THE PROSPECTS OF THE PULP MARKET
In the next few years, the pulp market will be shaped by new investments worth millions, corporate acquisitions and the attempts of Chinese companies to get to the sources of fibre. THE COMPETITION OVER FIBRE
MARKKU RIMPILÄINEN photo PETRI LYYTIKÄINEN
The consulting and engineering firm ÅF Pöyry estimates that demand for market pulp will grow by approximately 2.5 per cent a year over the next five years. As 2030 draws near, the growth in demand will slow down, but remain in the ballpark of two per cent. “The demand for market pulp continues to have a posi- tive drive behind it. Demand is growing particularly in the developing markets, such as in China, where the growth of the middle class is increasing the demand for consumer goods,” says Tomi Amberla , Principal of Pöyry Manage- ment Consulting. Major pulp producers are preparing for the expected growth by investing in increasingly efficient mills and new know-how. This is not the only interesting development in the mar- ket. Many companies are pursuing improved competitive- ness through corporate acquisition. The import restric- tions on recycled paper imposed by China have made the Chinese forest industry look for new fibre sources. THE SIZE OF INVESTMENTS HAS DOUBLED The pulp industry’s forthcoming investments are now clearly bigger than before. “Over the past 10–15 years, the size of typical invest- ments has doubled,” says Teija Konttori , Managing Di- rector of the management consulting firm Vision Hunters. Mills soon to be built in South America will achieve an annual production of over two million tonnes. Their
construction costs will amount to more than two billion USD. Konttori believes that it is precisely the industry’s big- gest companies that will continue to carry out the largest investments. “A company needs to be big enough and to have a strong balance sheet to be able to implement investments worth billions.” Large new mills also require new kinds of machines. “Forestry based on cultivated eucalyptus trees has enabled the construction of large-scale units, and this has also accelerated the development work of equipment sup- pliers at the same time. The size of equipment has clearly grown,” says Ilkka Hämälä , President and CEO of Metsä Group. Metsä Group also intends to make use of the develop- ment work carried out by equipment suppliers. In Kemi, Finland, the company is planning to replace the old pulp mill with a modern bioproduct mill, which would pro- duce 1.5 million tonnes of pulp a year. “We are looking at a clear economy of scale. We can dou- ble the production with fixed costs that are only slightly higher than the current ones,” says Hämälä. PERFORMANCE LEAPS ARE STILL NEEDED Hämälä says that Metsä Group has selected a strategy which focuses on the development of its own operations and on investments in mills that are as efficient as possible.
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