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Metsae Group Makes Biggest Investment in Wood-Fueled Mill

April 23 (Bloomberg) -- Metsae Fibre Oy is planning the largest-ever investment in the Finnish forest industry -- a wood-fueled mill to make pulp and other bio-products as well as generate energy.

The company, a unit of the Finnish forest-industry cooperative Metsae Group, will invest 1.1 billion euros ($1.5 billion) in the facility, to be located at an existing mill area in Aeaenekoski, the Espoo-based company said in a statement today. It’s due to start up in 2017 and will produce 1.3 million metric tons of pulp a year. All the energy required at the mill will be generated from wood and no fossil fuels will be used, the company said.

“The global increase in the demand for high-quality softwood pulp is the most important driver for the investment,” Chief Executive Officer Kari Jordan said in the statement. “The investment will support Metsae Fibre’s growth and improve profitability in the long term.”

The mill will boost annual exports by about 500 million euros for the Finnish economy, which is struggling to revive after contracting in three of the past five years. The northernmost euro member’s forestry companies have reduced 28 percent of their workforce in the past decade and closed mills in response to overcapacity in the European paper market, according to the Finnish Forest Industries Federation.

Industry’s Courage

The plan is an “excellent example of the courage of our traditional industry to renew and look into the future,” Economy Minister Jan Vapaavuori said in an e-mailed statement.

“Investments like this will bear fruit through job creation and economic growth, and they will instill confidence in the future,” Labor Minister Lauri Ihalainen said in a statement. Aeaenekoski, with an unemployment rate of about 20 percent, has been one of the worst-hit regions in Finland, he said.

As online media has crimped demand for newsprint, the industry has sought to branch off into different markets. As well as tapping into growing pulp demand, UPM-Kymmene Oyj this year introduced a prototype car using wood-based materials in a bid to replace plastic and Stora Enso Oyj is building a 1.6 billion-euro consumer board mill in Guangxi as it bets China’s growing middle class will need more containers for foodstuffs.

Pulp Exports

Finnish pulp exports will rise as much as 6 percent this year while paper sales abroad are set for a fourth consecutive year of decline, research institute PTT forecast on April 3.

Metsae Fibre is owned by Metsaeliitto Cooperative with a 50.2 percent stake. The remaining shares are held by Metsae Board Oyj and Itochu Corp with 24.9 percent each. Metsae Group produces tissue, cartonboard, pulp, wood products and forestry services through its units.

The investment will provide an additional 1,500 jobs in the forest industry on top of the existing 1,000 at the site, Jordan told reporters in Helsinki. The final investment decision will be made early next year after environmental permit processes are completed, Metsae Group said.

To contact the reporter on this story: Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editors responsible for this story: Christian Wienberg at cwienberg@bloomberg.net Kati Pohjanpalo, Alastair Reed

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