150 years’ understanding where we come from guides … · 150 years’ evolution toward a greener...

150 YEARS’ EVOLUTION TOWARD A GREENER FUTURE

PANU NYKÄNEN

THE OUTOTEC STORY

150 YEARS’ EVO

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ARD A GREEN

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TOTEC

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ISBN: 978-952-93-7721-3 OUTOTEC OYJ

UNDERSTANDING WHERE WE COME FROM GUIDES US FORWARDAs science and technology advanced in the industrializing Europe, new methods for the processing of natural resources were developed and environmental concerns began to emerge. From its roots in the German and Finnish mining and metals industries in the late 1800s to the modern day technology company that bases its operations on sustainability, Outotec’s story is one of a company striving for a cleaner, greener future.

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© Panu Nykänen and Outotec Oyj 2016

150 years’ evolution toward a greener future – the Outotec story

First published in Finland in 2016 by Outotec OyjRauhalanpuisto 9, POB 1000FI-02231 ESPOOPhone +358 20 529 211www.outotec.com

Translation and text editing: LionbridgeVisual design: Hill+Knowlton StrategiesGraphic design: Susanna AppelSources of photographs: Outotec Oyj, Central Archives for Finnish Business Records, Deutsches Museum, Stahl Institut VDEh

ISBN 978-952-93-7721-3 (paperback)ISBN 978-952-93-7869-2 (PDF)

Printed in Finland by Bookwell Oy 2016

Foreword 6On technology and science 7Man, culture, and the environment 9

PART 1: BIRTH OF THE TECHNOLOGY INDUSTRY: FROM EUROPE TO THE WORLD 13The roots of technological education 20Roots in Germany and Finland 25The inception of the Finnish mining industry 28The dawn of the metals industry in Germany 30Environmental problems and the growing need for energy 44The new beginning of the Finnish metals industry in 1910 47The crisis of globalization and World War I 51Finnish ores and the self-sufficiency of the state 59The nickel of Pechenga and the copper plant at Imatra 69Battle for metals 75Technology in World War II 83Review of the time of crisis 99

PART 2: THE NEW DIVISION OF THE WORLD IN 1945 AND THE BREAKTHROUGH OF NEW TECHNOLOGY 103Supply and demand for technology 104The metallurgical invention of the century 109

CONTENTS

Metallurgical research in support of the national economy 115Collaboration with universities 123Advances in automation and the funding of technological research 129

PART 3: ENGINEERING AND RESEARCH: THE DAWN OF A NEW BUSINESS 141Eastern trade and turnkey plant deliveries 156Growing environmental awareness 169Independence of technology sales 182Outokumpu’s difficult years 186Doubling of technology sales 190

PART 4: NEW BEGINNING: TECHNOLOGY AS A KEY SUCCESS FACTOR 203Independence 214Merger in 2001 219Listing on the stock market 221Vision of sustainable development 225Technologies of the new millennium 227

Conclusion 230References and bibliography 237

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ForewordThis study explores how the industrialized world has utilized the natural resources it has extracted from the soil, along with the preconditions and restrictions that have affected these extraction and utilization processes. The aim is to reflect on the problems involved in the use of natural resources and in doing so, to consider how the possibilities of new technology can be used in building the future while avoiding these problems. The history of Outotec, a technology corporation with a global presence, is also intertwined with this exploration.

This study also depicts events that led to the formation of Outotec, and how the company’s current business culture came about. Incorporated as an independent company in the 2000s, Outotec’s story is bound up in the economic and industrial history of Europe, its roots and technological knowledge being linked to many well-known, long-lived companies, including Outokumpu, Metallgesellschaft, Lurgi, Klöckner-Humboldt-Deutz, and Boliden.

When and where did the path leading to the founding of Outotec begin? There is no one answer to this question, but the company’s earliest confirmed roots lie in Central Europe and the German mining and metals industry of the 1880s. Company legend recollects that these roots were created 50 years before, in the early 1800s, with the operations of a private financial institution founded by Philipp Abraham Cohen in Hanover. Upon his death, his son-in-law, Raphael Moses (later known as Ralph Merton), would take over the company moving it to Frankfurt am Main and renaming it Metallgesellschaft in 1881. Perhaps the latest possible year that can be marked as the founding of Outotec is 1908, a year that also saw the beginnings of the prominence of the Finnish mining industry. That was when ore was discovered in Outokumpu in Eastern Finland. However, Finnish geological research related to the mining industry is much older.

This historical study is divided into four distinct periods. The early stages of the technology industry and the history of Outotec, from its beginnings up until the 1940s are discussed in the first chapter. The second chapter examines how the reorganization of the metals industry after World War II and the major economic changes in the 1980s and 1990s contributed to the

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150 YEARS’ EVOLUTION TOWARD A GREENER FUTURE — THE OUTOTEC STORY

emergence of cleaner production technologies. The third chapter describes the birth and growth of the technology business of Outotec’s former parent companies, Outokumpu and Lurgi. The fourth, and last, chapter traces the events that led to the formation of Outotec, and relates how the company’s current business culture came about.

Throughout its history, Outotec has developed new technologies for the processing of natural resources for the benefit of industrializing society, in accordance with the objectives of each era and by means of the best methods available. Outotec has its roots in Northern Europe. The study therefore focuses on the development of knowledge in the European mining industry and in the processing of metals and raw materials. However, the production of and trade in metals has always transcended national and continental borders. Changes in the structure of international trade have also guided the development of technology and the ways in which natural resources are used.

Every generation in its turn has set itself a goal of building a better future.

On technology and scienceThe development of a system of research and education to match the needs of industry is not merely a chapter in the history of engineering sciences. Rather, technology evolves as part of human culture. As Jacques Ellul noted in his book The Technological Society, first published in the 1950s,1 technology as a phenomenon is always tied to time and the culture using it. Technology advances hand-in-hand with the needs and expectations of the community, and it is always linked to other aspects of the culture.

Science and technology are inseparable, and advances made in them change our world, sometimes faster than we can comprehend. Scientific research is often carried out for pure knowledge, but technology is developed for the needs of humanity, for exploiting natural resources, and for producing energy.2 The rapid development of technology and science

1) Ellul 1964.

2) De Solla Price 1965; 1980.

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FOREWORD

is driven by a strong need for more economical and efficient ways to use natural resources and meet the needs of energy consumption. Already at the beginning of 20th century the German engineer and historian, Conrad Matschoss, stated that technology is never an end in itself. The outcome of technological research and operations is always practical, that is, an economic application.

Technology and science have supported each other in the course of history. Dedicated educational and research systems were set up for both during the scientific revolution of the 19th century. The two have also competed for social significance and position. This study explores, through the operations of Outotec’s predecessors, how the relationship of the industrialized world with science and technology has changed over time, particularly from the perspective of the European pro-industry research system.

Individual technical phenomena are not disconnected from the rest of the world. Thomas P. Hughes has written about LTS (Large Technical Systems), which evolve as a whole. An individual component may develop more slowly than the other components, thereby delaying development, or more quickly than the other components, in which case the system may move in a completely new direction. Indeed, an LTS may develop in a new direction in both cases.

These are some of the issues that preoccupied the engineering profession as it was formed in the late 18th century. The development of engineering education and its separation from the system of scientific education in the first half of the 19th century was the outcome of practical necessity. Hence, investments in the research and teaching of technology should be seen as investments in intensifying the use of natural resources.

Aside from technology, the history of trade structures is also an essential part of the development of industry. This study describes the key factors that contributed to the development of the minerals and metals processing industries. Changes in the structures of international trade and upheavals in world politics have had a crucial impact on practices in these industries. However, certain events and connections require further examination, such as the effect of the World Wars on the use of raw materials.

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Man, culture, and the environmentThe technological-scientific cluster built around the mining industry and metal production, together with its affiliated industries, form an LTS whose effects can be seen in the minutiae of everyday life as much as they can in the whole of the environment. Throughout recorded history, mankind has exploited metals and other raw materials extracted from the soil. In order to improve living standards and the quality of life, humans have striven to invent and develop easier and more economical ways to discover, process, and use raw materials. This is a global story that spans centuries and involves numerous subplots. It can also be perceived as a story of how mankind has found its place in the world, learned to use the opportunities on offer, and finally understood that natural resources are limited.

From the second half of the 18th century onwards, the history of Western society can be seen as a continuous chain of industrial and technological revolutions. The term ‘Industrial Revolution’ was coined by economic historians in the late 19th century to describe events that occurred first in Great Britain and then in other countries abutting the North Sea, before taking place elsewhere around the world.

Revolution is a sudden event, and historians at the end of the 19th century wanted to draw an analogy between changes in business and production and the political upheavals of the second half of the 18th century, such as the revolutions in North America and France. However, the development of industry was not exactly a revolution, since the modern processing industry was created over a period of around 50 years. Nevertheless, the relationship of Western consumers, industrialists, and engineers with the material world changed permanently in only a few decades – first at the end of the 18th century with the First Industrial Revolution and then in the 1870s with the Second Industrial Revolution.

The new achievements in science and technology during the 18th and 19th centuries were rapidly implemented into industrial production. Great strides made in chemical research, in particular, led to an increase in the efficiency of energy generation and the development of better production methods. As a consequence, it seemed as if the progress made by the energy and processing industries was more of a sudden breakthrough when compared to the scientific research the progress was based on. Within a short period

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FOREWORD

of time, the scientists and engineers of the newly industrializing countries learned to search for, process, and utilize natural resources in a way that had previously been unknown or unimaginable. The consequences were not altogether positive. By the middle of the 19th century, the period lasting roughly a century during which humans carelessly wasted natural resources had begun.

The way in which natural resources were exploited changed drastically the living environment in both the industrialized and industrializing world. Problems arose when the number of people exceeded an area’s capacity to support itself. In densely populated areas, the limits of the use of certain natural resources were reached hundreds of years earlier. The resources necessary for energy production were typically the first to be depleted. Administrative orders designed to control the relationship between humans and the environment are not a modern phenomenon, but date from antiquity and the Middle Ages. By the mid-20th century, it had become evident that environmental concerns could no longer be neglected without endangering the future of mankind.

European society and its material culture also changed fundamentally as a result of industrialization. Never before had such a change occurred in the Western culture. The artifacts used by common people in the late 18th century had remained essentially the same for hundreds of years. The emergence of the consumer goods industry led to a sharp fall in the prices for objects that were in high demand and made life easier. Awareness of an opportunity to obtain something to which only the wealthiest had previously had access, increased both demand and the need to further develop industry. Raw material extraction became the bottleneck of the production chain and a radical intensification of metal production was required to solve this problem.

Although living conditions improved, wealth increased, and living standards rose as industry was developed, by the mid-19th century, it was already obvious that industrial activity also had undesirable effects on the environment. In particular, the burning of coal polluted the environment, but in some places, the social ill-effects of industrialization were equally unbearable. As early as the beginning of the 20th century, a key objective in industrial development and in related scientific and technological research

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was to repair the damage and the detrimental social effects caused by industrialization. A combination of this with the fact that both industry and technology had also been used for harmful purposes, such as warfare, has meant that a culture dependent on industry and technology has not been solely seen in a positive light. Technology evolves according to its own laws, but decisions that guide the development and use of technology are political.

In the early 20th century, the power of technology was questioned in many quarters, following a debate on the relationship between man and the environment and the use of natural resources. Technological pessimists, led by philosopher Oswald Spengler, claimed that mankind was heading toward its own destruction with the use of technology. Meanwhile, technological optimists saw technological progress as a means of improving the quality of life and living standards. This discussion continues today to varying degrees, but the impact of industrialization on the environment has become part of the daily discourse in the 21st century. In the 2000s, sustainability has become a necessity in industrial operations and Outotec is a result of this development. The birth of the company was significantly affected by the increasing role of sustainable development when it came to planning new industrial investments and operations. The company aims to be an industry pioneer in the development of solutions that enable the processing and recycling of natural resources while maintaining with sustainable results and minimal impact. Outotec knows that clean production is possible in the modern processing industry; however, changing industrial structures and methods is just as slow, if not slower, as industrialization was in its time.

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PART 1 PART 2p. 103

THE NEW DIVISION OF THE WORLD IN 1945 AND THE BREAKTHROUGH OF NEW TECHNOLOGY

BIRTH OF THE TECHNOLOGY INDUSTRY: FROM EUROPE TO THE WORLD

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PART 1: BIRTH OF THE TECHNOLOGY INDUSTRY: FROm EUROPE TO THE WORLD

After the 16th century, Europe’s growing economic prosperity was largely based on the exploitation of her colonies. Due to increasing industrial activity, the continent’s own known natural resources

showed signs of depletion as early as the 17th century. In particular, this concerned the supply of wood. The large forests near the population centers of Central Europe were already dwindling, which affected other newly burgeoning industries. The glass industry, for example, was constantly forced to move north to where inexpensive fuel was still available.3 The mining industry also consumed substantial amounts of wood, both as a source of energy for metals industry processes and as mine support material and in quarrying. Used as both fuel and building material, the rising price of wood was one of the first factors that really changed industry.

In particular the demand for wood in areas where population agglomerations were at their densest not only drove prices up, it also lead to rapid deforestation. This together with the dense smoke that resulted from burning wood in larger cities, such as Paris and London, with populations in the mid-17th century of half a million each, led to a ban on wood being used as a fuel. Wood was instead carbonized in the vicinity of cities, but the resulting supply of charcoal was also insufficient due to the continuing deforestation. Although various liquid fuels and lubricants – which were just as important financially for charcoal producers – were also produced during the carbonization process as byproducts, new fuels simply had to be found.

By the beginning of the 18th century, rapid population growth and especially its concentration in places that were advantageous in terms of the economy and transport connections were causing problems, so advances in production and civil engineering were urgently needed. The solution was to develop the system of technological education. Apart from military engineers, the oldest organizations of technological research and education in Europe were linked to the mining and wood processing industries. For example, in 1697 in Falun, Sweden, renowned metallurgist and industrialist Christoffer Polhem would establish the laboratorium

3) Georg Haggrén 2001. Ylijoki 2011.

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mechanicum, a mining office and research laboratory dedicated to supporting the mining industry.

The solution to the fuel issue was found in the mining industry. Coal, which was available in many places in Central Europe and Great Britain, seemed to constitute an infinite fuel resource. However, the burning of coal and lignite had its own problems. Coal polluted the environment heavily, but emission restrictions were compromised on for financial reasons. As the demand for coal increased, the problems of the mining industry surfaced quickly. Deep mines were required for the continued production of coal, but the methods of the mining industry were not sufficiently advanced to meet the growing demand.

The need for more efficient coal mining led to the invention of the steam engine. Up until then, the mining industry had only used human, animal, and wind power. The steam engine was necessary for securing the energy production of pumping plants in the ever deeper coal mines. Dozens of years elapsed before steam power was adopted, but by the end of the 18th century, the steam engine had developed into a relatively economical and reliable power source.

The development of the mining industry and advances in energy production contributed greatly to the Industrial Revolution. Innovations spread rapidly to various fields, such as the textile and mechanical engineering industries. At the beginning of the 19th century, new branches of manufacturing industry emerged, and a shift to machine-operated factories was seen in countries around the North Sea. Political restrictions on the development of technology were set as early as the 18th century, when countries tried to gain an edge over their competitors through economic and technological means. The possibility of technology transfer, both gaining and losing, became an important political concern for Europe’s industrial nations. Many of these nations implemented restrictions to prevent such transfer; for example, Great Britain restricted the ability of its engineers to travel outside of the country. In spite of that, industrialization spread to

The need for more efficient coal mining led to the invention of the steam engine.

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areas where the availability of raw material resources enabled the creation of lucrative economic systems.4

The Industrial Revolution that had begun at the end of the 18th century was not the only revolution in Western Europe that would crucially shape the continent’s technological cultures. Following the French Revolution, Europe was divided in two. On one side was a group of allied states formed around the territories controlled by Napoleon Bonaparte, these states trusting their future to the development of French engineering and technology. Sweden was one of the countries that used French engineering, arming itself against Russia. On the other side was Great Britain, which as the most advanced industrial nation was prospering fast, but had isolated itself from events in Europe. Elsewhere on the peripheries of Europe, particularly in Austria and the Russian Empire, active measures were taken in order to intensify technology transfer. Yet by the beginning of the 19th century, as a result of political and economic demarcation, two main lines of organization of the European technological education and research had been formed. In less developed areas, the state assumed a larger role than in areas where private entrepreneurs were already able to operate in an internationally competitive way.5

Although technology transfer had a major impact on national finances in the late 18th and early 19th centuries, it alone cannot explain the differences in development from one part of Europe to another. On the peripheries of Europe, industrialization began as individual industrial concerns and concentrations. Known as ‘little Manchesters’, the development of these industrial concentrations required more than just access to raw materials, workers, capital, and technological knowledge; they also required the existence of old production structures and the capacity to adapt quickly and creatively to the local circumstances.6 Neither of these requirements were always present, but where they were, the ‘little Manchesters’ were able to develop faster than where they were not. Thus in Western Germany, industrialization started in the Ruhr area at the end of the 18th century and

4) Colin Heywood 1995. p. 159.



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would progress rapidly throughout the 19th century, whereas in Eastern Europe and the Nordic countries, it only gained momentum some 50 years later. Progress in Europe was made where all the required elements were present: population, available resources, financial systems, and knowledge.

Further, the idea that the rapid advances made in science and technology throughout the 18th century and early 19th century would be adopted to the benefit of industrial production and business life was not a given. Across Europe, the guilds – which had their origins in the Middle Ages – and their education system slowed the spread and adoption of innovations by protected areas of production. However, political and economic policy reforms altered the foundations of industrial activity, and the guild system was abandoned in Europe after the 1830s. The results of scientific research also had an indirect yet groundbreaking impact on the economy. For example, the new measuring instruments and the more detailed star charts and calendars used in astronomical research were quickly adopted by the sea trade to profound effect. The use of a sextant and chronometer made it possible to accurately determine the position of a vessel. Open oceans and unknown coasts were mapped within a few decades and navigation quickly became more reliable. This was of major importance to world trade, as the journey from Europe to America and the Far East shortened dramatically and freight costs decreased.

Along with the advances made in scientific research, technological and technical progress was made and adopted throughout the 18th and 19th century. This first occurred in the stages of the production where manual labor could be replaced by machines, particularly in industrializing sectors characterized by mass production, such as the textile and paper industries. Demand for industrial machinery and the manufacture of new types of machines led to the development of the mechanical engineering industry. A typical industrial hub included manufacturing facilities in these new sectors, built around a metals processing company. However, improvements in transportation and raw material extraction quickly boosted the production of consumer goods.

The 1840s saw the beginning of the first era of true globalization, which lasted until the outbreak of World War I. The construction of steamships, railroads, and telecommunications after the middle of the 18th century turned the world into a single economic and political playing field.

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Businesses that had previously operated in just local markets could now expand into large global corporations.

The leading superpower of the era was Great Britain, with its network of colonies extending around the globe. This network gave Great Britain the economic benefit of access to free markets for its industrial products all over the world. However, competition for global markets became the common cause for all superpowers of the period. France and Germany began to build similar networks of colonies and bases, although Germany’s late development as a unified nation would hamper its efforts right up until World War I. This rivalry contributed to the falling prices of raw materials

while trade, transportation, and industry continued to support each other.

The social changes brought about by industrialization were first visible in Great Britain. Closely-knit communities of factory workers formed around industrial plants, but poor housing and living conditions led to the creation of slums on the outskirts of major cities and the new industrial hubs. These slums would not only provide material for the stories of Charles Dickens, but social dissatisfaction

at these living conditions would lead to political activity. The phenomenon of slums and trade unionism would soon spread to the entire industrializing world. Efforts were made to restrict workers’ activities by introducing administrative means, improving the efficiency of police organizations, and preventing workers from organizing.

A seamless connection formed between industrial activity and the development of the surrounding society at an early stage. The well-being of production workers came to be seen as a crucial competitive factor as well as a social necessity, since industry also needed society’s infrastructure in order to develop its production. Many industrialists advanced the cultural and moral education of their workers and often had Christian goals. The Enlightenment, which spread across Europe in the early 19th century, required that the level of general education of society be raised. In

Demand for industrial machinery and the manufacture of new types of machines led to the development of the mechanical engineering industry.

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response, factories established their own schools, churches, and hospitals. Industrialists were often important patrons who financed the development of towns and cities. Joint projects between manufacturers and governments included the construction of transportation networks required by industry and the solving of hygiene problems with the help of new technology. Areas in which industry developed fastest were characterized by good connections, a sufficient workforce, the availability of raw materials and capital, and a social structure with capacity for improvement.

The influence of FrankfurtThe development of the German language area had a decisive impact on Central Europe’s economic development. At the beginning of the 19th century, British enterprises were about to take the leading position from Central European manufacturers. For example, the German chemical industry was largely in the hands of major English corporations, which were capable of making big investments. This was because prior to its unification in 1871, Germany was divided into over three dozen small states whose economies were being held back by a lack of raw materials and capital. After the middle of the century, the situation started to change. Led by Prussia, the dissolution of customs borders began after 1834, and the resulting free traffic led to the formation of a sufficiently vast economic support area for large-scale industry.

The City of Frankfurt occupied an exceptional position among the German states. As a result of developments since the Middle Ages, it had become a free zone in terms of trade and administration. Directly subordinate to the Holy Roman Empire, it was never part of the territory of any principality, enjoying considerable autonomy while retaining Imperial protection. The development of the Frankfurt area as a transportation, industry, and trade hub began as early as the 1840s, when telegraph communications were launched. By the start of the 1860s, some 40 smallish factories and workshops formed the heart of the area’s industry. These included iron and bronze foundries and chemical factories.

Since Frankfurt was never governed by a prince or duke, whose duties would have included taking care of the city’s social activity, a distinctive

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culture evolved in the city whereby merchants and craftsmen founded social institutions for which the nobility was ordinarily responsible. This tradition continued until the era of industrialization, when the responsibility for society’s development passed to industrialists.

Frankfurt was annexed by Prussia in 1866 after the Austro-Prussian War. The incorporation of the city into the Prussian kingdom after centuries of autonomy was akin to a political revolution, but integration into the larger kingdom reformed and strengthened the area’s economy and after that, the city’s population and industry expanded rapidly. In the 1880s, the construction of the German telephone network was centralized in Frankfurt. Since the city had been the hub of banking operations in Central Germany for centuries, the conditions were advantageous to the development of technological industry. Several enterprises utilizing new technology, such as Siemens & Halske, Helios AG, and Brown, Boveri & Cie, founded factories during this period.

The decades after the mid-19th century were the golden age of industrial activity and technological research in the German language area. The turning point was the Franco-German War in 1870–71, in which Germany defeated France. After the signing of the Treaty of Frankfurt, advances made in scientific and technological research in the empire were systematically used to promote industrial activity across the newly created nation. This included a significant hub of chemical and metals industry created in the western parts of Germany.

The roots of technological education

P roper institutionalized technological education is considered to have been created in the late 18th century and the first decades of the 19th century. At the turn of the century, studies in general subjects and

soon even research were added to the teaching of practical skills.By the 1830s, the teaching of technology in Northern Europe had become

greatly divided in terms of methods and curricula. The forms of education systems were determined by the nations’ wealth and resources and the state of their economies, but in many cases these systems did not provide

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adequate vocational education. In response, mining academies and forestry schools formed their own group of institutes to provide the vocational education necessary for their associated industries. In principle, it was already possible in the early 19th century for educational institutions to provide a theoretical scientific education in order to increase students’ general knowledge of technology. Barring a few exceptions, however, curricula were designed to train students for particular fields of technology and industry.

The question of the development of technological and industrial education was directly linked to the reform of European business life as a direct connection existed between technological education and the opportunities for a nation’s economic development. At the beginning of the 19th century, technological education had to compete with the strongly evolving research universities and the system of all-round education. Debate on whether practical industrial education, together with the theoretical, science-based education provided by these universities, was sufficient to satisfy the educational needs of business life, or whether a separate system of technological education was required, remained unresolved. Ultimately, it would be political decisions that put an end to the debate.

During the first part of the 19th century, when the university was evolving into a cradle of Enlightenment thinking and civilization, it embraced the idea of pure science as an intrinsic value. This led to the overvaluing of the faculty of philosophy compared to the other three, professional faculties: law, medicine and theology. Wilhelm von Humboldt’s idea of a general educational institute serving the nation meant that the teaching of practical subjects was all but shut out of universities. If subjects containing practical elements had been taught at universities, such elements were eliminated as fully as possible as the universities embraced the teaching and study of pure science. For this reason, the division between the university, providing general theoretical education, and the system of technological education became nearly fixed after the early 19th century. This division also influenced the basic education system, which was divided between the classically based schools and the more practical schools, for the rest of the century. In Prussia, the division between these two lines was institutionalized by Peter Christian Beuth.

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Educational institutes founded in wealthier areas that had industrialized early on often drew up their curricula following the French polytechnic model. However, Germany was divided in terms of economic resources, and less industrialized states dominated by agriculture set up a system of schools based on practical vocational education. Beuth’s school reform was based on a system where the student, having graduated from primary school, went to a regional vocational institute and then finally on to an institute of higher education.

As a result of Beuth’s reforms, education in the German language area was divided into French-style polytechnic institutes and the Realschule system of technical schools. The Prussian system of practical vocational education institutes and higher practical vocational education institutes also spread to the Nordic countries. In Stockholm, Sweden, the Royal Institute of Technology was founded in 1827, based on the German model. In the early 19th century, the Russian Empire was Prussia’s most important ally in the fight against revolutionary France. Russia followed closely both the administrative developments in Prussia and the reforms made in the education and research system. As a result, in 1847 the Technical School of Helsinki was established in the Grand Duchy of Finland, then an autonomous region of the Russian Empire. Both of the institutes in Stockholm and Helsinki followed the developments in the organization and methods of teaching made in Berlin.

In Finland, the Senate, the primary governing body of the Grand Duchy of Finland, set up the Manufacture Board to supervise the country’s industry. It sought to take advantage of the links already made with the institutes of higher education in the German language area. At the beginning of the 1860s, it recruited a group of young engineers from the Polytechnic Institute of Hanover. Relocating to Helsinki, they became the founders of the Finnish engineering sciences.

Following closely the models of Hanover and Berlin, the Technical School of Helsinki was changed into the Polytechnic School of Helsinki in 1872 and then into the Polytechnic Institute of Helsinki in 1879. Both reforms were based on a proposal made by the Manufacture Board in 1869. The German engineers and teachers from Hanover constituted approximately one half of the institute’s teaching staff in the 1860s and their contribution

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to the rapid development of technological education in Finland cannot be overemphasized. As well as their knowledge, these German teachers also brought with them the organization model of their own institute. Thus, the roots of the Finnish engineering profession are, both in terms of form and curriculum, in Hanover.

Connections to the German language area were also maintained through regular visits to schools in the German language area by teachers from the Polytechnic Institute of Helsinki. Supplementary studies in either Germany or Switzerland were the rule rather than the exception with the Polytechnic Institute of Zurich serving as an important example for the teaching of technology in higher education in Finland. The close links of Finland with the technical culture of the German language area were thus established as early as the Industrial Revolution.

In 1855, an association of engineers – Verein Deutscher Ingenieure (VDI) or Association of German Engineers – was founded in Germany. Under its leader Franz Grashof, the association began to purposefully improve the engineering profession’s position in society and develop an education system of its own.7 This led to contradictions between the traditional university system and the system of technological research and education.

In Finland, the organizing of the engineering profession also began within the highest technical institute. In the mid-1860s, three teachers at the Technical School of Helsinki – August Fredrik Soldan, Endre Lekve, and Rudolf Kolster – founded an association called Industriföreningen – Teollisuusyhdistys, following the model of the VDI in Germany. However, the size of the Finnish engineering profession was not yet sufficient to maintain a professional association. In 1878, the first actual engineers’ association – Tekniska Föreningen i Finland – was founded in Helsinki. During this period the ongoing dispute between the nationalist movement which favored Finnish as a language and the use of Swedish, which was still the language of government and science, led to an association for the Finnish-speaking engineers – Suomenkielisten Teknikkojen Seura – being established at the end of the century. These associations became the permanent central organizations of the engineering profession in Finland.

