Rauma Forest Sees Strength In the European CTO Market

04 June 2001 00:00  [Source: ICB Americas]

In the midst of declining global crude tall oil (CTO) fractionating capacity and ongoing major restructuring in the tall oil market, Rauma Forest Chemical Oy has decided to make a significant investment and enter the tall oil derivatives business in Europe without the participation of large industrial concerns.

Rauma was founded last September by a group of Finnish investors and former management members from Arizona Chemical Europe (CMR 5/21/01 p.3). Finnish capital investors Bio-Fund Management, Merita Capital and OKO-Venture Capital, representing their funds, and Suomen Teolli-suussijoitus are the owners of Rauma with additional ownership from company management.

In entering the market for tall oil-based oleochemicals and specialty chemicals based on oleochemicals, Rauma plans to build a tall oil fractionation plant with annual capacity of 150,000 tons of distilled CTO. The plant will be the world's largest so-called dry distillation unit and will exploit the latest know-how and technology in its design, says Rauma's CEO and president Martti Fredrikson.

"In the situation where the tall oil industry is facing a major restructuring and has not invested in new capacities in Europe for many years, Rauma Forest Chemical will bring to the market the most efficient fractionation unit, marking a new standard in our industry," he says. "The future growth of Rauma Forest Chemical will be based on competitive power and operational excellence, expected market growth in new downstream areas and exploiting opportunities opening in the recent and future re-structuring of the tall oil industry."

The new company, located in the town of Rauma in Southern Fin-land, will be in the vicinity of a port and a crude tall oil producing pulp mill of Metsè-Bot-nia."The location is an optimal solution for our company. Our investment will guarantee employment in the industry, which has lately been decreasing, especially in Finland. In addition to this, all the raw materials required by Rauma Forest Chemical can be obtained within a reasonable distance," notes Mr. Fredrikson.

Northern Europe is one of the major CTO-producing regions in the world. The largest tall oil fractionator in Europe, Arizona Chemical, consumes most of the Scandinavian CTO with fractionating plants in Moss, Norway; Oulu, Finland; Valke, Finland; and Sandarne, Sweden. Arizona's total fractionating capacity in Europe is currently 365,000 tons, according to International Development Associates, a Mendenhall, Pa.-based consulting firm, accounting for 83 percent of the European market share in tall oil fractionation capacity. Rauma has targeted a gain of 30 to 33 percent market share.

Rauma will market its products mainly to Europe, concentrating in Sweden, Great Britain, Germany, and in the Benelux countries. Export will account for about 90 percent of the company's manufacture. The overall value of the total investment is around FIM 400 million ($59.4 million) with production expected to begin by the end of 2002.

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