Monday, January 11, 2010

Farewell to the 'Commie' Conquistadors: Tables Turned on Finnish Papermakers

A decade ago, a prominent U.S. paper executive used to refer to Finns as "communists" -- until a Finnish company bought his firm.

Now it's the Finns' turn to complain about America's paper industry, weak currency, and government subsidies.

"The forest industry countries that charge in dollars or have tied their currency to the greenback . . . have a decided competitive advantage," the Helsingin Sanomat wrote in a recap of the Finnish forest industry's past decade. "Exports to the USA have turned unprofitable."

Sounding like an old-school American papermaker, the Finnish newspaper says that currency devaluation used to be Finnish industry's "classic trump card" before the euro and that overseas markets were where "the excess tons were dumped" to protect European price levels. The trouble began when Finnish companies decided to buy North American mills even though they were "in poor-to-appalling shape" and had been "patched up with metal wire and duct tape."

"In 2000, the Finnish forest lords strode like conquistadors of old into North America," states a companion article in the Helsinki newspaper. Like Spain and Portugal of old negotiating a line of demarcation, executives from UPM and StoraEnso even held discussions in 2002 about which company should exercise leadership in the U.S. market for coated papers. But both have largely abandoned their attempts to colonize North America.

UPM closed its Miramichi, New Brunswick operations after seven unprofitable years and is down to two operating machines at the four-machine Blandin, MN mill. StoraEnso sold its North American assets to NewPage at far below their original purchase price, then wrote down its remaining investment in NewPage last year as the American company was on the brink of insolvency.

Declining demand for publication papers and the euro's strengthening versus the dollar both caught Finnish executives by surprise, the newspaper notes. It doesn't mention that last year's huge subsidy of U.S. pulp mills in the form of black liquor credits put another nail in the coffin of Finland's ailing pulp operations.

"Europe has now become the dumping ground where the new forest industry countries offload their surplus," the newspaper laments.

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Paul Jonker-Hoffrén said...

I think this is a very good post, it focuses on one of the problems that face the Finnish paper industry. The other problem is a lack of innovation and a (misguided) emphasis on labour productivity increases/process innovation on part of the labour union. Please see my blog on this issue.

Paul Jonker-Hoffrén said...

My blog's URL is I hope you find my views on the Finnish paper industry interesting!