Joint venture among paper companies?

September 2, 2010 by timbercommunity

Newsprint production in recent years has been a dramatic loss for forest companies. The Finnish daily newspaper Helsingin Sanomat published an article on Thursday 2 September 2010 concerning a possible newsprint joint venture between Stora Enso, Holmen and Norske Skog. Paper company Stora Enso denies there are no discussions ongoing concerning the matter mentioned in Helsingin Sanomat. Helsingin Sanomat, however, confirms that interim speeches have been going. Trading in all three company's shares have been suspended on the stock exchange, because the article in Helsingin Sanomat about a planning joint venture.

Norske Skog announced in a pressrelease that the company does not comment on strategic organizational speculation."The Finnish newspaper Helsingin Sanomat refers today about speculations that consolidation will take place in the European newsprint industry. Norske Skog has on several occasions stated the need for restructuring of the industry, and the company is willing to contribute to such an initiative. Norske Skog does not wish to comment speculations and rumors about strategic processes."

There is a surplus of 15-20 percent of capacity to produce newsprint in the world. But there are no strong players who can restructure the industry on its own.

The goal with the joint venture acording to an article published in Vasabladet is to reduce the production of newsprint and get a better price for the paper. Production is now loss-making or giving very poor performance and the paper mills have closed across Europe in recent years. Agreement on the joint venture will be signed already this fall to allow time for the company to negotiate prices for the paper next year since prices are generally turned down for one year at a time.

STT reported that Holmen, like Stora Enso announced that no discussions have not taken place. Before the suspension of Norske Skog's share price rose by almost a fifth of the Oslo Stock Exchange.

Holmen Stockholm quoted on A-shares rose over four percent and the B-share six percent. Stora Enso's share price this morning was able to increase the Helsinki Stock Exchange during the four and a half percent.