In the first half of the year, China's paper industry reported a sharp decline in profits. This fact apparently has not discouraged Finland-based bio-industry company UPM Group, which announced that it had made significant investments in China estimated to be worth around $44.3 million.
The Finnish company announced that it has made two large investments to its paper plant in Changshu in China's Jiangsu province. According to officials, the investments were made to meet the expected rise in demand fueled by the continued e-commerce boom in the country.
As the company increases its investments in China, it is also cutting cost on its home country. In September, UPM Group announced that it would be closing down two of its paper-making faciltiies in Rauma, Finland. The plants officially closed on Novermber 6, reducing the company workforce by 179 people and domestic production by 265 tons annualy.
UPM Group officials stated that the $44.3 million investment in its plants should significantly increase the production of both its copy paper and label paper. Around $30 million had been invested in the addition and enhancement of the company's label paper finishing machine, which produces its specialty papers line. Meanwhile, around more than $10 million has been invested to enhance its copy paper machines.
UPM Specialty Papers executive vice-president, Jaakko Nikkila stated that the new investments are just the first of its series of planned expansions in China. The investments should translate to an added capacity of around 40,000 metric tons of paper by 2020. UPM Group's plant in Changsu currently has an annual capacity of around 1.4 million tons.
Since it established its presence in China back in 1998, UPM Group has invested more than $2 billion in expanding its operations. The company established its Changshu paper mill when it entered the country and it currently gets around 20 percent of its total global revenues from its Asian market.
China is currently the world's largest consumer of paper pulp, but the industry has recently been plagued by overcapacity. Last year, total output and consumption in China sharply declined, resulting in drops in revenues by the country's 22 publicly listed paper companies.
In the first half of 2019, the 22 listed companies reported a total net profit of $615 million. This was around a 50 percent drop in profits when compared to the same period last year. The drop in profits has mostly been attributed to the decreased demand from traditional printers such as newspapers, magazines, and book publishers.
Despite this, UPM Group believes that the expansion in e-commerce should offset the lowered demand from traditional consumers. Nikkila explained that the increase in e-commerce activity will translate to larger demands for packaging labels, invoices, and other office printing work. Even products such as food items, which are now available online, will require packaging, translating to increased demand in paper products.
