UPM to End Paper Production at Kaukas Mill, Shift Coated Mechanical Paper Output to Rauma Amid Industry Challenges
UPM Communication Papers has announced plans to cease paper production at its Kaukas paper mill in Lappeenranta, Finland, as part of a strategic move to address structural overcapacity in the graphic paper market and to safeguard the long-term competitiveness of its operations. This proposed shutdown, expected to take effect by the end of 2025, would involve discontinuing operations of Paper Machine 1 (PM1), reducing UPM’s total annual production capacity of coated mechanical paper by approximately 300,000 tonnes.
The company cited ongoing structural changes within the global paper industry, particularly the continued decline in graphic paper demand, as the primary catalyst for this decision. This decline is largely attributed to the accelerating pace of digitalization, macroeconomic uncertainties, and evolving consumer preferences that favor digital platforms over traditional print media.
While the planned cessation of paper production at the Kaukas site is a major operational shift, UPM affirmed that its other business units at the Kaukas industrial complex—including pulp production, sawn timber operations, biofuels manufacturing, and its research and development (R&D) functions—will continue unaffected. These core business areas remain integral to UPM’s long-term growth strategy and will continue to play a central role in its operations at the Lappeenranta site.
Employee Impact and Co-Determination Process
If implemented, the planned closure would directly impact around 220 employees currently working at the Kaukas paper mill. UPM emphasized that no final decisions will be made until a thorough co-determination process, in accordance with Finnish labor legislation, has been completed. This process will include consultations with employee representatives to discuss the proposed changes and explore all potential avenues for employee support, redeployment, or other mitigation measures.
Gunnar Eberhardt, Executive Vice President of UPM Communication Papers, acknowledged the human impact of the restructuring:
“UPM is well positioned to grow in several segments, while global demand for graphic paper continues to decline due to digitalization, macroeconomic challenges, and changing consumer habits. The planned steps announced today will enable a healthier capacity utilization and support our overall cost structure and competitiveness in the global graphic paper markets. We are aware that these plans will have a big impact on our committed employees in Lappeenranta and we will find solutions according to local practices. UPM will now engage in dialogue with employee representatives.”
Strategic Shift to Rauma Mill
As part of this strategic realignment, UPM plans to consolidate its coated mechanical paper production in Finland by transferring operations from Kaukas to its more modern and efficient facility at the Rauma mill. This transition is expected to optimize the company’s production assets and enhance overall cost efficiency—particularly in terms of logistics and production processes.
Antti Hermonen, Senior Vice President of Operations at UPM Communication Papers, commented on the shift:
“Our employees across mills work hard to ensure excellent performance of our machines, also at UPM Kaukas. Unfortunately, the market development requires steps such as this plan, which is a continuation of difficult but necessary steps to proactively ensure competitiveness of our overall paper operations. With the plan to shift UPM’s coated mechanical paper production in Finland from Kaukas to our Rauma mill, we are striving to optimize the asset structure and improve cost efficiency, particularly in our production and logistics processes.”
Financial Impact and Cost Savings
As a result of this planned restructuring, UPM expects to incur a total of €78 million in restructuring charges, of which €35 million will be a cash impact and €43 million will be recorded as impairment losses. These will be classified as items affecting comparability in UPM’s third quarter (Q3) 2025 financial results.
Despite the short-term financial impact, the company anticipates long-term benefits from the restructuring. The planned actions are projected to yield annual fixed cost savings of approximately €32 million, contributing to UPM’s broader efforts to enhance operational efficiency and profitability in a challenging industry environment.
Industry Trends and Broader Context
The global graphic paper industry has been under mounting pressure for over a decade, with demand shrinking consistently due to the rise of digital media, reduced print advertising budgets, and shifting consumer behaviors. Industry players like UPM have been forced to recalibrate their strategies, shifting focus toward more sustainable and high-growth segments such as bio-based products, packaging materials, and digital solutions.
UPM’s decision to wind down paper production at Kaukas is not an isolated move but part of a broader pattern of structural adjustments being made across the company’s paper division. These measures are designed to ensure the long-term viability of its paper operations in a market that continues to contract.
In recent years, UPM has placed greater emphasis on renewable innovations and high-value growth areas. Its sustained investments in biofuels, advanced fiber-based materials, and sustainable packaging underline a clear pivot away from traditional paper products. The retention of its R&D center at the Kaukas site further reinforces UPM’s commitment to innovation and its transition toward a more sustainable, diversified product portfolio.
