UPM removes significant magazine and newsprint capacity worldwide

http://www.forbes.com/HELSINKI (Thomson Financial) - UPM-Kymmene said it will permanently close its Miramichi mill in Canada as part of a plan to slash magazine and newsprint capacity and cut yearly costs between 50-70 mln eur.

The world's largest magazine paper manufacturer is closing Miramichi as the strength of the Canadian dollar has made UPM's exports to the US unprofitable.

Some 540 jobs will go, with the group expecting to take a 105 mln eur hit during the fourth quarter.

The move will also have a cash flow impact of 80 mln eur over 2008-09 and result in tax charges of 15 mln eur.

Miramichi, which has an annual capacity of 450,000 tonnes of magazine grades, has already been at a standstill since August.

Jyrki Ovaska, the head of UPM's magazine paper division, said: 'During the temporary shutdown, we have investigated several business solutions to make the Miramichi operation viable. Unfortunately, the current business environment leaves us no options.'

UPM said it would also trim newsprint capacity temporarily by shutting down a newsprint machine at its mill in Kajaani, Finland, for ten months, and one machine in Steyrermuehl, Austria, for two months.

Those measures, designed to trim its 2008 newsprint capacity by 250,000 tonnes, will be put in place during the first quarter of next year.

The cuts are the latest in a series of measures taken by key forestry industry players in a bid to tighten supply and boost prices amid rising raw material costs.

UPM said rising wood, recycled energy and energy costs means the current quarter will be its worst this year, though it is projecting full-year operating profit, stripping out special items, to be up on 2006.

The group said it will also reduce capacity of label papers by shutting one machine in Jamsankoski and one in Tervasaari, both in Finland, for up to three months.

On top of those cuts, three old self-adhesive label lines in Tampere, Finland, and one in Melbourne, Australia, are to cease production, while it is considering closing a timber components and planing mill in Luumaki, in Finland.

Also under review are sawmills and woodland it manages under license located close to Miramichi.

All-in-all, some 680 people are expected to be made redundant, with a further 270 to be out of work during the temporary shutdowns.

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UPM removes significant magazine and newsprint capacity worldwide

HELSINKI, Dec. 17, 2007 (Press Release) - Following the review of its asset portfolio against the current cost and business environment, UPM has decided on several courses of action, including removal of production capacity.

The Company today announced the following:

Removal of 450,000 tonnes of magazine paper capacity by permanently closing the Miramichi paper mill in Canada

reduction of 250,000 tonnes of newsprint capacity through the temporary shutdown of one paper machine in Kajaani, Finland, for ten months, and one machine in Steyrermühl, Austria, for two months

reduction of label paper capacity with the temporary shutdowns in Finland of one paper machine in Jämsänkoski and one in Tervasaari, both up to three months

rationalisation of the Company's self-adhesive label materials operations by closing three old coating lines in Tampere, Finland, and one coating line in Melbourne, Australia, and

commencing negotiations with employees on the possible closing of the timber components and planing mill in Luumäki, Finland.


With the exception of Miramichi and Tampere, all the above measures still require negotiations with employees according to the national practices in respective countries.

The decisions are based on UPM's view of the markets and cost competitiveness of the assets. We estimate that next year demand growth will be slower than in 2007 and in the beginning of the year meaningful price increases can be achieved mainly in magazine papers. At the same time the industry will face higher costs of wood, recycled paper and energy. The full year 2007 operating profit, excluding special items, is forecast to exceed that of 2006. The cost development is, however, visible already during the current quarter which will be our weakest quarter of the year.

The annualized cost saving is estimated to be in the range of Euro 50 - 70 million, mainly consisting of reduced wood, recycled paper, energy and personnel costs.

Due to the closure of the Miramichi mill, UPM will book in operating profit costs of approx. Euro 105 million in Q4 of 2007, majority of which will impact Magazine Papers Division. The cash flow impact is estimated to be Euro 80 million during 2008-2009. In addition, income tax charges of approx. Euro 15 million will be recorded from the reduction of deferred tax assets in Canada.

Actions related to magazine papers

UPM will permanently close its paper mill in Miramichi, Canada. The Miramichi mill has been temporarily shut down since August 2007.

"During the temporary shutdown, we have investigated several business solutions to make the Miramichi operation viable. Unfortunately, the current business environment leaves us no options," says Jyrki Ovaska, President of UPM's Magazine Papers Division.

