UPM Exiting Brown Sack Paper Business

Aug. 9, 2007 - UPM said that it will permanantly shut down PM 6 at its Tervasaari mill in Finland on August 10. The machine produces brown sack paper and packaging paper.

The closure marks UPM's exit from brownsack paper production.

The mill will also stop production of SAP special chemical pulp August 13, UPM said.

"The closure is a consequence of changes in the brown sack paper business environment. Production and consumption of brown sack paper is moving toward Eastern Europe and Russia, where wood, energy, and labor costs are lower," said General Manager Eero Kuokkanen. "In Western Europe consumption of brown sack paper has not increased, while in its main areas of application, cement and animal food, deliveries have been replaced by bulk transportation. This has decreased the profitability of our sack paper production.

"At the Tervasaari mill, we will respond to these changes by improving the competitiveness of our label and packaging paper production. The steps we have already taken are the renewal of PM8 last year and the investment for improving the quality and efficiency of PM 7 this year," Kuokkanen said. "In particular, the new pulp bleaching line, which will start operation in September, will allow us to increase the use of our own pulp in the label and packing paper production."

UPM's Tervasaari mill produces label release paper on two machines—PM 8 and PM 5, with the combined annual capacity of 250,000 tonnes. In addition, PM 7 produces envelope and bag papers, as well as special papers for technical applications, with annual capacity of 100,000 tonnes. Over 90 percent of the Tervasaari mill's production is exported.

There are about 700 employees at the Tervasaari mill, 80 of which associated with PM 6. Some of these workers will transfer to other departments at the paper mill and the rest will benefit from a pension scheme, UPM said.


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