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TABLE 25: HOLDINGS OF VALMET PAPER MACHINERY, INC.
(at formation)

Firm Nationality VPMI PCT. Of
of Firm Holding

Valmet Domnion, Inc. Canada 65
Valmet-KMW AB Sweden 75
Valmet-KMW, Inc. United States 75
Valmet-Appleton, Inc. United States 100
Valmet-Strecker, GmbH West Germany 100
Ateliers de Construction France 25
Allimand, S.A.

Sensodec, Oy Finland 40

Note: Sales figures given in this section refer only to VPMI and do not include Valmet's shipbuilding, defense, and farm machinery activities.

Source: Valmet Annual Report, 1986, p. 36.

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.

TABLE 26 FINNISH FOREIGN TRADE IN PAPER MACHINERY : 1982-86 ($ million) Years 1982 1983 1984 1985 1986 Imports $ 26.6 $ 17.7 $ 25.4 $ 35.9 $ 30. O Exports $179.3 $ 82. 1 $127. 6 $158.6 $160. O Balance $142. 7 $ 64.4 $102.4 $122.7 $13O. O * of Imports 18.8 16. 7 14.3 ll. 8 17. 5 From U. S. # of Exports 21.5 29 - 9 10. 3 42.2 36. 1 To U. S. Source: U.S. Department of Commerce, International Trade Administration. TABLE 27 U. S. PAPER MACHINERY TRADE WITH FINLAND: 1981-87 ($ million) Years 1981 1982 1983 1984 1985 1986 1987 Exports 6.4 5. O 2.9° 3. 6 4 - 2 2. 7 3. 7 Imports 1O3 - 7 37.4 24. 4 13. O 66, 8 55 - 2 37 - O Deficit -97. 3 -32 - 4 -21 .. 5 -9. 4 -62. 6 -52 - 5 -33 - 4 Source: U.S. Department of Commerce, International Trade Administration.

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.

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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.

machinery suppliers. The forest industries are long established in Sweden, with Stora Kopparsberg (founded in 1288) and Iggesund (founded in 1685) -- both having antecedents reaching back to the early beginnings of capitalistic enterprise.

An active forest products industry will breed a substantial machinery producing segment, and Sweden is no exception. The Swedish paper machinery industry ranks with Canada, Finland, and West Germany as a leader in production and trade. The Swedish industry is particularly strong in pulping systems and related equipment. Its notable products include drying systems, pulp digesters, pulp refiners, and wood preparation equipment. Additionally, Sweden is a major provider of boiler and energy recovery systems for pulp Mills. Table 28 presents data on Swedish production of paper machinery. The figures shown underestimate the total of Swedish shipments to the paper industry since they do not include recovery boilers, energy systems, machine controls, electric motors, and some specialty products.

TABLE 28
SWEDISH PRODUCTION OF PULP AND PAPER

INDUSTRY MACHINERY: 1983-85
($ million)

Year Pulp and Paper Paper Converting Total Production Machinery Machinery

1983 $133.6 $ 17.1 $150.7

1984 $149.9 $ 18.8 $168. 7

1985 $183.2 $ 22. O $205.2

Source: Swedish Office of Statistics, Industry 1985, Stockholm,
Sweden, 1987. Exchange value calculated at Skr 6.82 = $1.00.

The Swedish Pulp and Paper Association, known by its Swedish initials SCPF, represents both producers in the paper industries and in the supplier areas. SCPF serves as both a technical voice for the Swedish industry and as a lobbyist for the Swedish industry in domestic and International fora. The association is based in Stockholm and sponsors biennially an International trade show that is among the best attended in the industry.

Major Producers. The leading Swedish producers of paper machinery are active in the International market. Among the best known industry leaders is Kamyr, AB (Karlstad), a multinational joint venture firm owned in one-third shares by three Scandinavian firms -- A. Ahlstrom Corporation, of Finland; Myrens Verkstad, of Norway; and KMW, AB., of Sweden. Kamyr is the world's largest supplier of pulp digesters. Kamyr was originally formed in 1920 to market a

newly invented device, the wet lap machine. Wet lap machines are used to fold machine-dried market pulp prior to its shipment by the mill to a customer. Kamyr entered the U.S. market in 1952 and maintains engineering facilities at Glens Falls, New York.

Among other major Swedish machinery suppliers are Flakt, AB, now part of Brown-Boveri-Asea, AG. which produces paper drying systems and is also a leader in selling electrostatic precipitators to paper Mills (electrostatic precipitators are frequently employed at Mills to meet air pollution control requirements); KMW, which has formed a joint venture with Finnish-based Valmet for export sales of paper machinery; Sunds Defibrator, a worldwide supplier of pulp refiners; Iggesund, which has a joint venture with Bolton-Emerson in the United States; and the multinational Stora Koppersberg, which in 1984 acquired Billerud, a major producer of machine knives. In addition, there are several specialized product firms, such as Cellwood Machinery, a maker of chip dispersing equipment, and AB Amals M. V., a maker of slitter-rewinders. Notable in the converting end of the market is the Fiskeby Group, a maker of bagging, sacking, and packaging machinery.

Sweden also has several firms which are technically outside the paper machinery industry but which are leading suppliers of equipment for the paper industry. Among such firms are the previously mentioned Brown-Boveri-Asea, AG., the Swiss-Swedish electrical giant, which supplies motors and drives for paper machinery; the MODO Group, which produces Black liquor recovery equipment; Scandiafelt, which makes papermakers' felts; and Scanpro Instruments, a manufacturer of paper machine instrumentation.

Sweden's Role in Trade. Sweden is a major exporter of pulp-making and papermaking machinery, especially of pulp refiners and digesters. Sweden maintains a low external tariff rate, substantially in conformance with the rates applied in the European Community and elsewhere in the European Free Trade Area, of which Sweden is a member. Tariffs on most types of pulp-making and papermaking machinery are 2.5 percent ad valorem.

Sweden has maintained substantial trade with the United States in paper machinery. The United States has annually exported to Sweden between $3.5 million and $6.5 million of paper machinery and parts, primarily papermaking and paper-finishing equipment. Imports, consisting largely of pulp-making machinery and parts, have grown by about two-fifths over the recent 5-year period, rising from $27 million to $40 million (Table 29).

Research and Development. The Swedish Forest Products Laboratory (STFI) is Sweden's leading institution for paper industry research. Located in Stockholm, STFI is a quasi-governmental organization which receives 57 percent of its funding from industry and 43 percent from the Swedish Government. Government support is provided

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