The record strong Canadian dollar has made the export of Miramichi paper to the United States market unprofitable. The Canadian currency has gained 25% this year. The increasing cost of essential raw materials such as wood and chemicals has offset the benefit of price increase for magazine paper. Demand for magazine paper grades in North America has been stable, but globally, there continues to be overcapacity in magazine papers.

UPM has permanently ceased production of 980,000 tonnes of coated magazine paper in 2006-2007 to reduce the structural overcapacity and improve profitability of the business. Near Miramichi, UPM operates two sawmills in the communities of Blackville and Bathurst, and manages woodlands under Crown forest licenses. The future of these operations is under consideration.

UPM's North American customers will continue to be served by the Company's coated groundwood paper mill in Blandin, Minnesota, USA, and UPM's paper mills in Europe.


Actions related to newsprint

UPM will reduce its standard newsprint production capacity in 2008 by 250,000 tonnes by temporarily shutting down one paper machine (PM 4) in Kajaani, Finland, for ten months and one paper machine (PM 4) in Steyrermühl, Austria, for two months, starting during the first quarter of 2008.

Furthermore, the cost competitiveness of the Kajaani mill will be improved by streamlining and reorganization which will result in permanent headcount reduction.

"Shutdown for almost a year is an unconventional measure. However, we foresee a changing newsprint market situation in Europe in 2008. The demand growth for standard newsprint is currently flat in Europe, and with continued imports from North America and a decrease in exports to Asia, the European newsprint market is not in balance. Therefore, we need to take action," says Hartmut Wurster, President of UPM's Newsprint Division.


Actions related to label papers

UPM will temporarily shut down two label paper machines for up to three months, one in Jämsänkoski (PM 4) and one in Tervasaari (PM 5), both in Finland. In label papers, there is overcapacity in Europe and the strong euro makes the current exports unattractive.

Actions related to wood products

UPM will start negotiations with employees on the possible closure of the timber components and planing mill in Luumäki, Finland. The financial performance of the mill has been negative and the market outlook for 2008 will remain weak. The closure of the Luumäki planing mill relates to UPM Timber's plans to centralise its planing operations.

Actions related to self-adhesive label materials

UPM will rationalise its self-adhesive label materials production at its Tampere factory in Finland by closing three outdated coating lines, no later than in March 2008.

In addition, UPM will shut down a self-adhesive label materials production line at its factory in Melbourne, Australia. The specialty products produced on this coater have been transferred to other production lines. The Melbourne factory continues to serve the Australian market with a combination of locally produced products and imports from other Asian factories.

Impacts on personnel

UPM estimates that these measures will reduce the number of the Group's personnel by approximately 680, mainly caused by the permanent closure of the Miramichi mill (540 persons), streamlining and reorganisation of the Kajaani mill (60 persons) and the possible closure of the Luumäki mill (50 persons). Rationalisation of the self-adhesive label materials operations in Tampere, Finland, and Melbourne, Australia, will reduce the headcount by about 30 persons.

In Kajaani, Jämsänkoski and Tervasaari, negotiations on possible temporary layoffs will be started with employees. Temporary layoffs are estimated to affect approximately 110 persons at the Kajaani mill. At the Tervasaari mill in Valkeakoski, the temporary layoffs are estimated to affect approximately 90 persons and at the Jämsänkoski mill approximately 70 persons.

Paper products industry to lose $400M this year

Paper products industry to lose $400M this year, turnaround to start in 2008
3 hours ago

OTTAWA - Canada's paper products industry will be in the red again this year, recording about $400 million in losses as a result of the surging loonie and falling demand, the Conference Board of Canada says.

That would mark the third straight year of losses in the $11-billion pulp and paper industry, which has been in a deep funk for most of the decade.

But the Conference Board report released Thursday forecasts a turnaround for the industry starting in 2008 as prices begin to rebound modestly and demand increases from such expanding economies as China.

The report predicts the industry will make a modest $6 million profit in 2008, but earnings will rise to $600 million in 2009 and continue building to $1.7 billion in 2011.

"Much of the industry's profit will be generated by the pulp segment, boosted by strong demand in China and Western Europe," the report states.

Despite the brightening prospects, the board does not see the same bright picture for employment.

