【SCI View】Finland Pulp Market Mid-Year Review and Forecast

Finland Pulp Market Mid-Year Review and Forecast

According to data from statistical department of Finland, in H1 2019, Finland’s pulp output was 4,200kt, up 6% from the same period last year. Its pulp export volume was 2,190kt, up 9% from H1 2018. As the pulp production and sales went into a boom in H1 this year, the country’s enthusiasm for new pulp capacity investments was also on the rise.

H1 2019 Market Review

The main reasons for Finland’s pulp output increase in H1 were as follows: First, there was a wood supply shortage last year in Europe, and pulp mills operated at a low rate with decreased pulp output. Second, the number of unit turnarounds in Finland decreased compared with that from last year. As it is shown in table 1, only Kymi mill of UMP took overhaul in H1 this year while there were three pulp mills under maintenance in the same period last year.  

The reasons for the export volume increase were as follows: First, the supply was sufficient as the output in H1 increased. Second, the paper production output in Finland went down, and pulp mill prepared more pulp for merchant sales. According to statistical department of Finland, in H1, the country’s paper output was 3,100kt, which was the lowest since 1991.  Third, China’s paper market was sluggish in H1, and the SWP of Finland-origin held competitive advantage in price over those from Canada and Arauco. Therefore, traders and distributors increased purchasing volume for Finland SWP. As pulp sales in Europe slowed down, some pulp resources were redirected into the China market. According to data from China customs, in H1 2019, China imported 720kt SWP from Finland, and the import volume went up by 20% Y-O-Y.  

Enthusiasms in Finland’s Pulp Market Investments

Two of the three major pulp & paper conglomerates (UPM， Metsä Group and Stora Enso) had announced investment projects in H1 of this year. Metsä Fibre under the Metsä Group planned to invest 1.5 billion euros for the construction of a bio product mill in Kemi, Finland. The estimated capacity of the bio product mill is 1,500kt/a of SWP and birch pulp with an annual wood consumption of 7.6 million cubic meters. The UPM Group invested 2.7 billion USD for the construction of a pulp mill in Paso de los Toros, central Uruguay, and the designed capacity is 2,100kt/a of eucalyptus pulp.

Finland has also become one of China’s favorite pulp project investment destinations. Two pulp mills were set for construction this year. One is the Kemijärvi bio refinery backed by the joint investment of the CAMC Engineering Co. from China and Boreal Bioref Ltd. 950 million euros were invested for the construction of one bio refinery with a 500kt/a capacity of bio material and bio chemicals. Its products include dissolving pulp, SWP, pine tar, turpentine, MCC, C6, pentose as well as bio energy. The project is to be constructed during 2019-2020, and it is estimated to become operational in 2021. The other is the pulp and bio product plant located in Kuopio, hosted by Finnpulp under Hengan International Holding Ltd. The designed capacity of this unit is 1,200kt/a SWP plus 60kt/a tall oil and 1Twh/a bio electricity. This project was planned in H1 2018, and the construction commenced in 2019. Test runs and trail operations are planned in 2021, and it is expected to become fully operational by 2022.

According to SCI, China’s forest resources are scarce, and its wood chip supply for pulp production relies heavily on import. As the cost for production builds up, an increasing number of Chinese enterprises have centered their investments in countries with rich forest resources. Finland has a stable political environment for investment and rich softwood resources. Due to the uncertainties of the SWP import supply from the US during the trade conflict, Finland will become one of China’s major SWP import origins in the future.

H2 2019 Pulp Market Forecast

As it is shown in table one, in H2, there will be more pulp mill turnarounds in Finland than H1. Therein, Metsä Fibre plans to reduce its output by 75kt in H2, and no new capacity will be released this year. Considering that current the global pulp & paper industry is not very prosperous, SCI estimates the pulp output of Finland will slide down from H1 this year. On the export side, as the major export destination, China’s pulp market trading atmosphere during the traditional boom season is more insipid than expected, and the buying appetite at downstream paper mills was sluggish. Thus SCI estimates that Finland’s pulp export volume will be lower than that in H1.

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