Continued long-term decline in graphic paper demand combined with weakened economic outlook require prompt actions to ensure performance in UPM Communication Papers. In a declining market, competitiveness in company operations as well as local operating environment is of utmost importance.
In 2020, the COVID-19 pandemic related lockdown measures have caused a short-term demand disruption in the graphic paper market. While there are early signs of normalisation in paper demand after lockdowns, the ensuing economic outlook has deteriorated globally.
UPM Communication Papers plans to permanently close its Kaipola mill in Finland latest by the end of 2020. The planned closure of UPM Kaipola’s three paper machines would impact approximately 450 positions and lead to a permanent reduction of 720,000 tonnes of graphic paper capacity, thereof 450,000 tonnes of newsprint and 270,000 tonnes of coated mechanical paper.
“This is devastating news to Kaipola. While Kaipola has competent teams and well operated machines, external factors such as high logistics costs, regulatory and tax burden, high cost of labour and increasing fibre costs make it the least competitive among UPM’s paper mills,” says Winfried Schaur, Executive Vice President of UPM Communication Paper.
Further, UPM Communication Papers plans to reorganise and streamline its business function teams across Europe and North America. These plans would affect approximately 170 positions in more than 10 countries.
“We in UPM are very committed to the paper business and to serving our customers. With our assets, people and strategy, we are confident that we can run a profitable business for years to come. It is good to bear in mind that the world markets for graphic papers still exceed 70 million tonnes, whereof more than 20 million tonnes in Europe. Even if declining, these markets offer profitable business and good cash flow for mills with a competitive cost structure.”
“In a mature business, it needs relentless efforts to look after cost competitiveness and to make sure that our assets are in efficient use in all circumstances. Also, the operating environment does have a significant impact on the future success of each operating location. Long-term predictability of the regulatory environment is elemental to attracting investment and maintaining jobs,” says Schaur.
