Swedish timber producer Vapo is closing down three pellet plants and will leave its port facilities in Riga in response to weak conditions in the wood pellet market.
The company’s pellet production capacity will decrease from 900,000 tonnes to 500,000 tonnes.
Vapo, the leading Finnish pellet producer, said the market outlook for the pellet business has continued to weaken in key customer segments and markets, with the excess capacity situation continuing for a long time. This, combined with increased imports to Europe, has brought down pellets’ market price to a level that “often does not cover the production and transportation costs”.
Vapo has exported pellets to Scandinavia and central Europe, generating cumulative losses of €40m since it started producing the products in 2000. The company has invested almost €90m in pellet production.
Vapo is preparing to make a write-off of at least €29m in its current year accounts. In addition, Vapo will make write-offs to remaining pellet plants.
It will retain 11 pellet plants, spread across Finland, Sweden, Poland and Denmark.