7) Kees Gispen 1989.

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In 1899, the protracted controversy over the teaching of technology in Germany was finally resolved when the most important institutes of higher education gained university status. The reform spread over Europe and for example, Eidgenössische Technische Hochschule in Zurich followed the example in 1904. Finland would follow suit in 1908 when the Polytechnic Institute of Helsinki became the Helsinki University of Technology.8

Plant engineering or the systematic engineering of industrial processes began in the German language area in the 1870s, when the use of technical encyclopedias for describing industrial processes was no longer sufficient to meet the efficiency requirements in design and construction.

The reform was brought about by the need to represent technology in a literal form. Traditionally, technology had been taught and learned by studying existing machines. As early as the Renaissance, drawings had been made of mechanical devices and mechanics had been described by means of mathematical models, but they had been of minor importance. Technology had always been put together on site, using familiar

methods. Partly because of this, the development of technology had been very slow.

The issue of describing technology on paper originated from the efforts of Franz Grashof, the first director of the VDI, to raise technology, especially mechanical technology, to the same level with the traditional academic physical sciences. Grashof ’s idea was to set up a university-level unit at the top of the system of technological education. The teaching provided would be based on the highest scientific standards, mainly on physics and mathematics. Grashof only partially succeeded in his aspirations because his students expected to be undertaking practical engineering

8) The proper name was Suomen Teknillinen Korkeakoulu. The name Helsinki University of Technology has been used in translation for the time period 1908–2010.

Since mechanical technology was difficult to describe using mathematical models, engineering drawing quickly developed as a reaction.

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study rather than the hard sciences and, lacking his schooling, found some of Grashof ’s scientific ideas incomprehensible. Since mechanical technology was difficult to describe using mathematical models, engineering drawing quickly developed as a reaction. When the slide rule and the set of drawing instruments, created around the same time, were widely adopted by engineers, the subject of mechanical technology and industrial engineering in general took a great leap forward into a new era.

In the 1870s, engineering sciences changed in a crucial way. Machines and devices could be described using the methods of standardized engineering drawing. In practice, this meant that drawings and designs for an industrial plant or a large machine or other device could be created in a drafting office. A new element was thus added to the work of engineers: working at a drafting board.

The education of mechanical technology and industry rapidly abandoned the old methods. Previously, teachers of mechanical technology had been able, during the few years of advanced studies, to draw on the blackboard the most important basic drawings on the machines and devices used in industry. Students had then copied the drawings in their own exercise books. In the technical institutes of the German language area, the teaching of plant engineering began by dividing the studies of mechanical technology into several study modules concentrating on different fields of industry. In Finland, the thought of establishing the discipline of plant engineering was first brought up in 1892, as part of a discussion on the strategy of the Polytechnic Institute. At the end of the decade, when a curriculum reform was debated, the founding of a professorship in plant engineering was also considered.

Roots in Germany and Finland

U ntil Henry Bessemer published his new method for steel and wrought iron production in 1855, the high price of steel had been a hindrance to industrial activity. Afterwards, the price plummeted. It would

not be until 1858 that steel was produced using the Bessemer method in Scandinavia. This was at the Edske blast furnace in Sweden, where Göran

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Fredrik Göransson, who had purchased the Swedish patent for the method, would also manage to solve the practical problems involved in the process. Later, Göransson came to be known as the founder of Sandvik AB.

The Bessemer method had a huge impact on the development of the industrialized world, the new technology visibly changing Western culture and the whole infrastructure in the industrialized world in just a few decades. The increased use of ferrous metals combined with the availability of cheap steel expedited the construction of railroads and iron steamships, and by the end of the 19th century, the erection of steel-framed skyscrapers. However, as much as the Bessemer method solved one problem in the LTS built around the production of steel, that is, the bottleneck in the processing of ferrous metals, other problems in the production chain appeared elsewhere. The primary issue was the increasing scarcity of the metals, and the availability of raw materials emerged as the key question in the metals industry. This led the metals processing industry to look at non-ferrous metals.

The consumption of non-ferrous metals had been low until the mid-19th century. The production and processing of copper, tin, zinc, lead, and nickel had barely changed since the Middle Ages. They were used to some extent in mechanical engineering, for technical purposes, and in making household objects. The methods of craftsmanship in manufacturing both, passed on through the guilds, were efficient enough for these purposes. The relatively high price of non-ferrous metals was not a problem, since demand for such products was stable.

The consumption of non-ferrous metals changed as science and technological research advanced. Key advances were made in electrical engineering in the mid-19th century, but the creation of practical applications, particularly in telecommunications and the use and distribution of energy, took a few decades. As these practical applications were discovered, implemented, and widely adopted, the demand for non-ferrous metals grew rapidly. Commercial telegraph systems were first built during the 1830s, but networks spread quickly from the 1850s onwards, only to be supplanted by the telephone and telephone networks that spread even faster by the 1880s. Demand for copper and lead, used in wires and coils, grew faster than metal production. When the problems involved in the use of electric energy were solved, progress

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was further accelerated. From the 1890s, steam engines and their main shaft systems, which had been used in industry for one hundred years, started to be replaced by electric motors. They could be placed directly where power was needed, rather than having to be placed where there was a steady supply of coal and water as steam engines did. This transformed industrial activity and the demand for electric motors surged, as did the demand for copper. The manufacture of generators and motors, which were used to produce electricity, required large amounts of copper wire. Additionally, copper was an important raw material in the construction of the whole electrical system. The wires, relays, and switches used in power transmission were all made of copper. Perhaps the most important single factor contributing to the demand for copper was the production of electric motors.

Advances in technology and the application of technology were made possible by the development of basic research in technology, physics, and chemistry. This became a circular process as industrial applications were created from the new knowledge acquired from the research and new questions were asked of the researchers by the various industries.

In chemistry, major theoretical advances were achieved soon after the 1850s with the development of new methods of analysis. The expansion of chemical research led to the division of organic and inorganic chemistry and to the establishment of chemical engineering sciences in technical institutes. As an offshoot of the new chemical research, a similar breakthrough in metallurgical research was made by the chemist Clemens Winkler in 1886. This was the isolation of germanium, a metal that had been missing from the periodic table, thereby proving the prediction made by Dmitri Mendeleev, the publisher of the first periodic table in 1869, that properties of then-unknown elements would fill gaps in the table. This theory provided a solid foundation for metallurgical analysis and research. Metallurgy became an exact science, where the different elements could be discerned accurately and their properties precisely defined. Simultaneous advances in electrochemical research led to an explosive growth in the use and production of non-ferrous metals. Perhaps the most widely known innovation was the development of an aluminum production method based on electrolysis in 1886. As a result, the price of aluminum, which had previously been considered to be a precious metal, fell by around 80%. The process is known as the Hall-Héroult method

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after its inventors, American Charles Martin Hall and Frenchman Paul Héroult.

The technological and scientific progress described above resulted in concrete changes in European mining and metals industry organizations and their operations. It is nearly impossible to pinpoint a single factor with the greatest impact on these developments. It was more about changes in an LTS. Correspondingly, Outotec’s roots can be traced to the history of several organizations. In the background of this company, largely based on engineering skills, is an entire cluster of organizations and people from six generations.

The developments can be divided into various phases: first, the founding phase, which lasted from the 1840s to the 1890s; second, the period of intense development at the turn of the century, when the basic processes of metal production were created; and third, the period of further development during the two World Wars. After World War II, a fourth phase of reforms in science, technology, and industry followed, again with its own distinctive characteristics.

The inception of the Finnish mining industry

F innish technological research has its roots in the activities of military engineers and in the mining industry. The Royal Academy of Turku – Finland’s first university, founded in Turku in 1640 and transferred to

Helsinki in 1827 – had overseen the field of science and education for some two hundred years, but in the early 19th century, a system for producing technological knowledge was set up in response to pressure for reforms from industry. In this, Finland followed in the footsteps of the German language area. The two knowledge production systems were separated over the course of three decades.

The annexation of Finland by the Russian Empire in 1809 as the autonomous Grand Duchy of Finland meant that the country’s commercial and industrial interests were developed to serve the Empire’s needs. Since

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no real opportunities in the mining industry existed in the European lands of the Russian Empire, Finland provided excellent potential for the acquisition of raw materials for the emerging economic power. Russia even expected that ore bodies similar to those in Central Sweden would be discovered in Finland. However, the Finnish metals industry was based on the use of limonite, found in Eastern Finland, and Swedish pig iron, which was shipped to ironworks in Southern Finland for refining, due to the availability of cheap charcoal in Finland. With its annexation of Finland, Russia cut off Finland’s access to Sweden’s supply of pig iron. As the demand for iron was increasing, Russia hoped that new ore deposits would be found in Finland to induce new iron and copper industries it would be able to take advantage of.

In 1810, Fabian von Steinheil was appointed the governor-general of the Grand Duchy of Finland. A trained geologist, shortly after his appointment he launched a substantial ore prospecting project in Southern Finland. A number of minor deposits were discovered, some of which were large enough for small-scale mining activity, but these mines were short-lived. The state also tested new methods of iron production in Ulvila, but the project was not supported by owners of ironworks and was soon abandoned.

The city of Tampere was envisioned as the industrial center of the grand duchy. It had ready access to hydropower and an opportunity for iron production in the surrounding region with the Haveri iron ore deposit to be found northwest of the city. Owned by the Royal Academy of Turku, the deposit was considered to be large enough to sustain a concentration of mechanical engineering businesses. To spur the development of Tampere as an industrial center, it was given free trading privileges, modelled on those granted to Eskilstuna in Sweden, and entrepreneurs were encouraged to move to the city with state support. However, the city did not develop according to the original plans. This was because of problems with the technology system related to metal production.

The state trusted the analysis carried out by the university, by now renamed the Imperial Academy of Turku, regarding the quality of the ore, and there were plans to create an important European-scale industrial center, “Finland’s Manchester”, in Tampere. James Finlayson, a Scottish engineer, was recruited to build an engineering workshop in which industrial machinery

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could be constructed using iron from Haveri. The project failed because the ore contained too much phosphorus. Instead, Finlayson, together with his wife Margaret, founded a lucrative textile manufacturing company, which was to become the seed of the manufacturing industry of Tampere.

Although the hopes for building industry in Tampere were perhaps exaggerated, the project proved the importance of a national system for the production of technological knowledge. It was therefore easy for the Senate to rationalize the establishment of an education and research system of industrial management and technology based on the Prussian model. The main objective at first was to advance the country’s mining industry in order to meet the needs of both Finland and Russia. Governor-General Steinheil founded the Mining Office (later the Geological Commission of Finland and the Geological Survey of Finland aka GTK) in 1821, and chemist Nils-Gustaf Nordenskiöld – who had been taught by J.J. Berzelius, the Swedish chemist considered to be one of the founders of modern chemistry – became its director.9 Alongside Nordenskiöld’s project of knowledge production, the Manufacture Board (later the Ministry of Trade and Industry and the Ministry of Employment and the Economy) was founded, and the system of technological education evolved.

The dawn of the metals industry in Germany

B y the end of the 18th century, Hamburg, on the north coast of Germany, had become a center of the trade in precious metals, the type of metals that are resistant to corrosion or oxidation and

considered to be precious metals. Part of the old Hanseatic League, the port had also become an important center of money exchange, having helped finance a number of the wars that beset the German language area over the previous century. As part of the trade in precious metals, a precious metals

9) Of the connections in between the Russian mining industry and Nordenskiöld e.g. Gestrin 2006.

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foundry was established in the city in 1770 by Marcus Salomon Beit, who was of Portuguese-Jewish origin. Prior to this, the precious metals trade in the area had been dominated by the Netherlands, but it transferred to Hamburg when the Netherlands was occupied by France in 1795 and by the beginning of the 19th century, Beit’s business was the most important precious metals foundry in Hamburg, and probably in all of Northern Europe.10 Beit’s business was also the forerunner to Norddeutsche Affinerie, founded in 1866, which would play a major role in the Northern European metals industry.

In addition, a number of smallish zinc, copper, and lead mines were still in operation in Central Europe in the first half of the 19th century, and modern machinery was needed to improve their efficiency. The development of technological research, technology, and old industry began with small steps. Nevertheless, the direction of the change was immediately clear when the first technical experts trained as engineers entered the world of work.

New enterprises and fields of businessAnother important development in the metals industry knowledge began with Société des Mines et Fonderies de Zinc de la Vieille Montagne, a Belgian company founded in 1837. Operating across Northern Europe – in Belgium, the Rhineland, France, and Germany – it ran zinc mines and developed a method for processing zinc that lead to it being the leading producer of non-ferrous metals in Europe. At the end of the 1850s, it expanded its operations to Sweden and employed young engineers who had received the new education in technology, among them Martin Neuerburg and Wimmar Breuer. Their circle of acquaintances included the merchant Hermann D. Sievers, who had an office in Bonn. In 1856, the three men established Maschinenfabrik für den Bergbau von Sievers & Co. in the village of Kalk bei Deutz am Rein.11

Sievers’ business, one of Outotec’s oldest predecessors, started its operations with work typical of an engineering workshop of the period.

10) Rainer-Georg Strutz 1991. p. 2–6.

11) Henle 1956. p. 15–16.

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It manufactured steam engines and boilers, in addition to machinery for the textile and mining industries. However, machines and equipment required by the mining industry soon became its main line of business. At the end of the decade, the company was the first in Europe to specialize in machinery for coal mines and the coal industry. In 1871, the company was renamed Maschinenbau AG Humboldt. The name was chosen to pay homage to Alexander von Humboldt’s work as a scientist and a developer of the German education and research system.

After Sievers’ death in the early 1870s, Martin Neuburg expanded the firm significantly, but in the process drove it into near bankruptcy. The founders were forced to sell the company, and the new owners steered it

onto a new track. In 1880, Humboldt manufactured the first basic Thomas converter steelworks in Germany, followed by the production of steam turbines and locomotives, both of which would see real sales success during World War I. In 1903, Peter Klöckner was appointed to the board of Humboldt AG and began to actively develop the company.12

The transportation of raw materials from overseas for the European metals industry commenced at around the same time. In 1846, Elbkupferwerk was founded in Hamburg as a joint venture between Lipmann Raphael Beit, the new director of the Beits family business, and ship-owner Johaan César VI. Godeffroy. The required capital for this joint venture was raised from the old banks of Germany. Godeffroy owned a fleet which shipped ore from South America to the refinery that the company would build in Elbstrasse in the port area of Hamburg. Eleven years later, the company was reformed and its name changed to Elbhütten-Affinier- und Handelsgesellschaft.

The global economic recession that began in 1857 rapidly changed the operating environment for the precious metals trade. The import of precious

12) Geschichtbüro Reder 2006. p. 8–9.

The global economic recession that began in 1857 rapidly changed the operating environment for the precious metals trade.

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metals and copper from far-away countries became more difficult, but some German businesses managed to acquire raw materials from Russia. Elbenhütten Affinier was forced to close down,13 but in 1866, the company was re-established under the name Norddeutsche Affinerie AG.

As early as the Middle Ages, copper deposits were known to exist in the central part of Germany, near Mansfeld, and several mines and mainly copper and silver refineries were constructed there to make use of the deposits. In 1852, Mansfeldschen Kupferschieferbauenden Gewerkschaft was founded in Mansfeld and by the 1870s, it had become Germany’s most important copper producer. Around the turn of the century, the operations were expanded to cover the production of coal and other non-ferrous metals. The company was incorporated in the 1930s and renamed Mansfeldsche Kupferschieferbergbau. A customary cluster of subsidiaries was formed around the parent company.

European companies specializing in the production of ferrous metals followed a similar pattern to those that specialized in the production of non-ferrous metals. The ferrous metals trade was also concentrated in Western Germany, but in the Ruhr rather than Hamburg. The iron company, Friedrich Krupp, began operations with the building of a steel foundry in Essen in 1811 and despite some initial problems, it was the first company in Germany to implement the Bessemer method of making steel. In the 1880s, the company became the world’s largest steel producer.

The battle for raw material resources beginsThe availability of raw materials was critical to successful business operations. It also became a factor which directed foreign policy struggles. In addition to Mansfeld, there were other sources of raw materials in Europe, but demand grew much faster than production. This led to a series of foreign policy conflicts. Germany’s status as a producer of ferrous metals changed considerably in 1871 as a result of the Franco-German War. Several of the pivotal battles were fought in the border area of Lorraine-Lothringen where there were significant sulfurous iron deposits. Disagreement over the

13) Rainer-Georg Strutz 1991. p. 19.

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ownership of the Minette ore deposits was one of the actual causes of the war.14 The Franco-German War was presumably the first ever battle fought for raw material resources. It ended in France’s defeat and humiliation when the German troops besieged Paris. As a consequence, an iron ore deposit on the western side of the River Moselle, which previously belonged to France and was perhaps the most important iron ore area in Europe, was transferred to Germany.

Notably, the war had been fought with new technical weapons and industrially manufactured ammunition. During the war, the advantages provided by technological research and advances to the military and society of a modern nation became evident. The mastery of technology meant that a country could succeed on the battlefield and achieve prosperity. Technological and scientific research came to be seen as an integral part of a society’s preparedness to go to war. Science and technology were given an entirely new role alongside industry: as tools for a great nation’s armament and competition.

Science, technology, and world tradeIn the aftermath of the Franco-German War, Germany established a university campus in Strasbourg, the capital of Alsace. Kaiser-Wilhelm-Universität was designed to be a world-leading research center that would demonstrate the power of the German Empire’s science and produce new research results by means of scientific research. The university became the academic home for many future Nobel Prize winners. One was Emil Fischer, a future winner of the Nobel Prize in chemistry, who earned his doctorate in Strasbourg in the 1870s before being appointed as chemist at Badische Anilin- und Soda-Fabrik (BASF) and thereafter as Professor of Chemistry at the University of Erlangen and then at the University of Berlin. Young Wilhelm Röntgen was also a lecturer at Kaiser-Wilhelm-Universität early in his career.

Major scientific advances of this period included establishing the basic principles of generating and using a powerful electric current, in particular as part of an electrochemical process. Tests on electrochemical processes

14) Mäkinen 1933. p. 20.

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had already been performed in the early decades of the 19th century and the electrochemical processing of copper had been possible in the 1860s, in accordance with Elkington’s principle. Among the most famous companies in this field was the St. Petersburg-based Institute of Galvanoplastics of the Duke of Leuchtenberg, which made works of art for European churches and palaces by casting.

Producing direct current became possible in 1871, when Paris-based Société des Machines Magnétoélectriques Gramme introduced a new dynamo developed by the Belgian engineer, Zénobe Gramme, that operated on the Gramme principle. A German competitor, Siemens & Halske, launched its own apparatus almost simultaneously. Now sufficient current could be generated in order to develop industrial processes for production of metals in large scale.

One of the greatest problems in the processing of precious metals was the separation of gold from silver with sufficient accuracy. The first large blast tests were conducted at production plants in Mansfeld with its Hamburg-based competitor, Norddeutsche Affinerie, close behind. At the time, the principal chemist at Norddeutsche Affinerie was Emil Wohlwill, who was particularly knowledgeable about natural science and the history of science. Under the leadership of Wohlwill, Gramme’s invention was implemented almost immediately after its introduction. The process was ideal for a company whose main line of business was related to the re-processing of old coins. In 1872, aided by Friedrich Ross, an engineer from Hamburg, he succeeded in producing precious metals through electrolysis according to the Gramme principle. At the end of the decade, the company launched the process on an industrial scale, and at the International Exposition of Electricity held in 1881 in Paris, a precious metal process developed by Norddeutsche Affinerie was awarded a gold medal. After this, the selling of licenses for the process played a major role in Norddeutsche Affinerie’s operations. The process was patented in 1896 with Deutschen Gold- und Silberscheidenanstalt (Degussa), a German company specializing in precious metals trading acquiring the license as early as 1895. The largest customers for Norddeutsche Affinerie at the turn of the century were American.15

15) DR-Patent No. 90511 Cl. 40 and No. 90511 Cl. 40. Rainer-Georg Strutz 1991. p. 27–29.

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The new electrochemical industry needed anodes and cathodes, which were made from carbon and graphite paste by pressing. In 1856, the chemist Ludwig Baist founded Frankfurter Actiengesellschaft, but because Frankfurt forbade industrial production within the city limits, Baist was forced to build his factory in neighboring Griesheim am Main. The company was renamed Chemischen Fabrik Griesheim am Main in 1863. Initially, it manufactured chemical fertilizers, but towards the end of the century, the company expanded into other areas of the electrochemical industry. For example, in 1894, it began to manufacture graphite elements for various chemical industry processes and in 1912, it was one of the first in the world to manufacture PVC. Just before World War I, it began to make light metal parts for high-precision equipment using an alloy of magnesium and aluminum.16

After Germany had taken ownership of the Minette ore deposits in Alsace-Lorraine, the German Empire was able to develop its iron and steel industries using its own raw material resources. However, as industrial activity picked up, demand for metals grew faster than the mining industry’s production. A new era began in 1860s, when steamships made of iron replaced sailing ships in maritime transport. The falling price of iron and steel enabled the development of the shipbuilding industry and the construction of new vessels, while steam engine technology and the evolution of the propeller made the new vessels more economical. This even made the transportation of cheap raw materials from distant countries both possible and economical. As the interests of the metals industry shifted to the prospecting and exploitation of ore bodies in other continents, the Great Lakes region of North America, Congo in Africa, and far-away Australia became the key areas in the production of copper, lead, and zinc.

Metallgesellschaft – from a family business to a major forceWith Mansfeld in the lead, the Central European metal market was divided between companies running their own mining operations and those engaged in international trade. The Merton family business, founded in Frankfurt

16) http://de.wikipedia.org/wiki/Chemische_Fabrik_Griesheim-Elektron. Retrieved on January 14, 2013.

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in the 1880s, grew into a global corporation within a few decades. This corporation is also part of Outotec’s history. The company’s success was based on rapid internationalization, sufficient capital, and open-minded utilization of new technology and the latest achievements in scientific research.

Wilhelm (William17) Ralph Merton was born in Frankfurt on May 14, 1848. The family was of English origin, but in 1837, it moved to the Free City of Frankfurt, where Wilhelm’s father, who was engaged in international metal trading, was naturalized in 1855. Wilhelm went to school in Frankfurt, studied in Munich, and worked as a trainee at the Berlin branch of Deutsche Bank. In 1877, Wilhelm Merton married Emma Ladenburg, a daughter of a Frankfurt banker. The couple had five children: Adolf, Alfred, Walter Henry, Gerda, and Richard. Family relations were to play a key role in Wilhelm Merton’s career and business. The family had a Jewish background and, like many other European Jewish trading houses, it established extensive international connections.

Wilhelm Merton was well-placed to follow developments in the metals trade and the new opportunities provided by scientific advances. In 1881, utilizing the capital provided by the Ladenburg family, Merton founded Metallgesellschaft AG together with Leo Ellinger and Zacharias Hochschild. The company initially specialized in the trade of non-ferrous metals, namely copper, zinc, and lead. Nickel and aluminum were added later.18 In addition to sufficient capital, the company’s success was based on international networking and a fruitful combination of the results of basic and applied research and production. All these factors were present in Metallgesellschaft’s operations right from the start.

In establishing business relations, Metallgesellschaft was able to use the Merton family’s old connections to Britain. Henry R. Merton, Wilhelm’s

17) Merton Germanized its name to Wilhelm only at the end of the century. Here, the German name is used for clarity.

18) Cf. also Berghoff 2004. p. 134.

Demand for metals grew faster than the mining industry’s production.

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uncle, had stayed in Britain, and traded similar products to those of Metallgesellschaft across the Commonwealth, under the business name HRM. Henry Merton’s company was clearly a global business with operations throughout the British Empire. Wilhelm Merton’s new enterprise also began to collaborate with Deutschen Gold- und Silberscheidenanstalt (Degussa), a German company specialized in precious metal trading.

The known ore reserves in Central Europe were limited, and the mining industry could no longer satisfy the rapidly growing need for metals in the 1880s. With the support of HRM, Metallgesellschaft began to swiftly build trade connections and establish subsidiaries around the world. The first of these was the American Metal Company, established in the USA in 1887, followed by Companhia de Minerales y Metales, which became one of the group’s most important suppliers of raw materials, in Mexico two years later. The Australian Metal Co.19 was founded in 1897 in the Broken Hill district as a result of successful joint prospecting by the English HRM and German Degussa. By the end of the century, Broken Hill was one of the leading production areas of silver and lead in the world. Metallgesellschaft started to transport ore from the new production areas for refining in Central Europe and during the last decades of the century, cities in Northern Germany became important ports of entry for ore.

Although Metallgesellschaft remained the parent company and continued to be involved in the acquisition and refining of raw materials, its international mining activities changed its role in the company. Ore obtained from various sources had to be analyzed in order to plan future economic processing and to that end, the company needed to build an organization capable of processing samples from mines around the world and controlling the refining of raw materials. This led to the creation of a research and development department. As it shifted its focus, Metallgesellschaft became a consulting firm that advised on the metals trade and a recruitment consultant for scientists and engineers with the latest knowledge of the metals trade and metal processing.

In 1889, the company’s engineering office was organized into a separate department, whose duties included managing and designing technical processes, together with performing the necessary technical analysis and

19) Knetsch 1998. p. 29–31.

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study. This was because each of the company’s mines produced different kinds of ore that had to be continuously analyzed to enable economical processing. The department’s activities began to grow quickly, particularly in the field of technological research.

On the recommendation of Clemens Winkler, Professor of Chemical Technology at the University of Freiberg and adviser to Metallgesellschaft’s management, the young metallurgist Curt Netto was appointed the engineering department’s first director. Netto, who had been the director of the Japanese Kosaka mine in the 1870s and undertaken various study trips around the world, was one the most renowned metallurgists of the time. His achievements before joining Metallgesellschaft AG included the development of a revolutionary process for refining aluminum, intended for the use in the Krupp factories. However, Netto’s method was overshadowed by the Hall-Héroult process, which was widely adopted commercially. Together, Winkler and Netto consolidated Metallgesellschaft’s position as the world’s leading metallurgical research company.

One of Wilhelm Merton’s principles was not to advertise the company’s operations and not engage in marketing. Nevertheless, a series of publications launched in 1892 made Metallgesellschaft world famous. The publication Metallstatistik: Statistische Zusammenstellungen uber Aluminium, Blei, Kupfer, Zink, Zinn, Kadmium, Nickel, Quecksilber und Silber/Metallgesellschaft Aktiengesellschaft became a commonly used production and trade manual in the field.

The first enterprise specialized in technologyWithin a few years, Metallgesellschaft’s engineering office grew large enough to become a company of its own and so on February 5, 1897, the subsidiary, Metallurgische Gesellschaft AG, was founded. Metallurgische Gesellschaft’s first technical departments were the department of processing industry and the department of chemical industry. The former specialized in roasting technology, the agglomeration of iron ore, and the metallurgy of non-ferrous metals. The latter department specialized in designing equipment for the removal of dust from roast gases and for various processes in the sulfuric acid industry.

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At the same time, developments in electrical engineering required the investment of large amounts of capital in the metals industry’s production structure. To meet the group’s financial needs, in 1906 Metallgesellschaft founded a banking subsidiary, Berg- und Metallbank AG.20

Metallurgische Gesellschaft operated from the same building as Metallgesellschaft, in Bockenheimer Landstrasse in Frankfurt, with Wilhelm Merton as the chief executive of both companies. The similar names might have caused misunderstandings, but the new company Metallurgische Gesellschaft was soon identified by its telegraphic address LURGI, which became something of an icon among industry professionals. The company would actually begin trading under name Lurgi in 1919. In addition to Wilhelm Merton, Lurgi’s Board of Directors included Gustav von Brüning, the director of chemicals company Hoechst, and Emil Rathenau, the general manager of AEG. Professor Curt Netto was also a member of the board. While its subsidiaries mined, shipped, and processed ore for the metals industry, Lurgi specialized in solving customers’ technical problems, often Metallgesellschaft’s identified problems. Lurgi’s line of business was essentially a technology consultancy and the prototype for the modern engineering firm. Lurgi Metallurgie was acquired by Outotec in the 2000s.

