Potential methods of adjustment to declining imports of Russian roundwood for the Finnish pulp and paper industry

Abstract

Purpose

The purpose of this paper is to investigate optimal strategic decision alternatives for Finnish pulp production companies in response to rising export tariffs on Russian roundwood. Traditionally, increasing the domestic or Russian supply to pulp mills satisfied their wood requirements. However, once this conventional strategy could no longer be implemented (in 2008), the wood requirements were met by adjusting pulp production (reducing) and wood procurement (increasing domestic procurement).

Design/methodology/approach

As the primary research data for the study, the procurement situation in 2005 was used to describe the conventional business strategy for purchasers of Russian or domestic roundwood. Possible business strategies were then simulated for changing pulp production by Stora Enso, with the goal of adjusting roundwood requirements, to develop a globally‐optimal strategy to solve the procurement problem.

Findings

After removing production by the northernmost Finnish pulp mill, the authors could not find a globally optimal solution for the wood‐procurement problem. It was found that Russia's tax policy (high export tariffs on roundwood) will have large implications for Finnish wood procurement (i.e. the use of domestic wood vs imported Russian roundwood), and can dramatically change the basis, type, and location of pulp mills. The reduction or total elimination of imported Russian roundwood caused severe supply shortages and reduced pulp production.

Originality/value

Based on the results of analysis, the authors recommend adjustment methods to assist strategic wood‐procurement decisions, given the need to adapt wood‐procurement logistics to an unpredictable and complicated pulp production environment that requires continual optimization of the wood flow.

Citation

Palander, T. and Vesa, L. (2011), "Potential methods of adjustment to declining imports of Russian roundwood for the Finnish pulp and paper industry", The International Journal of Logistics Management, Vol. 22 No. 2, pp. 222-241. https://doi.org/10.1108/09574091111156569