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How Metsä Wood brought the modern plywood industry to Estonia

The Metsä Wood mill is the size of three football fields and is located in a Pärnu suburb. The production process currently takes place in three shifts, five days a week. Soon, the working week is set to encompass six days. ‘If commissions grow, it is not unlikely that the mill will work 24-7,’ says the factory’s Manager, Kaarel Tali. 

In a year, more than 100 people have been employed in the factory in addition to about twenty office staff. The company is still looking to recruit about 50 people. ‘Although we are still lacking workers, that does not mean cutting production volumes – there is also a lot of room for development in terms of efficiency,’ says Tali.

The construction of the birch plywood mill in Pärnu began in April 2017 and was completed last spring, with the Estonian firm Nordecon AS as building contractor. Production, in which birch veneer is used as a raw material, officially began in August 2018, and the mill is expected to reach its full capacity during 2019. The veneers are produced in Äänekoski in central Finland. All the wood is also acquired from Finland, from the forests of Metsä Group’s owner-members. Metsä Forest, part of Metsä Group, is the only wood supplier for Metsä Wood’s mills in Finland. Metsä Forest, as well as Metsä Wood’s Suolahti and Punkaharju plywood mills, have certified Chain of Custody, which includes a wood origin tracking system. The veneer mill at Äänekoski and the birch plywood mill in Pärnu constitute a mill complex, in which the two parts must work seamlessly together.

From Estonia’s timber industry to specific customers in Central Europe

Every day, truckloads of veneers are transported from the Metsä Wood Äänekoski mill in Finland and delivered in one side of the building. On the other side, tens of thousands of cubic metres of high-quality birch plywood are loaded onto trucks and transported mostly to central Europe. But commissions have included the USA, Turkey and South Korea, too.  At full production capacity, 10 truckloads of veneer are delivered per day and 7 truckloads of plywood leave the mill for Europe, which creates considerable losses in plywood production. Fortunately, in the vicinity of the Metsä Wood mill is the Fortum CHP plant, where wood leftovers are sent for heat production. The proximity of the Fortum plant was one of the significant reasons behind the decision to build the Pärnu mill in its current location. Metsä Wood is also able to buy electricity without transfer fees.

The plywood produced in the Pärnu Metsä Wood mill has very specific customers and fields of use – the plywood boards are mostly used in construction, especially in concrete formwork. As laminated plywood is a very resistant material, those boards can be reused up to 40 times. In addition, the mill produces laminated plywood for the interior elements of trucks and other means of transportation; for example, the anti-slip boards produced in the mill are used as floor covers for trucks and trailers.

Wall constructions of LNG tanker boats from Pärnu

In the future, the Pärnu mill will start producing for a third sector, one of high responsibility – namely the wall constructions of LNG tanker boats. In the shipping sector, which deals with liquid gas, the wood quality is not so much about its resistance to moisture, but rather its resilience in extreme conditions, because the temperature of liquid gas in LNG containers is -163 Celsius. ‘This is indeed a more complex product that requires extremely high quality. But the volumes are huge. For one tanker 3000-4000 cubic meters of birch plywood are used, which is two months’ production volume of our Pärnu factory,’ explains Kaarel Tali.

The total volume of investment in the plywood factory is 55 million euros. Enterprise Estonia, with its 2 million euros of funding, played a role in attracting the investment to Estonia.

 

Arto Salo, Vice President of Development Projects of Metsä Wood

‘We were told it would be impossible to get building permission for a factory in Estonia in just six months – but it was possible outside Tallinn!’ Arto Salo, Vice President of Development Projects at Metsä Wood Pärnu factory recalls how the entire process began three years ago. ‘We checked a lot of places – other countries and places besides Pärnu. We decided firstly for Estonia because it is near Finland and Estonia is, according to our understanding, a country where systems are really working. As our main market is Central Europe, Pärnu is logistically the perfect place in that sense also.’

Salo praises hard-working Estonians and local legislation, which is at times more favourable to employers than in Finland. Also, the salary level in Estonia is still competitive in comparison to Scandinavian countries. If the pressure on wages continues, he sees no serious problem. ‘We just have to increase efficiency,’ he claims.

