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Cover Story: Swedish Report: Sweden – the little giant in pulp and paper

It is true, at least in Sweden, that while the IT and telecom sectors are like a roller coaster, the pulp and paper industry is behaving like a train on a steady course with just small hills and valle…

It is true, at least in Sweden, that while the IT and telecom sectors are like a roller coaster, the pulp and paper industry is behaving like a train on a steady course with just small hills and valleys. Despite a decline in production and sales during 2001, this sector is still profitable. The Swedish pulp and paper industry is today stronger than ever on the international arena and very, very competitive.

Behind this situation, there is a long tradition, supported by both philosophy and strategy which has resulted in a strong structure for the business, as well as continuous investments in new technology with upgrades of existing mills (some 25 billion SEK in environmental measures over the last 25 years).

Despite being a small country, for those involved in the pulp and paper industry, little Sweden is a giant.

Sweden in a nutshell

Some facts might be interesting in connection with the Swedish pulp and paper industry:

Sweden is just 2,000 km from north to south and about 400 km wide. It stretches from 570 to 680 latitude north. As a reference, the corresponding latitudes in North America would be from the inlet of James Bay in Hudson Bay to Baffin Island. The total land area is just 410,000 km2 and the population just about 8,900,000. Out of these km2 about 68% is forest (some 280,000 km2), so it is not strange that the industry connected to this sector has become so dominant. It has long been the single most important business sector in Sweden.

The numbers of employees total approximately 180,000, if all sectors involved in the industry are counted. Add to this figure some 54,000 employed abroad by Swedish pulp and paper companies. This sector also accounts for about 20-25% of the total investments in the Swedish industry overall. The net export figure is 88 billion SEK, which is equal to 15% of the total Swedish export. [ed. note: At the time of publishing, the Swedish Kronor was equivalent to .166094 CAD — therefore 88 billion SEK is worth approximately $14 billion Canadian.] Another figure of interest — with just less than one percent of the total forest in the world, Sweden is No.3 in pulp production and No.4 in paper production.

In harmony with nature

Today, the Swedish pulp and paper industry companies are in the forefront when it comes to research, development and application of new methods that are adapted to the natural resources. The industry is today in harmony with nature and in about 25 years it has changed from being environmentally destructive to environmentally friendly. Some 10% of the forest land is set aside, voluntarily, as part of nature preservation at felling time and as natural parks and nature reserves.

The environmental awareness came early in Sweden, at least about 25 years ago. Even then, it was understood that the goal was to be “clean at source”, i.e. to minimize the pollutants by process changes. First to advocate this policy were the environmental movements; when the private sector became involved, changes started to speed up. Over the last eight to ten years, most emissions to air and water have been reduced by 90-95%. The expression “closed mill” is no longer anything impossible and unreachable — it is more or less here or just around the corner.

Cornerstones

The single most important factor for all of this is, of course, the forest, which the industry has been able to use so effectively. The reforestation has been doubled over the last 650 years and today the annual growth in the forest is exceeding felling with some 30 million m3sk (m3sk=forest cubic meters solid volume over bark, i.e. the volume of the whole tree trunk from stump to top, including bark).

Another factor of importance has been the close cooperation between all players in the business, as well as the intense market competition.

The forests in Sweden are privately owned to almost 80%, with individual ownership of 50% and private companies, 25%. The state has a share of 18%. The most common tree is the spruce (43%), followed by the pine (34%) and with the birch (11%) on third place.

The companies

The consolidation of the industry in Sweden has resulted in structures with big pulp suppliers, big paper and board producers and a lot of niche suppliers producing a number of very special paper products. These range from soft tissue and fluff products, special paper products, soft and hard board products and a never-ending stream of packaging products.

Sweden alone has five companies in Europe’s top ten Nordic bleached market pulp. There are also about 50 large companies with many subsidiaries.

Pulp producers

All in all, there are 20 pulp mills supplying market pulp, both ground wood, sulphate, sulphite and CTMP. The integrated pulp mills count for another 18. Of these, 21 are located around the Swedish coastline, mainly on the east coast with production figures ranging from about 30,000 to almost 700,000 tons annually. The six largest mills account for close to 60% of the total capacity. Sdra Cell (No. 2 in the world after International Paper) is the largest market pulp producer with three mills: Vr, Mrrum and Mnsters. Sdra is a privately-owned association with 34,000 members. The other big players are Stora Enso, with Skutskr and Norrsundet; Rottneros, with four mills producing ground wood, sulphate, sulphite and CTMP pulp; and finally Korsns with their Gvle mill. Stora Enso and Rottneros are on the stock exchange, while Korsns is owned by Kinnevik and is one of the biggest forest owners in Sweden.

Paper products companies

The number of paper mills is close to 50 and the big 12 account for 64% of total capacity. Paper products include everything from fluff and tissue, fine papers, packaging and board products. In this group are both very big players and small niche companies. The leader of the pack, production-wise, is Stora Enso with six sites in Sweden [ed. note: see separate comments by deputy CEO Bjrn Hgglund]. Holmen, noted on the stock exchange has four mills: Hallsta with mechanical printing paper, Braviken producing newsprint, Vargn with MWC and LWC paper grades and, finally, the Iggesund mill for virgin fiber paperboard and a specialist conversion plant located at Strms Bruk.

The oldest paper mill is Klippan, today with three units after a recent take-over of Mlndal from Stora Enso. Klippan started operation back in 1573 and ranks as No. 2 in Europe on coloured fine paper. It produces 30,000 tons of sulphite and maintains a small handicraft paper mill at Lessebo.

There are four players producing tissue and fluff products, first is SCA with units in Edet and Falkenberg, second is Mets-Tissue with mills in Katrinefors, Paulistrm and Nyboholm. Both companies are on the stock exchange with SCA ranking No. 1 in Europe and Mets-Tissue No. 5 in tissue and fluff. [ed. note: see also comments by SCA]. The other two companies are Munksj, with a unit in Jnkping based on recycled fibers, and Duni, with three mills in Kisa, Dals Lnged and Skpafors. Munkjs became a subsidiary of Jefferson Smurfit Group this fall and Duni is owned by two investments funds. Munksj has a further number of units in Sweden and a pulp mill at Aspa, a forerunner in environmental care.

Packaging is another big area and includes Kappa Packaging with the Pite mill for kraftliner and a further nine units in Sweden producing customer-oriented packaging solutions. SCA is also a big player in packaging products with mills in five other places and own production as well as market pulp at the stand mill. Wja Frantschach, owned by the Mondi Group, has a sack paper production line. The only state-owned company, Sveaskog, has a board paper mill at Frvi which is integrated with a pulp mill.

There is one Swedish mill owned by Canadians, that is Djupafors Cascade mill which produces some 60,000 tons of folding boxboard from chemical pulp and own production of ground wood pulp.

Making money

In addition, there is one more unit that has a very special assignment and that is the former Tumba Bruk (today called Crane) which makes currency. The pulp is made of cotton comber and a complete line makes (and
prints) the paper notes and other security papers. Formally Sveriges Riksbank (Bank of Sweden) owns the company but since the Riksbank has new tasks to perform, American Crane & Co. (which also has the responsibility of making US-dollar notes) has signed an agreement to take over the company.

Altogether, the above examples indicate a number of mills forming the important pulp and paper industry in Sweden, which is proceeding on its track to become an even more competitive player in the world market.P&PC

ke Nordlander, NordCom International AB. ke is, among other things, performing international reports on current events within the P&P and shipping industry.

Note: All figures are with reference to the Swedish Forest Institute and the companies mentioned in the article.