The Unresolved UPM Plywood Labor Dispute: A Test of Resilience in a Fragile Industry

The labor dispute between UPM Plywood, a subsidiary of Finland’s €10.3 billion UPM Group, and the Industrial Union has entered its 14th month, with strikes persisting into May 2025. This prolonged conflict—marked by failed conciliation efforts, escalating strike actions, and unresolved wage demands—poses a critical test for the company’s operational resilience and investor confidence.

Ask Aime: "UPM Plywood's labor dispute and its impact on investor confidence."

The Stalemate in Context

The dispute centers on wage increases for 1,000 Finnish workers under a contested collective agreement. While the broader terms of the agreement were settled in August 2024, negotiations over pay remain deadlocked. A National Conciliator’s proposal for a 7.8% wage increase over three years—aligned with the union’s broader agreements in Finland’s export sector—was rejected by the union on March 31, 2025, despite UPM’s acceptance. This marked the second consecutive rejection of a mediated offer.

Strikes, which began in March 2024, have now halted production at all four Finnish mills (Ristiina, Savonlinna, Joensuu, and Kalso), idling the workforce and straining supply chains for construction, shipbuilding, and industrial sectors reliant on UPM’s WISA® plywood and veneer products. Meanwhile, UPM’s Otepää mill in Estonia continues operating normally, offering a sliver of operational stability.

Economic Pressures and Financial Risks

UPM Plywood faces a dual challenge: rising production costs and stagnant demand. Wood prices have hit record highs, squeezing margins, while the construction sector—its primary customer base—remains in a slump. In 2024, UPM Plywood reported €430 million in sales, down slightly from €422 million in 2023, reflecting pre-strike market conditions. The prolonged strikes now threaten further revenue erosion.

Juhani Tenhunen, UPM Plywood’s Vice President of Operations, has warned that the strikes are causing “significant damage to customers” and risking long-term business viability. The company estimates that eight weeks of halted production in April 2025 alone could cost millions, though precise figures are undisclosed. UPM’s broader group, with annual sales of €10.3 billion and 15,800 global employees, has thus far shielded UPM Plywood’s losses, but sustained disruption could strain its balance sheet.

Sustainability Credentials Under Strain

UPM’s emphasis on sustainability—recognized by EcoVadis and inclusion in the Dow Jones Sustainability Indices—may face indirect scrutiny. While the company positions itself as a leader in renewable materials, the labor dispute underscores vulnerabilities in its supply chain. Investors increasingly prioritize ESG metrics, and prolonged strikes could tarnish UPM’s reputation as a socially responsible employer.

The union’s demands for better pay and contract terms also highlight tensions between corporate profitability and worker welfare. UPM argues that meeting the union’s wage expectations would be “very challenging” amid low demand and high input costs, a stance that risks alienating labor stakeholders and consumers.

Outlook and Investor Considerations

The National Conciliator has not set a timeline for resuming talks, leaving the dispute’s resolution uncertain. With the union set to strike again from April 28 to May 5, 2025, the conflict shows no signs of abating. Key risks for investors include:
1. Revenue Losses: Finnish mills account for a significant portion of UPM Plywood’s operations. Extended strikes could further depress sales.
2. Customer Attrition: Key clients in construction and shipbuilding may seek alternative suppliers, eroding market share.
3. Sustainability Backlash: The dispute could undermine UPM’s ESG narrative, affecting its ability to attract ESG-focused investors.

Conclusion: A High-Stakes Balancing Act

The UPM Plywood labor dispute is a microcosm of broader challenges in global manufacturing: balancing labor costs, profitability, and sustainability. With 14 months of strikes, UPM’s Finnish operations face existential risks. While the Otepää mill provides a lifeline, the company’s reliance on its Finnish facilities for core products means the dispute’s resolution is non-negotiable.

Investors must monitor two critical indicators:
1. Strike Duration: Each additional week of halted production deepens financial strain. A resolution by mid-2025 could mitigate losses; a prolonged conflict risks triggering a downward spiral.
2. Wage Negotiations: A compromise on pay increases—perhaps a phased raise tied to cost reductions or productivity gains—could break the deadlock.

For now, UPM Plywood’s story is one of resilience tested. Its ability to reconcile labor demands with financial realities will determine whether this labor dispute becomes a cautionary tale or a stepping stone to sustainable growth. The stakes are high—for workers, customers, and shareholders alike.