Ghost Towns Dot Finland as Forestry Collapse Threatens Growth
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By Kati Pohjanpalo and Diana ben-Aaron
March 13 (Bloomberg) -- Juha Pikkarainen has been out of work since Stora Enso Oyj shuttered the world’s northernmost pulp mill last year in Finnish Lapland, heralding the end of an era.
“It’s hopeless trying to get a job here now,” said the 55- year-old power-station control-room operator, who followed in his father’s footsteps in 1979 when he started at the Kemijaervi mill of Europe’s largest papermaker. “We’ve lost all faith in the big companies.”
Finland’s forest industry -- once a pillar of the Nordic nation’s economy -- may be collapsing as the global recession stifles demand and exacerbates years of plunging prices for commodities and products.
While the nation’s telecommunications industry, led by mobile-phone company Nokia Oyj, and makers of machinery will likely recover when the economic crisis subsides, forestry may be beyond resurrection. Its decline threatens growth prospects, drives up unemployment and is creating a rust belt in rural areas that offer few alternative sources of employment.
“When jobs vanish, it’s certain that those who want to work will move away,” said Timo Tyrvaeinen, chief economist at Aktia Bank Oyj in Helsinki. “We have ghost towns, lost villages -- lots of them -- throughout the country.”
The forest industry’s share of Finland’s economy has halved in three decades to 3.8 percent as exports fell to 15 percent of total shipments from 42 percent. In January, production slumped 35 percent from the same month a year earlier, the most on record, Finland’s statistics agency said March 10.
Cutting Demand
Increased use of the Internet is cutting demand for pulp and paper, which account for about two-thirds of industry revenue, according to the Finnish Forest Research Institute. This has helped drive down the price of newsprint in Europe by 19 percent to 495 euros ($639) per ton in the seven years since December 2001. In addition, companies including Metso Oyj, the world’s biggest manufacturer of papermaking machines and rock crushers, are moving production to countries where labor and other costs are lower.
Stora Enso and UPM-Kymmene Oyj, Europe’s second-largest paper company, shut five Finnish mills in the last four years, cutting their employment in the country by 28 percent since 2005. So far this year, they have temporarily laid off more than 6,500 of the remaining 22,000 workers.
“Even if these companies survive, it might be that the Finnish forest industry won’t,” said Markku Kuisma, a history professor at the University of Helsinki.
Pine forests cover two thirds of Finland, whose $235 billion annual gross domestic product and population of 5.3 million make it economically and demographically the size of Minnesota.
Ports, Icebreakers
In the 1950s and 1960s, the government boosted the industry by building roads, railways, ports and icebreakers, plowing paths through the frozen sea for ships to carry paper to Europe year- round, Kuisma said. By the 1960s, the government directly controlled about a fifth of forest-product exports.
Communities swelled wherever the industry spread. In 1964, the government built the pulp mill in Kemijaervi, a lakeside village on the Arctic Circle that didn’t have any other manufacturing, as part of an effort to industrialize the rural north and east. Pikkarainen’s father moved there that year to work at the mill, which employed as many as 500 people at its peak in the 1960s and three decades later became part of the newly created, publicly traded Stora Enso, a merger of Finnish and Swedish papermakers.
Metso is one of many companies that grew with Finnish forestry, benefiting from years of investment and orders. It has made about half the paper machines that are still in operation around the world, and about a third of all its employees work in Finland.
Asian Investment
In January, Metso started talks on cutting as many as 1,100 of the jobs in its paper-machines unit and said new investments in pulp and paper machinery will fall by a third or more compared with the level from 2004 to 2008. Most of the new investment will be in Asia and South America, the company said.
The government last year resisted calls from unions and workers to stop the closure of Kemijaervi’s mill. The coalition, led by Prime Minister Matti Vanhanen, said it didn’t want to interfere with free markets by preventing the demise of an industry that couldn’t cope on its own.
The state has since identified Kemijaervi as one of several areas of “sudden structural change” and given it 17.4 million euros ($22.2 million) to create employment opportunities and boost entrepreneurship.
“When the mills are shuttered in bad times, people don’t find other jobs,” said Eero Lehto, chief economist at the Labour Institute for Economic Research in Helsinki.
Rising Unemployment
Finland’s economy shrank 1.3 percent in the final three months of 2008 from the previous quarter -- its biggest drop in 17 years -- pushing the Nordic nation into a recession. The government predicts the jobless rate will exceed 8 percent this year compared with 6.4 percent last year, and the economy may contract as much as 4.4 percent, Finance Minister Jyrki Katainen said Feb. 24. Economic expansion had surged as high as 6 percent just two years ago because of foreign demand for machinery such as elevators made by Kone Oyj and Nokia’s mobile phones.
As paper mills close, a growing number of young people are moving to cities from northern rural areas to find work. Kemijaervi has shrunk a third to 8,600 residents since 1981, while Helsinki has grown 17 percent to 563,000 inhabitants. The shift has left roads, bridges and other infrastructure unused in smaller towns, while new highways and homes now need to be built in the cities, said Hannu Katajamaeki, professor of human geography at the University of Vaasa.
The government has had to cut services in places people are fleeing, which in turn speeds up the exodus. Last year, it closed 90 elementary schools, mostly in the north.
“Small towns are very vulnerable,” said Pertti Keraenen, chairman of the Lapland district of the opposition Left Alliance. “When a big employer stops operations, even decades won’t help plug that hole.”
