervo Economic Research PTT, a Finnish think tank, said last week in its forecast that China's economic growth and demand for paper products will be the main impetus for the Finnish forest industry to withstand the impact of the COVID-19 pandemic.

While the paper industry is now declining, the pulp and cardboard sectors and the new usage of pulp such as textiles, are regarded as promising. Finnish analysts said cardboard and paper for packaging will be the core of the future paper industry.

According to data firm Statista, the Finnish pulp and paper industry is one of the key revenue earners in the country, accounting for around 20 percent of its total exports, with the euro area and Asia being the two largest destinations.

by Juhani Niinisto HELSINKI, April 21 (Xinhua)