The industry has shed about 21,000 jobs in the last four years. But despite expected increasing profits, the board forecasts only minimal job growth starting in 2008.

The key factor ailing the industry is the high loonie - the board estimates that every cent rise in the Canadian dollar has shaved $200 million in profits from the sector's bottom line.

As well, the increasing computerization and Internet use in North America has cut into the demand for certain types of paper, the report says.

"The death of paper has been forecast many times since the 1990s," the report notes.

"Yet the industry - especially in North America - has still been hit by the rise of computers and the Internet," it adds. "Newsprint has been worst hit as circulation and classified advertising continue to decline and as environmental concerns multiply."

The Pulp and Paper Products Council pegged newsprint consumption decline at 12.2 per cent in the first three quarters of 2007.

In the wake of increased competition and mounting losses, many companies have either merged their operations, shut down money-losing mills or made other streamlining moves to remain profitable.

For example, Montreal-based paper giants Domtar and Abitibi have struck deals to merge with major U.S. forestry companies and are moving forward with efficiency drives to improve their finances.

Domtar Corp. (TSX:UFS), formed by the merger of Domtar Inc. and the fine-paper business of U.S. forestry giant Weyerhaeuser Co. (NYSE:WY), is the largest integrated producer of uncoated freesheet paper in North America and the second-largest in the world based on production capacity, and is also a manufacturer of paper-grade pulp.

The company, with nearly 14,000 people, also produces lumber and other specialty and industrial wood products.

Meanwhile, AbitibiBowater Inc. (TSX:ABH) is launching a review of operations as the newly combined company attempts to improve operations and reduce debt by $1 billion over three years. The review could lead to mill shutdowns in Canada and the United States.

The combination of Abitibi-Consolidated Inc. of Montreal and Bowater Inc. of South Carolina was completed Oct. 29.

Earlier this week, Vancouver-based Catalyst Paper Corp. (TSX:CTL) extended the shutdown of its No. 1 paper machine at the Elk Falls newsprint mill at Campbell River, B.C. until the end of March because of a shortage of fibre.

Other pulp and cardboard operations at the mill will also be shut down over Christmas, affecting 600 employees.

Expected Rise in Paper Costs Leaves Publishers Shuddering

Expected Rise in Paper Costs Leaves Publishers Shuddering
Mags Could Be Paying 25% More Next Year Due to Mergers in Pulp Biz
By Nat Ives

http://adage.com/mediaworks/article?article_id=122187

Magazine publishers are already facing way too many rising costs: technology investments, postage, editors both diva and deserving. But the seemingly mundane budget line for glossy paper is suddenly the one everyone is worried about.

Welcome to our hell, publishers said last week.

"I frankly became more of a quasi-expert than I would want to be, only out of necessity," said John P. Loughlin, exec VP-general manager at Hearst Magazines.

The weakness of the American dollar is increasingly restricting publishers' overseas options.

Seller's market
More worrisome, paper seems to be emerging from a competitive era of cyclically rising and falling prices. This year already has seen increases implemented and announced. Now structural changes, including mergers and a growing role for aggressive private equity, look likely to drive prices up next year by another 20% to 25%, Mr. Loughlin said.

The industry hasn't seen a spike like that since 1995, when announced increases led to a brief run on the paper market that echoed Dutch Tulip Mania. This isn't spare change, either: Paper comprises some 15%-20% of publishers' costs, Mr. Loughlin estimated. One big publisher said it's still unclear how big a hit is bearing down. "We're still examining what we believe specifics amount to, and whether there are benefits to our scale," an executive there said, speaking on the condition of anonymity.

Planning the right strategic response is complicated by that fact that visibility, beyond such rough projections, remains limited. Paper manufacturers aren't too helpful on this score. A spokesman for AbitibiBowater, the result of an October merger and now the third-largest publicly traded paper company in North America, declined to discuss publishers' fears. "We cannot speculate on pricing on a going-forward basis," he said.

A spokeswoman for NewPage, which hopes to close on the acquisition of Stora Enso's North American operations by the first quarter, did not respond to a voicemail and an e-mail seeking comment Nov. 21.

Hearst ready
Mr. Loughlin said Hearst would get by. The company increased cover and subscription pricing on many of its magazines this year and is considering a couple more hikes next year. "We have tried to be thoughtful about our structure in the good years and in the tough years relative to paper prices," he said. "Nobody wants to be here, but frankly we're in a good position in that we've managed our costs and don't have to change the physical specs on the magazines."

