Experts Warn of Pulp Overcapacity in Finland

Finland’s forest industry may need to reduce capacity again amid rising raw material costs and weaker market conditions affecting profitability, according to Juha Varis, senior portfolio manager at S-Bank, during the Talousaamu programme.

Wood prices stay high while demand for forest products grows more slowly than anticipated, prompting investor expectations for production cuts. The discussion escalated after Björn Wahlroos remarked in the Asiastudio podcast that a large modern pulp mill in Finland might close due to raw material shortages, sparking sector-wide debate addressed in Kauppalehti’s Talousaamu.

Overcapacity affects Europe’s forest industry in pulp, paper, and packaging segments, weakening competitiveness at some Finnish pulp mills, Varis noted. Investors anticipate capacity reductions, though specifics on affected companies, countries, or mills remain uncertain, with possible actions this year.

Stora Enso plans to list Swedish forest assets separately and consider Central Europe sawmill sales; UPM reviews plywood operations and explores graphic paper cooperation with Sappi. Stora Enso CEO Hans Sohlström highlighted integration of Finnish pulp with paperboard operations for profitability evaluations. UPM CEO Massimo Reynal stated challenges span northern hemisphere forest companies, making mill closures likely if conditions persist.

Wood supply issues hit older eastern Finland mills hardest, despite new investments like Metsä Group’s Kemi pulp mill operational since autumn 2023. UPM’s market pulp sites include Kaukas in Lappeenranta, Kymmene, and Pietarsaari; Stora Enso’s at Enocell in Uimaharju and integrated Oulu, Imatra, Varkaus, Heinola; Metsä Group’s in Joutseno, Kemi, Rauma, Äänekoski. Future outcomes hinge on raw materials, energy costs, and global demand, with restructuring possible.