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The Stora Enso wood industry group  plans to move its pulp production from Europe to new plants in South America, Asia and perhaps Russia.
In the long run it is financially more advantageous to produce pulp from fast growing eucalyptus than from Nordic tree species. This piece of news was published by Dagens Nyheter, one of Sweden's biggest morning papers.
The extensive enlargement and reconstruction of the Kvarnsveden paper mill in Sweden at a cost of 4.5 billion SEK will be Stora Enso's last big investment in the western world. When the new paper machine starts up at the end of the year capacity will increase from 675 000 tons to one million tons per year.
Such conversion is a process requiring a lot of time. Our long term strategy is to gradually move our pulp production from Europe and North America to countries in Asia, South America and perhaps Russia, says Mr Jukka Härmälä, the Group's Chief Executive Officer, to Dagens Nyheter.
Access to timber and increased demand for all kinds of paper products, from cardboard and newsprint to fine paper, will determine the future location of production plants. In the north it takes 70 - 80 years for coniferous wood to mature for conversion into pulp, but in the south the required time span is not more than 10 - 15 years for wood species like eucalyptus or acacia. Veracel in Bahia in North-Eastern Brazil is a good example. Forest planted there in 1994 is now ready for felling and at the end of the year the timber will make 900 000 tons of pulp in the new plant.
Unless industry adapts, profit margins will decrease in the future and consequently also opportunities for expansion and for further development.
Internally we discuss these matters a lot. We believe that demand for paper will increase, but profitability entirely depends on our cost structure.
In the coming years we are practically doomed to have high timber prices in Sweden, Finland and North America. We have no means of escaping that situation, even though productivity is continuously improving, says Jukka Härmälä.
Like in Brazil ten years ago Stora Enso has started buying land and planting forest in China. Most likely developments will be similar; when the forest is mature for felling in 10 - 15 years time it will become pulp in our own factory.
As part of its investment project in China Stora Enso has withdrawn from its big forest holdings in Indonesia. The project did not turn out to be what the group's management had hoped for.
Instead we have decided to invest in China where investments are more advantageous and the political situation is more stable than in Indonesia.
Does this mean that jobs will be reduced in Northern Europe in favour of China and South America?
This issue must be dealt with very carefully. Nothing will happen overnight, but evidently this is the long term trend. |