The other obvious recourse, trying to pass costs along to advertisers, just won't work well enough for everyone, said Malcolm Campbell, publisher of Spin. "It's going to put some people out of business," he said.

And he didn't just mean the indies. "Don't kid yourself," he said. "There are a lot of large-publishing-company old titles that are very marginal anyway. You're going to see a lot of icons going down if paper prices go up that much."

Spin, he said, will continue just fine in print, even without exploring options like switching to cheaper paper stock or reducing the magazine's size. "There may be some adjustments," he said. "I don't think we're going to go that route. We'll find other ways."


-----------------------------------------------


Paper prices "must double" says M-real chief

BY William Mitting, PrintWeek

http://www.printweek.com/paper/news/768484/Paper-prices-must-double-says-M-real-chief/



Paper prices must double to make the paper industry economically and environmentally sustainable, Andrew Gun­man, regional director of paper manufacturer M-real, has warned.



Speaking at the annual PPA Magazine Conference at London's Millennium Hotel last week, Gunman said the industry had to "pay the right price" for paper to save the environment and secure its future.



"Increased paper costs would reduce waste and force the industry to consume less," he said. "The paper industry needs more money to build a sustainable future."



Gunman added that, while most publishers do not insist on the environmentally friendly FSC certified paper, there has been increased demand from large retailers such as Sainsbury's.



"We have seen a 100% increase in demand for FSC paper in 2007 which is pushing up prices," he added.

Bemoaning the cheap price of paper in Europe, Gunman said the supply and demand mismatch was the fault of the paper industry, which had sold too cheaply.



He added that the low prices were destroying communities across Europe as paper mills are forced out of business.



Gunman's comments will be met with concern among the printing industry which is already struggling with increased paper prices.

One industry insider said that paper-based marketing and information communication has to stand up economically against other delivery channels. As paper prices increase, it makes these other channels more viable, threatening the industry.

In 2006, the dollar price of softwood kraft pulp increased by 22%, a cost which was passed onto printers.


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US toughens paper import duties to save local jobs

US toughens paper import duties to save local jobs
Jennifer Whitehead, printweek.com, 23 October 2007
http://www.printweek.com/news/753883/US-toughens-paper-import-duties-save-local-jobs/

The US government is to put anti-dumping and anti-subsidy duties on coated paper imported from China, Indonesia and South Korea, after calls from unions wanting to protect jobs in America.

This will prevent the sale of glossy paper products at below US production costs.

The United Steelworkers union has welcomed the US Department of Commerce's decision, saying that China had, until now, enjoyed "special treatment" that exempted it from anti-subsidy tariffs.

However, it criticised the delay in making the decision, saying that it had already forced mill closures and the shutdown of paper lines in the US.

United Steelworkers president Leo Gerard said: "Today's ruling is the right direction for American workers, but much more still needs to be done to bring about fair trade.

"For example, China imports most of its timber, yet there is still no real way to determine if the imported wood – which is used to make paper products exported to the US – has been harvested illegally."

China had appealed to the World Trade Organisation against moves to impose the tariffs.

The number of jobs in the US paper industry has fallen dramatically since 2002, when United Steelworkers counted around 190,000 workers in the paper and forestry products industry. That number now stands at 130,000 workers.

Reading into the pulp mill fictions

Reading into the pulp mill fictions
Judith Ajani
http://canberra.yourguide.com.au/detail.asp?class=your+say&subclass=general&story_id=1053684&category=opinion

The silent sleeper in the Gunns pulp mill debate is its commercial viability. Perhaps Environment Minister Malcolm Turnbull, with his business blood, cannot imagine a company advancing a $1.5billion investment without having done its sums, carefully. Turnbull is not alone here, most people would think it incredible.
But Gunns is no ordinary company. It has never experienced a conflict-free business day since its mid-1980s beginnings. Its business battles are as much battles against greens as they are for market share.

Gunns is a company lifted by a cheer squad rooted in four decades of battles over hydro-electric dams, mining, woodchipping and pulp mills in an island state of just 500,000 people. While its cheer squad bears little commercial responsibility for Tasmania's largest-ever investment, financial prudence requires that Gunns' board somehow keeps its feet firmly on the ground.

