Jobs arise from ashes of Finland forestry industry

Terhi Kinnunen, Reuters 17 Jan 08;

KUUSANKOSKI, Finland (Reuters) - When Finland's UPM-Kymmene bowed to tough market conditions and shut its Voikkaa paper plant two years ago, Raimo Loytty readily swapped a 30-year career in the mill for a stone mason's chisel.

He and 677 co-workers were among the first victims of heavy layoffs by paper companies facing rising production costs, weak demand growth and overcapacity.

But Loytty turned what could have been a personal disaster into success, starting a stoneworks business with a colleague.

Nor is he alone. The inventiveness of many former forestry workers, along with a shift in Finland's once timber-dominated economy into new areas, has helped limit the economic fallout from the job cuts.

On the face of it, the numbers look bleak.

More than 8,000 forestry jobs have vanished in the past three years in Finland, the world's sixth-largest paper producer with 63,000 employed by the industry. More will go this year.

UPM launched the country's largest-ever layoff program in May 2006, with a planned 2,500 job cuts over three years, including Loytty's. In October 2007, rival Stora Enso said it would cut 1,100 Finnish positions.

A decision by neighbor Russia to raise wood export duties has made things tougher for forestry firms since some 20 percent of wood used in Finnish paper and pulp mills comes from Russia.

Stora Enso, which plans to close mills this year in the towns of Anjalankoski and Hamina in southeastern Finland and Kemijarvi in northern Finland, has threatened more closures if Russia raises duties as much as it now plans.

So far, though, the layoffs have had little visible effect on Finland's economy, which grew an estimated 4.4 percent in 2007, or on the overall job market, which created 50,000 new positions last year while unemployment fell.

COMMUNITY REINVENTION

The economy's health may be one reason why Loytty and many of his Voikkaa mill colleagues found new work just a year after the closure of one of Kuusankoski's largest employers sent shockwaves through the community.

Back then, residents were convinced the town might take years to recover from the blow.

They demanded the plant be sold to a buyer who would keep it open, while local voters turned away from then-governing Social Democrat party in March 2007 elections.

"People changed quite a lot, happy and joking guys became serious," said Jari Lukkari, 39, a former mechanic at the plant.

"I thought about studying or selling my house and moving somewhere else."

But Lukkari struck lucky, finding work "immediately" at industry maintenance company Enpower, where he now works with many of his former UPM co-workers, although the associated travel has complicated life for the single father.

Timo Mikkela, 44, said it took time to get past his anger.

"At first I was furious and did not want to do anything. But my thoughts changed during the summer and I started an industrial painting course in the autumn," he said.

The painter-to-be said while the career change will mean a drastic cut in income, losing his job at UPM gave his life needed structure as he swapped shift work for a day job.

"This has been an opportunity for me. I doubt I would have changed career otherwise."

Like its people, the town is reinventing itself.

Out of the 678 laid off in the Voikkaa closure, only about 160 are still out of work, 50 are in training programs and some 20, like Loytty, have started their own businesses.

"The employment situation in Kuusankoski has been rather good," said Marjukka Matikka of the regional employment office, adding that most who have found new work still live in the town.

The UPM facility has been re-named the Voikkaa Business Park and is home to 17 businesses, including the workshop of Loytty and his partner. More are set to move in.

In October, Swiss engineering group ABB said it would hire 40 people at a new component plant there due to start production during the first quarter of this year.

"We want to find new use for this industrial area," UPM's property manager Hannu Lahtinen said. "We want to take part in developing employment in Kuusankoski."

The town's jobless rate was 10.9 percent in November, up from a year-earlier 10.7 percent but a clear improvement from the 13.1 percent in December 2006 when UPM paid its last wages.

DOWNWARD TRACK

The reinvention in Kuusankoski mirrors a broader trend in Finland, where metals, machinery and electronics have overtaken wood and paper as the country's dominant exports.

The timber industry suffered a steep reversal since the golden 1990s, when prices were so high that media mogul Rupert Murdoch paid a 1995 visit to Helsinki to "beg for paper."

Seduced by the strong market, many European paper producers overexpanded, which has only fed the price decline since 2001.

"The companies started to build up capacity in the turn of the century encouraged by growing paper demand," said Evli Bank analyst Teemu Salonen.

According to research group RISI, paper prices fell some 19 percent in North American markets in 2001-2002. In Europe, prices dropped about 20 percent from 2001 until 2005.

Meanwhile, wood, energy and labor costs have risen, eating up savings reached through cost cuts.

However, as the forestry sector has contracted, other industries have stepped into the breach.

According to 2006 data, some 34 percent of Finland's exports were metal and machinery products, 25 percent electronics products and 20 percent forestry products.

Spurred on by Nokia, Finland's largest company and the world's biggest mobile handset maker, electronics has been on a particularly strong growth track since the 1990s.

Loytty said the economic transformation of Kuusankoski may yet prove precarious since many of his colleagues have found only temporary replacement jobs.

"A year from now will show what the situation really is like," he said.

(Reporting by Terhi Kinnunen; Editing by Eddie Evans)