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News archive 2004

Tall oil company becomes major player


Talouselämä, Esko Rantanen

The chemical industry

Forchem, the Finnish tall oil fractionation company,made a profit in the first year of operation.

Normally consumers would probably never see the products of the tall oil refinery but they will hardly be able to avoid coming into contact with them. The products of the fractionation process, such as rosins and fatty acids, are used in alkyd paints, glues, printing inks and lubricants.

The obligation to reduce carbon dioxide emissions is threatening to put an end to Forchem’s operations early on, though. According to Martti Fredrikson, President and CEO of Forchem, the trouble caused by the emission limits must be resolved. Forchem has submitted a proposal on the issue to the Ministry of Trade and Industry.

The emissions levy could be eliminated, for instance, by abolishing the carbon dioxide tax on fuel replacing tall oil in the pulp industry. In this way, the forest industry would be released from the environmental costs arising from its use of fossil fuels instead of tall oil, which is a bio fuel.

Last year Forchem had a turnover of 34 million euros, despite entering the market during the recession in Europe. The company managed to increase production capacity in the first year of operation.

Demand for Forchem’s products was boosted by the fact that customers finally had an alternative to Arizona Chemical’s Nordic monopoly.

“Within a few years we will be processing 150,000 tonnes of tall oil. Last year the volume was nearly 100,000 tonnes,” Fredrikson says.

This volume may also be exceeded. Accordingly, the company’s turnover will rise to between 50 and 100 million euros. In a few years, Forchem will become a major company and will be ranked in the top 500 list of the Finnish business magazine Talouselämä. The minimum turnover for the list this year is 58 million euros.

Forchem may also grow through acquisitions, although as a young company it needs to build up some more financial muscle. The main competitor, Arizona Chemicals, is owned by the American paper giant International Paper, which has a major plant in Oulu.

According to the latest rumours in the market, IP is again trying to sell Arizona. In the Unites States, the company Georgia-Pacific is selling its entire chemical products branch, of which tall oil forms a part.

Initially, Forchem was based not only on technical and competitive aspects but also national ones. While still working for Arizona Chemical, Fredrikson and Hannu Näsi, CFO, saw that in tall oil there lay a market opportunity and an opportunity for Finnish competence. Within the global chemical industry, however, the tall oil industry is a realtively small player.

In addition to the management, Forchem’s shareholders are the Finnish investment companies Biofund Management Oy, Nordea Capital Oy, OKO Venture Capital and the government-owned Finnish Industry Investment Ltd. With their funds and bank credits, Forchem made a 65-million euro investment.

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