Gunns is reserving its final judgment on the viability of the mill until the approvals are in. But because the environmental and political debate precedes the economic judgment, the mill's commercial viability has slipped under the radar. It is quite possible it will fail the test.

In Tasmania, a grudge factor has simmered since the late 1980s when Canadian paper maker Noranda pulled out of the Wesley Vale joint venture pulp mill proposal with North Broken Hill. The public understood the pull-out as industry's response to then federal environment minister Graham Richardson's tightened requirements. This was just half the story.

Since Noranda's decision, globally traded chemical pulp prices have halved in real terms, a scenario they had not planned for and an economic reality of little interest to grudge-bearers. In the shadow of Wesley Vale, Gunns' proposed pulp mill is so emotional and politically complex that neither Turnbull nor his shadow, Peter Garrett, should assume economic rationalism drives the show.

Despite the mill's commercial viability remaining untested publicly, both Gunns and the Tasmanian Government promote its wider economic benefits. If the pulp mill's financials do not stack-up, neither does the $6.7billion boost to Tasmania's economy and the 1617 new jobs calculated by the Allen Consulting Group as input to Gunns' integrated impact statement.

Allens did not investigate the financial viability of the mill before calculating these figures. The study's project director later argued that "it is difficult to see why this [the mill's commercial viability] is anything other than a matter for Gunns and the company financiers" and questioned the legitimacy of government or the public interest in the commercial viability of major industrial projects. Allens, however, ignores the Tasmanian public's business interest through Forestry Tasmania who will supply most of the wood from public native forests.

It also ignores the risk of more Federal Government hand-outs if Tasmania's public purse is used to keep an uneconomic mill alive. ITS Global, the consultants engaged by the Tasmanian Government to review the social and economic benefits of the pulp mill, also started with the premise of the mill's commercial viability.

CommSec, using information Gunns presented in its impact statement and its own market analysis, concluded the mill would be marginally positive for Gunns but emphasised the project was highly risky, strongly leveraged to a volatile commodity price and subject to approval and construction risk. Its analysis was hamstrung by data constraints, especially on native forest log prices that remain confidential to Gunns and the Tasmanian Government. Other broker reports agree with CommSec's risk assessment but give a more positive assessment of the mill.

Five years ago, Visy Industries broke through the pulp mill barrier in Australia when it commissioned its softwood plantation mill near Tumut. Environmentalists gave it a tick having passed the first hurdle no native forest logging and the second concerning emissions. Visy also engaged in real public consultation. On environmental and consultation matters, the two pulp mills are fundamentally different. They also differ in their market orientation, and herein lies the high economic risk CommSec associated with the Gunns mill.

Visy processes softwood pulp into paper to supply its domestic box-making plants. It enjoys the transport and familiarity advantages of a domestic market. Visy's strategy copies the global corporate structure of integrated pulp and paper production. Gunns can't follow suit, as its hardwood pulp is geared for printing and writing paper. This is because PaperlinX, Australia's monopoly producer of such paper, has the domestic market effectively stitched up through its own production or its subsidiaries' imports. Gunns must therefore compete in the global pulp market, a market that's both a dumping ground in economic downturns for old players and the target of new, extraordinarily low-cost producers in South America. CommSec believes Gunns cannot match their costs.

For many decades now, real (inflation-adjusted) pulp prices have followed a roller coaster down in this gruesome market. Gunns' forceful lobbying to keep costs down is no surprise. The problem lies in the Tasmanian Government who leads the cheer squad.

Under intense political pressure, Turnbull brings in scientists to help fix the growing political problem. An economic evaluation would be equally valuable. It would help shape how the Federal Government might best bring Australia's native forest pulp mill saga to a close. For Opposition Leader Kevin Rudd, this task includes managing the forestry union and Labor politicians who will not forget Wesley Vale days.

Judith Ajani is an economist at the Australian National University and author of the recently published The Forest Wars, by Melbourne University Publishing, 368pp, $34.95.

Stora Enso found not guilty of anticompetitive conduct in the USA

Stora Enso found not guilty of anticompetitive conduct in the USA
Friday July 20, 3:02 am ET


HELSINKI, FINLAND--(MARKET WIRE)--Jul 20, 2007 -- Stora Enso Oyj News Release July 20, 2007 at 07.00 GMT
ADVERTISEMENT


HELSINKI, Finland - Stora Enso (NYSE:SEO - News) today announced that On 13 December 2006 the US Antitrust authorities announced that Stora Enso North America Corp. had been indicted for its alleged anticompetitive conduct in connection with the sale of coated magazine paper in the USA in 2002 and 2003.

