Paper and wood-pulp
While tourism is an evidently crucial industry for Portugal and others such as textiles, cork and automobile components are well-known, the importance to the economy of a business more famous in Nordic countries – wood-pulp and paper production – may not be so obvious.
The second phase of privatisation of wood-pulp and fine paper major, Portucel, has been headline news in Portuguese business newspapers for two years. Battle for control between leading contenders Cofina/Lecta and Norway’s M-Real has been fierce and acrimonious. The favourite in the race, which for the first time is being decided by a jury rather than on the basis of a simple auction, is Portuguese conglomerate Cofina, in partnership with Europe-wide paper group Lecta.
The reason that the debate has been so hot is that the pulp and paper business really is one of Portugal’s most important industries. Exports of wood pulp and paper total over €1.4 billion, nearly 5% of all Portuguese exports. Over 60% by value of these exports are as paper and the rest as pulp. For a small economy, this is definitely big business.
Portugal is a significant player in the European market. While Finland and Sweden dominate pulp production, Portugal is fifth among the other competitors and produces some leading office and printing paper brands.
Portucel is by far the biggest player in Portugal, boosted by recent major acquisitions of Soporcel (pulp producers) and Papeis Inapa (paper mills). These purchases brought not only sizeable additional areas of forestry – Portucel now controls 20% of Portugal’s eucalyptus forests, which represents 2% of Portugal’s total land area – but also a portfolio of some of Europe’s leading fine paper brands: Navigator, Explorer and Inacopia, to name only three. Portucel is one of the world’s biggest producers of bleached eucalyptus Kraft pulp for the packaging industry and one of Europe’s top five producers of uncoated wood-free paper.
Other key players in Portugal are Caima (pulp), Stora Enso-Celbi (pulp), Companhia de Papel do Prado (specialist printing and packaging products), Renova (sanitary paper products) and Nisa (sanitary paper products).
Even in these hard times, Portugal’s paper and pulp business has remained strong, with latest estimates showing that sales increased by over 3% in 2002. Pulp production is growing even faster than paper as demand in the local market also expands. As the industry consolidates and vertical integration from tree to distribution of finished paper deepens, so Portugal’s main players are becoming stronger. Horizontal geographical integration is also an important strategy, with Portuguese companies forming joint ventures and alliances with producers in Spain and elsewhere.
This summer’s tragic forest fires, which destroyed nearly 200,000 hectares of forest have obviously affected the pulp industry although they are not saying exactly how much wood production area they lost. Nevertheless, the big producers’ forests tends to be much cleaner and better protected than other commercial operators or wild woodland and they are also well insured, since this is a common risk in the warm Portuguese summers. At least the Lisbon stock exchange believed these propositions and did not significantly discount quoted producers for fire loss.
The future of this industry is good. The paperless office came and went and it seems that the more e-mails we write and integrated IT and communications systems we install, the more paper we consume. Demand for pulp for paper has been increasing substantially in recent years. Portuguese companies are set to stay strong in this business, whether those like Portucel who have created economies of scale and the control of their supply chain right from the planting of their own trees or some of the smaller operators who sustain competitive advantage by operating in value added specialist niche areas.
Clive Viegas BennettWebsite: www.businessinportugal.com
Source:
www.bpcc.com
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