The improvement of the Wetherhill zinc refining process, acquired by Lurgi in 1897, is considered to be the first achievement of the company’s research and development activities. The American Samuel Wetherill had already in the 1850s developed a method for extracting zinc oxide directly from the ore. Based on the use of a reeling, horizontal kiln, the method transformed the production of zinc and its market price decreased considerably. Lurgi was able to improve the process further and thereafter, the company was granted its first patents in the processing industry. The following year, Lurgi obtained the license for the Herreshoff roasting furnace, used for roasting pyrite, and immediately set out to improve this process too. The Herreshoff multiple hearth furnace was the first roaster with air cooling. The most important innovation was the Huntington-Heberlein process used in lead ore sintering.21 This roasting-sintering process, which

20) Knetsch 1998. p. 9, 21.

21) Cf. e.g. Knetsch 1998. p. 177.

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used compressed air, was the most popular method at the time, but it was also messy and had a major impact on the environment. Partly because of this, the Huntington-Heberlein process was replaced with new methods when they became available.

Lurgi also began development work on the sintering of fine-grained ores. Since these ores could not be used in shaft kilns, turning them into coarse-grained form was essential in order to make ore processing more efficient. In 1908, it was discovered that the sintering method used in processing lead ores could also be applied to iron ores. This was a great breakthrough in metals processing technology and one of the first times that the traditional borderline between metallurgical technology systems, that is, using one technology used to process one type of metal to process another, had been crossed.

Soon after this, Lurgi acquired the license for the Dwight-Lloyd method of sintering and immediately developed its own application of the method. The use of electric current as a heat source for metallurgical processes had already been tested in the early 19th century, but it was not until the 1890s that the price of electricity decreased and production increased to a level that enabled the use of electric furnaces. The work of Thomas Edison and Nikola Tesla, among others, to produce and transmit large amounts of energy made it possible to develop new methods. Using electric current was in many cases more expensive than using other fuels, but electric furnaces provided significant advantages when high temperatures and a clean process that could be accurately adjusted were needed. As a consequence, electric furnaces became customary processing equipment in the production of high-quality steel and specialty metals. For example, the energy generated by the Niagara Power Station, completed in the 1890s, was used in aluminum production. The development of electric furnaces changed radically the light metals industry in particular, and contributed greatly to advances in military technology during World War I.

The development of processes based on the use of electricity resulted in Norddeutsche Affinerie completely reforming its processes. By 1900, it was able to refine 1,200 kilos of silver a day and also separate zinc and bismuth from the concentrate. At the beginning of the 20th century, Norddeutsche Affinerie and Metallgesellschaft collaborated on the construction of large production plants in Peute, Hamburg’s port area. Initially, the electrochemical

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plant in Peute utilized new steam engine technology, but in 1912, the old piston engine was replaced by a steam turbine. Linked to a generator, the turbine produced power for electrolysis and increased production by 30%. Over the next five decades, developments at the production plants in Peute were carefully followed by companies across the industry.

As a result of the production development program at Peute, Metallbank und Metallurgische Gesellschaft, together with Degussa, acquired half of Norddeutsche Affinerie’s stock in 1910 and by 1915, Norddeutsche Affinerie had practically become a subsidiary of Metallgesellschaft and Degussa.

Meanwhile in 1908, on the other side of the Baltic Sea, in Finland, a large copper deposit in European terms was discovered in Outokumpu in Northern Karelia. One of the forebears of Outotec, Outokumpu – named after the site of this copper deposit – would be established in 1910s to develop the mine.

A group built on technological knowledgeMeanwhile, Metallgesellschaft was also studying methods of aluminum production elsewhere. In 1906, it began systematic research with Chemische Fabrik Griesheim-Elektron to develop the aluminum process. Collaboration between the companies intensified in 1913, when Metallbank und Metallurgischen Gesellschaft and Chemischen Fabrik Griesheim-Elektron founded Elektrometallurgische Werke Horrem AG. The aim of the new company was to develop a process for producing pure zinc by electrochemical means. Its pilot plant would succeed in applying technology used previously in processing aluminum to zinc production.

In the first years of World War I, Germany organized the production of strategically important branches of industry into specific companies, in which the state was a stockholder. Vereinigte Aluminium Werke AG was founded in Berlin in 1917. The stocks were owned by the state and companies operating in the field of light metals manufacturing, such as Griesheim-Elektron and Metallbank und Metallurgische Gesellschaft. At the end of the war, the state assumed a dominant position in Vereinigte Aluminium Werke.

Metallgesellschaft had become the parent company of an extensive group of companies within a few decades. At the beginning of the 20th century, Metallgesellschaft’s operations were divided fairly clearly into distinctive

43


areas, but for outsiders, it must have looked obscure. In any case, all the lines of decision-making could be traced to its Frankfurt headquarters. The parent company’s main line of business was trading; Lurgi was tasked with metal production and processing industry engineering; mining operations were managed by separate companies, and Berg- und Metallbank handled the group’s finances. The banking arm soon became a holding company that was responsible for the financial administration of the subsidiaries. The trade and industry financing operations were added to the department in charge of processing industry engineering when the banking unit was merged into Lurgi in 1910. A company called Metallbank und Metallurgische Gesellschaft was formed.

After World War I, Metallgesellschaft was a sufficiently powerful global player that remained independent of the consortium of other German chemical industry companies. Metallgesellschaft did, though, become part of the fabric of society. The Merton family business was managed in a way that resembled today’s corporate responsibility. In accordance with the traditions of the urban and industrial culture of Frankfurt, Wilhelm Merton strived to look after the community’s spiritual and financial welfare.

Building a society based on industry was not dependent on any individual actions. The mindset that had developed during industrialization was founded on managing the big picture both within companies and in society as a whole. In this sense, the education system played a crucial role. After the early 1880s, the German education system developed rapidly into an extensive, multi-level system, at the top of which were institutes of higher education. Frankfurt – where life centered around merchants and the administration – had no medieval university, and the German Empire’s interest was in developing educational institutes in other cities rather than Frankfurt. Thus local businesses had to step in to ensure the provision of higher-level education.

Wilhelm Merton is considered to have been one of the most important sponsors of political and social sciences in Germany at the end of the 19th

A large copper deposit in European terms was discovered in Outokumpu in Northern Karelia.

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century. In 1890, he founded an institute of social research, Institut für Gemeinwohl, and soon after the turn of the century, an academy of social sciences and economics. A little later, together with Johann Adickes, the mayor of Frankfurt, he actively promoted turning the institute into a university. Founded in 1914, the University of Frankfurt focused on research and teaching in disciplines benefiting the business life and modern society.

Environmental problems and the growing need for energy

T he processes used in metal production involved two major problems, both of which contributed fundamentally to the environmental effects of production. The first problem was the ever-increasing need

for energy, which became a serious bottleneck in metals production. To solve this problem, burning gases created in the process were recycled for use as a heat source or used as fuel for gas engines, for example.

The process of using the combustion heat of the iron and sulfur contained in sulfide concentrates to produce the heat required, that is, autogenous smelting, was known and being studied at the end of the 19th century. Applying the method in practice became possible when scientific and technological research had progressed sufficiently enough that thermodynamic tables could be published. Computations then indicated that a sufficient amount of energy could be produced to sustain the smelting process if a chemical reaction could be triggered. V.A. Vanyukov published the principle in the journal Tsvetnyje Metally in 1930, and T.E. Norman in the Engineering and Mining Journal in 1936.22 However, no one managed to use the method in practice. Tests were carried out in Canada and the Soviet Union in the 1930s using small reactors, but they failed. It was not until 1949 that Outokumpu succeeded in developing a method of autogenous smelting – a flash smelting process for copper – with which it would make its first sales of metals processing technology.

22) Särkikoski 1999. p. 92–94. Juusela & Mäkinen 1977. Pekka Taskinen’s communication on November 27, 2012.

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Another major problem was the poisonous gases released from the processes, the trickiest of which were sulfur compounds and emissions rich in arsenic and lead. These emissions were harmful both to plant employees and the surrounding environment. By the beginning of the 20th century, serious environmental problems began to emerge near metals industry plants. Process gases also include various fine particles, which prevented the use of burning gas as fuel for engines.

The situation called for the development of filter and gas cleaning technologies. Economic concerns were also involved: fine-grained copper, zinc, and other valuable metals were attached to the fine particles in emissions. Hence, the motive for developing cleaning technology was two-fold: preventing pollution and ensuring financial gain.

It also made economic sense to recover the sulfur compounds removed from the roaster gases and use them to produce sulfuric acid. The processing industry needed huge amounts of sulfuric acid and now it could be obtained as a by-product of metal production. This improved the profitability of metallurgical plants considerably.

Filter technology was developed using both mechanical filters and electrostatic precipitators. The basic types of mechanical filters include dust chambers and cyclone installations connected to flues, where the heaviest particles are removed from the gas by the application of centrifugal force. Very small particles of dust are also removed by means of filter technology.

The best results can be achieved with Electrostatic Precipitators (ESP). In an ESP, the particles in the gas are negatively charged, which allows positive electrodes placed in the filter chamber to collect the particles. Although the basic idea of the precipitator had been discovered in the early 19th century, it would not be until 1907 that it could be used commercially when the American chemist and inventor, Frederick Cottrell, applied for a patent on his Electrostatic Precipitator. At around the same time, Erwin Moeller introduced the commercial version of his own electrostatic precipitator. The terms ‘Cottrell precipitator’ and the ‘Cottrell-Moeller process’ were used for a long time.23

One fundamental reason for the European debate on environmental issues was the pollution of the environment of the continent’s most densely

23) E.g. Knetsch 1998. p. 177.

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populated areas. As early as the 19th century, industrial activity and emissions generated by population centers made the air and water unfit for humans in many places. Although the issue had first been brought up during the Middle Ages when the burning of wood was restricted in cities because of the smoke, real environmental problems were caused by the phenomena of the industrial era.

In the vicinity of industrial cities, the air was at times poisonous to breathe in the mid-19th century. The term ‘smog’ for a mixture of smoke and fog was coined in the 1890s and first used in a scientific context in 1905 by Doctor Henry Antoine Des Voeux in a paper delivered to the Public Health Congress in London, in which he described the smoky cloud created by coal

dust and fog.The initial reason for water protection

was simple: the supply of clean water was running out. In population centers, water became a limited natural resource by the early 19th century because sewage and industrial effluents were routinely discharged into rivers and

lakes. This continued until governments were forced to regulate both the supply of water and the discharge of pollutants because potable water was no longer available.

The availability of clean water had a decisive impact on the development of cities. Water utilities and sewage systems in major European cities were mainly constructed after the mid-19th century. There were great regional variations in this, partly because of differences in national legislation. The availability of water also influenced the formation of local traditions. Sometimes the driving force was a need for fire-fighting water or clean water for households, while elsewhere water utilities were built in order to provide water for industry. Sewage systems often developed in different realities; quite often sewer systems were constructed because of lethal epidemics in cities.24 Specialized engineering offices and enterprises sprang up in the field of water treatment, and they built the equipment and systems. Berlin-

24) Cf. e.g. Juuti & Katko 2005. p. 28 onward.

In population centers, water became a limited natural resource by the early 19th century.

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Anhaltinischen Maschinenbau AG (BAMAG), which mainly developed municipal engineering, was founded in 1872. Early on, BAMAG also conducted construction projects overseas, such as a water treatment and distribution facility in Egypt in 1904. The company became a subsidiary of Lurgi AG in 1991.25 In Finland, the construction of clean water and sewage systems only began in cities in the late 19th century.

Among the first systematic actions aimed at solving the environmental problems of industry were emission standards, the forerunner of which was Deutsche Industrie-Norm (DIN). The organization behind the DIN system was established in December 1917 as Normenausschuss der Deutschen Industrie (NADI). The current name Deutsches Institut für Normung e.V. was given to the organization in 1975 in the Federal Republic of Germany.26 The standardization system began to gradually expand in the early 1920s.

Actual environmental protection standards were not introduced until the beginning of the 1950s. However, the Verein Deutscher Ingenieure (VDI) or Association of German Engineers founded Staubtechnik, a professional publication focusing on dust prevention in industry, as early as 1928.27

The new beginning of the Finnish metals industry in 1910

By the end of the 19th century, the optimistic forecast of both Finland’s geology and its mining industry proved to be false. The small iron mines opened in Southern Finland as part of the Nordenskiöld project

had been closed, the production of limonite was no longer economically viable, and the gold rush in Lapland that began in the 1870s had declined

25) The company name was changed into Pintsch Bamag AG in 1953 and again into Davy Bamag GmbH in 1970.

26) The system has been joined, among others, by Russia’s GOST standard system, Switzerland’s Schweitzerische Normen-Vereinigung SNV, and Austria’s Österreichische Normungsinstitut ON.

27) 50 Jahre KRdL. p. 37.

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as new finds grew scarce in the 1890s. In the latter half of the 19th century, Finland’s annual export volumes of pig iron and wrought iron were between 10,000 and 20,000 tonnes. After the turn of the century, these volumes decreased rapidly, and by 1910, the exports of both types of iron had fallen below 1,000 tonnes.28

Nevertheless, interest in the new methods used in the metals and mining industries did not disappear in Finland. In 1915, only a few years after M. Keller had succeeded in producing pig iron in an electric furnace, Berndt Grönblom and Gustaf Aminoff founded Elektrometallurgiska Ab in Vuoksenniska, Ruokolahti. The start of production was delayed by World War I. At first, the smelter produced ferrosilicon and calcium carbide, but it would go on to produce pig iron from scrap iron. In 1933, the company was incorporated into Oy Vuoksenniska Ab, managed by Berndt Grönblom, which became an important link in the chain of the Finnish metals and chemical industries.

Geology in Finland had become an academic area of study rather than a purely practical knowledge; it was pursued by only the few people who had appropriate education. Research and teaching were divided into three parts. First, the Geological Commission of Finland carried out basic mapping of the country’s soil and bedrock. Second, teaching and research of geology and mineralogy, at the level of basic research, was conducted at the University of Helsinki under the leadership of F.J. Wiik. Third, economic geology was taught through lectures and exercises at the Polytechnic Institute, led by Ossian Solitander. However, students were still reluctant to study the subject because there were few job opportunities to be had once they graduated. It was students from another field of study, chemistry, who were interested in geology, since crystallography enabled them to better examine the internal structure of materials.

The decline in the interest in and study of geology also led to the gradual destruction of the mineralogy and geology collections gathered over the course of the 19th century. For example, the mineral samples collected in the early 19th century under the direction of Fabian Steinheil and Nils-Gustaf Nordenskiöld from the Geological Commission of Finland were

28) Kaarina Vattula 1983. p. 190–191.

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either used as part of exercises for students or divided into smaller samples for various technical tests.29

At the start of the 20th century, Northern Europe – with the exception Sweden – was in danger of becoming a complete bystander in both the European and global mining industries. Finnish industry was almost exclusively based on the use of wood raw material and agricultural products and its mining industry accounted for only a few percent of the entire volume of the country’s industrial production. Finland could do nothing but watch as Central European industry progressed, despite the problems of the mining industry and despite having to rely on imported raw materials. It was clear that an LTS encompassing production and the economy, based on technological development, was being built in Central Europe, and it was impossible to compete with it. Meanwhile, Sweden continued to successfully explore ore deposits in Central Sweden. The shortage of metals during World War I accelerated the mapping and prospecting work across the country, and one of the richest gold deposits in Europe was discovered near Skellefteå in 1924. Zinc and lead ores were soon found nearby and an industrial site focusing on metal refining was built in the area. The international corporation Boliden AB, founded in 1931, had its origins in the efforts to mine and process the ore from these deposits.

The death knell of the Finnish mining industry was sounded in 1905, when ore deposits ran out in the Pitkäranta mine and it was closed. The industry’s rebirth in 1908 was no coincidence. The discovery of the ore deposit in Outokumpu was the result of elaborate coordination between the country’s scientific and technological education and research institutions.

Two factors contributed greatly to the discovery of the ore deposit. For a few decades, ordinary citizens had been told about treasures possibly hidden in the soil and they were asked to inform the authorities of any strange minerals found. The education of the commoners had started already in the mid-18th century by Daniel Tilas, when Finland was under Swedish rule, but it was not until one hundred years later that the stone sample collections provided for elementary schools by the state and systematic guidance began to bear fruit.30 In addition, and despite the decline in academic interest in

29) Aarne Laitakari 1928.

30) Jari Nenonen 2006.

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the subject, the citizens of Finland had retained a genuine interest in basic geological research.

The first signs of the exceptional ore deposit in Eastern Finland occurred in early February in 1908, when Ossian Asplund, a dredge operator at a canal construction site in Rääkkylä, found a 5 m3 boulder. The boulder was so large that it had to be blown to pieces. Asplund’s colleague noticed unusual features on the boulder and thought it to be a meteorite. Karl Johan Montin, the site supervisor, sent a sample weighing 17 kg to the Geological Commission in Helsinki.31

At this point, a mailing mistake almost meant that the sample and details of its origins were lost. The cover letter was lost and the sample ended up at the home of the state geologist, J.J. Sederholm. Fortunately, Sederholm naturally understood that the sample, containing 3.73% copper and 29.85% iron, was exceptionally valuable, but he had to ask Montin to send a new sample in order to be sure about its origin. The new sample was soon submitted for analysis to Pentti Eskola, a newly graduated MA, and his findings would lead to Finland becoming an industrialized nation.

The Industrial Board appointed the geologist and mining engineer Otto Trüstedt to supervise the efforts to find the source of the sample. This began with the examination of maps of the bedrock around the city of Joensuu made at the beginning of the 20th century. However, there were glacial striae – scratches made on rock by ice – indicating two main directions of boulder movement during the Ice Age. For this reason, it took until the end of 1909 before field research was focused on Outokumpu in the municipality of Kuusjärvi. Drilling samples were taken by Claes Törnqvist with March 16, 1910, considered to be the mining field’s birthday, since that was when the first drilling samples saw daylight. These were not the only drillings taken in the area as geologists prospected for other deposits over the next few years. Their samples, as well as those taken in Outokumpu, would greatly enhance the geological knowledge about the area’s bedrock.32

Developing the deposits proved to be difficult. In the late 19th century, Eastern Finnish industrialists had acquired extensive areas of forest in order

31) Vilho Annala 1960. p. 16–17.

32) Frostelius & Wilkman 1920.

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to ensure the supply of raw material for the wood-processing industry. The paper and cardboard industry had become the most important form of industry for the country. The idea that the mining industry was unprofitable, understandable given its lack of success towards the end of the 19th century, was deeply embedded in the minds of Finnish industrialists, including Hackman & Co. A trading house based in Vyborg which owned large areas in the Kuusjärvi region, it was mainly interested in the forestry industry. Like other Finnish industrialists, its president and CEO did not find the considerable investments required by the mine worthwhile.

Nevertheless, this did not stop Hackman & Co entering into a partnership to raise the capital needed for the construction of the mine and concentrator. The other partners were the Finnish state and Victor Hybinette, whose electrolytic method, developed in Norway, was to be applied in the copper plant that was under construction nearby.33 The name of the partnership was Outokumpu Kopparverk.

The crisis of globalization and World War I

T he outbreak out of World War I in the summer of 1914 was abrupt, even though the great powers had long been preparing themselves militarily and diplomatically. In particular, the powers of Europe had

organized themselves into two alliances, the Triple Entente, consisting of Great Britain, France, and the Russian Empire, and the Triple Alliance of Germany, Austria-Hungary, and the Kingdom of Italy. The shots in Sarajevo on June 29 were simply an individual event that triggered the war between these alliances after a long period of tension.

By the end of 1914, the war was an ongoing worldwide conflict between the two opposing alliances, the Allies, composed of the members of the Triple Entente, and the Central Powers, Germany and Austria-Hungary (Italy would join the Allies after it was attacked by Austria-Hungary). The

33) Markku Kuisma 1985. p. 14–20.

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war was expected to be a brief show of force that would clarify the economic and political situation in Europe after the Franco-German war forty years before. The nations on both sides had prepared for the war by building traditional, purely military systems, but the nature of the war changed as early as 1915. It became a battle between economic and production systems, which countries tried to win by means of science and technology on the one hand and world trade on the other. The war also changed the basic structures of industry and trade in Europe.

The strategy of the Allies entailed, from the beginning, the isolation of the Central Powers from international trade. The British Navy blockaded all traffic to Germany in the North Sea and the English Channel, meaning that Metallgesellschaft’s connections to its subsidiaries were also effectively cut. HRM, Metallgesellschaft’s London-based counterpart, was brought under the control of the British administration in 1917 due to its German connections and position as a strategic supplier of metals.

The economic blockade of Germany completely interrupted the import of raw materials. This resulted in a severe shortage of food and the reorganization of industrial activity. Metallgesellschaft had to try and import the necessary products from neutral countries, but when the French Navy closed Austria’s Mediterranean ports, the only option was to intensify the use of domestic resources. During the war, three aluminum smelters which belonged to a consortium owned by Metallbank und Metallurgische Gesellschaft and Chemische Fabrik Griesheim-Elektron were set up in Germany. The factories were founded next to a primary pilot plant in Horrem, near Köln; in Rummelsburg, Berlin; and Bitterfeld, Halle. The division of duties between the companies was clear: Griesheim was responsible for practical implementation, engineering was carried out together, and Metallbank und Metallurgische Gesellschaft was in charge of the business side.34

As the war went on, the difficulties increased for German industry, since a considerable share of the workforce was recruited by the army. Metallgesellschaft also had to go through a change of generation. Wilhelm Merton died in December 1916 in Berlin. His death did not disrupt the

34) Stefanie Knetsch 1998. p. 161.

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company’s operations, since his sons Alfred and Richard continued to work as executives of the different divisions of the corporation. The death of Leo Ellinger at the end of 1916 meant that the company’s management no longer included any of its original founders.35

As much as the war accelerated military development and invention, it also accelerated industrial development and invention, including the first production of synthetic materials. Although the German and Austrian economies during the war were largely based on the use of their own natural resources, many commodities soon started to become scarce. The biggest problem was the supply of food and fuel. There was crude oil in Europe, but the production levels were insufficient to replace the volume of pre-war imports in a situation where the fuel demands of the army, the navy, and the nascent air force grew fast. In particular, the production of the high-octane gasoline required by airplanes of the Imperial German Air Service proved to be a problem.

Fortunately, the German chemical industry was quite well prepared for solving the problems associated with the production of a substitute for high-octane gasoline. This was because of the high quality of organic chemistry research and the high aspirations that chemists had for it during the first years of the 20th century. In France, Marcelin Berthelot had already proven in the late 19th century that coal could be transformed into oily products, but the basic principles of organic chemistry were, however, only just being discovered. It was not until 1903 that Finnish Gustaf Komppa demonstrated that the total synthesis of camphor was actually possible in practice. Despite these successes, oil chemists quickly became aware of the problems they faced in perfecting the needed cracking and polymerization processes.

For many years, the development of the processing industry was obstructed by the limitations posed by chemical equipment. In 1913, German chemist Friedrich Bergius developed a method of converting coal into oil under high pressure at the Hanover Institute of Technology. Although the method was improved during the war, actual production could not be started. Once the war was over, the difficulties faced by the German chemicals industry during the war rapidly eased and the Bergius method

35) Stefanie Knetsch 1998. p. 141–142.

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was soon applied on a large scale. In 1925, Franz Fischer and Hans Tropsch, researchers at the Kaiser Wilhelm Institute, achieved a total synthesis of gasoline from carbon dioxide and hydrogen. The Fischer-Tropsch method was also widely adopted by industry for producing lubricating oils, and later diesel fuel. Demand for large chemical industry equipment and process engineering grew rapidly.

The exceptional circumstances during the war had a direct impact on Lurgi’s organization and operations. Lurgi aimed to develop the Krause drying process, which was widely used in the steel industry yet ineffective. However, due to a constant shortage of energy, the company had to change its strategy. Out of necessity, Lurgi’s engineering department became interested in technologies related to carbonization processes and the gasification of

organic materials as well as gas cleaning technologies and various syntheses.

By the end of the war, Metallurgische Gesellschaft had developed new industrial processes, including the new steam-based drying methods in metallurgy, as well as the use of spray drying, heat exchangers, and various evaporation technologies. Yet it was not until after the war that the company was able to fully and rapidly

adopt them. It also began using the new carbonization and gasification methods related to fuel refining, which are also part of Outotec’s current portfolio.

The solutions proposed by both sides in response to the technological and industrial problems caused by the war represent the first instances of systematic state-run science policy. The development of science and technology began to be coordinated in terms of the war’s objectives, with chemical research in particular serving the needs of the war. In the last years of the previous century, the German government had already established state-sponsored technology and research centers close to the nation’s universities and commercial operations. There were no similar establishments in Britain and the USA, but both founded state-run science

Out of necessity, Lurgi’s engineering department became interested in carbonization processes and gasification of organic materials.

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policy organizations – national science councils – in the final years of the war.

The first proper technological science academy, the Swedish Ingenjörsvetenskapsakademin, was established in 1919 as a reaction to the problems caused by the war. The original proposal, made three years earlier, had been made for a research institute that aimed to solve Sweden’s fuel supply problems should another war occur.

The impact of the new power structure on businessThe end of World War I with the defeat of Germany in November, 1918 changed the balance of Europe at once. The armistice implied the complete surrender of Germany and that it alone would plead guilty to having been the aggressor and cause of the war. Under the terms of the subsequent Treaty of Versailles, the Allies demanded astronomical war reparations and the dismantling of the German Empire. Although the shame of this defeat and losing both its empire and its associated prestige had an immediate impact in the form of an internal power struggle and would have an even greater impact a decade later with the rise of Adolf Hitler, the more immediate effect of the defeat was felt on Germany’s economy. The need to repay the reparations and the loss of captive markets in the form of its old colonies would paralyze Germany’s economy and in the 1920s, the country descended into economic chaos and hyperinflation. A scientific and industrial superpower for almost fifty years, Germany’s position was radically changed.

For Germany’s metals industry, the defeat had one further effect. As part the Treaty of Versailles, Germany had to return the territory of Alsace-Lorraine, captured following the Franco-Prussian War, to France. With it went ready access to the Minette and other ore deposits on the western side of Moselle. This meant that Germany was dependent on iron imported from France.36

36) Cf. Outokummun kuparituotanto vaihtotavarana ulkomaisessa kaupassa September 21, 1939. Appendix: Eräiden metalli- ja malmitarpeiden tyydyttäminen Saksassa. September 12, 1939. EMA.

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During the war, Germany encouraged greater production of base metals by means of administrative coercive measures. Production of metals was essential for the war economy. For example, Norddeutsche Affinerie increased its production to meet the war industry’s requirements, doubling copper production to 20,000 tonnes using power purchased from the Hamburg power company. This production was not economically viable, and a backslash occurred after the war. The economic crash in 1918 interrupted the plant’s operation for many years. Nevertheless, the following year, Norddeutsche Affinerie launched silver electrolysis, in compliance with authorities’ demands.

In the face of the pressure of Germany’s economic situation, Metallbank und Metallurgische Gesellschaft – the company that had formed around Metallgesellschaft to develop new technology – had to reorganize. The different arms of the company were turned into subsidiaries. The first of these were engaged in the manufacture of industrial machinery. In 1919, Metallbank und Metallurgische Gesellschaft founded Krause-Trocknungs-Apparatenbau, which began to construct machines related to the drying technology of chemicals developed by Georg A. Krause of Munich. Lurgi Apparatenbau, which manufactured industrial equipment on a wider scale, was established the same year and Lurgi Gesellschaft für Chemie und Hüttenwesen the year after. The company designed Wetherill, Huntington-Heberlein, Herreshoff, and Dwight-Lloyd equipment, together with devices used in the production of sulfuric acid. As an engineering firm that focused on equipment design for the processing industry, Lurgi Gesellschaft für Chemie und Hüttenwesen was a completely new form of business.37

Further subsidiaries were set up specializing in technologies for refining new fuels. Lurgi Gesellschaft für Wärmetechnik was founded in 1922, followed by Lurgi Werkstätten, a unit focusing on refining activated carbon.38 In addition to the above-mentioned subsidiaries, the group included a dozen or so other companies related to the production or refining of metals, located in various parts of Germany and Switzerland. As of 1923, the group’s

37) 50 Jahre… 1970. p. 5. Stefanie Knetsch 1998. p. 177.