On Thursday 19 July 2007, following a jury trial in the US Federal District Court in Hartford, Connecticut, the jury found Stora Enso not guilty of the charges.



For further information, please contact:
Per Lyrvall

By gum, it might just be a solution

By gum, it might just be a solution
Email Print Normal font Large font July 19, 2007

Page 1 of 4 | Single page
Selective crossbreeding to speed the growth of trees offers a breakthrough in meeting the increasing world demand for timber and at the same time saving forests, writes Louise Williams.

Advertisement
AdvertisementIn a secure, sterile greenhouse just south of the Arctic Circle trees are flowering in four weeks that would otherwise have taken 10 to 15 years to mature. The genetically modified seedlings are a huge step forward in the race to produce bigger, faster-growing trees.

It's a race which must be won to meet insatiable global demand for wood and forest byproducts without pushing commercial logging even deeper into the world's dwindling native forests.

"The post-fossil fuel era will see human society turn back to its traditional dependency on wood," says Professor Ove Nilsson, the scientific co-ordinator at the Umea Plant Science Centre in northern Sweden.

But, he says, projected demand dramatically outstrips forest production. Soaring global consumption, especially in Asia, is colliding with new demands on forests for carbon-neutral biofuels for electricity, industrial furnaces, heating and vehicles.

"Everyone agrees that if we are going to solve this puzzle we have to make commercial forests more productive," Nilsson says. "We have to grow bulkier trees faster so we get much higher yields per hectare. Otherwise we risk cutting down every stand of rainforest left on the planet."

In China, the forest products industry grew from $US4 billion to $US17.2 billion in the five years to last year, paper consumption has doubled in a decade and forests, especially in Indonesia and Russia, are being rapidly felled to feed the Chinese industrial machine. Elsewhere, scientists are eyeing wood for biofuels because it is at least twice as "energy dense" as crops used to make ethanol for green vehicles, and trees require much less land and fertiliser.

The commercial forests of the future, Nilsson says, will be fast-growing plantations "tailor-made" for bio-energy, pulp and paper, new wood fibre products and sawn wood and logs for construction and furniture.

And it's not all science fiction; a plant enzyme has been identified in Sweden which makes paper highly water resistant, a potential replacement for petroleum-based plastics, and a wood fibre composite is being tested to replace plastic components in cars. Millions of cloned high-yield trees are being planted in the US, following decades of research and breeding to select the most productive trees. The most dramatic breeding gains have been achieved in Brazil, where massive eucalyptus plantations grow to 35 metres in seven years, a 300 per cent increase on the original Australian species. But most trees are still only 20 to 40 per cent bigger than their ancestors. Genetic engineering is the next frontier.

The futuristic seedlings are locked inside a pressurised greenhouse on the roof, to prevent cross-contamination of pollen and spores with native forests. Unlike work on crops such as corn and soy, the genetic modification of trees is in its infancy. In agriculture, extraordinary improvements in food crops have been achieved through millennia of selective breeding, irrigation, fertilisers and, more recently, the biotechnology revolution, which began in the US in 1995. Wild tomatoes were originally no bigger than a strawberry and corn was about the size of a finger.

"You could argue that biotech has an even bigger potential for trees than crops because crops were already greatly improved before GM, but in forestry we are still at the beginning," Nilsson says.

The trouble with trees is that, unlike crops, selective breeding takes decades. Many cold climate trees such as spruce and aspen take 10 to 15 years to flower, meaning superior trees can only be picked out and crossbred - in the hope of even more productive offspring - a couple of times in a forester's career.

Eucalypts have galloped ahead because they flower in two to three years, allowing rapid crossbreeding to emphasise favourable characteristics such as fast growth and straight stems, boosting harvests in Brazil from 20 cubic metres of wood per hectare to up to 60 cubic metres.

What Nilsson and his team have managed to do is to mimic one of the earliest flowering plants on the planet, the Arabidopsis, a member of the mustard family that flowers in four to six weeks. They discovered poplars and other trees have the same FT (flowering locus T) gene which triggers early flowering in the Arabidopsis, but in nature it is dormant for up to 15 years. By isolating the gene, activating it, then returning it to the seedling, they've turned on almost instant flowering in several of the slowest-maturing trees.

