By Agnieszka Flak
HELSINKI (Reuters) - European and North American forestry companies are increasingly investing in making biofuels out of wood residues, a market they say will be closely linked with their core paper business.
Making production self-sufficient is their primary target as rising energy costs hurt their already low profit margins, but they also see bioenergy as a lucrative business in itself.
"We wouldn't be there if we didn't see good profits out of that kind of business," said Jussi Pesonen, chief executive of the world's top magazine paper maker UPM-Kymmene (UPM1V.HE: Quote, Profile, Research, Stock Buzz).
UPM has for years invested in energy production and its paper plants are already self-sufficient in Finland and at 70 percent across its operations globally.
Pesonen said combining energy production with paper making was a natural move and adds value to biomass used.
"Bioenergy is well integrated into the paper and pulp mills, where you can combine biomass coming from forests and mass production," he said.
That is what makes the business so profitable, he said.
"Standalone, a biodiesel plant wouldn't be that competitive," he said.
Along with some of its peers, UPM is now investing in developing biodiesel technology, looking to reduce dependency on skyrocketing electricity costs.
Stora Enso (STERV.HE: Quote, Profile, Research, Stock Buzz), the world's top paper and board maker, has formed a joint venture with refiner Neste Oil (NES1V.HE: Quote, Profile, Research, Stock Buzz) to jointly develop technology for producing biofuels from wood residues.
PINE TREE OIL
Swedish refiner Preem said last month it planned to start making biodiesel from pine tree oil, a non-edible forestry industry waste product, in the face of criticism biofuel has pushed food prices to record highs.
Biofuels are mainly produced from food crops such as wheat, maize, sugar cane and vegetable oils and are seen as a way to cut greenhouse gas emissions that contribute to climate change.
But critics say diverting land from food crops to biofuel feedstock production has helped push up global food prices.
"Previously wood scraps have been unused totally, so this will definitely improve the companies' profitability," Handelsbanken analyst Sampo Timonen said. Continued...
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