Finpro: China wants to renew paper factories

Finpro, which aims to help Finnish companies in international markets, said in a press release that China is eager to use Finnish know-how to upgrade its paper plants. The organization formerly known as Finnish Export Association said that China plans to renew its pulp and paper manufacturing and will increase production by over 30% in connection with the latest five-year plan.

Finpro and Finnish Technology Industries have started a project to bring Finnish technology expertise in the field together in a single entity to take into the Chinese market. Investments of up to 40 billion Euro may be made for some 30-50 new paper machines in existing factory locations and modernization of old equipment. Of course a headline number in one thing and the actual rewards reaped from such projects are always very uncertain.

Metso (OMX: MEO1V) is seen as the most likely beneficiary of continued investments in the field in China. The company is already doing large-scale business there and its stock market value reflects expectations of continued strong order inflow. Metso advanced 1% today.

Finpro aims to focus on aiding smaller companies to be able to take part in the push. Vaahto Group (HEL: WAT1V) was down over 10% in a continued sell-off after it reported of 2.9 million Euro operating loss for 1 September 2011-29 February 2012 period on Friday.

Many Chinese travelling to the Nordic region notice the superior quality of local paper as one of the very few things that clearly stands out compared to home. In historical context this is of course somewhat perplexing. I personally have been asked by several local commercial chambers in the Middle Kingdom on the matter and what it would take for them to be able to get into projects alleviating the situation as well in the years past during my long stays there.

While it is possible to acquire quality paper in China, it tends to be pretty expensive (the moister environment in the Southern regions also affects perception). The raw material availability is typically a concern for pulp mills, something what the companies have been tackling with large scale plantations and raw timber imports from Russia.

Of course pulp is also imported particularly from South America and companies from Nordic regions take part in that trade. Coated paper imports have already been declining so the impact on Nordic pulp & paper sector companies in general is ambiguous depending on the actual investment mix and how the particular company is positioned.