"The flowers are formed normally and they produce pollen," Nilsson says of the first batch grown last year, which created waves in the global scientific community.

The seedling themselves aren't much use in forests; they're not necessarily bigger or stronger. The idea is to use the GM early-flowering trees for cross-breeding; giving researchers the chance to select the best trees using molecular markers a couple of times every year, instead of once every two decades for cold forests such as those in Sweden.

The way the remotely activated FT gene has been delivered into poplars also opens the door for other genetic modifications from a bank of 250 tree genes identified at the Umea centre. The genetic delivery mechanism is a naturally occurring soil bacterium which readily infects plant cells, transferring part of its own genes into those cells. The bacterium has been hijacked by scientists looking for way into a tree's genetic structure.

"We just replace the bacterium's genes with the genes we want to introduce into the tree and the bacterium (or the plant) won't notice the difference.

"If you take the gene that controls the production of growth hormone and turn it off you get a bonsai, but if you make it more active you get a tree that produces almost twice the amount of wood fibres," Nilsson says.

An Australian PhD candidate, Jonathon Love, is at the Umea centre searching for his tree accelerator. His research focuses on how trees seek to correct a lean by generating more wood on one side to straighten the stem.

"If you identify the gene that is responsible for the localised growth stimulation, turn it on, then put it back, you can stimulate faster growth in the entire trees," he says.

Turning laboratory super seedlings into super forests is likely to rely increasingly on embryonic cloning. When genetically superior parents have been created, embryos can be excised from their seeds and grown in tissue culture, where they can be stimulated to make copies of themselves. The embryos can be stored in liquid nitrogen while the copies are planted out to identify which of the original seeds produced the best characteristics. Cloned tree embryos are not difficult to handle; they can be dried, shipped all over the world, and planted without a seed.

Love has worked in commercial forestry in Tasmania and says he's acutely aware of the pressure rapidly growing demand for wood products is putting on wilderness regions.

"The benefit of using forest sustainably is that you can have a carbon-neutral process. Wood is solar power harnessed by trees; you fix the same amount of carbon growing trees as you lose when you harvest them.

"Science can help with technical solutions to maximise productivity, but you still need good management and political commitment to replanting," Love says.

Umea lies in Sweden's biofuel region of vast forests. Wood waste from local timber industries fuels the power plant, providing carbon-neutral electricity, hot water and heating. Garbage is also tossed into the furnace. There's enough emissions-free hot water to run pipes under the city centre, keeping streets free from snow in winter, when the temperature plunges to minus 20 and the sea, lakes and rivers freeze over.

Forest industry waste is being used to generate electricity and heating in Europe, and in Brazil forest offcuts are replacing fossil fuels in the likes of smelting and food processing. Wood and wood composites must eventually replace high-emissions building materials such as steel, bricks, concrete and synthetic composites. In Sweden's south, Europe's first high-rise wooden apartment block is under construction.

Most significant, perhaps, are Swedish experimental factories turning wood and forest waste into second-generation automotive biofuels, raising the prospect of vehicles running on trees. GM trees are being tested in the US for biofuel production and New Zealand and Denmark are also investing in wood-to-vehicle fuel research.

How close we are to commercial GM forests is a matter of conjecture. China has planted out GM trees modified to resist pests, but many governments are cautious. Nilsson plans to use the fast-flowering mechanism only for breeding in sealed greenhouses. Once high-yield trees have been created, the gene can be bred out, leaving genetically normal trees to be cloned and planted.

GM eucalypts, he says, may be only five for six years away, but genetically modified hardwoods are unlikely in cold climate forests before 2015.

And there's still the contradiction between environmental demands for carbon-neutral biofuels and building materials to reduce greenhouse gas emissions and the traditional opposition to commercial forests from green groups concerned about biodiversity, especially with single-crop plantations.

But, says Nilsson: "The only way we are going to cope with rising demand is increase forest productivity. GM is one tool but this is a new way of thinking and working and we need more experience to fully understand its potential."

Louise Williams visited Sweden at the invitation of the Swedish Institute for the 300th anniversary of the birth of Carl Linnaeus, the world's first ecologist and the father of the binary nomenclature system of scientific classification.