industry ample stature in world markets and substantial influence on Finnish Government policymakers. The manufacture of paper machinery represents a greater contribution to Finland's gross national product (GNP) than the industry does to the GNP of any other country. With its 1984 production of paper machinery valued at $334 million (largely papermaking and pulp-making machinery), Finland ranked fourth worldwide, trailing the substantially larger economies of Canada, West Germany, and the United States. In no other country do paper machinery producers play so central a role in the economic life of the country or rank so high among the nation's manufacturers. Consequently, the Finnish paper machinery industry has a reasonable expectation that government policy-makers will address its trade and tariff concerns. Industry Overview. The Finnish paper machinery industry possesses broad capability to produce most types of papermaking and pulping machinery. Finnish suppliers can equip a mill from wet end to dry end. The Finnish paper machinery industry, unlike that of the United States, is characterized by significant integration of pulp and paper producers with machinery manufacturers. Several of the leading suppliers--including Ahlstrom, Enso-Gutzeit, and Rauma-Repola--have extensive forest product interests. This allows the firms to integrate R&D activities for machinery with forest product development. Furthermore, the firms achieve economies of scale impossible to reach simply as machinery manufacturers. Finnish firms have been particularly successful in providing pulping systems for most forms of modern mechanical pulping including thermomechanical pulping, chemi-thermomechanical pulping, and pressurized groundwood pulping. Finland also has successfully exported paper machine dryers and finishing equipment, areas in which Finland has proved to be a strong competitor to U.S.-based producers. Major Finnish paper machinery manufacturers are shown in Appendix A. Finnish paper machinery producers have moved extensively to set up shop abroad. Most overseas subsidiaries have been acquired within the past 10 years, substituting for a policy of direct exporting. At an earlier stage, joint venture and licensing agreements have also been a major means for Finnish penetration of foreign, especially North American, markets. These included (1) the now terminated agreement between Ahlstrom and Beloit licensing Beloit to produce its pump line in Canada for sale in that country and (2) Wartsila's agreement with its subsidiary Wartsila-Appleton for the manufacture and sale of finishing equipment in North America, which has been superseded by the Valmet, Oy. takeover of Wartsila's paper machinery activities. In current agreements, Rauma-Repola acts as a licensee of Gauld Equipment Co. (Theodore, Alabama) for the production of pressure screens. In turn Rauma-Repola is a licensor of Sumitomo Heavy Industries of Valmet, Oy: The New Giant. Following a policy of aggressive acquisitions both at home and abroad has brought Finnish-based Valmet, Oy to the position of the number one paper machinery producer in the world. Valmet, a state-owned company, was formed in 1951. Valmet and its subsidiaries have shipped over 800 paper machines and 3,500 paperboard machines. With the formation of Valmet Paper Machinery, Inc. (VPMI) on January 1, 1987, the firm clearly established its preeminence among worldwide paper machinery makers. VPMI is a result of the creation of two new firms merging the shipbuilding and paper machinery operations of Valmet Corporation and Oy Wartsila AB. Valmet controls a 65 percent interest in the new VPMI while Wartsila Marine Industries, Inc., the shipbuilding company, is 30 percent held by Valmet. In 1987, VPMI sales were estimated at $770 million, of which sales of $95 million were in the North American divisions. Paper Machinery Division sales totaled $450 million, and sales of finishing equipment totaled half as much, or an estimated $225 million. Major VPMI operations within Finland include (1) paper machine works, technical services, and a foundry which are at Jyvaskyla; (2) Pansio Works, located at Turku, which manufactures air systems, sawmill machinery, and process filters; (3) Jarvenpaa Works, Jarvenpaa, which makes paper finishing machines; and (4) Valmet-Ahlstrom, Karhula, at which paperboard machines and pulp drying lines are produced. Total worldwide Valmet employment was estimated at 6,900 in 1987, up 60 percent from 4,300 in 1984. Valmet now has topped Beloit as the world leader in industry employment. Valmet Paper Machinery, Inc., at its formation was the parent company for two wholly owned subsidiaries and five joint venture holdings. These are shown in Table 25: Since the initial formation of VPMI, Valmet has announced further mergers and joint ventures. In March 1987, Valmet formed Valmet-Enerdry (Knoxville, Tennessee) to supply paper machine and mill air dryer systems. In July 1987, Valmet-Ahlstrom, Inc. incorporated the paper machinery interests of the Finnish-based Ahlstrom, a maker of narrow width paper machines, folding boxboard machines, and pulp drying lines. In September 1987, Valmet acquired majority control of the Italian firm, Rotomec, S.p.A., a maker