According to Antti Viljakainen of Inderes, the European pulp market is quite fragmented. Central European paper mills buy pulp both in the Nordic countries and across the Atlantic.
Tuesday The cartel raid that began on Wednesday continued in the offices of Finland’s major forestry companies. UPM did not agree to indicate whether the inspectors were still at the company’s premises, but Stora Enso and Metsä Group confirmed to HS that the inspections would continue.
On Tuesday, EU competition authorities said they suspected a cartel in several European countries in the pulp market and were conducting inspections at the companies’ premises.
A cartel means cooperation in pricing, which is prohibited by competition law, and in practice it also involves agreeing on production volumes. Investigations and raids do not mean that prohibited cooperation has taken place.
Made of wood cooked pulp is a raw material for paper and board.
All forest giants produce pulp well in excess of their own needs and sell it to other paper and board producers in Europe and the rest of the world.
Analyst at Inderes, an analysis company Antti Viljakainen However, according to the European pulp market, it is quite fragmented, ie there are many other pulp traders in addition to Finnish companies.
The Commission said it was carrying out raids in a number of countries.
“Mercer International, headquartered in Vancouver, Canada, listed on the New York Stock Exchange, announced yesterday that its German unit was undergoing an inspection,” Viljakainen says.
The Canadian company has two pulp mills in Germany.
Its instead, for example, no announcements have been made from Swedish companies. Communications Director of SCA, a major Swedish pulp producer Anders Edholm tells HS that the competition authorities have not visited the company ‘s premises.
According to data collected by the consulting company Afry, each Finnish company has a share of about four percent of the world market pulp market. According to Viljakainen, the share is likely to be somewhat higher in Europe.
But other large producers, such as the huge Brazilian Suzano, also sell pulp to Europe.
“The companies have not disclosed exactly how much of the market pulp is sold to Europe, but I understand that Stora Enso and UPM sell most of it to Europe. At Metsä Group, on the other hand, China’s share is larger, estimated at about half, ”says Viljakainen.
The share prices of forest companies fell by a couple of percent on Tuesday after the suspicion of cartels came to light. UPM and Stora Enso share prices also declined on Wednesday morning.
According to Inderes Viljakainen, professional investors are just as dark about the possible effects of the investigation as other readers of the magazine.
“It is impossible to make a reasoned risk analysis in light of this information. Rates will fall when potentially big and hitherto unknown news comes. The market doesn’t like uncertainty, ”he says.
Uncertainty increased by the fact that the raids of the competition authorities must be based on a suspicion justified in some way. In practice, the background may be a report made by a customer or the disclosure of a company involved in a cartel.
The company that uncovered the cartel and provided the evidence usually survives without fines.
Professor of Business Law at Aalto University Petri Kuoppamäki estimates to HS on Tuesday that the perpetrators of the raid must have a reasonably accurate idea of whose office or computer to look for evidence in.
Random gossiping at a big company’s headquarters would hardly be very productive.
Pulp is a product that fluctuates strongly according to the economic cycle, the significance of which for the results of forest companies depends on the economic situation.
At its best, when demand has been brisk, margins in pulp production have fluctuated at 30 percent, measured by operating profit margin. After the fall in the interest rate crisis, the price of pulp has risen again this year and improved the margins of forest companies.
Viljakainen estimates that the cartel investigation will not affect the companies’ production or operations in any way, at least in the short term. If there were evidence of a cartel, the fines could be significant in euro terms.
“However, the financial position of Finnish forest companies is so strong that they could afford to pay the fines.”