38) Georg Küffner 1997. p. 8.

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operations were managed from its newly completed head office in downtown Frankfurt. The building still stands at Gervinusstrasse 17/19.

The reorganization meant that Metallbank und Metallurgische Gesellschaft was now engaged in the mining and production of metals as well as the engineering of industrial processes. There were, though, upsides and downsides to this diversification. Prior to the reorganization, a major obstacle in the development of new heavy industrial processes for commercial use was the testing. Understandably, the investment required to purchase and install new industrial processes was substantial, so potential customers were unprepared to take risks by acquiring a process whose reliability had not been proven. For Metallbank und Metallurgische Gesellschaft, the advantage of having both production and process engineering take place within the same group was that taking financial risks when testing methods related to new processes was considerably easier than if engineering had been purchased from an external supplier.

The downside to this diversification was that Metallbank und Metallurgische Gesellschaft’s engineering unit had to sell technology to the group’s competitors. Potential customers were placed in a situation where their confidential data, once disclosed to the engineering firm, could leak to a competing production unit within Metallbank und Metallurgische Gesellschaft. In metals processing, the matter was not so straightforward, since processes were always local applications and could not be transferred to other environments without the need to make design changes.

The question of competition arose following World War I. It was not a new question, economists having talked before the war about the impact of trusts and cartels – groups of companies linked to each other through various economic and contractual arrangements – on business life. The existence of cartels was questioned in all Western countries and as a result, various governments enacted anti-trust legislation that restricted poor competitive practices. The most widely known struggle between authorities and a cartel occurred in the early 1910s, when Standard Oil, the colossal oil company created by John D. Rockefeller, was broken up into smaller companies as ordered by the US judicial authorities.

A similar debate arose in Europe. In 1913, Robert Liefmann, a German economist and political scientist, published an article entitled Die

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Internationale Organisation des Frankfurter Metallhandels in the magazine Weltwirtschaftlichen Archiv. The article became famous because it included a chart showing Metallgesellschaft’s international organization. Liefmann was thereafter generally considered to be the key cartel theorist in Europe. V. I. Lenin, then living in exile in Switzerland, copied and used the chart as part of his, and subsequently, the Soviet Union’s Communist propaganda. As a result, in the Soviet Russia and socialist Eastern Europe, both Metallgesellschaft and the way its structure was organized came to exemplify the ills and greed of the capitalist world order.

The use of the chart showing its organizational structure and the fear that it was engaging in anti-competitive practices meant that Metallgesellschaft AG came under sustained economic and political pressure throughout the 1920s. Ultimately, this led the company to simplify its organizational structure, merging subsidiaries into the parent company, with even Metallbank und Metallurgische Gesellschaft becoming a Metallgesellschaft AG department in 1928. By the beginning of the 1930s, the group’s structure was largely the same as when it was first founded, but its engineering activities continued within the parent company rather than in subsidiaries.

Unlike the German metals industry, the German chemical industry operated within the framework of German legislation and was able to establish a well-known cartel in 1925. This was I.G. Farbenindustrie A.G., of which Griesheim-Elektron was one of the founders and principal stockholders, in addition to BASF, Bayern, Hoechst, and AGFA. It was set up to promote the interests of the German chemical industry all over the world. Along with major Anglo-American corporations, the German processing industry cartel became a big player. As a result, not many opportunities existed in the mining industry and metal refining for new small companies.

Humboldt AG, managed by Peter Klöckner, fought its way out of the economic chaos that followed World War I to join forces with Motorenfabrik Deutz AG in 1924. In 1930, Klöckner merged the companies with Motorenfabrik Oberursel to form Humboldt-Deutzmotoren. Six years later, Ulm-based Magirus was added to the corporation and two years after that the name was changed to Klöckner-Humboldt-Deutz. The company had become the leading manufacturer of diesel engines and heavy-duty transportation vehicles in Europe.

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Klöckner-Humboldt-Deutz did not give up developing machinery for the mining industry. It continued to work on machinery and equipment needed in the aluminum industry and for refining coal and graphite. Over the course of the 1930s, it delivered machinery for the coal and graphite industries in the Soviet Union and Germany. Its aluminum technologies transferred to Outokumpu Technology in the early 2000s as part of the acquisition of KHD, and are still today sold by Outotec.

Finnish ores and the self-sufficiency of the state

A lthough the deposits showed great promise, the Outokumpu Kopparverk partnership’s operation of the Outokumpu mine and concentrator did not meet the targets set for it in the first decades

after they opened. However, the outbreak of World War I altered the nature of the business. The paper and pulp industry could no longer acquire the sulfur it required from abroad, which is why sulfur obtained from the Outokumpu ore by roasting became one of the concentrator’s two principal lines of production. Financially speaking, the Outokumpu Kopparverk plant could even be characterized as a sulfur production plant rather than a copper processing plant. The main customers of the metals extracted and processed at Outokumpu were now located in St. Petersburg, while sulfur was sold to domestic pulp mills.

Although the quality of the copper produced by the dressing plant was not as high as that of the copper supplied by Central European competitors, it was of sufficient quality for the Russian Empire’s wartime needs.39 However, this supply of copper was regarded as a state resource and its supply was bound by the wartime economy, and since the Hybinette method of concentrating had not achieved its goals, the entire company’s existence was reviewed by a court of arbitration. Victor Hybinette, one of the partners in Outokumpu Kopparverk, offered to acquire or rent the plant, but the Russian

39) Markku Kuisma 1985. p. 20–28.

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administration in Finland was not willing to let foreigners gain control of the strategically important plant. In the end, the whole company was rented to a Norwegian-Finnish company in the leadership of Hybinette in August 1917. Unfortunately, Hybinette was still not able to make the metallurgic copper process profitable, and when global metal prices dropped abruptly after the war, the company began to make a loss.40 Sulfur production, launched due to the import restrictions during the war, also became unprofitable when imports were restarted in the early 1920s.41

Both the Outokumpu mine and concentrator were returned to their main owners in 1920. Thus the Finnish government reclaimed its interest in the operations of the mine and concentrator, which was largely based on securing sufficient raw material for newly established sulfuric acid and superphosphate plants in Kotka and Lappeenranta.42

At the same time, Outokumpu Kopparverk was affected by a number of political trends that affected Finland as a whole. At the turn of the century, a political trend grew in the Russian Empire, the purpose of which was to do away with the special privileges of the Empire’s fringe nations. In the last decades of the 19th century, Poland and the Baltic states had been subjected to a policy of Russification and Finland followed suit. Beginning in 1899 and lasting until 1917, this period is known as the ‘years of oppression’.

National industryThe measures aimed at terminating Finland’s autonomy started with orders concerning the Finnish postal service and armed forces, but nearly all Finns resisted the policy of Russification. The draft of the imperial armed forces failed because the draftees were on strike, while academic students opposed all changes to laws that were aimed at crushing Finland’s autonomy and legislation. Resistance increased during the Russo-Japanese War of 1904–1905, after which Finns began to actively work against the

40) Markku Kuisma 1985. p. 40.


42) Later Kemira Oy.

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empire. At the forefront were technology students, who created a strong nationalist ideology in which the Finnish identity was built on natural values and the opportunities opened up by new technology. Landscapes which had become national icons were used in propaganda both at home and abroad. The pure environment and the industrial plants built there, as well as the use of modern means of transportation – trains, steamships, and, very soon, automobiles – were included in the idea of national identity.43

Among graduate engineering students, the development of technology and industry was seen as a national cause, the aim of which was to create an independent technological culture. People had fanatical attitudes and the engineering profession was expected to build the technical side of Finland with military rigor. This would result in the 1920s in a generation with strong national goals having risen to leading positions in Finnish industry.

The situation in Finnish technological education and research changed when World War I broke out in the summer of 1914. Traveling to Germany was no longer possible in the fall, and so all the young people interested in studying engineering and technology had to stay in Finland. As a result, the first-year classes at the University of Technology were full, and the principle of numerous clauses had to be introduced in order to limit the number of students. Although the university’s resources had been increased significantly at the beginning of the 19th century, the campus was unbearably crowded. The uncomfortable conditions paved the way for a mood of protest and activism against the regime imposed by St. Petersburg. The year 1915 saw the emergence of the Jäger Movement, which transported hundreds of young Finnish men to Germany for military training in order to prepare for the upcoming fight for independence.

43) Cf. e.g. Tiina Päivärinne. Luonto, Tiede, Teknologia – Kansanvalistuksen Suomi-kuva 1870–1920. Helsinki 2010.

Pure environment and the industrial plants built there were included in the idea of Finnish national identity.

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The breaking of traditional trade connections to Central Europe showed Finland’s dependence on imports. This was mainly the case with raw materials for the chemical industry and special products for the technology industry. For example, the Finnish paper industry ran into difficulties when the import of additives from Germany ended. This led to the founding of a central laboratory for the paper industry – Oy Keskuslaboratorio – Centrallaboratorium Ab – in 1916.

New challenges of the independent FinlandAt the same time, the power struggle between the Finnish-speaking and the Swedish-speaking population over the leading positions in culture and administration became critical. Speakers of Finnish thought that superseding speakers of Swedish – or at least building a Finnish-language university system next to the Swedish-language one – was a great national mission. The struggle for Finland’s independence united the disputed parties during 1917 and 1918, but the language feud did not disappear from Finnish society even after that. However, the situation eased markedly when political activity was directed toward a common cause.

Finnish-speaking students and young researchers of technology, who were striving for the country’s economic independence, were particularly interested in new branches of industry, such as the mining industry, strategic chemicals industry, and electrical engineering. The idea of national, self-sufficient industrial activity stuck vividly in the minds of technology students who studied in the 1910s. This had great significance in the 1920s, when independent Finland began to build a national chemical and metals industry cluster. A clear connection formed between new industry and the nationalist cause.

Among the students with nationalist inclinations were three young researchers who had a decisive impact on the development of the Finnish mining industry. They formed the first group of new-generation scientists within the industry’s research tradition.

Eero Mäkinen, born in 1886, began his studies at the University of Helsinki in 1904. In the final stages of his studies – as of 1907 – he worked at the laboratory of geology and mineralogy of the university, but soon transferred

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to a similar position at the laboratory of the University of Technology. Mäkinen was probably the most interested in the economic applications of geology and the mining industry in general, but the political atmosphere among the students of technology must have played a part in this.44

Mäkinen obtained his Licentiate of Philosophy at the University of Helsinki in 1913 and his doctorate three years later. He then went on to study in Stockholm, where he completed a degree in mining engineering at the Royal Institute of Technology in 1918.

While still a student, Mäkinen became friends with Pentti Eskola, who earned his Master’s Degree in 1906, Licentiate in 1915, and Doctorate a year later. During World War I, Eskola taught mineralogy and geology at the Department of Agriculture and Economy of the University of Helsinki. After continuing his studies at the Freiberg University of Mining and Technology in Germany and in University of Oslo, for example, Eskola was appointed as the state geologist in 1922 and as Professor of Mineralogy and Geology at the University of Helsinki two years later.45 Mäkinen and Eskola worked together throughout their lives; Mäkinen was responsible for practical production and Eskola for basic scientific research.

The third young scientist of this generation was Väinö Sihvonen. He graduated from the University of Helsinki in 1914 and earned his Doctorate in 1921 after several study trips to Germany and years of working as an assistant at the chemistry laboratory of the University of Helsinki. At the beginning of the 1920s, Sihvonen transferred to the University of Technology, where he began to teach modern physical chemistry. He also advised Outokumpu on the construction of a copper plant which employed electro-thermal processes after having familiarized himself with the Swedish metals industry. Sihvonen played a key role in teaching the results of modern basic research in metallurgy to technology students in Finland in the 1930s.

Sihvonen’s work was related to the research of thermodynamics, which advanced rapidly in the 1930s. Scientists at the time had access at least to thermodynamic tables published by the U.S. Bureau of Mines, such as

44) Cf. Pentti Eskola 1958.

45) Paavo Haapala 1986. p. 309–310.

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K.K. Kelly, U.S. Bur. Mines Bull. No. 383 (1935) Contributions to the Data on Theoretical Metallurgy.46

Sihvonen was appointed as Professor of Physical Chemistry and Electrochemistry of the Helsinki University of Technology in 1936. Over the course of the decade, his research on coal combustion earned him a place at the forefront of combustion researchers. Sihvonen was killed in the first bombing of Helsinki when the Winter War began on the last day of November in 1939. In his lifetime, he wrote about 100 scientific papers that were published in the most renowned publications in the field.47

Finland became independent at the end of 1917 after the collapse of the Russian Empire in the aftermath of the Russian Revolution. A fierce civil war ensued in the spring of 1918, and before World War I ended, the winning monarchist party had committed itself to Germany’s foreign policy and economic arrangements around the Baltic Sea. There were German troops in Finland, Germany having supported Finland’s independence from Russia, and the aim was to turn independent Finland into a monarchy, in compliance with the constitution of 1734. Friedrich Karl Ludwig Konstantin von Hessen-Kassel, the brother-in-law of Wilhelm II, was elected as the King of Finland in October, 1918. The plan fell through, however, when Germany was defeated in November, 1918, and having such strong ties with the disgraced Kaiser Wilhelm II was no longer seen as being beneficial. As a result, king-elect Friedrich Karl resigned the throne in December of that year and was never formally crowned.

In terms of government structure, the transition from the Grand Duchy of Finland to Kingdom of Finland to the Republic of Finland was relatively stable. The old units of state administration had operated relatively free of interference from St. Petersburg since the Grand Duchy of Finland had been mostly autonomous under Russian rule and thus were able to continue functioning with little or no changes. Unfortunately, the same cannot be said of Finnish industry, which had to reorganize its operations and foreign trade, since the metal and wood processing industries’ exports had previously mainly gone east to the Russian Empire.

46) Pekka Taskinen, written communication November 27, 2012.

47) Väinö Ilmari Sihvonen, personnel records.

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A few years elapsed before the new export connections to Great Britain, other Western European countries, and the other side of the Atlantic could be firmly established. The country’s newly gained independence also caused some pressure to make changes in its system of technological education. Up until the outbreak of World War I, Finland had strong industrial, educational, and technological ties with the neighboring great powers. The primary tie was with the Russian Empire as part of its industrial production and to meet the demand for Finnish industrial products in the St. Petersburg region. The secondary ties were with the relatively near scientific circles of St. Petersburg and Germany’s various research institutes and universities that together formed a wider scientific and technological cluster of which the Helsinki University of Technology had been a part. In the wake of World War I, both of these traditional connections were blocked and could no longer be relied upon. The majority of the Finnish engineers and scientists who had worked in Russia had returned to Finland following the Russian Revolution and communication to the East was practically impossible after 1918. Barring the loss of countless young researchers during the war, the German system of higher education was mostly intact after the war. Nevertheless, the country’s economic situation led to the decline of higher education.

In response, Finland saw that it would have to establish connections to Great Britain, France, and other nations in Western Europe as well as the other side of the Atlantic. Another option was to quickly develop national research and production systems. In a situation where the ideology of national industrial activity, formed among students prior to World War I, could evolve into practical action, an ideology of a chain of industrial activity was brought up particularly in the chemical industry. An individual branch of production could be unprofitable, but the system as a whole, viewed from the perspective of the national economy or national security, could be profitable. For example, the requirements of military technological production were now taken into account when drawing up production plans. Securing the domestic supply of electrolytic copper, which was needed for the production of ammunition, was discussed as early as 1922, when plans for the new copper plant in Finland were being laid out as the copper from the Outokumpu mine was ideal for producing artillery shell casings. Although the production line would not be completed until the

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1930s, it was clear that the management of the entire system was crucially important for maintaining the country’s military preparedness. Depending on Swedish industry for Finland’s supply of copper could no longer be regarded as an option.48 Considered to be part of Sweden until annexed by the Russian Empire as the Grand Duchy of Finland in 1809, the newly independent Republic of Finland’s relations with the old mother country Sweden were not warm during the first decades of its independence and Sweden’s willingness to support Finland in the event of crisis could not be relied upon.

Despite needing to reorganize and refocus its industrial efforts, environmental protection issues and the long-term goal of setting up sustainable economic production were not in conflict with Finland’s

strategic aims. In the early 1920s, when the global economic systems were reorganizing, the Outokumpu company was also forced to review the economic foundations of its operations. The Outokumpu mine’s ore reserves attracted international interest. A Swedish industrial syndicate owned by Stockholm’s Enskilda Bank

and American mining companies put forward proposals for utilizing the Outokumpu ore, but the Finnish government was not interested in these and similar projects, seeing them only as efforts to maximize profits.49

The national ideology of Eero Mäkinen, the state geologist and Professor of Mineralogy and Geology at the University of Helsinki, was evident in this situation. His objective was to build economically viable activities in order to increase Finnish welfare, instead of just seeking financial advantages for potential investors. It also seems that environmental issues were already considered at that time. In 1942, Mäkinen addressed the stockholders’ meeting of the Outokumpu company as follows:


49) Markku Kuisma 1985. p. 57–58.

When the production equipment in Outokumpu needed to be updated, German technology was chosen.

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“It is obvious that if Outokumpu’s production had in 1928 been increased at once to 600,000 tonnes of ore per year, ‘at an American speed’, by setting up the copper plant, copper electrolysis, and metal plant simultaneously, this would also have resulted in ‘American-style’ wasting of natural raw materials. Only copper would then have been recovered from the ore, as is still the case in America. Sulfur would have ended up in the sky and in the soil, and iron would have been wasted as part of slag...”50

When the production equipment in Outokumpu needed to be updated, German technology was chosen. During the initial planning of the concentrator plant’s refit, the preferred option were methods and technology used in the Swedish mining industry, although German methods and technology had also been considered. When Wäinö Tammenoksa was the company’s director in the 1920s, he ordered preliminary calculations from several possible suppliers. These included the companies Krupp and Humboldt in Germany; Gröndahl-Ramen in Sweden, and the mining laboratory at the Royal Institute of Technology in Stockholm. The equipment for the new concentrator, based on the flotation process, was eventually supplied in August, 1928 by Fried. Krupp Grusonwerk. The company became Outokumpu’s principal supplier of concentrator technology for many years.51

Meanwhile, both Metallgesellschaft and Norddeutsche Affinerie expressed an interest in Finnish production. Their Peute, Hamburg production plant would become the link between Metallgesellschaft’s headquarters in Frankfurt and Outokumpu. The Hamburg production plant got a new director in 1920, when Metallgesellschaft appointed Felix Warlimont, a specialist in non-ferrous metals technology. Warlimont, a Merton family friend,52 became the long-term CEO of Norddeutsche Affinerie. Under his chairmanship, Norddeutsche Affinerie’s industrial processes were modernized and its business picked up, in spite of repeated strikes and political conflicts which occasionally interrupted work. The greatest difficulty faced by Norddeutsche

50) EMA. [Eero Mäkinen] Katsaus Outokummun vaiheisiin 1928–1941. Outokumpu Oy’s Annual General Meeting on March 27, 1942.

51) Markku Kuisma 1985. p. 72. Väinö Tammenoksa to Harald Herlin May 19, 1926. EMA.


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Affinerie came between 1923 and 1925, when French and Belgian troops occupied the Ruhr area as a reprisal after Germany failed to fulfil its World War I reparation payments as agreed under the terms of the Treaty of Versailles. This hindered the delivery of new machinery to the smelter in Hamburg,53 the delay causing significant losses to the company.

Finnish raw material sources presented an interesting opportunity for the German industry. World War I had exposed the risks involved in a production chain based on overseas sources. The Outokumpu ore deposits were much closer than raw materials available overseas. The arrangement between Outokumpu and Norddeutsche Affinerie was clearly meant to be a permanent one, because in 1926 the copper processing capacity of the Peute smelter was increased considerably54 and by the end of the decade, Outokumpu was listed as major supplier for Norddeutsche Affinerie, along with Rio Tinto in Spain. Politically and economically, the effect was to turn the Baltic Sea into an inland sea controlled by Germany and Sweden, particularly the former as the Baltic states – previously part of the Russian Empire – achieved independence and cut ties with their former master.

Also part of Norddeutsche Affinerie during this period was Joseph Eitel, who later became the director of the parent company, Metallgesellschaft. Both Eitel and Warlimont belonged to Eero Mäkinen’s personal network, which meant he had a direct connection to the most well-known electrochemical industrial plant in Europe. Networking at that time was based on personal relationships between researchers and corporate executives. This was partly due to the uncertain political atmosphere in which organizations had only limited operating opportunities, particularly when it came to international relations.

These personal relationships strengthened the commercial relationship between Outokumpu and Norddeutsche Affinerie and enabled trade agreements to be concluded without the need for intermediaries. As a result, Norddeutsche Affinerie became the most important customer for Outokumpu’s copper concentrate and when Outokumpu began constructing the Imatra copper plant, Felix Warlimont became a trusted adviser for the project. The trade terms for the plant’s output were agreed on before it had



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been completed, and when the agreement was signed, it was before the quality of the concentrate was defined in detail. This shows how much the customer and supplier trusted each other.55

However, the growing links between Outokumpu and Norddeutsche Affinerie, between Finnish and German industries, worried the Finnish government. The Finnish state was concerned that significant production plants might fall into the hands of foreign investors and thus out of Finnish control. Despite active lobbying by business groups, the Finnish Parliament decided in 1924 to buy out Hackman & Co from its stake in Outokumpu Oy. In late 1924, the company became wholly owned by the state.56

The struggle for consolidating companies, which occurred in conjunction with the founding of Finnish government-owned corporations, continued until the 1930s. The merging of sulfuric acid and superphosphate plants into Outokumpu, advocated by Wäinö Tammenoksa and Roope Hormi, was opposed by Eero Mäkinen, who advocated the independence of the mining industry business. Behind the disagreement were attempts by certain members of the Board of Directors to link Outokumpu’s production to the production chains of the other companies they represented. Mäkinen attacked the proposals hard, thinking that the directors in question were mostly interested in seeking personal financial gain.57

The nickel of Pechenga and the copper plant at Imatra

A fter the discovery of the Outokumpu ore body, Finnish geologists’ interest in deposits in Eastern Finland increased further. In the fall of 1920, in connection with the Treaty of Tartu between Finland and

the Soviet Union, Finland gained the area of Pechenga, which gave it access

55) Markku Kuisma 1985. p. 84. For Warlimont’s visit to Imatra, cf. Otto Barth to Eero Mäkinen July 16, 1939. EMA.


57) Panu Nykänen 2009. p. 47–49.

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to the Arctic Sea. Pechenga was included in the geological survey of Finland, and this led to the discovery of the Pechenga nickel deposit, which turned out to be exceptionally large. The young republic had in its possession one of the world’s biggest nickel deposits then known.

Unfortunately, there was insufficient capital in Finland to exploit the deposit. Not even the government had the means required to launch such an extensive project that involved major financial risks. The capital available to the government was barely sufficient to secure the operation of the Outokumpu copper mine, and the prevailing political situation was such that expanding the state’s mining industry business was impossible. The only option was to turn to a foreign mining company. This was not an easy task, since nickel had significant economic and political value. It was one of the most important of strategic raw materials.

Although the price of nickel had plummeted in the 1920s from its wartime peak level, it was to be expected that the situation would stabilize by the start of possible production at Pechenga.58 In the 1930s, as much as 90% of the world’s nickel market was dominated by the International Nickel Company of Canada (INCO), which used its dominance to keep nickel prices low in order to deter competition.59

Faced with this fierce competition, it was impossible for the Finnish state to secure the funding needed to exploit the nickel deposits at Pechenga and so at the beginning of the 1930s, Finland signed a contract with the Mond Nickel Company, a subsidiary of INCO. A Finnish subsidiary, Petsamon Nikkeli Osakeyhtiö, founded as a production company under Mond, invested large sums in the mine, which was opened at the end of the decade. Finland was now co-operating with the British mining industry. Even so, the more nationalist figures in Finland’s industry were reluctant to let the country’s riches fall into the hands of foreigners.

The lack of capital threatened to become the most important factor limiting the development of production in Finland. The options available were cooperation with foreign corporations, freezing investments until Finnish financiers would have the courage to get involved in high-risk


59) Eloranta & Nummela 2007. p. 325.

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projects, or investing government funds in industrial activity. As the first option undermined the country’s economic independence, and new industries were not attractive enough in the eyes of Finnish investors, a solution was to be sought in the government’s investment policy. The industrial plant – which had to be in operation to ensure emergency preparedness or for financial reasons – became an incorporated company, with the government holding most of the stock. The government also agreed to develop any technology needed by the industry, which would have been acquired from abroad had the owner not been Finnish.

The first Finnish government-owned corporation was Enso-Gutzeit, a wood-processing company from Eastern Finland. When it needed reorganizing in 1918, the government made a direct investment, thus saving Enso-Gutzeit. The company’s resulting share structure provided the model for dividing Outokumpu’s stock a few years later. Imatran Voima, another signif icant government-owned corporation, was formed around the Imatra hydropower plant in the late 1920s to support the development of the metals industry. The completion of the plant in 1929, which at the time was the second largest in the world, made it possible to build a cluster of energy-intensive processing industry companies in the province of Vyborg. This was important because by the early 1930s, the development of the processing industry to support the mining industry was primarily dependent on domestic capital. This did not halt the debate about government-owned corporations, which became especially heated at the end of the 1920s, when proponents of economic liberalism objected to the government meddling in business life. The conversion of Outokumpu into a government-owned corporation in particular was strongly opposed.

In the early 1930s, Outokumpu was already one of Finland’s most important industrial plants, but it was a minor player internationally. In the European market, Outokumpu was the fifth largest copper producer and thus well-placed in the industry.

In the early 1930s, Outokumpu was the fifth largest copper producer in Europe.

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The work performed to reform the Outokumpu mine proved profitable immediately. In just a few years in the late 1920s, the company’s turnover increased nearly tenfold and profits even more.60 Although the depression that began in 1929 led to several years of losses, the company was ready for new investments at the beginning of 1930s.

Eero Mäkinen’s idea of founding an entire production chain based on the Outokumpu ore deposits began to seem possible. The next step was building a modern copper plant, which would be powered by the plant harnessing the power of the Imatrankoski rapids. For the first time in history, Finland had enough base load power in order to develop electricity-dependent industrial activities. The main problem was that the country lacked the experts, the expertise, and the technology to establish and develop such an entire production chain.

When the Imatra power plant had been completed, Outokumpu immediately launched a project to build a new copper plant. The plant would be the largest electrically operated copper smelter in the world. Copper refining alone would not have ensured sufficient profitability, which is why a sulfur dioxide plant would be set up next to the smelter. Since Finnish industry lacked the technology and the expertise to design and build either the plant or the smelter, Eero Mäkinen needed to look elsewhere for both. So in early 1931, he visited Central European industrial plants and again met executives at companies such as Norddeutsche Affinerie in order to bring that expertise and technology to Finland. However, the task of designing the new copper plant’s key element, an electric furnace, was given to Norwegian Norske Aktieselskab for Elektrokemisk Industri (later known as Elkem AS).61

Although the mining and production of copper was the primary reason for Outokumpu developing its site at Imatra, the production of other raw materials would ensure its economic viability. The first of these was sulfur. The paper industry, which used sulfur as part of the kraft pulp industry, had used pyrite from the Outokumpu mine as a source of sulfur during World War I, and was also able to utilize the liquid sulfur dioxide produced



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by the Imatra plant. Selling sulfur guaranteed stable production, which in turn made it possible to develop the slightly uncertain metals industry in the 1930s. The second raw material, iron, was to be found in considerable amounts in the Outokumpu deposits, the iron content of the ore being roughly 30%, while that of the roasting residue from the copper process was as much as 60%. Outokumpu was thus also an important iron mine.

Separating iron from the roasting residue was not easy, however. Outokumpu’s preliminary plans for an ironworks of its own were abandoned due to the lack of investment, and an agreement for the treatment of roasting residue was concluded in 1934 with Berndt Grönblom, CEO of Vuoksenniska Oy. Vuoksenniska built its own smelter at Imatra62 to separate iron and cobalt from the ore for its own processes, but the agreement became a source of long-standing disputes when the production chains of the metals industry improved a few decades later.