Pärnu mill is part of Metsä Wood’s 100-million-euro investment programme in Estonia and Finland, which improves production excellence and competitiveness in the market. Approximately half of the investment went to Finland – a new birch veneer peeling and drying line was built in Äänekoski at the Metsä Group’s Pulp and Paperboard Industries’ mill site and a new production line was built in Lohja mill.

 

Sulev Alajõe, Director of Regional Business Development in West Estonia, Estonian Investment Agency

‘The information that a big wood processing group is interested in expanding to the Baltics arrived in the Estonian Investment Agency’s pipeline in autumn 2015. Estonia was chosen quite quickly over Latvia due to a more reliable ecosystem and similar business culture. The following competition between Tartu and Pärnu brought out the outstanding importance of energy supply for investors. In Pärnu, the possible production plot in the neighbourhood of Fortum CPH contained the potential for grid-fee connections of electricity, heat and steam, collecting residues of plywood mill. Crucial support for landing the investment in Pärnu was provided by HML, an Estonia-based consultancy company with an Irish background and strong international technical, environmental and legal competence.

For investment projects, it is always critical that the local municipality understands the importance and scale of the investment. The Metsä Wood plant will bring the city of Pärnu an additional annual tax revenue of 333 216 euros, and under the same preconditions, the social tax revenue will reach 950 400 euros per year. On top of that, the Niidu industrial area gets a strategic investor, which will attract more due to its highly improved infrastructure. There are vacancies in proximity to Fortum power plant waiting for the next direct-line energy consumers for a win-win deal. Pärnu authorities resolved its complex water and sewage supply solution and elongated the factory road, providing additional access from the E67, which is the Tallinn-Warsaw-Prague road. Pärnu’s advantage is its location next to the main road to continental Europe, soon supported by the new European railway and renovated regional airport. While the main focus has been on the IT sector lately, the decision to establish Metsä Wood plywood mill in Pärnu shows the importance of keeping strong traditional manufacturers and strengthening local production with new technologies and know-how.’

 

Leo O’Neill, manager of HML Consulting

‘HML was first appointed by Metsä Wood in 2015. Our role was to carry out a feasibility study in relation to their potential to establish a Plywood Mill in Estonia. Once HML had completed the initial task and submitted our findings, Metsä Wood’s Board made the decision to proceed with investigating a short list of sites in Estonia. HML was again engaged in work with Metsä Wood to prepare cost estimates for each of the short-listed locations. As part of this process, HML had to carry out a study to determine the most suitable site in regard to infrastructure and services.

HML worked closely with Enterprise Estonia (EE) during this process and due to this close cooperation, we were able to complete this process relatively quickly. In May 2016, HML submitted their report outlining the estimated construction costs for each site, along with our expert opinion on the time frame necessary to amend the detail planning and apply for new construction permits. As part of the report, we indicated a start date of the 4th of April 2017 for construction in order to meet the strict deadline set by Metsä Wood to start production by August 2018.

After Metsä Wood made the decision to proceed, HML was again engaged in supporting Metsä Wood in the negotiations and acquisition of the site. This process was completed very swiftly with the support of EE, which supported several meetings with City Officials and HML in order to look at ways to run processes in parallel. The swiftness of the meetings and the whole process were paramount for Metsä Wood in their decision to establish a plywood mill in Estonia. It only took 9 months from the start of the land purchase, to the changes and amendments of the detail planning, the appointment of main designers, the entire design process, the construction permit application, the granting of the permit and subsequent appointment of the main contractor, through to the start of construction. Considering the complexity and size of the project, this process was relatively straightforward. Construction was started on the 4th of April 2017 as indicated one year earlier by HML. This was one of many major milestones achieved during the previous 9 months. These milestones could not have been met without the close cooperation with EE and all the related authorities. We found the willingness from all entities to embrace new processes in order to achieve these strict milestones.

Setting up these stringent processes was also a vital part of the completion of the construction stage of the project. Due to this, the project met every milestone set out and the completion of the Plywood Mill was done ahead of the planned schedule. This allowed Metsä Wood to start their specialist equipment installation process earlier than planned.’

 

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