of coating, laminating, and printing machines. The firm also acquired a minority share in the Finnish-based Jylhavaara, Oy (United Paper TABLE 25: HOLDINGS OF VALMET PAPER MACHINERY, INC. Note: Sales figures given in this section refer only to VPMI and do not include Valmet's shipbuilding, defense, and farm machinery activities. Mills), a producer of narrow coaters and winders. In 1988, Valmet acquired IRT, a Swedish maker of infrared drying systems. Valmet has formed Valmet Builders, Inc., of Charlotte, North Carolina to oversee construction operations, primarily in North America. Valmet has recently made substantial new investments to upgrade and expand its Valmet-KMW facilities at Charlotte, North Carolina. Valmet's sales per market area, through August 31, 1987, were estimated as follows: Finland 31 percent, Western Europe 27 percent, North America 25 percent, Sweden and Norway 12 percent, communist countries 4 percent, and other countries 1 percent. Valmet is an industry leader in R&D, on a scale comparable with Beloit and Voith. Valmet maintains six R&D facilities in Finland, Sweden, and the United States, which together employ over 300 people. R&D expenditures by the company are reported as approximately 4 percent of annual sales. Additionally, Valmet is the leader in capital spending, with expenditures reported at about 8 percent of total sales, or $60 million, or nearly 50 percent greater than the recent level of capital expenditures by the entire U.S. paper machinery industry. Trade. Finnish paper machinery trade is worldwide. North America accounts for the largest segment of the trade. Although exact amounts are not available, Finland also appears to dominate shipments to the Soviet Union. Overall, Finnish paper machinery exports have rebounded substantially from a steep decline in the recessionary year of 1983. According to Finnish statistics, overall Finnish paper machinery exports totaled $159 million in 1985, up 24 percent from $128 million in 1984.7 This level was nearly twice the $82 million exported during the recessionary low in 1983, although below the $187 million exported in 1981. During this period Finland's rank as exporter plummeted from third place in 1981 (8.4 percent) to ninth place in 1983 (5.1 percent) but rebounded to fifth place in 1985 (7.3 percent), as shown in Table 26. Years TABLE 26 FINNISH FOREIGN TRADE IN PAPER MACHINERY: 1982-86 Imports Balance % of Imports From U.S. % of Exports To U.S. 7 These figures are based on the same categories as other U.S. trade compilations in this report. They are not precisely comparable with the Finnish (Central Statistical Office) figures given in the text. Finnish imports have remained more stable. Imports declined by nearly half ($32 million to $18 million) between 1981 and 1983, but then rebounded to $36 million in 1985 and $55 million in 1986, essentially tripling the low while still remaining 45 percent below the pre-recessionary high. Finnish trade with the United States has followed a similar pattern resulting in a U.S. trade deficit with Finland as shown by the U.S. data in Table 27. U.S. imports of Finnish paper machinery have been volatile, rising and falling with the availability of new orders and the domestic demand generated by the U.S. paper industry. Such fluctuations have been common over the past two decades since the first Finnish machine was exported to the United States. Most U.S. imports from Finland fall into three categories: dryers, pulping machinery, and parts. U.S. exports to Finland are largely parts, which accounted for over three-fifths of the dollar value of U.S. paper machinery export trade to this nation in 1985.8 Sweden In perhaps no other country, except possibly neighboring Finland, do the forest industries loom as large as in Sweden. Sweden trails only the United States as a per capita consumer of paper goods, with each Swede utilizing 524 pounds of paper per year. As in Finland, leading paper producers, such as the Stora Group and Iggesund, are also machinery producers, thereby enhancing the economic strength of the paper machinery producing sector and increasing the industry's ability to make its wishes known to Swedish Government policymakers. The more integrated industry structure also serves to increase the international visibility of Swedish firms, thereby enhancing their ability to sell machinery and equipment in foreign markets. Sweden also hosts the largest European-based paper industry trade show. Industry Overview. To set the stage for consideration of the Swedish paper machinery industry, a brief look at the forest industry is desirable. In 1987, Sweden was seventh worldwide as a producer of paper and paperboard, its 7.8 million metric tons only slightly trailed Finland. Swedish pulp production totaled 10 million metric tons, making Sweden the largest pulp producer outside of North America. Sweden boasts 110 pulp and paper mills (55 of each) which provide an ample domestic base for paper and pulp 8 Statistics on shipments, production, and foreign sourced trade statistics used in this and other country sections are derived from unclassified reporting of the U.S. and Foreign Commercial Service, International Trade Administration, U.S. Department of Commerce. |