Finland hopes for new growth from shrunken forest industry

Wed Mar 30, 2016 2:07am EDT
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By Jussi Rosendahl

LAPPEENRANTA, Finland (Reuters) - It has created a modest 200 jobs in a Finnish forestry industry that has lost around 20,000 in the past decade, but UPM-Kymmene's new biofuels plant offers long-awaited growth and hope.

The 180 million euro ($200 million) investment in wood-based renewable fuel production marks the first major case of transformation in a sector that has long been managing decline.

UPM still makes 50 percent of its revenue from sales of paper, and biofuels can't yet plug a gap created by consumers in European export markets shifting from magazines and newspapers to smartphones and tablets.

But the new plant, a global first, is already breaking even after little more than a year in operation in the eastern town of Lappeenranta; its success now needs to be replicated across the economy if Finland is to drag itself out of stagnation.

The government regards forestry products, traditionally Finland's industrial and export backbone, as vital to its hopes of promoting economic growth while simultaneously pursuing tough labor, budget and healthcare reforms.

"Making new products from wood is a big thing for the future of the Finnish economy. Finland still relies on the forests, it is our foundation stone," said Employment Minister Jari Lindstrom.

With only 5.5 million people, Finland's export-driven economy has suffered three years of recession due largely to the demise of Nokia's mobile phone business, crisis in neighboring Russian markets and the decline of the forestry sector.

Three quarters of Finland's land is under forests, so the industry's problems have hit hard - the OECD says they have shaved 0.75 percent off gross domestic product since 2007.   Continued...

A maintenance truck seen at UPM-Kymmene's biofuel plant in Lappeenranta, Finland, March 9, 2016.  REUTERS/Jussi Rosendahl