To contact the reporters on this story: Kati Pohjanpalo in Helsinki at [email protected]Diana ben-Aaron in Helsinki at [email protected]
Last Updated: March 12, 2009 18:01 EDT
Share | Email | Print | A A A
By Kati Pohjanpalo and Diana ben-Aaron
March 13 (Bloomberg) -- Juha Pikkarainen has been out of work since Stora Enso Oyj shuttered the world’s northernmost pulp mill last year in Finnish Lapland, heralding the end of an era.
“It’s hopeless trying to get a job here now,” said the 55- year-old power-station control-room operator, who followed in his father’s footsteps in 1979 when he started at the Kemijaervi mill of Europe’s largest papermaker. “We’ve lost all faith in the big companies.”
Finland’s forest industry -- once a pillar of the Nordic nation’s economy -- may be collapsing as the global recession stifles demand and exacerbates years of plunging prices for commodities and products.
While the nation’s telecommunications industry, led by mobile-phone company Nokia Oyj, and makers of machinery will likely recover when the economic crisis subsides, forestry may be beyond resurrection. Its decline threatens growth prospects, drives up unemployment and is creating a rust belt in rural areas that offer few alternative sources of employment.
“When jobs vanish, it’s certain that those who want to work will move away,” said Timo Tyrvaeinen, chief economist at Aktia Bank Oyj in Helsinki. “We have ghost towns, lost villages -- lots of them -- throughout the country.”
The forest industry’s share of Finland’s economy has halved in three decades to 3.8 percent as exports fell to 15 percent of total shipments from 42 percent. In January, production slumped 35 percent from the same month a year earlier, the most on record, Finland’s statistics agency said March 10.
Cutting Demand
Increased use of the Internet is cutting demand for pulp and paper, which account for about two-thirds of industry revenue, according to the Finnish Forest Research Institute. This has helped drive down the price of newsprint in Europe by 19 percent to 495 euros ($639) per ton in the seven years since December 2001. In addition, companies including Metso Oyj, the world’s biggest manufacturer of papermaking machines and rock crushers, are moving production to countries where labor and other costs are lower.
Stora Enso and UPM-Kymmene Oyj, Europe’s second-largest paper company, shut five Finnish mills in the last four years, cutting their employment in the country by 28 percent since 2005. So far this year, they have temporarily laid off more than 6,500 of the remaining 22,000 workers.
“Even if these companies survive, it might be that the Finnish forest industry won’t,” said Markku Kuisma, a history professor at the University of Helsinki.
Pine forests cover two thirds of Finland, whose $235 billion annual gross domestic product and population of 5.3 million make it economically and demographically the size of Minnesota.
Ports, Icebreakers
In the 1950s and 1960s, the government boosted the industry by building roads, railways, ports and icebreakers, plowing paths through the frozen sea for ships to carry paper to Europe year- round, Kuisma said. By the 1960s, the government directly controlled about a fifth of forest-product exports.
Communities swelled wherever the industry spread. In 1964, the government built the pulp mill in Kemijaervi, a lakeside village on the Arctic Circle that didn’t have any other manufacturing, as part of an effort to industrialize the rural north and east. Pikkarainen’s father moved there that year to work at the mill, which employed as many as 500 people at its peak in the 1960s and three decades later became part of the newly created, publicly traded Stora Enso, a merger of Finnish and Swedish papermakers.
Metso is one of many companies that grew with Finnish forestry, benefiting from years of investment and orders. It has made about half the paper machines that are still in operation around the world, and about a third of all its employees work in Finland.
Asian Investment
In January, Metso started talks on cutting as many as 1,100 of the jobs in its paper-machines unit and said new investments in pulp and paper machinery will fall by a third or more compared with the level from 2004 to 2008. Most of the new investment will be in Asia and South America, the company said.
The government last year resisted calls from unions and workers to stop the closure of Kemijaervi’s mill. The coalition, led by Prime Minister Matti Vanhanen, said it didn’t want to interfere with free markets by preventing the demise of an industry that couldn’t cope on its own.
The state has since identified Kemijaervi as one of several areas of “sudden structural change” and given it 17.4 million euros ($22.2 million) to create employment opportunities and boost entrepreneurship.
“When the mills are shuttered in bad times, people don’t find other jobs,” said Eero Lehto, chief economist at the Labour Institute for Economic Research in Helsinki.
Rising Unemployment
Finland’s economy shrank 1.3 percent in the final three months of 2008 from the previous quarter -- its biggest drop in 17 years -- pushing the Nordic nation into a recession. The government predicts the jobless rate will exceed 8 percent this year compared with 6.4 percent last year, and the economy may contract as much as 4.4 percent, Finance Minister Jyrki Katainen said Feb. 24. Economic expansion had surged as high as 6 percent just two years ago because of foreign demand for machinery such as elevators made by Kone Oyj and Nokia’s mobile phones.
As paper mills close, a growing number of young people are moving to cities from northern rural areas to find work. Kemijaervi has shrunk a third to 8,600 residents since 1981, while Helsinki has grown 17 percent to 563,000 inhabitants. The shift has left roads, bridges and other infrastructure unused in smaller towns, while new highways and homes now need to be built in the cities, said Hannu Katajamaeki, professor of human geography at the University of Vaasa.
The government has had to cut services in places people are fleeing, which in turn speeds up the exodus. Last year, it closed 90 elementary schools, mostly in the north.
“Small towns are very vulnerable,” said Pertti Keraenen, chairman of the Lapland district of the opposition Left Alliance. “When a big employer stops operations, even decades won’t help plug that hole.”
To contact the reporters on this story: Kati Pohjanpalo in Helsinki at [email protected]Diana ben-Aaron in Helsinki at [email protected]
Last Updated: March 12, 2009 18:01 EDT