During the Great Depression, the Finnish government’s opportunities to invest in industry diminished considerably. The issue of converting Outokumpu into a limited company also came up since it was believed that Norddeutsche Affinerie would participate in the construction of the copper smelter as a partner.63 In the implementation phase, Norddeutsche Affinerie tried to convince Outokumpu’s management that the project was unfeasible; after all, the plant would probably become one of its major competitors. Norddeutsche Affinerie’s earnings were dependent on the degree of upgrading of the concentrate at its own plants. Norddeutsche Affinerie’s management envisaged Outokumpu as a raw material producer for the existing production chain, not as a direct competitor.64

The question of investments was mainly a political one in Finland. The Right objected the operation of government-owned corporations, as they saw it as a form of state socialism that had a negative effect on private business. In the Parliament, the National Coalition Party and the Center Party started to advocate the conversion of government-owned corporations into privately-

62) Markku Kuisma 1985. p. 195–196.



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financed limited companies. The objective was to make it possible to sell the entire stock of these companies on the free market if necessary. Despite the strong opposition of the moderate Left and some Center Party politicians, the new company form was ratified in the Parliament in December, 1931 after heated discussion. The newly founded Outokumpu Oy (Ltd) started operations on June 1, 1932. The government reserved itself a minimum of 75% of its stock.

In spite of the difficulties involved, the construction of the Imatra copper plant was set in motion in the spring of 1934. The technological solutions were carried out by a German group of experts. Otto Barth, a doctor and engineer, was hired as the technical supervisor for the plant in January, 1935. Barth had earned his doctorate from the Aachen University of Technology in 1912, just before World War I. He served as the director of Mansfeld AG für

Bergbau und Hüttenbetrieb until 1933, after which he became an independent consultant and a lecturer at the University of Berlin.

Mansfeld was primarily a copper company, but Barth’s specialty was the processing of nickel and cobalt ores and the production of tungsten and

molybdenum. He had also mastered the production of zinc oxide and sulfuric acid while working as the director of German government-owned nitrogen plants in Piesteritz bei Wittenberg at the end of World War I.

Why did Eero Mäkinen choose Barth as the expert for constructing the Outokumpu copper plant? The main reason was that there was no one in Finland who had experience of building a smelter, whereas many Germans, including Barth, did. This was problematic for Mäkinen and Outokumpu because it was in the interests of the German companies to keep the technologies and knowledge of them in German hands. Eero Mäkinen’s hiring of Barth to consult in Finland was objected to within Mansfeld. The issue was settled just before Barth changed jobs when Borchers, the director who objected to the transfer, retired.

Barth’s possible transfer to Finland was also met with immediate resistance in Hamburg. Correspondence between Barth and Eero Mäkinen shows that

There was no one in Finland who had experience of building a smelter.

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Norddeutsche Affinerie and its CEO, Felix Warlimont, also played a role in initiating the engineering of the copper plant. Norddeutsche Affinerie would have gladly linked Outokumpu’s operations to the same group as Metallgesellschaft and Norddeutsche Affinerie, which would have meant that the process and licenses the new Finnish plant required would have been acquired through Warlimont. In any case, Barth received a polite letter from Warlimont when he moved to Helsinki and Imatra.65 Ultimately, Outokumpu made an independent decision to try and raise the degree of upgrading of its products, its breakaway being based on having the two German corporations, Mansfeldt and Metallgesellschaft, compete against each other.

Outokumpu’s Imatra copper plant began operations in February, 1936. It was an exceptional achievement, considering the difficulties and status of industrial policy in Europe during the Great Depression. It also gave Finland a major competitive advantage at a time when the availability of metals became a severe global problem.

Battle for metals

I n the 1930s, several European countries came to be governed by totalitarian systems which had a profound effect upon their economies. The Soviet Union implemented a highly centralized economic policy,

particularly with regard to the output of its heavy industries. Italy had been governed by Benito Mussolini’s dictatorship and fascism since the beginning of the 1920s and Spain was plunged into a civil war in the late 1930s, from which General Francisco Franco emerged the winner with German and Italian support. In Germany, Adolf Hitler was elected in 1933 and under his newly founded Third Reich, the country’s economy was centralized in the hands of the government. This centralization aimed to counter the effects of two factors – the Great Depression and the Treaty of Versailles. The latter, signed at the end of World War I, limited Germany’s rearmament, but the country paid serious attention to the lessons learned from the war and the government took control of raw material production.

65) Otto Barth to Eero Mäkinen, December, 1934. EMA.

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As governments sought to overcome the economic crisis of the 1930s, another, more political crisis loomed. It was clear – as early as the start of the decade – that the outcome of the next possible world war would be highly dependent on who controlled the strategic resources available in Europe. The term ‘political metallurgy’ took on a tangible meaning in Northern Europe as the Soviet Union, Germany, Sweden, and the British Empire competed for ore deposits, ore, and metal refining.

The Treaty of Versailles forbade Germany to develop armaments industries and related technology, but its rearmament was enabled by the industry and research institutes of the obliging neighboring countries. The Dutch company Fokker became an important supplier to the German aircraft industry while new models for the U-boat fleet were developed in Turku, Finland, at Crichton-Vulcan shipyard, though this was under the supervision of German naval architects. A significant bottleneck for the aircraft industry was caused by issues related to the production of light metal products.66

Global development of the mining and metal industries was not only being directed by state governments, but also directed and limited by cartels, agreements aimed at restricting competition. Some of these were known, but most were only speculated about in Finland and Sweden. Metal manufacturers of both countries were small agents in the international market and in Finland in particular, its budding national metals industry was felt to be under growing threat from abroad throughout the 1930s. So it was to the surprise of no one when the founding of the Pechenga nickel mine and the discovery of new gold finds in Lapland aroused the interest of foreign mining companies.

Geological surveying thus intensified in Finland for three reasons. First, keeping up with international competition in the mining industry required quicker response times. Since industrialists and financiers had already become aware of the opportunity to find valuable minerals, particularly in Eastern Finland, several initiatives were launched to step up prospecting efforts and to open new mines. Second, the increasing global tension

66) For submarines, cf. Forsén, Björn & Forsén, Annette: Saksan ja Suomen salainen sukellusveneyhteistyö. WSOY, 1999.

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indicated a situation where strategically important raw materials would play a vital role in international politics. Third, Finland had to ensure the supply of its own strategic raw materials during the forthcoming global conflict.

During the 1920s, the idea of developing systematic test and pilot operations began to gain ground among designers in the processing industry. Prior to this, any necessary pilot study – a small-scale preliminary study conducted to evaluate a project’s feasibility in an attempt to predict and improve upon the design prior to its full-scale implementation – had been conducted during the construction of new production plants and the gradual development of existing processes. Yet these pilot studies and the metals industry were restricted by the limitations of what was known about metallurgical science. The production of metals continued to be based on practical knowledge until after World War I when knowledge of the physical and chemical foundations of the science of metallurgy began to evolve rapidly. The mastery of the theoretical and scientific side of metal production processes brought a long-term view to engineering activities, which also benefited from systematic experimental research. Research and development became an established part of the metals industry in the 1930s.

Metallurgical pilot plant in FrankfurtIn the early 1920s, Frankfurt was already home to many pilot plants, most of which were jointly owned by several metals industry companies. These included the first pilot plant built by Lurgi Chemie, a coal gasification plant with Heddernheimer Kupferwerke, a metallurgical pilot plant in Eschborn, and Metallgesellschaft’s laboratory complex in Reuterweg. The transfer of the company’s research institutes to a pilot plant facility in Gwinnerstrasse, east of Frankfurt, began in 1936. The area housed a pilot plant of Metallgesellschaft and a company called Revertex Rubber. By 1937, Lurgi had centralized its experimental activities in the rapidly expanding industrial area of pilot plants, where Outotec still has a Research & Development unit today.67 The pilot plants of all Lurgi subsidiaries were set up in the same area. The main user was Lurgi Chemie- und Hüttentechnik,


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which had plants for testing sintering and roasting, for example. Lurgi Apparatentechnik, Lurgi Wärme, and Lurgi Mineralöltechnik also built their pilot plants in the area.

Finland offered no opportunities for conducting even basic metallurgical research, let alone larger-scale experiments. The entire system of metals production had to be built from scratch. This called for collaboration between all universities and research institutes on the one hand and national enterprises on the other. However, when setting up the operations, a controversy that lasted several years broke out over the organization of the research system. Development started with ore prospecting.

A proposal was made in Finland for establishing a new, government-owned prospecting company. The first discussions between the Ministry of Trade and Industry and Outokumpu took place in the winter of 1934 to 1935. In the spring of 1935, the founding of the new prospecting company was proposed, with the government-owned corporations Imatran Voima, Enso-Gutzeit, Veitsiluoto, Rikkihappo- ja Superfosfaattitehtaat, and Outokumpu already promising to provide capital for the new company. Despite the criticism of the liberals, the Parliament adopted the government’s proposal with the support of the major parties. Suomen Malmi Oy was formally established on July 19, 1935.68 Due to the criticism directed at government-owned corporations, a group of private metals industry companies were included as part-owners. Yet even as Suomen Malmi’s first operations were being launched, the severe lack of professionals in the country was immediately noticed.

Outokumpu begins to finance researchThe geology and mineralogy education provided by the University of Helsinki was insufficient to satisfy even the needs of the reformed state-sponsored prospecting efforts. At the University of Technology, the situation was even worse, although the Geological Commission continued to work closely with it in an effort to satisfy the educational needs of Suomen Malmi. Both the University of Helsinki and the University of Technology had some shared

68) Rankama-Haapala 1988. p. 30. Suomen Malmi Oy 1961. p. 5.

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premises and used the same geological collections. Gustaf Komppa, an aging Professor of Chemistry, was responsible for the teaching of mineralogy, but in practice, teaching was given by Aarne Laitakari. The number of hours for exercises was clearly inadequate. Mining engineering was taught briefly as part of civil engineer training. The result of these problems was that the country simply lacked the teachers to educate a new generation of geologists.

Just as Finland lacked educational resources to support the demand of its growing metals and mineralogy industry, it also lacked the technological resources. Nor were there easy solutions to this scarcity of technological resources. The absence of a mineral processing laboratory was the weakest link in the production chain, since field researchers’ finds could not be processed in Finland. The circumstances in Finland were unfavorable for setting up an independent laboratory or pilot plants of any kind because of the general lack of resources, and so Suomen Malmi’s director Martti Palmunen proposed in the summer of 1935 that a mineral processing laboratory be founded together with the University of Technology and the Geological Commission. The plan was approved in March the following year, and the laboratory was completed at the University of Technology in early 1937.69

The role of the University of Technology within the metals and mineralogy industry became increasingly important. As a result, it was proposed that the department of chemistry of the University of Technology share the same building occupied by the Geological Commission. A professorship of mining technology was founded in the university in 1938, but a competent person could not be found for the position. At the same time, the political situation in Europe escalated and the need to organize Finland’s mining industry education was becoming urgent. It was feared that it would not

69) Panu Nykänen 2007a. p. 265. Suomen Malmi Oy 1961. p. 8.

Just as Finland lacked educational resources to support the demand of its growing metals and mineralogy industry, it also lacked the technological resources.

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be started properly before the outbreak of the looming war and borders worldwide were closed.

A suggested solution to the unavailability of the much-needed experts was to make use of the government-owned corporations. In the fall of 1937, Ilmari Killinen – a former Minister of Trade and Industry and newly appointed Director General of the National Board of Customs – proposed setting up a foundation to support the teaching of mining and metallurgy at the University of Technology. The funds for this foundation would simply be extracted from Outokumpu’s profits. The year 1937 was the first profitable one for the company following initial investments and the Imatra copper plant seemed to be turning into a moneymaker for the government. Killinen proposed that one-sixth of the 70 million Finnish markkas profit be used to fund the education project to support the mining industry and metal refining.

Outokumpu’s Board of Directors quickly accepted the proposal and submitted it for government approval. Unfortunately, the proposal did not find favor with everyone. Liberal members of parliament believed that Outokumpu’s profits should be transferred directly to the credit side of the state budget; the large amounts of funding stirred up envy in other branches of science; and the researchers of economy voiced strong protests against the government’s spearhead project policy after their own support application for a national research project of economy had been rejected.70

None of the objections raised was serious enough to dissuade the government from accepting the proposal and the Outokumpu Foundation was duly created in December, 1937. Its remit was defined in detail in rules confirmed by Outokumpu’s shareholder meeting – to support the teaching and research of mining technology, metallurgy, and geology at the University of Technology with the objective of building a technological-scientific research and education system especially to cater to the needs of the mining industry.

The Outokumpu Foundation’s basic capital was ten million Finnish markkas. This and future funding was only to be used by the Outokumpu Foundation to fund the work of students and researchers at the University of Technology that supported the needs of the metals and mining industry.

70) Panu Nykänen 2009. p. 84.

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Basic research was not funded and research of geology and mineralogy based on theoretical approaches was to be financed by other, traditional means.71

When Martti Palmunen died of tuberculosis in 1938, there were very few candidates for the position of Professor of Mining Industry. Aarne Laitakari was one, Martti Saksela was the other. When Laitakari was appointed as the Director General of the Geological Commission, Saksela was expected to take up the role, but he was appointed Professor of Geology at the University of Helsinki. This meant that there were no suitable Finnish experts to take up the position of Professor of Mining Industry, so inquiries had to be made outside Finland. Many of the available experts were from one of the superpowers, such as Germany and the Soviet Union, but appointing an expert from either was problematic for Finland’s burgeoning metals and mining industries. Doing so would threaten the independence of these industries by creating ties to those nations.

The only option was to turn to Swedish experts. A dozen or so experts were asked about their willingness to come to Helsinki, but none of them accepted the invitation. The salaries and perks paid by Swedish industry were considerably higher than those the Finnish government was able to offer. With no suitable Finnish applicants available and no-one from Sweden prepared to move to Helsinki, doctor-engineer Otto Barth, the manager of the Imatra copper plant, was appointed Professor of Mining Industry. This enabled the teaching of metallurgy at the University of Technology to begin only a few months after the Outokumpu Foundation, supported by a supplementary commission granted by the Foundation for the professorship. Barth’s place at the helm of the Imatra copper plant was taken by a young John Ryselin.

The Outokumpu Foundation also funded two further educational initiatives. The first was to pay for the teaching of mine surveying, initially taught by V.A. Heiskanen, Professor of Geodesy at the University of Technology, along with his own work. The second was the researchers’ training program, which granted scholarships for study trips abroad for students of mining industry and metallurgy.

71) Vilho Annala 1960. p. 432.

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In 1937, Pori was selected as the site for Outokumpu’s new metal plant as electric power was readily available and it had excellent connections to the Baltic Sea, Sweden, and Germany. The technology chosen for the plant was copper electrolysis. Eero Mäkinen began to immediately train his own staff for the engineering of a new production plant. Petri Bryk, who had just graduated from the University of Technology, was hired to design the Outokumpu copper electrolysis plant and sent to the USA to study the latest production technologies, including working at the engineering firm of Archer Wheeler Co in New York.

In building its metals production chain, Finland was reluctant to rely on other European countries for expertise and technology, especially since

several of them were actively preparing for war. Once again, it all boiled down to Finland’s desire to retain its economic independence. In particular, Eero Mäkinen had a negative view of the German economy’s future and wanted to stay outside the economic structures of the Third Reich. Thus the ideals and models of education were sought from the North-American universities and mining industry. The

granting of the Outokumpu Foundation’s extended scholarships was started in the summer of 1939, shortly before the outbreak of the Winter War. Three three-year scholarships worth 65,000 Finnish markkas were offered for studies in the USA and Canada. The board of the Foundation decided to grant two scholarships; a suitable applicant was not found for the third one.72 In the years that followed, the scholarship holders made their study trips in exceptional political circumstances.

Two scholarship holders succeeded in starting their studies abroad before the outbreak of World War II – Risto Hukki and Paavo Maijala. Risto Hukki obtained a Master of Science in Mining Engineering from the University of Technology in the spring of 1939. He started his post-graduate studies at the

72) Reino R. Lehto 1958. p. 8.

Petri Bryk was hired to design the copper electrolysis plant and sent to the USA to study the latest production technologies.

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Queen’s University in Canada and continued at Massachusetts Institute of Technology in Boston, where he worked in the laboratory of Doctor Antoine M. Gaudin, who is considered to be the father of the flotation process. Paavo Maijala graduated in Inorganic Chemistry and Mining Engineering from the University of Technology. He started his studies at the Michigan College of Mining and Technology in September, 1939.73

Technology in World War II

S ecuring strategic production during a future time of crisis was constantly highlighted when Finland was planning its metals production in the late 1930s. In addition to the financial issues

related to metal production, defense economics was also considered. The country needed a copper plant in order to manufacture ammunition parts, particularly artillery casings.

At the end of the 1930s, Finland’s Swedish-language metals industry group advocated a project based on Nordic cooperation, but the political situation meant that this was by no means simple. Attitudes were cautious even with regard to the Swedish-Finnish project proposed in 1937 for the non-ferrous metals industry by Ville (Wilhelm) Wahlforss, the objective of which was to build a production plant specialized in copper and brass products near the metals plant in Pori. The government solved the issue by keeping the project in Finnish hands; in other words, it was to be handled by Eero Mäkinen and Outokumpu. The solution was mainly based on strategic questions related to defense economics. The production of non-ferrous metals was deemed to be so important in ensuring the supply of materials in wartime that Swedish management of the project was not an option, although the plant itself would be safely located in Pori.

In the fall of 1938, the Finnish Defense Forces’ Department of Wartime Economy announced that it could not guarantee the large orders promised previously to Outokumpu. Finland’s economic situation was so tight that cuts were necessary in the armaments industry. The decision was

73) Paavo Maijala to Referendary Counselor R. Lehto October 10, 1939.

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premature. Six months later, circumstances had changed and production had to be started urgently. The company began to immediately design a special punching and mangle unit needed in the manufacture of copper and brass products. The engineers designing the copper plant visited one of the Royal Ordnance Factories in Great Britain.74 However, the work was started too late and the special machinery required could no longer be ordered. A potential supplier at this stage would have been Magdeburg-based Polte Armaturen- und Maschinenfabrik. Had the order been placed at once, the machines could have been operational in the spring of 1942. Outokumpu therefore proposed to the Ministry of Defense that the plant’s production program be changed, so that the Pori plant would focus on making semi-finished products, while actual production would take place at the government’s cartridge, rifle, and gun factories in Jyväskylä, which already had the machines.

In August, 1939, Germany and the Soviet Union signed the Molotov–Ribbentrop Pact, a non-aggression agreement which included a secret protocol which divided Northern and Eastern Europe into German and Soviet spheres of influence. Mere days after the signing of the pact Germany attacked Western Poland and the Soviet Union occupied Eastern Poland. Great Britain had pledged to defend Poland and declared war on Germany. The outbreak of World War II was apparently a major surprise to Finland, although political developments and the annexation of Austria and Czechoslovakia by the Third Reich had been closely followed. For example, Outokumpu’s report of the new status of the European economy was not completed until the end of September 1939. The statistical data had probably been provided by Metallgesellschaft, although no mention of this is made in the report.

The outbreak of war would have a profound effect upon Finland’s mining and metals industries. First, it would change the efforts of those industries from economic to political activities. Second, the threats related to political geology painted in the 1930s would be almost fully realized. Third, although the value of nickel and non-ferrous metals in particular increased because of the munitions industry – nickel in particular, was needed as raw material to produce steel for tanks, the markets for Finland’s mining and metals

74) K.I. Levanto. Chronicle, metal factory, nickel manufacturing. 5.5.1959. EMA.

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industry products were limited to Sweden and Germany. The German demand for those products was particularly high, since the outbreak of war had a disastrous effect on German industry’s raw materials procurement. Germany’s need for copper had increased prior to the war as follows:

GERMANY’S NEED FOR COPPER IN 1936–38 (TONNES)

Own raw materials Imports Self-sufficiency

1936 116,800 175,600 40%

1937 63,300 243,100 27%

1938 66,800 353,100 21%

Germany’s own copper production had declined considerably relative to the total amount. Its growing imports in the last years were seen as an indication of stockpiling, that is, preparing for the war. Despite this, it was evident that Germany, which could no longer import raw materials from Cyprus and other overseas suppliers, was in trouble. The only available European producers in addition to small German mines were Finland and Yugoslavia. None of the territories annexed or occupied before or after the outbreak of war, Poland included, were capable of supplying the Third Reich with the copper it needed, since the industries of these countries suffered from a serious shortage of copper in their domestic markets. As a consequence, the German economy had an annual copper deficit of at least 100,000 tonnes.

The situation was identical with zinc, pyrite, and nickel. Global zinc and sulfur production areas were controlled by the Allies, and the continued import of pyrite from Spain, an ostensibly neutral country that was on good terms with Germany, could not be guaranteed. Iron imports from Sweden did not have quite the same problems. Like Spain, Sweden was a neutral country, but it was much closer to Germany and shipping in the Baltic Sea was easier to protect against attacks from the Allies. While imports from Sweden to Germany could be expected to grow a little, it was not enough to fill the shortfall, which in 1939 was estimated at 10 million

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tonnes a year. Germany’s self-sufficiency in nickel was only 10%, and so the future prospects of the German wartime economy were very bleak.75

Outokumpu’s plans for developing trade with Germany were interrupted when the Soviet Union attacked Finland on the last day of November 1939, thereby starting the Winter War. Outokumpu’s business relationships in Germany were also changing. Eero Mäkinen had had long-term personal, confidential relations with the owners and directors of Metallgesellschaft. In addition to the Merton family, many of the company’s executives had Jewish backgrounds. Germany’s new political leaders had indicated as early as 1935 that they wanted to excise the Jews from the population of the Third Reich. Years of anti-Semitic propaganda and government policies

would lead on November 9–10, 1938, to organized attacks against Jewish merchants and individual persons across the country in an event known as ‘Kristallnacht’ or ‘Night of Broken Glass’. Richard Merton, the chairman of Metallgesellschaft’s Board of Directors, was also arrested and taken to the Buchenwald concentration camp.76

Although Richard Merton was able to move to Britain in early 1939,

Mäkinen was faced with a major dilemma. The company with which he had been building the Finnish technological system for two decades was falling into the hands of a totalitarian government of Germany, which he objected to for political reasons. The time of confidential discussion between Metallurgische Gesellschaft and Outokumpu was over.

Germany’s wartime economy and its growing production created practically limitless markets for copper, steel, and specialty metals. However, Germany’s position was almost identical to what it had been twenty years

75) Outokummun kuparituotanto vaihtotavarana ulkomaisessa kaupassa September 21, 1939. Appendix: Eräiden metalli- ja malmitarpeiden tyydyttäminen Saksassa. September 12, 1939. EMA. Eloranta & Nummela 2007. p. 333.

76) Rainer-Georg Strutz 1991. p. 58–61.

Germany’s wartime economy and its growing production created practically limitless markets for copper, steel, and specialty metals.

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before during World War I. Central Europe was isolated from world markets and raw material production. Despite the Molotov-Ribbentrop Pact, Germany turned to Finland in the fall of 1939 in order to negotiate the purchase of Pechenga nickel to support Germany’s armaments industries.77

The circumstances were such that Finland was unable to respond. Before the Winter War, Finland had mobilized its troops to prepare for the Soviet Union’s attack, but the country was completely unprepared in terms of a wartime economy. Practically all men who were fit for military service were called up and all economic and industrial production stopped. In the metals industry, only the most important processes related to metals production and essential workshop operations were kept running. The mining industry also came to a complete halt. The war between Finland and the Soviet Union lasted only a few months, ending in March, 1940.

Throughout the short conflict, the Soviet Union was seen as the aggressor and Finland not only had the support of world opinion, but also materiel support sent by both Germany and Sweden. This was one reason why Finland gave up its wholly neutral stance during the interim peace that followed the Winter War, turning to Germany both politically and economically. The other reason was that there were no other options, since the country needed the export income to be gained from metals trading. The situation remained unresolved in the spring of 1940, when Outokumpu’s Supervisory Board asked the government’s advice on whether it should continue to export copper to Norddeutsche Affinerie. If this were to prove impossible for foreign policy reasons, the only option would be to deliver the copper to Sweden.78

For Germany, the need for nickel was its most significant problem. In the 1930s, Germany had mainly used raw material supplied by the International Nickel Company. After the outbreak of war, Germany had relied on nickel provided by Norway.79 Finland chose to continue cooperation with Germany, and nickel became an important sales article. In the summer of 1940, Petsamon Nikkeli made an agreement with I.G. Farbenindustrie for the


78) Outokumpu Oy’s Supervisory Board to the Ministry of Trade and Industry March 29, 1940. EMA.

79) Outokummun kuparituotanto vaihtotavarana ulkomaisessa kaupassa. 12.9.1939. EMA.

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nickel extracted from the Pechenga mine. Part of the nickel was to be delivered to Outokumpu. As a result of the deal, the company’s relationship with its parent INCO/Mond soured.

Although the nickel production of the Pechenga mine was not sufficient to satisfy Germany’s needs, the metal became a key tool in the political trading between Finland and Germany. It pushed Outokumpu to develop the Nivala ore deposits to meet the Third Reich’s demand for nickel and in early summer 1940, Eero Mäkinen traveled to Berlin, where he concluded an agreement, according to the Finnish government’s instructions, for opening the Makola nickel mine in Nivala and delivering the concentrate to Germany. The agreement included advance payments made by I.G. Farbenindustrie, which were repaid in the form of concentrate.80

The development of Finland’s national production chain continued at the same time. Outokumpu’s factories in Pori began to plan their own electrolytic production line for nickel, but the order to start the production of domestic nickel came directly from the government. The aim was to upgrade the degree of refining the nickel ore in order to maximize the benefits for the national economy. Foreign policy also influenced these decisions. When the process engineering began, both British and German companies had refused to provide expert assistance, so Finnish industry designed the entire system on its own.81

The construction of the plant underlined, once again, the inadequate resources of Finnish metallurgists. Everything depended on the expertise of only a few engineers. The designer of the plant, Bruno Hisinger, died just after its completion in 1940. Ilmari Harki, a young graduate engineer, was chosen to replace him at the plant’s helm. Petri Bryk returned from his study trip to the USA after the Winter War, immediately taking up the job of an operations engineer at the electrolysis department of the Pori copper plant.82

Torgny Torell, a Swedish engineer who had worked in Canada, was hired to develop the nickel process. At first, his expertise was greatly trusted, but it soon transpired that he could not fulfill the expectations set for him. When


81) Eero Mäkinen. Outokumpu Oy’s metal factory in Pori. Chronicle August 5, 1943.


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Torell failed to build a functioning process, he was dismissed and the job was given to Petri Bryk.83

Bryk developed an operational nickel electrolysis line and production started in early 1942. The process was built using temporary equipment and Outokumpu had no suitable electric furnace for smelting nickel oxide. For this reason, nickel oxide was at first transported to Tampere for smelting at the Lokomo plants. Nevertheless, Bryk’s achievement was the first real breakthrough in Outokumpu’s metallurgical research.84

The production of precious metals was also started in Pori. Originally, the plan did not include refining precious metals recovered through the electrolysis of copper, as the intention was to do this in Germany. The plan was to only treat the concentrate produced at the Outokumpu mine. When new mines were opened during the war, the range of the metals produced expanded. Moreover, mainly due to the economic and political situation during the Continuation War ( June, 1941 – September, 1944), again fought against the Soviet Union, it was decided that gold and silver be retained within the country’s borders. In wartime, a considerable proportion of the country’s precious metal assets was obtained by collecting scrap gold from goldsmiths and citizens. The electrolysis of both gold and silver was started in Pori.85

The strengthening of the relation ship with Germany meant that Finland’s preparations for joining the war between Germany and the

83) K.I. Levanto. Chronicle, metal factory, nickel manufacturing. 5.5.1959. EMA. Note on the side of the article: Partly inaccurate, V.A.

84) Eero Mäkinen. Outokumpu Oy’s metal factory in Pori. Chronicle August 5, 1943. Mäntymäki 1998. p. 18.

