Over the past few years, in addition to receiving market feedback from the Chinese branch, Ismo Nousiainen (Chinese name: Nuo Yi), CEO of Metsä Fibre, has frequently traveled from Finland to China to conduct further market research and engage with customers.
Metsä Group is one of Finland’s "Big Three" forestry and paper industry giants, with operations spanning wood pulp, paperboard, tissue paper, and wood product manufacturing. China represents its largest single market globally. Its subsidiary, Metsä Fibre, is a world leader in softwood market pulp. In January of this year, Nousiainen visited China as part of a business delegation led by Finnish Prime Minister Petteri Orpo.
Metsä Fibre provides softwood pulp, a critical raw material for various paper products. Its downstream partners include major Chinese papermaking giants such as Hengan Group, Vinda (C&S Paper), and Sun Paper.
Over the last two years, the global pulp market has been characterized by "ample supply, downward price shifts, and diverging demand structures." According to Ismo Nousiainen's observations, the Chinese softwood pulp market is experiencing a similar divergence. On one hand, domestic pulp capacity is rising while demand fluctuates, leading papermakers to prioritize cost-effectiveness. On the other hand, high-quality softwood pulp remains in high demand. Due to its long fibers and high strength, premium softwood pulp is essential for high-toughness products like packaging board, specialty paper, tissue, and high-end printing paper.
Amidst this global market volatility, Metsä Fibre is actively seeking certainty.
On April 23, after concluding his market research in China, Nousiainen told reporters: "Looking at growth trends, we anticipate a slight decline in demand in Western Europe and stability in North America, while the Chinese market will continue to grow. Therefore, we are very excited about our growth potential in China. Metsä Fibre has been deeply rooted here for many years and will remain so. We have set strategic goals and anticipated various scenarios for the next 5 to 10 years, though I cannot disclose specific details at this time."
Reflecting on his visit earlier this year with Prime Minister Petteri Orpo, Nousiainen noted the significance of discussing bilateral trade and the removal of barriers with Chinese officials, including the Minister of Commerce. "I observed that both sides are eager to explore every possibility to drive trade growth. I believe maintaining and improving these strong bilateral trade relations is vital."
Diverging Market Demand
In early March, Metsä Fibre announced it would suspend production at its Joutseno mill in Finland starting March 31. This move aimed to adjust output to meet short-term demand uncertainty in the Asian market.
This capacity adjustment reflects a broader trend among global pulp producers. For over a year, the market has faced multiple shocks, leading to downward volatility in pulp futures prices.
Nousiainen explained that global macroeconomic uncertainties—including geopolitical and trade conflicts—have kept consumer confidence low. Since the pulp and paper industry relies heavily on consumer spending, weak confidence leads to reduced consumption of paper-related products and packaging.
In this volatile landscape, China remains a pivotal player.
Pulp is generally divided into two categories: short-fiber and long-fiber. Softwood pulp (long-fiber), produced in countries like Finland, is premium-priced. Hardwood pulp (short-fiber) is generally less expensive. China relies heavily on imports for softwood pulp, with import ratios exceeding 95% at their peak; high-quality bleached softwood pulp is almost entirely dependent on overseas supply. Conversely, China’s reliance on imported hardwood pulp has decreased to about 60% due to domestic capacity expansion.
Nousiainen noted a clear split in demand between these two types in China:
- Hardwood Pulp: Domestic capacity in China has surged to approximately 13 million tons, leading to a degree of oversupply. Consequently, the growth rate for imported hardwood pulp is no longer as rapid as in previous decades. Downstream companies are increasingly seeking "cost-performance," which pressures imported hardwood prices and intensifies competition.
- Softwood Pulp: Due to geographical constraints, China’s domestic softwood capacity remains very limited. Because the quality of softwood pulp determines the strength and performance of the final product, Chinese papermakers still have a robust demand for overseas supply.
"From a demand perspective, China is undergoing a consumption upgrade," Nousiainen said. "As living standards rise, more people are using high-quality hygiene products. Demand for premium tissue paper, for instance, is growing strongly. In the mid-to-long term, I expect demand for softwood pulp in China to maintain a steady upward trajectory."
Seeking Certainty
Historically, Metsä Group’s revenue in China has grown at an average annual rate of 15%. In the face of current market shifts, the company is doubling down on high-quality pulp to find stability.
Nousiainen believes that in a cyclical market, the producer of high-quality softwood pulp will always maintain a stable market share. Metsä Fibre’s advantage lies in its access to premium Finnish softwood and specialized production processes.
Due to the cold, long winters, Finnish pine grows slower than Southern hemisphere varieties, resulting in longer fibers and thicker cell walls. These attributes provide superior strength. Furthermore, Metsä Group is a cooperative owned by approximately 90,000 private forest owners, supported by over a century of sustainable forest management.
Because high-quality softwood pulp is more expensive, Metsä Fibre also researches how to optimize the ratio of softwood to hardwood pulp for its clients. This helps manufacturers maintain product quality while reducing raw material costs.
Additionally, as China’s papermaking capacity shifts toward the western regions, Metsä Fibre is adapting its supply chain. For example, while the company previously had little business in Guangxi, it has increased supply and added warehouses in Southern China to match the growing local demand.
"In the short term, supply and demand may cause price fluctuations and shifts in market layout," Nousiainen concluded. "But in the long run, high-quality products remain the core competitive advantage for a pulp company to navigate market cycles."
