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Paper and Pulp Indsutry in Sweden

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Sweden is the second largest exporter of pulp, paper and other sawn wood combined products, meaning that the forest plays a big factor in the Swedish economy. Near 90% of all the paper and pulp production is exported. If we look at the consumption, nearly a quarter of all the pulp used in Europe is produced in Sweden. We will also look at the country’s GDP, unemployment, factor markets, competition and inflation. Paper and pulp is a product with a rather high demand. Because of this reason there is need for regulations to keep the companies in control, so they won’t destroy the environment. Now that you have a slight overview, lets start exploring the topic.Exploring the topic – Micro and Macro Economics

Although Sweden is a rather small Country, in this industry they are dominant even though the paper and pulp industry is very competitive. If we look at their geographical location, the country is covered by forests for 68%. This means they don’t need to rely on import of raw materials in this industry, what already gives them the upper hand. It also shows why this industry sector is their most important one. The sector uses 20-25% of all the investments made in Swedish industries. This shows us the importance of this single industry in their country. To put it more in perspective, the net export figure is around 15% of the total Swedish export. They are the world’s 3rd largest exporter in this type of industry. The reason because they export this much is because Sweden is a small country. Their own population just simply doesn’t consume as much as the country can supply. They are and always were efficient in producing these materials, they just had to export to different countries to gain as much profit as possible.

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Microeconomic components

Now we will have a closer look on the microeconomic components of the paper and pulp industry in Sweden. Lets start with the supply and demand. This industry has a stochastic and hard to predict supply of volumes and quality needed. When the supply is predicted badly, it could easily cause surpluses or shortages. The reason for this is most likely because there are a lot of different kinds of end products, compared to the raw material (the types of tree species is limited). According to a Swedish organization, (Swedish Forest Industries, 2018) Sweden exported:

  • 11.9 million tonnes of pulp
  • 10.1 million tonnes of paper
  • 18.3 million cubic metres of sawn timber

 

These numbers give us a good idea of the demand. As stated before, this raw material has a wide variety of ways it can go. Because it can be used in so many different kind of end products, the demand will always stay rather high, even though it is hard to predict the volumes the industry is needed to supply. If we look deeper into the demand, you probably understand it is pretty high for paper.

We use paper on a daily basis and multiple times a day as well. The main ones are;

  •  Printing and Writing
  • Newspapers
  •  Tissues and toilet paper
  •  Packaging

 

Worldwide the consumption of paper was roughly 360 million tonnes per year in 2005.

Like I said before, the paper and pulp industry is very competitive. Although this is the case, not everyone can just enter the market. It is very capital intensive to start-up and the businesses only get small margins on their sales. In Sweden they have 5 main businesses in this industry. These are part of the top ten paper and pulp businesses in Europe.

The industry also faces a couple of challenges. Due to the rapid growth of the digitization, the consumption of paper is having a decline. Paper will never get removed out of our lives because it remains to important. Businesses simply focus more on hygiene products and packaging. It isn’t all bad though. Because of this digitization, they are able to use high-tech machines for production which increases their supply. The challenge remains to not over-supply the market with the digitization. Next-up there is the challenge of the raw material supply. The industry has a big impact on many environmental issues. Even up until this day this remains serious. Therefore there are policies. These policies include regulations for emission limits, technology requirements but also taxes and the allowed tradable emissions. But as we all know, these only have minimal effect on making the impact on the environment any less. The market demand and community pressure is the main thing that could change environmental performance.

Another important point is recycling. In Europe we are already recycling near our maximum capacity. Even if this is the case, it remains a challenge for every single business to be innovative and finding new sustainable collecting systems and keep increasing quality of secondary raw materials. The supply is also challenged by the recovered paper exports to non-EU countries.

They have around 234,000 Swedish employees in this sector , including the ones abroad. The unemployment rate in Sweden always has been rather low. If we look at this industry, it underwent a shift in employment. In the past the paper and pulp had to be made manually, but now with the technological advancements, there is more need for employees for maintenance of the machines.

Macroeconomic components

Because this industry is such a big deal in Sweden, you could imagine what would happen to all the forests if everyone just keeps making more and more paper without taking nature into account. Therefore, the pulp and paper industries are constantly researching new ways to develop and apply new methods to use natures resources in a more friendly way. Apart from that, they also agreed on leaving 10% of nature aside, to preserve it or use as natural parks (nature reserves). Already 90-95% of all emissions have been reduced past eight to ten years.

As you probably already guessed, the most important factor is the forest, which the industry uses so effectively. Another important factor is the close corporation between everyone involved in the businesses and also the intense market competition.

The growth domestic product (GDP) of this country is therefore dependant on this industry. Sweden uses its resources efficiently and because of this they are among the world’s leading exporting nations.

Lets talk about the country for a minute. Sweden has one of the highest growth domestic products (GDP) per capita in Europe. They also have healthy banking systems spread out in the country and have low inflation, but in the past this was not the case. They suffered from low growth and high inflation. After a crisis hit them in 1990, banks became unstable, the unemployment number shot up in the sky and so did the government spending.

Ever since that crisis, the governments successfully controlled the public spending. Sweden reinvented their economic governance with a set of innovative regulations. The first one placed a ceiling above public spending. Because of this ‘ceiling’, the governments could prevent the accumulation of debt and make sure that the national debt doesn’t skyrocket.

Following after, Sweden created a committee of experts who analyses the policy decisions regarding the public spending. The committee aims to have consistency regarding the goals of growth, employment and long-term financial sustainability. Because of this management, Sweden is now among the most fiscally responsible countries in Europe.

Today Sweden is a highly competitive country with a very successful economy. As I repeatedly stated, they are mainly an exporting nation. They like to have a trade surplus which means that the value of the goods and services they export is greater than the value of the goods and services imported by the country.

Sweden has maintained their competitiveness in goods and manufacturing because they have a strong growth in current service sectors such as information and communications technology.

Conclusion

Now that we came to the end of this paper, we came to a couple conclusions. First of all, the paper and pulp industry will remain highly competitive and a strong factor in the Swedish economy. Sweden has placed regulations on the businesses in order to protect the environment. Apart from that the businesses face a couple of challenges, one of them is keeping up with the digitization. But we can be sure that the paper industry won’t die. Sweden is among the top exporters in Europe for these materials. So to finish this paper, the paper and pulp industry in Sweden is a strong and healthy industry that knows high competitiveness.

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