85) Eero Mäkinen. Outokumpu Oy’s metal factory in Pori. Chronicle August 5, 1943. EMA. Mäntymäki 1998. p. 18.

Both British and German companies refused to provide expert assistance for engineering the nickel refining process, so Finnish industry designed the entire system on its own.

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Soviet Union began in early 1941. Lessons learned from the Winter War meant the government ensured that the best of the country’s industrial and technological expertise was secured to support both a wartime economy and Finland’s military commanders. In February 1941, the headquarters of the Finnish Defense Forces gave an order for the founding of a war industry council. Arno Solin and Eero Mäkinen, along with chief executives Ville Wahlforss and Harald Gullichsen, were invited to join the council.86

Finland was sucked into the expanding global war in the summer of 1941. The war between Germany and the Soviet Union began in June, with Finland supporting Germany in attacking the Soviet Union. Finland’s aims in what was known as the Continuation War were to reclaim territories taken by the Soviet Union during the Winter War. Finland’s participation in the Third Reich’s attacks on the Soviet Union would have mostly negative consequences. The favorable reputation gained during the Winter War was lost because Finland was now seen as the aggressor and an ally of the Third Reich. Together these factors led Great Britain, by now an ally of the Soviet Union, to first break off diplomatic relationships with Finland, then declare war on it late in 1941.

Outokumpu copper in great demand Export trade in metals became perhaps the most significant individual factor in managing Finland’s wartime economy, together with food production and trade. However, in terms of the country’s commercial policy the situation was everything but simple. The shortage of raw materials was severe at home, and Sweden also expected an increase in copper deliveries from Finland to secure its economy.87 Outokumpu was forced to participate in a game where it did not have enough to offer.

In early 1942, Eero Mäkinen was again invited to Berlin to hear Germany’s proposal that Outokumpu’s production be rapidly increased to address the Third Reich’s shortage of metals. There were clearly two considerations to the proposal – political and economic. Finland supported Germany’s aims

86) Order for the founding of a war industry council KD No. 185/Stal. Sal. 2.1941. Mannerheim, E. Heinrichs. EMA.


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formally and strove to maintain good relations with the country, so the Finnish government quickly gave in under political pressure.88 However, the objectives and interests of Finnish business life and Outokumpu as well as nationalist circles contradicted the obvious political objectives. Agreeing to the proposed 9,000–10,000 tonne increase in production, to a total of 27,000 tonnes of copper a year, would have meant exhausting the Outokumpu ore body in 16 years.89

Nevertheless, the project was viable in principle. Eero Mäkinen’s calculations showed that technically speaking, reaching the required production figures would have required 3–3.5 years. Since the subject was obviously politically sensitive, Outokumpu asked a Metallgesellschaft mining engineer named Ömisch, who had come from Berlin to Finland, to assist in making the estimate. Ömisch confirmed Mäkinen’s calculations and Metallgesellschaft CEO Joseph Eitel informed90 the Third Reich’s Ministry of Economy of the estimate. However, the German government was not satisfied with the estimate or Helsinki’s response and brought the matter up again after a few months. Berlin clearly saw the project as crucially important politically. In August, 1942, special envoy Karl Schnurre, who had previously been responsible for the financial agreement aspects of the German–Soviet Non-aggression Pact, was sent to Helsinki to negotiate the possibility of Outokumpu’s development.91

Despite the demands of the Third Reich and the technological improvements made during the 1930s, Outokumpu was by this time also having technical problems. Before the war, Outokumpu had increased its production output considerably faster than other similar plants, its production output having increased sevenfold since the late 1920s, while at the same time, the production from similar mines in Central Europe had declined or remained unchanged. For example, the production of the Mansfeld copper plant in Germany had

88) Ministry of Trade and Industry to Rainer von Fieandt September 18, 1942. Copy of letter in Eero Mäkinen’s archive. EMA.

89) Federation of Finnish Industries Wilhelm Wahlfors to Outokumpu Oy August 29, 1942. EMA.

90) Eitel was fired after the war for his Nazi views. Reichel 2008, p. 89. Cf. Kuisma 1985. p. 225.

91) Ilmari Killinen to the Ministry of Trade and Industry August 27, 1942. EMA.

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remained roughly the same throughout the century.92 Only in Sweden had copper production come even close to matching Outokumpu’s output. In the face of strong demands from the Third Reich, the danger was that Finland was about to become some sort of a pilot project for the development of the mining industry in a Europe controlled by Germany.

COPPER PRODUCTION IN EUROPE 1929–1941 (TONNES) (Metallgesellschaft’s statistics 1942)

Spain and Portugal

Germany and Austria

Yugoslavia Norway Sweden Finland

1929 63,700 32,100 20,700 19,100 1,100 3,500

1930 58,400 29,300 24,500 17,300 800 4,400

1931 54,000 32,300 24,400 8,700 1,600 5,300

1932 35,000 32,200 30,200 16,700 4,300 5,400

1933 35,000 31,700 40,300 19,400 6,900 5,900

1934 33,000 28,100 44,400 21,000 5,100 9,500

1935 30,000 30,300 39,000 20,500 6,400 12,000

1936 26,000 29,900 39,400 22,600 8,100 11,400

1937 28,000 33,400 39,500 23,000 7,500 12,000

1938 34,300 30,000 41,700 21,000 9,000 13,200

1939 25,700 30,000 41,500 19,400 9,500 13,700

1940 n/a n/a 43,000 n/a n/a 15,300

1941 n/a n/a n/a n/a 12,000 17,000

92) Increase in Outokumpu’s production. To the Ministry of Trade and Industry, Outokumpu Oy’s Supervisory Board, Ilmari Killinen August 27, 1942. EMA.

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Increasing production was difficult due to a lack of workers. A much greater number of skilled workers would be needed, in addition to huge investments in Outokumpu’s production plants. Although the country’s economy was more stable now than it had been during the Winter War, much of the trained workforce was fighting at the front. Efforts were made to replace these workers with handicapped workers and prisoners of war, but the limited availability of labor became a major bottleneck in Outokumpu’s metals production.

With regard to investments, Outokumpu suggested that liability for costs be transferred to Germany, to which the production would be sold in any case. The idea was essentially the same as that behind the operations of the Nivala nickel mine, only this time the financial outline and calculations had been taken further. Eero Mäkinen proposed that between 1943 and 1945, 20% extra be added to the price of copper sold to Germany to cover Outokumpu’s capital expenditure. He also suggested issuing shares to increase shareholders’ equity by some 25%.93 Germany was already beginning to lose the war during 1943, so these ideas were not pursued any further by the Finnish government, which had anyway partly agreed to cooperate with Germany on the matter. As a consequence, both of Mäkinen’s proposals disappeared from the agenda.

It was by now clear that the metals production and mining industries had become a cornerstone of Finland’s foreign policy. Their importance was such that interest in new production opportunities grew, with several new sites seen as possibilities during the Continuation War. This included the production of non-ferrous metals and rare-earth elements which Finnish scientists had only begun to show in at the end of the 1930s. Indium, for

93) Eero Mäkinen, Outokumpu Oy to the Ministry of Trade and Industry October 5, 1942. EMA. Eero Mäkinen, memo on the increase of Outokumpu’s production. 15.9.1942. EMA.

It was by now clear that the metals production and mining industries had become a cornerstone of Finland’s foreign policy.

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example, was then separated from the Pitkäranta ore.94 The significance of indium as a coating for bearings was only discovered during the war in the aircraft industry. Due to advances in metallurgy and mechanical engineering, research into metal ores gained in importance. Since large-scale technological research was impossible in Finland during wartime, research into specialty metals remained rather insignificant due to lack of personnel. Even in peacetime, mining industry experts had been few and far between, and now laboratories were deserted. Nevertheless, the Finnish government was becoming aware of the value of the slate zone of Eastern Finland as a source of raw materials.

Although the lack of personnel prevented large-scale technological research in Finland, it did not stop small projects from being carried out, typically by individual young researchers to complement their studies. At the beginning of the Continuation War, the Ministry of Trade and Industry assigned Paavo Asanti, who was starting his post-graduate studies, to study the opportunities that would arise from a geological survey of newly occupied East Karelia. Asanti conducted a map analysis of the area, but further field work was never initiated.95

New ore deposits found in Finland immediately became factors in the political trading between Helsinki and Berlin. For example, the Geological Commission discovered an iron-vanadium-titanium deposit in Otanmäki in 1937. The initial survey of the site was complete by the beginning of the interim peace96 between the Winter War and the Continuation War. In the end, production was not started in Otanmäki. The reason for this was complex. It was believed in Finland that opening the Otanmäki mine would be considered in Germany an attempt to disengage from the German economic system. This would generate a series of unpleasant politico-commercial actions, which in turn would jeopardize Finland’s

94) Memos and exchange of letters with Martti Palmunen in 1937 regarding analyses on Pitkäranta indium. E. O. Erämetsä’s collection. TKKA.

95) Paavo Asanti, interview on August 18, 2008.

96) Memo, commencement of Otanmäki mining business. Uolevi Raade, Herman Stigzelius, February 25, 1947. Confidential. Cf. also Chief Eng. Ilmari Harkki’s presentation at the Jyväskylä Association of Graduate Engineers’ meeting on March 4, 1952. EMA, OKA, Elka. Suomen Malmi Oy Annual Report 1941. Pääkkönen 1952.

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food supply. Germany simply would not sympathize with Finland’s aspirations to increase domestic iron production, as its aim was to keep Finnish industry in the role of a raw material producer. This is also why Germany prevented Finland from increasing the Pechenga nickel’s degree of upgrading. It was a clear case of coercion. If it wanted to, Germany could easily stop industrial activity in Finland by restricting its import of coal.97 Thus the battle over metals production turned into a battle over the degree of upgrading.

The only measure to be taken in the face of this coercion was to increase the production of vanadium and titanium. Finland knew well that specialty metals were the bottleneck in the German metals industry, so the production of these metals was in full swing, because they were by-products of the existing nickel processes, for example in Pechenga.98 The Otanmäki mine was given a key role in shaping the mining industry’s future as it had ilmenite, for example, which contains titanium. However, the development of Otanmäki had to wait, as surveying the area was impossible when all of the specialists at Outokumpu and Suomen Malmi were away at the front. So Eero Mäkinen took personal responsibility for the surveys, with Arvid Brantberg, a Swedish mining engineer who had worked previously in Orijärvi, appointed as his assistant.99

Even as its industries sought out new sources of ore, Finland was unable to develop or exploit the sources of specialty metals it already had, notably from the Pechenga nickel deposits. The problem was that although the deposits of nickel and other metals at Pechenga were owned by Petsamon Nikkeli Oy, according to a contract extending well into the 1950s, the ore was actually owned by I.G. Farbenindustrie.100

97) Memo. Berndt Grönblom June 7, 1941. EMA, Outokumpu-Vuoksenniska folder, memos. Memo on the fulfillment of iron needs in Finland. Eero Mäkinen on behalf of Suomen Malmi Oy’s Board of Directors June 6, 1941. EMA. Otanmäki Oy, minutes of meetings 1941, exchange of letters 1941–1952. OKA, Elka. Autere & Liede 1989. p. 53.

98) Information Ilkka Nummela 27.4.2016.

99) To members of Suomen Malmi Oy’s Board of Directors July 26, 1941. Eero Mäkinen. EMA.

100) To the Ministry of Trade and Industry June 5, 1941. Suomen Malmi Oy’s Board of Directors, Eero Mäkinen. EMA. For Pechenga’s situation, e.g. Autere & Liede 1989. p. 50, 53 onward.

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The mining industry’s future was settled in late 1942 when the war economy was getting to be critical. Finland’s self-sufficiency in iron was only 20%. The production estimates for the Otanmäki mine were recalculated. Martin Wiberg, Professor of Metallurgy at the Royal Institute of Technology in Stockholm, and Swedish engineering firm T. An. Tesch AB had inspected the calculations related to the opening of the mine in the fall of 1941. Within a year, the Finnish government was urged to start preparations for the opening of the mine and the Otanmäki committee was appointed in June 1942 as part of those preparations.101

In addition to helping prepare the opening of the Otanmäki mine, the Otanmäki committee began to examine the future of the trade in specialty metals and the adaptations necessary for when the war ended. The representatives of the Otanmäki committee – Heikki Herlin and engineer Matti Häyrynen – traveled to Germany in the fall of 1942 to see what the market conditions were like. There were almost unlimited markets for vanadium and ilmenite, by-products of the Otanmäki mine, and metal prices were soaring. However, the committee did not want to open the Otanmäki mine only to satisfy the needs of the wartime economy, since Finland could not afford to make its national economy dependent on what were exceptional conditions – exceptional conditions that would not last with the end of the war approaching. The situation was clearly changing.In the meantime, longtime ally of the Finnish mining and metals industries, Felix Warlimont, left Norddeutsche Affinerie’s operational management, but continued to chair the company’s Supervisory Board until the beginning of the 1950s.

Exceptions to the limited development of the Finnish mining and metals industries during World War II were two small ore bodies that Finland was forced to develop. Production proved profitable from both due to the exceptional conditions and high metal prices. The Makola ore deposit in Nivala had been discovered in the late 1930s as part of deposits that were thought to be poor in terms of quality and supply. A decision to open the Makola mine was made during the Interim Peace and its output supplied a nickel plant that operated in Pori during the war. Since Germany’s demand

101) Plan and feasibility calculation for iron production from Otanmäki ore. 19.1.1942. EMA.

The steel industry was concentrated in western Germany. The Völklingen iron works represent early 20th century engineering.

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1850sThe use of natural resources and metals increased fast along with industrialization. Electrochemical processing of copper was already possible. One of Outotec’s oldest predecessors, Maschinenfabrik Sievers, was established in 1856.

Dwight Lloyd traveling grate sinter machine in 1911.

Traveling grate, pot grates and rotary kilns were used for iron ore sintering.

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1880sMetallgesellschaft was founded in 1881 for metal trading, its activities expanded to mining and metallurgical plants.

1900sSintering became an important method of agglomerating fine grained iron ores for blast furnace operation at steel plants.

Huntington and Heberlein patented the sintering converter for sulfidic ores in 1897.

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1890sIn 1897, the first company specializing in technology, Metallurgische Gesellschaft aka Lurgi was founded within Metallgesellschaft.

Outokumpu company was founded in 1910 to develop a large copper deposit found in Eastern Finland in 1908.

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1910sMetallgesellschaft built its first complete sulfuric acid plant in 1912. Lurgi Apparatenbau was established to manufacture industrial equipment in 1919.

Outokumpu’s first flotation process was supplied by Fried. Krupp Grusonwerk.

The copper concentrator in Outokumpu in 1928.

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1920sDespite the rich copper deposit, the Outokumpu mine and concentrator did not meet their targets until the World War I altered the nature of the business.

Plant operators working at the Outokumpu concentrator in 1928.

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1920sOutokumpu’s turnover increased nearly tenfold and it became one of Finland’s most important industrial plants.

Hand-drawn plant engineering sketches from early 20th century.

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1920sDemand for large chemical industry equipment and process engineering grew rapidly. The first pilot plant was built by Lurgi Chemie for coal gasification in Frankfurt.

New technologies were introduced in technical papers published in German trade magazines.

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1920sVerein Deutscher Ingenieure (VDI) founded Staubtechnik, a professional publication focusing on dust prevention, in 1928.

1930sThe world’s first single catalyst acid plant for metallurgical gases was commissioned at Norddeutsche Affinerie in Hamburg in 1936.

Electric furnaces changed radically the light metals industry.

A9

Face shield of a plant worker in Germany in 1935.

Casting of metal plates in 1935.

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1930sResearch and development became an established part of the metals industry.

1930sFinland had to secure metal production during a future time of crisis and started planning a copper plant.

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1930sMetallurgisches Gesellschaft’s headquarters, the Lurgi House, was located at Gervinusstrasse in Frankfurt until 1987.

1930sOutokumpu built the largest electric copper smelter in the world in Imatra, Finland. Because of the war it had to be moved to Harjavalta in the 1940s.

A metallurgical pilot plant was established at Gwinnerstrasse, Frankfurt in 1936.

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1930sThe availability and price volatility of nickel proved to be of crucial importance in terms of the economy and politics.

1930sTests performed in Canada and the Soviet Union to achieve autogenous smelting had not been successful.

A13

1940sThe greatest metallurgical innovation of the 20th century, the flash smelting process, was invented by Outokumpu at Harjavalta, Finland.

Petri Bryk and John Ryselin inaugurated the flash smelting furnace in Harjavalta in 1949.

Sulfur recovery at the copper plant transferred from Imatra to Harjavalta became a major problem in 1944.

A14

1940sOutokumpu’s organized research activities to develop new technologies started in Pori, Finland.

A15

1940s1949 marked the birth of Outotec’s research center when metallurgical research was started in Pori.

The central laboratory established in 1942 in Pori focused on quality control and standardization of metal products in compliance with the DIN standard.

A16

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for nickel greatly exceeded the supply, the Third Reich was prepared to make advance payments and Finland was not required to really sell the concentrate.102 Thus starting production proved to be relatively inexpensive. The Finnish government combined the agreement to start up the Nivala mine with an agreement to open a copper mine in Ylöjärvi in the fall of 1943. When the war ended, the production from Ylöjärvi stopped as the price of copper declined.103

In 1942, Outokumpu founded a central laboratory in Pori to control the quality of the plant’s products, with the aim of increasing the degree of upgrading in Finnish industry and supporting the independent operation of the manufacturing technology cluster. The central laboratory contained both a chemical and a mechanical laboratory.104 The chemical laboratory’s main activity was quality control, while the mechanical laboratory focused on the standardization of metal products in compliance with the DIN standard. This was under the leadership of Heikki Miekk-oja, later appointed Professor of Metallurgy at Helsinki University of Technology. This meant that when the payment of war reparations began in 1945, the Finnish metals industry was capable of independent standardization work, which before the war had been coincidental.

The Battle of Stalingrad, fought between 1942 and 1943, was the decisive battle of World War II. It ended with the surrender of the besieged German forces, and after this defeat, the Third Reich could no longer win the war. By now, the USA had joined the Allies. The resulting changes in the international political landscape had an immediate impact on Finland’s political and

102) Markku Kuisma 1985. p. 147–148, 226–228.

103) Markku Kuisma 1985. p. 150–151.

104) Tarmo Mäntymäki 1998. p. 17.

In 1942, Outokumpu founded a central laboratory containing both chemical and mechanical facilities in Pori.

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economic status. Finland was no longer as beholden to Germany as it had been in the earlier years of the war and it now had more leeway in its foreign policy. Overtures of peace were made to the Allies in the spring of 1943 via the USA and economic plans began being formulated based on a new vision of the future. In the summer of 1943, the feasibility calculations for Otanmäki were also updated in preparation for peacetime production. The price of coal, for example, was expected to fall substantially. Nevertheless, the specialists consulted by the government in 1943 were completely sure that the production of the Otanmäki mine would continue to be profitable after the war.

The start-up of the nickel refining process at Outokumpu in 1942, which improved Finland’s financial and strategic position considerably, came as a surprise to Germany.105 It exacerbated the decline in Berlin’s opportunities to exert pressure on Helsinki that had begun the year before as various military-technological and financial difficulties began to occur in the relations between Germany and Finland. I.G. Farbenindustrie and Petsamon Nikkeli interrupted the deliveries of nickel ore to Outokumpu. In the negotiations that followed, the companies agreed that Finland was entitled to 1,200 tonnes of nickel ore, which also included the production of the Nivala mine. The domestic need for nickel in Finland was only about five tonnes and so Outokumpu gladly consented to sign an agreement in the spring of 1944.106 The war was about to end in any case. It was evident that Finland’s position was vulnerable when the Soviet Union launched a major attack on the West. Outokumpu anticipated future problems by moving the Imatra copper plant quickly to Harjavalta, close to Pori and connections to the West. Again, Finland’s mining and metals industries played a fundamental part in its foreign policy. Where they had been used to cement an alliance with Germany, now they were being seen as a means to maintain its independence while also being a neighbor of the Soviet Union.

After 1943, the Allies bombed Germany intensively, trying to destroy industrial plants and infrastructure at first, but also civilian targets during



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1944. Although the aim of precision bombings was to disrupt the metals industry in Western Germany in particular, the results were unexpected. Despite the continued bombing campaign, Germany’s industrial production reached its peak in late 1944, falling only slightly in the spring of 1945.107 Nevertheless, when the war in Europe ended with Germany’s surrender in May, 1945, German industrial production and foreign trade collapsed to nothing.

Review of the time of crisis

D uring World War II, industrial production systems were organized to meet the demands of the wartime economy in all warring countries, and technological advances were rapid in many areas. The progress

in metal and material technologies was also so swift as to justify the view of the post-war period as a new era in science and technology. A tremendous increase had been seen in the use of light metals and special steel, for example.

The wartime advances in technology had a downside. While striving for higher production figures, the environmental impact of industry had been forgotten, and it is fairly certain that the beginning of the era of sustainable development was delayed by several decades because of the war.108 The emissions generated by the metals industry were also overlooked due to financial reasons.109

The development of Outokumpu’s production implemented by Eero Mäkinen in the 1920s and 1930s proved very successful. It is highly unlikely that other methods would have delivered the same results. The only option would have been the unlimited exploitation of Finnish natural resources for the benefit of the German war industry. Outokumpu, led by Mäkinen, did not agree to this.

107) Werner Abelshauser 2004. p. 67–74.

108) Manfred Beilstein, Hans-Georg Thielepape October 10, 2011.

109) Werner Schmidt October 12, 2011.

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During the war, it was obvious that Finland made its trade policy decisions based on Germany’s demands. Germany aimed to keep Finnish industry in the role of a raw material producer, but Finland was nevertheless able to use the metals found in its territory successfully to develop the country’s economic and political status. Although Finland consented to the political agreements made as part of the trade negotiations with Germany and I.G. Farbenindustrie, Mäkinen’s opportunities to increase production as expected were virtually non-existent for economic and technical reasons.

Finland’s industrial and technological breakaway was, to a certain extent, based on having the German mining corporations compete against each

other. Initially, it was only about the role of one expert, Otto Barth, who first worked for Mansfeld and then for Outokumpu, but in the end, he became a significant developer of the Finnish technology system. He was also a key figure in modernizing the Finnish education of metallurgy and mining. The training program set up for specialists by Outokumpu and Outokumpu Foundation, which was partly implemented during the

Continuation War, opened up opportunities for the Finnish mining industry to create an independent refining process and be prepared for trading after the war.

Although the state of the Finnish mining and metal processing industries immediately following the war could be best described as modest, the patriotic efforts to develop both these industries and their associated production development programs should be viewed as a success story given that they were made when the country was also paying war reparations. What was crucial to that effort was the profession of Finnish mining experts and metallurgists that had been created from scratch over the course of the previous ten years. During the Continuation War, Finnish mining industry experts were mainly trained in the USA, where Risto

Finland’s industrial and technological breakaway was, to a certain extent, based on having the German mining corporations compete against each other.

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Hukki and Paavo Maijala had traveled to just before the outbreak of the Winter War. Paavo Asanti completed his studies leading to a doctorate in Germany and Sweden, as he failed to leave Europe in time before the Continuation War started. The Department of Mining of the Helsinki University of Technology began to operate in 1942 with Finnish teachers, and the critical mass of knowledge had been achieved by the 1950s. After that, Finland was capable of building entire technology systems based on the mining industry’s production.

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PART 1p. 13

BIRTH OF THE TECHNOLOGY INDUSTRY: FROm EUROPE TO THE WORLD

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PART 3p. 141

THE NEW DIVISIONOF THE WORLD IN 1945 AND THE BREAKTHROUGH OF NEW TECHNOLOGY

PART 2

ENGINEERING AND RESEARCH: THE DAWN OF A NEW BUSINESS

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PART 2: THE NEW DIVISION OF THE WORLD IN 1945 AND THE BREAKTHROUGH OF NEW TECHNOLOGY

W orld War II ended in Europe in the spring of 1945 with German surrender. Germany was split into zones of occupation controlled by four Allies. Berlin, the old capital, remained in the center of

the Soviet zone but also occupied by the four Allies. After the onset of the Cold War, Europe was promptly divided into East and West according to the front lines at the end of World War II. In 1949, the Western-held portions of Germany became the Federal Republic of Germany in 1949.

This division of the former Third Reich symbolized how the rest of the world was divided into two camps, each adhering to a different political and economic system.

Supply and demand for technology

I ndustrial activity in Germany all but collapsed at the end of World War II and in the opening years of the Cold War would barely begin its recovery. This was in part because of the damage suffered from Allied

bombing programs and because the economy no longer had the need to be on a wartime footing. It would not begin to fully recover until the USA implemented the European Recovery Plan or Marshall Plan. This was a package of aid and investment intended to rebuild war-devastated regions, remove trade barriers, modernize industry, make Europe prosperous again, and prevent the spread of communism. The Organisation for European Economic Co-operation (OEEC) was established to help administer the Marshall Plan in Europe and to coordinate economic relations between the beneficiary countries in Western Europe. In response, the Soviet Union set up its counterpart, the Council for Mutual Economic Assistance (Comecon), in 1949. Although not an open conflict, the Cold War was an economic conflict as much as it was a political one.

During World War II, the American and British air forces had bombed German cities and infrastructure, destroying many old city centers completely. In Frankfurt, as little as 20% of the city’s buildings survived. Clearing the ruins before reconstruction could begin was a major effort that took several years. There was a great shortage of building materials needed for the reconstruction, and the city government of Frankfurt

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decided that the ruins should be reused. To this end, a company called Trümmerverwertungsgesellschaft was founded together with two large construction firms and Lurgi to plan a process for sorting out the mixed materials of the ruins and turning them into usable raw materials. The sorting process had to be exceptionally complex, since the ruins included not only building stones, pieces of brick, and metal, but also plaster and organic substances. The main plans for the process were ready in early 1946 and by 1949 a processing plant was in operation.

Until it closed in 1961, the reprocessing plant processed 100 tonnes of material in an hour and the building materials produced were enough for constructing some 70,000 apartments in and around Frankfurt. Many of the plant’s technical solutions had to be developed specifically for this purpose. The plant was therefore an important pilot project for creating new methods of processing materials.

At the start of the 1950s, Lurgi was ready to begin building the European economy. The economic miracle seen in Germany during this decade re-established West Germany among the economic powers of the world. The economy began to grow almost immediately when the most visible damage caused by the war had been repaired.

The reorganization of production began in Europe as world trade opened up after the war years. Small mineral deposits in Central Europe, which had been exploited during the war, became unprofitable. Klöckner-Humboldt-Deutz, a manufacturer of mining industry machinery, was forced to change its direction in the 1950s when the mining industry was all but shut down. What was left of the production was converted into small-scale local operations. Only zinc continued to be produced in reasonable quantities. Coal production actually increased at first, and Klöckner-Humboldt-Deutz delivered coal processing equipment to an ever wider customer base in Europe and later also in the USA.

Lurgi – together with three other companies – started to plan a process for sorting out the mixed materials of the ruins and turning them into usable raw materials.

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When the 1950s began, Klöckner-Humboldt Deutz changed its line of production and focused on developing briquette manufacturing machines for the coal industry. As the 1960s drew on, the use of coal declined and coal production and the briquette industry also ceased to yield a profit. Klöckner-Humboldt-Deutz acquired Wedag GmbH, a competitor based in Bochum, mainly in order to eliminate competition, but this was not enough to prevent the company’s financial position from deteriorating quickly. This poor profitability drove Klöckner-Humboldt-Deutz to consider the implementation of new technologies. Since the company possessed knowledge related to coal processing, it could easily apply that to aluminum production. In the 1970s, the company moved into refining aluminum.

The building of a Western European economic area began at the same time as West Germany joined the European Coal and Steel Community in 1951, together with France, Italy, and the Benelux countries. The treaty ended the disagreement over the control of raw materials between the countries, which had continued for around two hundred years. The forming of the community was the first step toward the European Union.

