(Adds UPM comment, background, market prices)
By Jussi Rosendahl
HELSINKI Feb 28 Pulp and paper maker
UPM-Kymmene plans to invest 160 million euros ($220
million) on boosting output at one of its Finnish mills on
expectations of a pickup in Nordic wood pulp, and having cut
back on spending at a paper factory in China.
Although the company has been cutting back its paper output
in Europe for years, it sees a brighter future for pulp needed
to make paper, tissue products and packaging board.
UPM said in a separate statement that it would save 113
million euros by reducing infrastructure investments at its
factory in Changshu, China.
UPM said the investment would lift Kymi mill's annual pulp
capacity by 170,000 tonnes to 700,000 tonnes. The company has
three pulp mills in Finland and one in Uruguay. Total capacity
will be about 3.5 million tonnes after the Kymi investment.
Pulp chief Jaakko Sarantola said the long-fibre pulp made of
Nordic pine and spruce has a bright outlook as there were no new
plant projects in sight that would increase sector supply.
"The market for long-fibre pulp looks very favourable,
capacity is well in balance," he said.
UPM aims to lift pulp output further in the coming years to
more than 3.6 million tonnes with existing mills, he said.
The global pulp market is seen growing steadily on the back
of booming Chinese demand for tissue and packaging board.
However in short-fibre eucalyptus pulp, many companies have
recently been ramping up new capacity in South America.
European market prices for benchmark long-fibre pulp have
risen 10 percent this year to $918 while that of short-fibre has
fallen 1.5 percent to $768, according to FOEX indexes.
Long-fibre pulp prices are typically driven by global demand
for packaging board, while short-fibre pulp is more commonly
used in the making of hygiene products.
UPM's pulp unit generated about 44 percent of the group's
underlying operating profit of 683 million euros last year.
(Editing by Louise Ireland)