The completion of the Leuna plant is indeed eagerly awaited, to see how profitable it will be and whether it will spawn further projects. Time will tell.
"The factory’s price tag doubled during construction from 550 million euros to 1.18 billion euros. Commissioning was delayed by over two years.
The chemical industry is cost-optimized. Production costs have been pushed as low as possible, and production chains are based on familiar processes – and those, in turn, are based on cheap crude oil, says Martin Ledwon, Marketing and Sustainability Director at UPM Biofuels and Biochemicals. There’s a risk in building something new. But then there’s also that exciting feeling in your gut that you might have hit a goldmine. We are the first producer of this scale in the bioplastics category"
That new machine at Tervasaari is indeed good news also for the two UPM specialty paper machines still operating there. It improves their cost competitiveness as well, as a new payer was found for part of the fixed costs of the factory area.
"*Things don’t look good right now, no matter how you look at UPM-Kymmene, Stora Enso, and Metsä Board. A sharp jump in pulp prices is not quickly visible, and pulp inventory levels are above the long-term average. There is an oversupply of cartonboards because consumers are still cautious. Timber is suffering from weakness in construction. *
When the market situation is combined with the high price of the key raw material, wood, Finnish forest companies are struggling. And the outlook is also subdued"
SCA is attempting a $50/tonne price increase for European pulp, effective February 1, 2025 (to $1530). In itself, the European price for long-fiber pulp has consistently been near its peak, which is good. The problem has been more about demand volume, to which SCA refers in that article, noting an improvement now due to declining inventories.
It’s surprisingly long that Tako operated in such an awkward location. A shame in itself, the factory was a great part of Finnish industrial history.
Now these are starting to drop. SE started co-determination negotiations (YT-neuvottelut), Tako will be closed. Perhaps UPM will also make its exit soon.
The root cause of the efficiency measures is the unprofitability of the mills due to the difficult market situation. In our opinion, the news was not surprising at all, as the demand for cartonboards, driven by goods consumption, has remained subdued, and at the same time, Metsä Board’s profitability has remained very weak.
Therefore, we consider the efficiency measures necessary. However, we are not yet convinced that the announced measures will be sufficient to raise Metsä Board’s result to a satisfactory level, considering the intensified competition in the cartonboard markets, the structurally tightened wood market in the Nordic countries, and the uncertainty related to the European economy.
Pulp market demand, down. Sawn timber demand, down. Energy prices down. Demand for the newest and trendiest, i.e., cartonboard, down. Wood prices will come down from their peak.
As we navigate this new normal for an indefinite period, this sector will accumulate debt, and the next major investment cycle I mentioned earlier will come in about twenty years.
Tako has been able to operate with those specifications for quite a long time. Without a cooperative background, it probably wouldn’t have been running for years now. Such individual factories, where raw material is brought from other factories, are becoming rare. In addition, logistics in general has been a significant challenge. Simpele seems to be safe still due to the investments made, but Kyrö is also on its last legs.
I don’t see anything special here other than the media not calling things by their right name.
There is a recession or depression in the world, however one wants to express it, and it just happens to hit Finland’s forest sector, and it’s having an impact elsewhere as well.
The big picture is in the background, and in weak moments it’s always forgotten, but it doesn’t disappear.
And if production isn’t shut down at times like these, then when?
Finland has nothing but wood, and that fiber is globally superior in strength. Forest management is the best in the world, and what is felled is replanted.
But can we accommodate 3 larger operators at the same time?
That early January stock jump without a reason… did someone know when it rose without a reason +20% and now another 10%.\nWhich parties are behind the trades?
Talouselämä discusses the possible effects of short-fiber pulp coming from South America on the carton markets in the coming years. The article is behind a paywall.
When hardwood pulp-based boards enter global competition, the Finnish forest industry will be in an even tighter spot than now, unless new tricks are invented.
Well, not necessarily entirely so. Metsä Board / M-real has, however, gone through quite a wringer on both sides of the financial crisis, so every mill must have contributed positively to the group’s profit and cash flow over time. Metsä Board also made an adjusted operating profit of EUR 386 million in 2021 and EUR 521 million in 2022, which likely required every mill to pull its weight. And I don’t really see reasons why Tako wouldn’t have been clearly in the black in a market situation where utilization rates are 100% and costs are significantly lower than current levels. Now the situation has fundamentally changed, and Tako simply no longer has the competitiveness in the prevailing playoff in the board market. A partial reason, of course, is that the mill’s location has limited operational development. However, I strongly suspect that given the scale of current challenges, the situation would be the same even if more could have been invested in the mill (though it’s another matter whether the company would have wanted to).
Yep, tough times for the upper end of the cost curve. The company has now publicly flagged Kyrö’s challenges. At Simpele, the mill structure is also the same, but the larger size of the machine, lower technical age, integration of mechanical pulp production (also at Kyrö), and more efficient energy production certainly help to some extent.
The context isn’t entirely clear, but if, as I suspect, it concerns Metsä Board’s A-shares, then it’s not worth following. As a very illiquid stock, it lives a life of its own. The more traded B-share has behaved very differently, and conclusions should indeed be drawn through the B-share.
This has been discussed numerous times, but one should not draw any conclusions about pulp prices from that European list price, as a customer-specific discount, typically in the tens of percentages, is deducted from list prices. The problem for softwood pulp producers is precisely the margin, as the price has decreased and wood costs have risen in H2’24. Volume (i.e., demand), on the other hand, has recovered to at least a tolerable level after a weak summer. The Chinese price gives a better indication of the current pulp price level, as market practices in China do not include the same kind of discount maneuvering as in Western countries.
Good analyses, however, the situation is tough as logistics costs have risen, along with wood price and energy.
For TAKO, everything, including pulp and chemi-thermomechanical pulp (CTMP), was brought in by trucks through the city center area. It’s also quite convoluted.
Two rather small specialized machines, of which at least one was idle for months at a time last year.
A gas boiler that can be easily converted to oil burning, but emissions might be higher.
This was expected when the Kaskinen factory was shut down and investments for other factories were announced.
The decision was probably already made then.
Historically a great place and the product is certainly good, but if it’s making a loss, nowadays one doesn’t wait long for better times, which is a pity.
The Takon factory property could be quite valuable if developed for other uses in a good market situation, as it is located in the center of Tampere by the river. Loft spaces, for example?
I’ve been thinking about this myself ever since the potential closure of this factory was reported yesterday. I’m not sure, but I think the building is protected, or at least partially protected, considering that the entire Tammerkoski area is a national landscape. So it’s unlikely to be demolished, at least.
Most of those former factories in the center of Tampere, such as Finlayson, Frenckell, and Tampella, are now mostly used as offices.
According to Aamulehti, the factory’s exterior is protected. Surely there will be purchase offers for it, and it won’t be left to decay in the middle of the city.