Finland did not accept aid from the Marshall Plan. Finland’s official foreign policy rejected economic cooperation with the West, but in practice the country affiliated with Western systems of technological research and education in all important areas of new technology. Nevertheless, Finland did receive aid, a significant portion of the aid it did receive being delivered through official channels. Finland had made regular repayments of its debt to the USA, dating from World War I, through Switzerland. The U.S. Congress converted these repayments into a special fund that was used for supporting Finnish science and culture. U.S. Public Law 81–265 was passed by the Congress in August, 1949. Hundreds of Finnish post-graduate students and researchers were awarded so-called ASLA grants, enabling them to travel to the USA.

The ASLA grants did not, however, make it possible to pursue studies in a special field in the USA. The Outokumpu Foundation continued to grant its three-year researcher scholarships, but only on an individual basis. Study grants for shorter periods were also given out and the connections to the USA intensified. In the spring of 1945, Birger Wiik received a scholarship worth 462,000 Finnish markkas for a study trip to the Department of Geology to

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the University of Chicago. During his five months there, Wiik familiarized himself with spectrographic methods of analysis.

Of equal importance to the development of Finland’s basic industries was the fact that the Soviet Union demanded considerable war reparations from Finland. These were paid in the form of industrial products from 1944 until 1952. Until 1948, when the Cold War actually began, part of these war reparation deliveries were purchased from Britain and the USA. After that, Western countries no longer provided major deliveries since they were being sent to the Soviet Union, and Finnish industry had to produce all of the necessary reparations itself. Although the Soviet Union agreed to renegotiate the scope of the deliveries, the payment of the war reparations was a huge endeavor for Finnish industry, and required the building of new production capacity and the reformation of management practices at all levels of work.

When the Korean War broke out in 1950, the United Nations backed South Korea, which had been attacked by communist North Korea. The battle was a typical Cold War conflict, in which the superpower blocs waged war via a third-party territory. The war resulted in an enormous growth of production in the West. Known as the Korean War boom, this phenomenon filled the order books of Western European industries for several years.

Finnish industry also benefited from the Korean War boom, as it enabled the expansion of the export industry just after Finland’s war reparations to the Soviet Union had been paid. All raw materials were suddenly in short supply in Western Europe, and Finland was the only European supplier of nickel. The Makola mine was decided to be reopened in the spring of 1951, this time on West Germany’s initiative. I.G. Farbenindustrie, the leading chemical industry company in Germany since the 1930s and headquartered in Frankfurt, had been broken into several smaller companies following the end of World War II. One of these companies, Badische Anilin- und Soda-Fabrik (BASF), had already made inquiries about the relaunching of nickel deliveries at the beginning of the 1950s. BASF had a nickel plant of its own, but it could not be started up because of a lack of raw material. Metallgesellschaft, a supplier of nickel in Germany, was also involved in the negotiations held in September 1951 in Ludvigshafen and Frankfurt.110

110) Memo, Metallgesellschaft negotiations, Frankfurt a.M. October 4, 1952. EMA.

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Outokumpu did not accept the proposal at first; Mäkinen restated his opinion that Finland needed the nickel for itself. Plans were initiated for raising the degree of upgrading of nickel and building a new nickel plant in Harjavalta. However, it became evident in 1951 that the plant could not be opened for another three years. It was feared that demand would decline during that time. A solution was made to convert the Makola ore into sorely needed income as quickly as possible while the economic boom lasted.111

The preliminary feasibility calculations for the mine had been made using a nickel content of 1%, but Mäkinen’s documents indicated that the ore only contained 0.81% of nickel and cobalt.112 Nevertheless, the increased metal prices made it possible for the mine to operate economically for a short period of time. The Makola mine was opened in August, 1951, and the ore sold to Germany had been exhausted by the end of 1954.

Major advances were made in science and technology during World War II and the years after, just as they had during World War I. This development was the fastest in the USA, where the government invested huge sums in applied research in technology, especially in military technology. In

Europe, the German research system had collapsed during the war, and this would actually benefit the West as a significant proportion of Germany’s leading researchers who were left moved to the USA or other Allied countries.

Energy shortage became the bottleneck of economic development in the whole industrialized world. The burning of coal was not sufficient to satisfy the need of electricity, and most industrial countries decided to adopt nuclear power. However, the first commercial nuclear power plants started operations only at the end of the 1950s, which is why industrial engineering in the 1940s was guided by the need to save energy.

111) Memo, Metallgesellschaft negotiations, Frankfurt a.M. October 4, 1952. EMA. According to the memo, Mäkinen’s estimate of the extent of the ore body was 400,000 tonnes. Previously reported figures were higher. Kuisma 1985. p. 148.

112) Memo, Metallgesellschaft negotiations, Frankfurt a.M. October 4, 1952. EMA.

Energy shortage became the bottleneck of economic development in the whole industrialized world.

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The metallurgical invention of the century

I n Finland, a constant shortage of energy was the single most important factor that influenced industrial activity long after the war reparations had been paid up. Hydropower plants on rivers in Northern Finland

provided base load power, but it took years to complete these large plants, and demand for energy grew rapidly as the structure of society changed and industry needed more power.

Using electricity for smelting copper did not seem like a viable solution due to the high price of energy and the sheer lack of it. Fortunately, Eero Mäkinen knew of a way to solve the energy issue – autogenous smelting based on utilization of the feed material’s internal energy for smelting. The theoretical foundations of autogenous smelting had been known since the beginning of 20th century. However, tests performed in Canada and the Soviet Union in the 1930s to achieve autogenous smelting had not been successful. The French company Société Française des Mines de Bor had experimented with the autogenous method of producing copper in Yugoslavia before World War II, but the tests had failed and the war had interrupted the project. Outokumpu contacted the company to inquire about collaboration opportunities, but the answer was negative. The Saint Jacques method of Mines de Bor had delivered promising results, but as the equipment and the mine had remained in Yugoslavia and thus behind the Iron Curtain in the Communist Bloc, the tests could not be continued. Outokumpu was on its own.113

In 1946, Mäkinen gave graduate engineers Petri Bryk and John Ryselin the assignment to develop a working method based on autogenous smelting. Before the war, the assignment would have been impossible. The project succeeded with the help of the teachings of Väinö Sihvonen, a lecturer in physical chemistry at the University of Technology in the 1930s. Sihvonen was one of the foremost specialists in the combustion of coal dust in the world and he inspired students to research the subject, among them Bryk,

113) Tuomo Särkikoski 1999. p. 124–126.

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whose thesis work was supervised by Sihvonen. Bryk would succeed in applying the idea of coal dust combustion to the combustion reaction of iron and sulfur. In doing so, Petri Bryk, as head of the metallurgical department in Pori, would place himself at the forefront of metallurgical research in Finland.

Although there was no certainty that Bryk’s method would work, Mäkinen trusted the engineer and a test reactor was built in Harjavalta. The risks associated with the tests were high and initially, the tests were unsuccessful, but they soon resulted in a positive outcome. In 1947, a patent application for flash smelting was submitted. What was new in the process was that the heat content of the gases generated during smelting was recovered using the recuperator principle in order to heat the process air.114 Following the success of the test results, a decision was made to build an industrial flash smelting furnace in Harjavalta that same year, and the furnace was started two years later, in 1949.

Bryk and Ryselin’s tests had been performed using test equipment at the actual plant and scaling industrial product development was now the key question in developing new production methods. Outokumpu’s central laboratory could not meet the growing research needs of the company in the post-war years. The building of a new research organization started with an individual appointment: in 1949, Bryk was named as the company’s principal metallurgist, reporting directly to the CEO. Graduate engineer Jorma Honkasalo, who had worked as an operations engineer at the Pechenga nickel smelter during the war, was hired as his closest employee. These appointments established a research institute for Outokumpu in Pori, which transferred to Outokumpu Technology and became part of Outotec when the company was separated from Outokumpu.115

The first flash smelting process was implemented by Toivo Niemelä, who was responsible for putting Bryk and Ryselin’s theoretical ideas into practice. Niemelä worked around the clock when the flash smelting furnace was being built, and the result was a great success. In 1967, Niemelä began to manage the new Metallurgical Engineering department’s overseas projects,

114) Cf. Tuomo Särkikoski 1999. p. 132 onward.

115) Heikki Mäntymäki 1999. p. 18.

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which in the first few years were mainly about selling licenses for the flash smelting method as well as related process engineering.116

The development of the flash smelting method was possible because the company’s operational management had a scientific training. The financial and technical risks and opportunities associated with investing in the application of a new scientific theory to a new industrial process were thus fairly well known. An article written by Bryk, Autogenes Schmelzen von Sulfidischen Kupfererzen und Herstellung von Eisen aus Eisen Silikatschlacken von Kupferschmeltzöfen was published by 1951.117

Since then, the flash smelting method has been constantly improved. The recuperator principle, used for preheating the process air, has been abandoned and replaced by steam generated by waste heat boilers. Another major improvement has been the use of oxygen-enriched combustion air in smelting. The flash smelting method increased the profitability of copper refining, while also reducing considerably the sulfur and other emissions from copper production.118 The post-war shortage of materials had a significant impact on the environment. Sulfur recovery at the copper plant transferred from Imatra to Harjavalta became a major problem late in the summer of 1944. Finland and the Soviet Union concluded an armistice in September and efforts to restart Finland’s industries in order to make war reparations began that same fall. These reparations required a substantial increase in copper production. Outokumpu was expected to act quickly, but was unable to capture sulfur gases at the Harjavalta factories, as there were no materials or equipment for this purpose. This combination of technical problems and economic necessity resulted in extensive environmental damage. Furthermore, an old dispute between the government-owned companies Rikkihappo- ja Superfosfaattitehtaat, a sulfuric acid and phosphate producer, and Outokumpu also had an impact on the matter.

The dispute between these companies dated back to the 1920s when the CEO of Rikkihappo- ja superforfaattitehtaat Väinö Tammenoksa with young

116) Eero Löytymäki 1991. p. 6.

117) Tapio Tuominen June 7, 2011. Erzmetall IV (1951), p. 447–450.

118) E.g. Markku Kuisma 1985. p. 351.

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engineer Roope Hormi tried to supersede Eero Mäkinen from Outokumpu. The relations between the companies were inflamed for a long time after this.119 By the end of the war, it was possible for the two companies to reach an agreement in part because the parties to the dispute had died, leaving it without the personal issues that had ensured its longevity. The dispute was settled after the war for compelling and clear financial reasons, and the result was not just an improved relationship between the two companies, but an actual collaboration between them.

The opening of the sulfuric acid plant was delayed by several years, as the necessary equipment could not be delivered. The Harjavalta plants therefore had to release sulfur into the environment on an ongoing basis. The damage was devastating. The installation of effective equipment for collecting sulfur did not begin until 1947 and would continue until 1954. The so-called Petersen method for collecting sulfur, adopted in 1954, dramatically reduced emissions into the air.120 Repairing the damage to the environment took a few decades. Obviously, without the weighty economic and foreign policy reasons that pushed the development and output of Finland’s mining and metals industries, the environment would not have been so badly polluted. Equally, the pollution of the environment was obvious, a situation that was contrary to everything that the Finnish metals industry had aimed at, at least when it came to its principles. Further, pollution was both unpleasant and resulted in substantial financial losses in the long run. These losses were due to the clean-up costs of the pollution and to the lost materials in the pollution – had they been processed appropriately, they would have been worth a great deal of money.

The beginnings of technological exportsThe copper process based on the flash smelting method attracted international interest at once. In the early 1950s, Harjavalta saw a continuous stream of visitors. In 1951, the license for the method was offered to the Soviet Union, but no deal was reached at this point. Yugoslavian company

119) Panu Nykänen 2009. p. 47 – 49.

120) Heimo Saarinen 1972. p. 387–394.

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Bor – the Communist Bloc offshoot of French company Société Française des Mines de Bor – and Japanese Furukawa Mining Co., which had tested autogenous smelting themselves, advanced furthest in the negotiations.

Furukawa needed a new copper smelter. In the final stages of procurement, it examined both the Japanese Mitsubishi process and the new Finnish flash smelting method. The visit by Furukawa representatives to the plant constructed by Outokumpu in Harjavalta proved decisive. The first licensing agreement was signed with Furukawa in 1954, and the flash smelting process was launched in Japan two years later. Mitsubishi would become Outokumpu’s greatest competitor in the supply of copper smelters for decades.121

The next licensing agreement was concluded with an American company after the Furukawa plant was completed. However, the plan was cancelled although Outokumpu had already received the license fees. Technology exports then stopped for many years. There were two reasons for this delay: conservative copper companies were unwilling to adopt new methods and Outokumpu put little effort into really marketing the flash smelting method. Instead, Outokumpu continued to develop the method, applying it to nickel production in Harjavalta at the end of the 1950s and beginning of the 1960s, and to smelting pyrite concentrate in Kokkola a few years later. The company’s ability to apply the method improved considerably as its knowledge of the field expanded.

The export of technology continued in 1963, when full technical drawings and specifications for a copper smelter were delivered to production plants in Baia Mare, Romania. The smelter was opened three years later. The flash smelting furnace was designed by Kauko Kuosmanen and Akseli Lindeman, under the supervision of Jorma Honkasalo, while cooling and

121) Erkki Ryynänen, Kalevi Nikkilä May 7, 2012. Eero Löytymäki 1991. p. 2. Markku Kuisma 1985. p. 351.

Furukawa examined both the Japanese mitsubishi process and the new Finnish flash smelting method. The visit to the Harjavalta plant proved decisive.

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launders were designed at the Harjavalta plant. A small workgroup led by Rolf Malmström provided the specialist knowledge for the project while Petri Bryk, by now the Outokumpu Chief Executive Officer, maintained tight control of the project.122

Supporting and developing this project in Romania was not without its difficulties. Traveling in Europe in the 1960s could turn into an adventure, something hard to imagine by any business traveler in the 21st century. For example, in November, 1966, specialists Rauno Seeste and Manu Hannuniemi were sent by Outokumpu to Romania. They were due to fly from Finland to Bucharest in Romania via Copenhagen in Denmark. Their flight from Finland to Copenhagen, aboard a new Super Caravelle jet flown by Aero (known as Finnair since 1968) was forced to land in Gothenburg instead of Copenhagen due to weather problems. In order to make their connection, they traveled by bus to Copenhagen, where they had tickets for a Tarom flight. By the time they arrived, the Romanian airline flight had already departed. After an unexpected day in Copenhagen, Aero managed to arrange tickets to Prague, where the travelers had to spend another extra night. The Finns did not even have entry visas, but they were given temporary ‘propuskas’ – entry permits typically granted following a misunderstanding – at the airport, after which they got to know the bars of Prague.

After Prague the travelers finally arrived in Bucharest, but nobody was there waiting for them. Getting train tickets to Baia Mare also proved impossible. It was only when the travelers got in touch with engineer Ceucalascu, a representative of the host company, that everything began to work out. They spent the night with an engineer’s family in Bucharest, and had a wonderful evening together, enjoying caviar and music.

The next morning, Hannuniemi flew to Baia Mare and arrived at a familiar lodging. His diary entry shows what his feelings were like:

“Cartos was there to meet me and everything was okay, Apt. no. 2 was okay. I gave the cleaning lady a hug and left for the home smelter.”123


123) Manu Hannuniemi, Päiväkirja III, Romania. Friday November 11, 1966. OK.

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People in Baia Mare were friendly, but cultural differences between the locals and Finns were sometimes too great. A cooled furnace was being demolished using dynamite, but cartridges could not be put in place because the holes were too narrow. After a short negotiation, it was decided that the cartridges be dropped in the furnace. The Finns had to provide the workers with safety goggles, but engineer Csiki, who headed the plant workgroup, refused to use them.

A bigger problem was that the operating personnel had no authority over the furnace and process. The ministry in charge ran the process from Bucharest by issuing instructions over the phone, and so the instructions given by the Finnish specialists were not implemented as the responsible official was on vacation. One of the most important tasks for the Finns was therefore teaching independent decision-making to their colleagues in Baia Mare.124

Metallurgical research in support of the national economy

T here was no doubting the quality of the Finnish system of scientific and technological research and education, but as high as the quality of it was, it was all too often concentrated in too few hands and

dependent on international connections. Had it not been for the strong aspirations of industrial decisionmakers to achieve economic independence, Finland could easily have contented itself with being a producer of raw materials for global corporations in the 1930s. The alternative was financial success through internationalization, which called for the rapid exploitation of natural resources. The will to build national technology systems was linked successfully to the system of technological research and education, which was developed under the pressure of multiple international crises. When the ideology-driven desire to take possession of technological systems was connected to political control over the raw materials found in Finland, the result was an exceptionally lucrative branch of industry by the 1960s.

124) E.g. Manu Hannuniemi, Päiväkirja III, Romania. Thursday November 24, 1966. OK.

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After the close of World War II, metal prices – particularly the price of nickel – declined rapidly as munitions production ended and the major economic powers of the world transitioned to peacetime production. Mines opened during the wartime boom were closed hurriedly. Production at the Makola mine in Nivala was discontinued in 1946. Terminating the mining operations in Ylöjärvi was also discussed, with the intention of closing the mine in 1949. However, the mine’s profitability started to increase again when, after studies conducted by Pentti Eskola, sufficient quantities of tungsten, arsenic, and gold were recovered from the ore to sustain profitable production.

Despite the volatility of metals prices, basic geological research received a great deal of attention in post-war Finland. A major ore prospecting project implemented at the end of the 1930s had changed ideas about what geological riches could be waiting underground. New geophysical research methods, based on remote sensing technologies developed during the war and the use of new electronic, seismic, and radiological methods, were adopted as basic methods in geological mapping. Prospecting under the leadership of the Geological Survey of Finland quickly led to the discovery of new ores, providing developers of metals production and the mining industry with new ideas.

The question of how to use these raw materials in the most beneficial way for Finland’s national economy led to reforms in the organization of technological research. The central laboratory founded in connection with the Pori metal plant during the war was reorganized in the late 1940s in order to accommodate the changed production conditions. The mechanical laboratory headed by Heikki Miekk-oja began to disengage itself from the central laboratory, to focus on special questions related to metals production, such as the electrical conductivity of copper. In only a few years, Miekk-oja’s laboratory was able to standardize the metal plant’s products in compliance with the DIN standard, which naturally improved the opportunities to market them. The central laboratory mainly worked on tasks of analytical chemistry.

The successful nickel studies in 1941 and the development of the flash smelting method at the end of the decade showed the value of organized, target-oriented technological research for Outokumpu’s operations. In

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practice, the company’s research activities were now in the hands of Petri Bryk, the head of the metallurgical department in Pori. Jorma Honkasalo’s arrival in Pori in May 1949 marked the birth of Outokumpu’s research institute – at first the pilot plant and later the subsidiary Outokumpu Research Oy and Outotec’s Pori Research Center. On Honkasalo’s recommendation, the company decided in the summer of 1950 to build a pilot plant for research purposes.

The research institute was set up in an unused building constructed for the nickel plant during the war, which was expanded in 1956 with a new laboratory wing.125 The research unit’s first interest was the exploitation of pyrite waste, obtained from the Outokumpu mine and pulp mills. The waste contained 60% iron, 0.5% cobalt, 0.4% copper, and 1.5% zinc. The aim was to separate sulfur from the waste and recover the metals, particularly cobalt. Research progressed fast and delivered favorable results, but Outokumpu was forced to cancel the planned plant. This was primarily because of an objection raised by Outokumpu’s rival, Vuoksenniska Oy, who referred to an agreement concluded in 1934, which specified that Outokumpu had to deliver the roasting residue from copper processing to it. The matter was taken to a court of arbitration, after which Outokumpu withdrew from the project in 1953.

The use of iron silicate slag, which formed during copper production and had a high iron content, was considered again in Harjavalta to replace imported steel, which was very expensive in the years following the war. The slag had previously been completely worthless commercially, and huge piles of it accumulated near the copper smelter. Otto Barth had proposed reducing slag to iron in the 1930s, but the conditions had been such that the idea had not been taken any further.

The project was to become the next large-scale Finnish research project into new technology related to metals production after the development of the flash smelting method. Bryk performed the first successful steel production tests in Pori in April, 1947. To celebrate the occasion, a silver creamer and sugar bowl were made with the date April 11, 1947 and the symbols for copper and iron engraved on them. As early as the end of the


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1940s, a decision was made to build an innovative steel plant in Harjavalta. The process made it possible to produce steel suitable for forging from slag without having to make pig iron first. The machinery for the Harjavalta plant was ordered from Germany in 1951, but the project soon fell through due to the collapse of steel prices in the global market and the rising price of energy. Nevertheless, the investments made in research and development had not been in vain. The unfinished development projects had trained Finnish researchers to solve questions related to large industrial processes in an organized manner.126

The expansion of metallurgical research activities in the 1960s called for investments in new laboratory and administrative premises. After the mid-1960s, when it was decided that the research activities in connection with the Outokumpu headquarters and the operations of the new instrument plant be located in Niittykumpu, Espoo, the transfer of the Pori research institute to the capital region was also discussed. Since the metallurgical research institute needed the services of the central laboratory of the Pori plants – all laboratory analyses were performed there – and also a close connection to the pilot plant, the metallurgical research laboratory was kept in Pori. The pilot plant could not have been run outside of an industrial site.

The new laboratory building of the metallurgical research institute in Pori was completed early in the summer of 1971. All of the institute’s units were placed in the building. These included a minerals processing technology laboratory, materials testing laboratory, model test station, powder laboratory, corrosion laboratory, pyrometallurgical laboratory, and furnace room. Office and administrative premises and a metallurgical central library were also added to the building.

It goes without saying that Finland was not the only country that began to examine non-mainstream technological phenomena in searching for new, economically viable solutions. A fundamental premise in technological research is that studies are conducted in areas that may provide solutions or new opportunities to circumvent existing technical, financial, or administrative problems. Development work related to technological


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knowledge is impossible to prohibit, since engineers usually succeed in inventing new methods to replace the forbidden ones. A well-known example of a cluster of knowledge forming as a result of restricting technology transfer is South Africa, where the industrial production of synthetic fuels developed rapidly due to the international embargo imposed in order to oppose Apartheid, the country’s system of racial segregation imposed between 1948 and 1994. Since building an oil refining industry based on the Fischer-Tropsch process was the only way for the country to secure its fuel supply, it was among the leading countries in fuel research at the beginning of the 21st century.

The availability and price volatility of nickel had proven to be of crucial importance in terms of the economy and politics since the late 1930s. At the beginning of the 1950s, the long-term exploitation of the Makola ore deposits had to be halted due to the rapid rise and fall in the price of nickel, but the ore found in Kotalahti, Leppävirta, in 1954, renewed the hopes for founding a large industrial system on nickel technology. The quality of the Kotalahti ore was poor – its nickel content was only 0.9%, but the deposit was large, and now that Pechenga was in the possession of the Soviet Union, Kotalahti became the most important nickel deposit in Western Europe. The resources of the Outokumpu research institute were tied almost completely to studies related to the exploitation of the nickel from the Kotalahti deposit.127

The engineering of the Harjavalta nickel plant and the series of tests to be performed at the pilot plant were initiated in the summer of 1957 with the plans for the nickel refinery being completed in late 1958. The research focused on the problems of leaching and electrolysis, since it was possible to smelt the Kotalahti concentrate, rich in pyrrhotite, at a low cost at the Harjavalta flash smelter. Since smelting tests could be performed using an


The availability and price volatility of nickel had proven to be of crucial importance in terms of the economy and politics since the late 1930s.

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old emergency furnace originally intended for use in the copper smelting process, no major investments were needed.

The nickel process in Harjavalta was started in May, 1960. Despite many years of systematic studies, it had to be admitted that the method did not work. The leaching process for nickel matte obtained in the smelting phase consumed so much sulfur dioxide that it had to be produced specifically for this purpose. The process had to be changed, and a new process using oxygen from the air, developed under engineer Heimo Saarinen, worked without any major problems. The electrolysis of nickel in a sulfate solution was a great success, and by the summer of 1961, the plant was already approaching the projected production figures.

A positive result had thus required only three years of intensive work. The leaching process for matte became one of the basic methods of nickel production in the world, and it is still a technology process owned by Outotec today.128

Around the same time, a decision was made to begin the exploitation of a chromium deposit in Elijärvi, close to Kemi and Tornio, that had been found in 1959 and been considered to be too difficult to exploit. The problem was that the deposit also contained iron, and chromium ore that contains iron had been thought to be useless for a long time. However, this did not prevent Outokumpu’s research institute in Pori from studying the concentrate from the chromium deposit, and the problems related to the processing of the concentrate had been solved and the mine opened by 1965. The Tornio ferrochrome plant, which smelted the test concentrates, was commissioned in 1968.129

With the development of the chromium deposit at Elijärvi came the possibility that Finland’s mining and metals industries could make the country a producer of stainless steel. Bringing this about was by no means a simple matter. When the new production of stainless steel was planned, the same problems that had emerged when planning and initiating the production of copper and nickel came up again. The first problem was that the mining and metals industries lacked the scientific and technological


129) Tuomo Särkikoski 2005. p. 22. Heikki Mäntymäki 1999. p. 23, 29–32.

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knowledge necessary needed to develop the new field. Turning to foreign companies would have placed Finland immediately in the position of a raw material producer or subcontractor, something that it had worked to avoid since World War II. To avoid this, the idea was to make full use of all parts of the Finnish technology system. Then came the problems with obtaining the enormous investments required to build the new industry.

At the end of 1959, Reino R. Lehto, Secretary General of the Outokumpu Foundation, asked Professor Miekk-oja to look into the question of where the teaching of the science of metals should be taken to improve the competitiveness of the country’s metals industry. Lehto’s view was that the answer lay in the development of the country’s metallurgy laboratories, and Miekk-oja agreed.130

The development of the stainless steel industry in Finland took about fifteen years, as was expected when the plans were made. At first, experts were trained for key areas. The research project was initially financed by awarding Olavi Siltari an extended grant from the Outokumpu Foundation. The study focused on the hot working properties of stainless steels, mainly austenitic stainless steels, as well as their intergranular corrosion and austenite grain size.131

As expected, Siltari’s studies were followed by a number of publications, first from the VTT Technical Research Centre of Finland in 1962 and then in the Vuoriteollisuus (“Mining Industry”) magazine in 1963. With the help of these studies, Finnish researchers were trained in the intricacies of stainless steel production. As the production of stainless steel required even more capital than the production of copper, the project became a major development project for the entire nation. At the start of the 1970s, Outokumpu was a distinctly national industrial enterprise.132

The newly launched research program and the building of an industrial system for the production of stainless steel was seen to be of crucial importance to Finland’s national economy. For this reason, the Outokumpu

130) Tuomo Särkikoski 2005. p. 22. OKS Board of Directors’ Minutes December 10, 1959.

131) OKS Annual Report 1960.

132) Jyrki Juusela September 18, 2011.

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Foundation, established some twenty years before, changed its rules at the beginning of the 1960s so that it could make the exceptional step of injecting capital into the project. According to the proposal made by Jaakko Rahola, President of the Foundation and Rector of the Helsinki University of Technology, and Reino R. Lehto, Permanent Secretary of the Ministry of Trade and Industry, one fifth of the Foundation’s funds would be used by 1970.133 This was a significant investment by Finnish standards, but the resources and research appropriations of the industrial superpowers were astronomical in comparison.

The Outokumpu Foundation’s financial support made it possible to carry out basic metallurgical research projects in collaboration with universities and research institutes. However, Outokumpu needed abundant resources of its own for engineering and development activities related to expansion of its mining operations and building new industrial plants. In 1960, the company founded a special engineering department at its headquarters, which can be seen as the first step in a series of developments that would lead to the formation of Outotec.

The new special engineering department was small, consisting of Kauko Kuosmanen from the Outokumpu mine and Akseli Lindeman from the Pori plants. Engineer Lindeman had already been involved in the construction of the Imatra copper plant at the end of the 1930s. He was one of the company’s long-term employees who was familiar with all aspects of the company’s operations at the various locations. Under his direction, the engineering activities quickly became more organized.134

133) Outokumpu Oy Foundation Jaakko Rahola & Reino R. Lehto to the Ministry of Justice June 15, 1961. Decision of the Ministry of Justice on the application March 23, 1962. J. O. Södehjelm.


In 1960, Outokumpu founded a special engineering department, which can be seen as the first step in a series of developments that would lead to the formation of Outotec.

