Metsä Wood plans to phase out the plywood mill in Suolahti

Translation: Original published in Finnish on 10/11/2024 at 7:31 am EEST.

The Suolahti spruce and birch plywood mill competes in particular with Koskisen and UPM on the end product market and also on the raw material market. In our view, the likely removal of Suolahti's capacity from the market would be somewhat positive news, especially for Koskisen, for whom the closure of a competitor's capacity in the important birch plywood segment may tighten the end product market to some extent and at the same time loosen the raw material market somewhat.

Suolahti mill to be closed in stages

Metsä Wood, part of the Metsä Group, announced yesterday that it will start change negotiations in connection with its plan to end plywood production in Suolahti. The plans to close the mills are based on their poor profitability. According to the plans, production at the Suolahti birch plywood mill would end by the end of Q1’25 and production at the spruce plywood mill would end by the end of 2026 at the latest. The statutory negotiations at the Suolahti mill concern all the plywood mill’s employees, in total about 370 people. The Suolahti plywood mill has an annual production capacity of 35 000 cubic meters of birch plywood and 160 000 cubic meters of spruce plywood.

Likely closure of Suolahti’s capacity could benefit Koskisen

Metsä Wood's Suolahti mill has competed with Koskisen and UPM in the birch plywood segment and with UPM in the spruce plywood market. We estimate that the profitability challenges have recently affected the construction-dependent spruce plywood segment in particular. In the birch plywood segment, the market picture is likely to be better, as the supply on the European market is significantly limited due to the sanctions imposed on Russian imports as a result of the war of aggression. Due to the supply restrictions, the price of birch plywood is high. On the other hand, birch plywood production may have been limited by problems with the availability of birch logs, but our assessment is that Koskisen has not suffered from profitability challenges in the birch plywood market, and the profitability of Koskisen's Panel Industry has remained good this year despite somewhat more difficult demand and cost dynamics. In our view, the poor profitability of the Suolahti mill may have been caused not only by the market situation, but also by the probably high technical age of the mill and thus its poor competitiveness.

In view of this situation, the anticipated removal of Suolahti's capacity from the market should have a somewhat positive impact on the birch plywood segment, which is relevant for both Koskisen and UPM from the perspective of both the end product and raw material markets. For the spruce plywood market, which is relevant for UPM, we estimate that the change will be more limited.