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Collaboration with universities

I n the early 1960s, the Harjavalta copper plant’s production increased without any significant investments. Copper production was still Outokumpu’s core activity. Development work was about customary

engineering: once the process had been started, minor upgrades and adjustments were enough to increase its efficiency. The first large investment in process development was completed in 1966, when the processing of copper slag was improved with the introduction of a flotation plant. Saleable substances could now be better recovered from the slag. An electrostatic precipitator for cleaning gases and an automatic anode casting system were installed the same year. Production volumes grew by one fourth over the course of the decade. The copper anode casting system later became a Finnish success story, and Outotec continues to be the market leader in anode casting systems in the 2010s. As a result, Sumitomo, a long-term rival, decided to give up the development of its proprietary technology and acquire the Outokumpu system at the end of the 1990s.135

Copper production was enhanced using new automation technology whose development had begun in the early 1960s at the University of Technology and the Faculty of Technology of the University of Oulu. The improvements served two purposes: raw materials could now be exploited more carefully, and emissions to the environment were greatly reduced. Industrial planning aiming at maximizing financial gains no longer contradicted environmental considerations. Production costs declined substantially as a result of more efficient production and lower emissions.136

In process metallurgy, hydrometallurgy became more common and led to the development of new technologies and process equipment. Leaching processes were developed at the Pori research center in the 1960s for the Harjavalta nickel plant and further in the 1970s and 1980s for the Kokkola zinc plant, among others. Solvent extraction had already been studied in

135) Markku Kuisma 1985. p. 304. Markku Kytö November 8, 2011.


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the 1960s, and its breakthrough occurred in 1995, when the Zaldivar mine in Chile began to produce copper using this method. Hydrometallurgical processes gained ground rapidly both in the exploitation of sulfide and oxide ores, and today they are a key product for Outotec.

The nickel flash smelting process developed more slowly. It was not until the end of the 1960s that a major reform program was implemented in Harjavalta, with the key aim of building an oxygen plant. The production of the plant – the largest in Finland – was to be used in boosting the metal production processes. Feeding oxygen into the processes would reduce fuel consumption and further diminish the amount of impurities released. At the same time, the nickel smelter and the copper flash smelting furnace were completely upgraded and a central control room was built at the plant. Automatic data processing was becoming an integral part of the ideology of metal production.

The construction of Outokumpu’s industrial plants in Kokkola in the 1960s was another major project in Finland. The primary line of business was the separation of sulfur from pyrite produced by the Pyhäsalmi mine, mainly for the pulp industry’s needs. Kokkola was chosen as the location of the new plant because of its excellent land and sea transport connections.137 At the heart of the sulfur process was the suspension smelting of pyrite, developed by Outokumpu as an application of the flash smelting technology.

The plant was designed in cooperation with well-known process and equipment suppliers, with Orkla Metal and BASF as partial suppliers of technology. Preliminary negotiations with the companies were conducted in May, 1960. Metallurgische Gesellschaft was also involved right from the beginning, since building the plant was one of the first major opportunities it had for delivering equipment to Northern Europe. Metallurgische Gesellschaft’s international subsidiaries were founded in the 1950s after the end of the Marshall Plan in order to sell services and products to several countries when global competition in plant engineering began. The company succeeded in delivering manufacturing equipment to Turkey and Spain at the beginning of the decade, then to Canada, and to Luxembourg

137) Markku Kuisma 1985. p. 307–309.

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in 1954. The group’s aim was to become the market leader in designing and supplying machinery for heavy industry.

The sulfur recovery technology provided by Orkla was based on experiences gained from production at the Løkken mine. Orkla and its administrative director Per Palmer took a positive, active approach to the project, and an agreement was soon reached on an order for the sulfur process. Meanwhile, Jorma Honkasalo, Rolf Malmström, and Heikki Tanner’s negotiations with Doctor Rutbach and Doctor Kreisler of Lurgi for dust removal equipment for the process were more tentative. Lurgi would have wanted to sell the entire plant as a lump sum turnkey delivery, but Outokumpu’s representatives were not sure what kind of a process Lurgi was willing to sell. It was therefore agreed at first that a pilot project be implemented using dust samples provided by Outokumpu.138

The decisive question was whether Outokumpu wanted Lurgi to also supply a roasting furnace or whether it would be ordered from the Finnish manufacturer, Rosenlew. For Lurgi, the matter was clear: if the entire roasting process was acquired from Lurgi, it would take responsibility for the plant’s operations. However, Outokumpu – whose fundamental principles included independent control of its production – did not agree to order everything from Lurgi. Instead, the companies agreed on continuous cooperation on the construction of the Kokkola plant’s process as a follow-up measure after May, 1960.139

The test run of the sulfur plant commenced in 1962, at the same time as the engineering of new production plants began. A decision was taken to place a cobalt plant at the industrial site in Kokkola and the process was completed six years later. With its completion, Finland rapidly became one of the most important cobalt producers in the world.

The construction of the Kokkola plants is a good example of the long development paths required in the industry, which transcend the rhythm of political and economic changes. The decisions taken on building the cobalt

138) Account of Honkasalo’s, Malmström’s, and Tanner’s negotiations with Orkla, Lurgi, and BASF on May 2–12, 1960.

139) Account of Honkasalo’s, Malmström’s, and Tanner’s negotiations with Orkla, Lurgi, and BASF on May 2–12, 1960.

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and zinc plants were made in the 1930s and early 1940s, when both the global political and financial situation were very different from the 1950s and 1960s when the projects were realised. Only now was it possible for Finnish industry to invest in such large projects. The zinc plant was financed using a tried-and-tested method: Outokumpu received advance payments from a German and an English bank for zinc concentrates to be delivered to Metallgesellschaft. The zinc plant was mainly designed by Outokumpu’s own engineering office, but process technology was acquired from Canadian Electrolytic Zinc Ltd. and purchasing a license from the ASARCO Group

was considered. However, part of the equipment was once again supplied by Lurgi, with whom Outokumpu had been in continuous discussions regarding the use of various technologies. A dispute soon occurred over the application of fluidized bed technology because Lurgi and Outokumpu were about to become competitors in designing key technologies. To compensate for the disagreement, Lurgi was included in flash smelter projects as an almost permanent engineering partner.140

Besides Lurgi, Outokumpu regularly used the US-based engineering firms, the Lummus Company, Arthur McKee, and Parsons Jurden. Cooperation with the American firms was also influenced by personal opinions. As part of Outokumpu’s nickel plant project, Petri Bryk and John Ryselin had to deal with German lawyers when the agreements with Lurgi were being drawn up. The discussions were not very amicable and the Finns became frustrated with the way in which the opposing party handled matters. It was about a culture clash and incompatible personal chemistries. After that, Outokumpu preferred to deal with the English-speaking world when it came to questions of engineering.141 This was a major change in Outokumpu’s outlook because

140) Seppo Rantakari January 12, 2012.

141) Tapio Tuominen June 7, 2011. Cf. Kuisma 1985. p. 352.

Part of the Kokkola zinc plant equipment was supplied by Lurgi, with whom Outokumpu had been in continuous discussions regarding the use of various technologies.

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German was still the language of technology both in Finland and elsewhere in Europe.

Finnish industry’s close relationship with Finland’s technology universities – of which there were four in the country by the end of the 1960s – had a crucial impact on Finnish engineering. The Tampere University of Technology had been established as a branch of the Helsinki University of Technology, located in Otaniemi, Espoo. Additionally, the Faculty of Technology of the University of Oulu had begun to invest in research and teaching in industrial equipment and processes in the early 1960s. The University of Oulu also added teaching in mechanical engineering and chemical engineering to its portfolio, since these were considered to be linked to the local mining, pulp, and paper industries.

Successful research cooperation was based on good personal relationships between the representatives of various institutions. Ever since the 1920s, Turku-based Åbo Akademi University had been building a culture of in-depth metallurgical knowledge in its Faculty of Chemical Engineering. Hence, a significant proportion of the Finnish metallurgy specialists of the 1960s and 1970s graduated from Turku. Leif Hummelstedt, the Professor of Chemical Engineering at Åbo Akademi University, had been a fellow student of Rolf Malmström, the principal metallurgist of Outokumpu, and so collaboration between the university and Outokumpu’s researchers was seamless. Furthermore, since the VTT Technical Research Centre of Finland and Outokumpu’s own research institutes provided a strong backbone for experimental research and the Outokumpu Foundation was able to award funding to long-term research projects, it was possible to conduct and complete research projects whose results could be applied to the mining and metals industries.

Nevertheless, the division of responsibilities between academic researchers and Outokumpu’s target-oriented research was clear. The latter aimed at translating knowledge and skills into profitable applications, which meant that being familiar with the basics of a phenomenon did not always matter that much. Petri Bryk noted that,

“Here at Outokumpu, we invent things that people in universities study for decades!”

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However, at least in the development of solvent extraction, the idea came from university researchers. Another saying that Bryk often repeated was:

“If you want to sell know-how, you have to know why.”142

As the 1960s ended and the 1970s began, a clear change of generation occurred among Finnish metals industry and metallurgy specialists. Those who had been educated in the late 1940s and early 1950s began to transfer to executive positions or retire. This meant that when baby boomers – those born between 1945 and 1964 – began entering university, the education system was faced with major structural problems – there was a possibility that the general educational level of the nation would be declining if the volume of especially higher education was not significantly increased. Despite this, knowledge could be transferred to the new generation mainly due to the close, personal relations between the universities and industry. Finnish research in minerals processing technology, hydrometallurgy, and physical chemistry in particular was renowned for being at the cutting edge globally in the late 1960s.

Up until the beginning of the 1970s, Finnish research in engineering phys-ics and metallurgy was influenced by a research tradition formed during the Continuation War, mainly at the State Aircraft Factory of Finland. As a result of this tradition, a large number of researchers trained in duties during the crisis ended up as professors at the Helsinki University of Technology. These also included researchers trained for research and managerial positions in the metals industry who were part of the first truly international generation of independent Finland.

Perhaps the most important figures in forging the links between the University of Technology and the metals industry were Professors Tikkanen, Hukki, and Miekk-oja. Matti Tikkanen was appointed as Professor of Metallurgy of the university in 1949. After graduating with an M.Sc. in Engineering from Åbo Akademi University in 1938, he had worked as an operations engineer at the State Aircraft Factory throughout the war. Tikkanen, who specialized in powder metallurgy, was in charge of the operations of the plant’s surface treatment department, paint shop, and

142) Quotes Tapio Tuominen June 7, 2011.

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foundry. Meanwhile, Risto Hukki, who had trained for the position in the USA during the Continuation War with the Outokumpu Foundation’s funding, was appointed as Professor of Mineral Processing in 1947, while Heikki Miekk-Oja became the Professor of Metallurgy in 1954.

Finnish universities in the 1950s and 1960s were characterized by an atmosphere of enthusiasm and optimism, and this spirit of open-mindedness then transferred to Finnish industry and to Outokumpu in particular. Technological knowledge developed in a large sector where the results of basic technological research were quickly addressed by applied research and utilized by industry. Despite its humble beginnings, Finland established itself among the leading old industrial countries, such as Sweden and Germany, in many technological fields.143

Advances in automation and the funding of technological research

T he bold developments made in the 1950s and 1960s and the cooperation between companies and universities, aimed at developing the Finnish metals industry, enabled the building of new means of

production based on the new information surprisingly quickly. The mining and metallurgical industry became the first world-class technical-scientific production system in Finland based on collaboration between universities and industrial enterprises.

The fundamental problem in research and development in Finnish industry had always been a lack of research funding. The question was brought up in the late 1940s when basic scientific research was being organized. The Academy of Finland, established in 1947, focused on funding basic research in its early years. It only began to provide funding for technological research in the 1960s.

Since the funding system for science did not support the development of industrial operations, the education system for the mining and

143) Jyrki Juusela August 19, 2011.

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metallurgical industries was developed and key specialists were trained with the aid of the Outokumpu Foundation during and after World War II. Although the funding provided by the Foundation was essential to building a technical system needed for launching the production of stainless steel, for example, the country still lacked a robust funding system to support basic technological research.

Representatives of the technological and industrial sectors founded two organizations to rectify this situation. The Finnish Foundation for Technology Promotion was established in 1949, a centennial anniversary of higher technological education, to fund basic technological research and enable the transfer of new technologies to Finnish society. The Foundation funded, for example, the launch of television services in Finland in the late 1950s. The Finnish Academy of Technology started operations in 1958. In its early years, it aimed to greatly influence the development of major technology projects.

In the 1950s, new fields of technology adopted by the global superpowers were based on applications in the engineering physics fields, which had progressed swiftly during World War II. Especially automation and systems technology, together with the electronics industry, had taken a great leap forward, driven by military technology.

During the war, Finland had been unable to actually follow research developments in engineering physics. Due to its high level of theoretical knowledge in science and technology, Finnish industry could just about manage to develop technologies needed for aircraft maintenance, but this sector was also affected by a shortage of research equipment and personnel. When the war ended, the scarcity of technology and technological development had reached almost catastrophic proportions.144

Erkki Laurila – an innovatorThe lack of knowledge in new technology fields in Finland restricted the general advancement of industrial activity and technological research in the 1950s. Erkki Laurila, the director of the Precision Mechanics Department of the State Aircraft Factory, had been appointed as Professor of Engineering Physics

144) Karl-Erik Michelsen 1993. p. 113 onward.

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at the Helsinki University of Technology in 1945. He had to create a new research tradition almost from scratch. After the Continuation War, Laurila had tried to launch the production of control and measuring devices for the processing industry at the Aircraft Factory, but the factory’s management had directed its operations in other directions. He was, however, able to continue this work at the University of Technology and at various industrial plants. Laurila also headed the Laboratory of Engineering Physics at VTT Technical Research Centre of Finland. He was later obliged to withdraw from practical teaching and research work when he joined the Finnish Academy as academician, who was not expected to take part in the work in universities.

Laurila became a significant technical developer in the Finnish mining and metals industries. In the 1950s, he started to build control instruments for the mining industry at the VTT laboratory and actively contributed to the early stages of the Finnish computer-related industry. By the mid-1950s, the University of Technology, in association with researchers in physical sciences from the University of Helsinki, had gotten started in fields such as computing technology, nuclear engineering, and radio engineering. Professorships for the most important of these new disciplines were founded in the late 1950s and early 1960s.

In addition to the inadequate research resources, Finnish research in engineering physics was restricted by superpower politics. Both the USA and the Soviet Union competed openly in spreading their technology systems in the global market. The Soviet Union’s primary aim was to get the countries of the Communist Bloc to adopt its technology standards. This led to the Nordic countries – Denmark, Finland, Iceland, Norway, and Sweden – to begin co-operating technologically and to their moving closer to the Western superpowers and away from the Soviet Union.

Finland’s objective was to stand by the other Nordic countries, but due to its position on the edge of the Soviet sphere of influence, it was often forced to engage in a political high-wire act. This led to the development of domestic technology, often in unexpected ways. Finnish engineers were, in many cases, able to successfully combine different aspects of technology from the East and the West. In key areas of technology, Laurila managed to connect Finland to Western technology systems with British and American companies being selected as suppliers of computer technology and in the

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construction of nuclear technology systems, Finland also joined the Western camp through the International Atomic Energy Agency (IAEA).

The lack of control and measuring technology in particular was an obstacle to the development of the processing industry at the end of the 1950s. In 1958, Outokumpu’s management decided to set up a Department of Physics at the corporate headquarters, tasking it with the building of control and measuring instruments, especially for ore concentrating. In the mid-1960s, the department employed two engineers, one technician, and one mechanic. Antti Niemi was hired as an instrument engineer in the early 1960s. The instrumentation at Outokumpu’s Kokkola plants, then under construction, and the design and building of measuring and control equipment for the

Pyhäsalmi mine’s concentrator were assigned to Niemi. This marked the beginning of strong ties between the Pyhäsalmi mine and Outokumpu, and the Pyhäsalmi mine has remained an important partner for Outokumpu and Outotec in the development of process automation, despite changes in ownership. After the appointment of Doctor Pekka Rautala as head of the Department of Physics in 1962, the

operations began to grow rapidly. In addition to precision mechanics, the department also began the production of crystals and glassblowing.

The founding of Outokumpu’s Electronics Department came about in 1963 when Doctor Erkki Laurila, after having been named a member of the Academy of Finland, was looking for new work. Academicians were not expected to work for research institutes, but in 1963 Laurila proposed that Outokumpu arrange funding for a small enterprise that he would establish, which would start to produce measuring instruments for the needs of the mining industry based on the prototypes that he had made alongside his research duties. However, Petri Bryk did not warm to this idea, and suggested instead that Outokumpu acquire the rights to Laurila’s measuring instruments and establish a special laboratory to develop, study, and produce them. Laurila himself would be given executive duties at

A new Department of Physics was tasked with the building of control and measuring instruments, especially for ore concentrating.

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the laboratory. Laurila accepted the proposal and worked as a member of Outokumpu’s Supervisory Board until the 1970s.

As per Petri Bryk’s plan, Outokumpu decided to build a new laboratory in Espoo, in an area between the districts of Niittykumpu and Olari. The location was selected for its proximity to Helsinki University of Technology and VTT Technical Research Centre of Finland. The manufacture of Satmagan, the first instrument for measuring the magnetite content of ore samples to enter the market at the end of the 1960s, began at the VTT Mechanical Engineering Laboratory before the completion of Outokumpu’s own laboratory. Operations at the new laboratory and production plant started promptly with a new administrative and support campus being built by Outokumpu in Niittykumpu during the 1970s.

In the 1950s, the Finnish Foundation for Technology Promotion began to finance the education of Finnish electronic engineers with exceptional investments. These investments were based on the experiences gathered during and after World War II on the importance of measurement, automation, and control engineering for industrial operations and the country’s security of supply. Finland was already able to carry out independent research into automation and control engineering by the turn of the 1960s, even though the research performed by more advanced countries seemed light years ahead. The further training for working graduate engineers organized by the Finnish Engineering Society gave a major boost to their development and that of electronic engineering in Finland. A course on transistor technology was organized in 1959. In addition to the basics of semiconductor physics, the course dealt with the use of transistors and crystal rectifiers. Helsinki University of Technology also organized further training. Basic and advanced courses in nuclear engineering, which set aside the development of automation and system engineering in process management, were held in the same year under the leadership of Professor Pekka Jauho. The teaching of computer science in Finland began in 1963, after the University of Technology obtained the first computers for educational and research purposes. Education in the field was strongly influenced by Suomen Kaapelitehdas (later Nokia), which supplied Elliott computers to Finland.

Outokumpu closely followed the advances made in automation and electrical engineering. Antti Niemi, who was familiar with the control

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engineering of mines, was one of the young researchers under training. The management of the zinc concentrating process jumpstarted Niemi’s future career as a researcher, which began at the Faculty of Technology of the University of Oulu. He then did his doctorate at a new unit that carried out research in the field of industrial systems. The growing University of Oulu was the perfect place for the young researcher to showcase his skills. This determined the direction his career would take.

Antti Niemi worked as a physics assistant in the Industrial Engineering Department of the Faculty of Technology at the University of Oulu between 1962 and 1964, when he also gained his Lic.Tech. degree145. He obtained his doctorate two years later in the modeling and control of the ore flotation process. The research for the thesis was funded through grants from the Outokumpu Foundation and the Emil Aaltonen Foundation.

A career in academia soon beckoned to Niemi. In 1963, Niemi already had some of the teaching responsibilities of an engineering physics professor at the University of Technology. In 1969, he was appointed as Professor of Electrical Engineering at the University of Technology, which played a major role in the development of metals production technology. When Outokumpu’s new headquarters in Espoo were under construction, a direct relationship between the two organizations was established due to the personal contacts.

The cooperation between the University of Technology and Outokumpu (now Outotec) has remained strong to this day, especially in the field of electrical engineering research. Combined with the analyzers developed by Outokumpu’s instrument factory, knowledge of flotation control solutions has played a fundamental role in strengthening Outotec’s market share.

Outokumpu developed measuring instruments for physics applications in the same way as process technology that is based on the use of the company’s own production machinery as a testing ground. The research carried out by the physics laboratory in the 1970s focused on developing methods for interpreting the data produced by automatic analysis methods and geophysical survey equipment. At the same time, however, researchers tracked down new innovation chains. When the operations of the physics

145) Lower researcher’s academic degree.

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research institute and of the instrument factory took off in the early 1970s, products developed from the new technology were launched on the market soon thereafter. The best performer was the Metor Metal Detector, which had originally been made for the needs of the mining industry. The device has been designed to detect any scrap metal in the ore going to the mine’s crushing plant. By the mid-1970s, hundreds of devices had already been sold to Finnish mines. It was soon discovered, however, that the device could be adapted to suit the needs of safety and security services such as the walk-through metal detector. The sales of this device, now known worldwide, to airports and nuclear power plants doubled within a few years.

Other important exports from Outokumpu’s instrument factory include the automatic Courier 300 X-ray analyzer for minerals processing plants and the smaller Minexan Analyzer System.

Though the relationship with the universities was not openly discussed, the contacts especially to the Helsinki University of Technology were close. Teuvo Kohonen, a professor at the Helsinki University of Technology, was one of the most active and innovative developers of the operations of the Electronics Department. His cooperation with Outokumpu began through the engineering firm he owned with his brother.146

However, Outokumpu’s resources were inadequate for long-term research with such a wide scope. The issue of the relationship between basic technical-scientific research, applied research, and technology production came up as soon as the new Niittykumpu research and production premises were completed. Outokumpu Engineering’s director Raimo Monni described the situation as follows:

“We were supposed to do science, but the premises were turned into a production facility.”147

The company was unable to invest adequately in maintaining its own basic technological research and technology development work – at least not to

146) Raimo Monni May 3, 2012.


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the extent envisaged by Erkki Laurila. When the focus of Outokumpu’s research work shifted to process engineering during the 1970s, mostly as a result of higher demand in the field and of the research carried out by the University of Technology and the University of Oulu, development slowed down significantly in the electronics industry. The responsibility for electronics production in Niittykumpu, which had gotten off to a flying start, was also transferred to other parties. For example, during the establishment of the Valco cathode ray tube plant, Outokumpu’s expertise was transferred to the new company.148

To some extent, the Finnish government’s new university policy also influenced the degree of cooperation between universities and Outokumpu. In Finland, the 1970s were a time of strong politicization, as reflected in the state’s university and research policy. The leftist Ministry of Education tried to sever the link between industry and higher education. In late 1973, the Finnish Government approved the Act on Criteria for Charges Payable to the State, according to which all research agreements worth over 5,000 Finnish markkas, had to be approved by the Ministry. The law diverged significantly from the statements given by university and industry experts during its drafting, including Outokumpu’s chief physicist Pekka Rautala’s statement about the results of the cooperation with Finland’s universities. According to Rautala, for example, the work carried out by Professors Pekka Jauho and Olli Lounasmaa at the University of Technology continuously resulted in new equipment for industrial production. He also reminded the Ministry of Education that the Technical Physics Department at Helsinki University of Technology had trained almost the entire personnel of Outokumpu’s physics laboratory.149

Continued cooperation between Finland’s universities and its metals and mining industries was further threatened by the question of who owned the copyrights to the innovations and inventions, whether new devices or new processes, developed through the universities’ research. These copyrights had traditionally belonged in an undetermined manner to both the university that conducted the research and the party (or


149) Panu Nykänen 2007b. p. 234.

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company) that ordered the work. However, the Advisory Board for Higher Education in Technology and Economics proposed the integration of copyrights into the basic rights of researchers, including students doing research for their theses. This constituted a problem for thesis supervisors, who were actively taking part in the innovation process. No appropriate solution was found.150

At Outokumpu, copyrights to innovations and inventions were assigned to the inventor or researcher until the 1980s. This had a major financial impact on the company when they came to be licensed, as part of the revenue from any license sale was transferred to the inventor. For example, as the inventor of the flash smelting method in 1947, the licensing of the method made Petri Bryk one of the highest earners of his time in Finland.151

The battle over the control of research cooperation between universities and the metals and mining industry came to an end in the late 1970s, when a change occurred in the political power. The Social Democratic Party of Finland had been driving a total separation between the universities and industry, and now the post of minister was appointed to Central Party and Swedish People’s Party of Finland who took a much more conservative approach to the case.

The political battle over the control of cooperation between companies and academia had far less severe effects on the mining and metals refining industries than on many other technology sectors. This was due to the fact that the relations between companies and universities were based on direct personal contacts built over a long period of time. Furthermore, both of

150) Copyright issues were handled by a committee led by Professor Sakari Heiskanen. The committee was also responsible for HUT’s relations with the industry and companies. Nykänen 2007b. p. 235.


The copyrights to innovations and inventions were assigned to the inventor or researcher until the 1980s.

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Outokumpu’s research and cooperation with academia were long-term by nature. It took several years for its research projects to produce results and these projects were varied in nature and direction. Outokumpu’s cooperation network, already operating globally in the 1970s, also included several Swedish, German, and American universities. Research simply played a bigger and more international role than mere domestic political debate.152

A fundamental reorganization of Outokumpu’s Research & Development operations as well as of its entire future was implemented at the turn of 1974 and 1975 under the leadership of Kauko Kaasila. The reorganization was from a CEO-centered group into a division-based group, consisting of four divisions, led by a Board of Directors. Each of the four divisions was responsible for its

own support services and production.153 At this stage, the electronics department was merged into the engineering department, which was still located at the company’s headquarters. This is how the Technical Export Division was born. The other divisions were the Mining and Metallurgy Division, the Metals Industry Division, and the Stainless Steel Division.

The Technical Export Division became an essential division in the formation of Outotec and the development of new technologies, as it converted the need for technology into goal-oriented research and development projects. The reorganization, which lasted about 20 years, had not been planned beforehand; it was simply driven by external – and partially unexpected – factors.

From the point of view of the processing industry, it was about differentiating the importance of technology. During the 1960s, technology development gradually became a fundamental part of the business along with process engineering. However, it took about twenty years before the intrinsic value of technology was recognized and the revenue logic of its

152) Jyrki Juusela August 19, 2011.


The value of technology was recognized and the revenue logic of its development began to shape up.

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development began to shape up. By the end of the 1960s and beginning of the 1970s, metals refining had clearly changed. After having relied on the experience and engineering work of other Western countries, the industry in Finland was getting a new generation of researchers and engineers with a solid scientific education for its research institutes. The nation’s traditional industrial culture, still led by German-speaking engineers, became more analytical and more focused on scientific research.154

154) Eila Paatela, Markku Kytö, Asmo Vartiainen, Hans-Georg Thielepape November 15, 2011.

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PART 1p. 13

PART 2p. 103

BIRTH OF THE TECHNOLOGY INDUSTRY: FROm EUROPE TO THE WORLD


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PART 4p. 203


PART 3

NEW BEGINNING: TECHNOLOGY AS A KEY SUCCESS FACTOR

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PART 3: ENGINEERING AND RESEARCH: THE DAWN OF A NEW BUSINESS

E ngineering operations grew quickly when activity in the sector picked up as a result of the investments in new projects made by the Finnish mining industry during the 1960s. This was taken into account in

Outokumpu’s organization as a series of careful steps. The company was used to contracting construction and engineering projects out to subcontractors with agreements usually being made verbally. Sakari Seeste, who worked at Outokumpu’s headquarters as construction project manager, was in direct contact with, and made verbal agreements with, each of the subcontracted companie’s ‘purveyors’, which included, among others, engineering firm Pöysälä, YIT, and electrical contractor Strömberg. These quick agreements may have amounted to something as simple as ‘electrical work for one mine’.155 As the number of construction projects grew and their cost levels increased, the verbal procedure obviously no longer worked. Outokumpu was forced to establish its own engineering office specializing in technology sales, which soon began to grow faster than the old production branch of the mining and metals industries.156

Development followed the same course as in Frankfurt about a century earlier, when the interaction between production and engineering was institutionalized into a permanent structure and technology sales became an important line of business for the company.

The development was the result of complicated interaction between engineering and technology exports. The engineering work for Outo-kumpu’s new industrial plants continued to be done at its headquarters as always. However, towards the end of the 1960s, it became clear that a separate expert division was needed to handle engineering work as engineering knowledge could not be transferred in writing. This had been proved when in several cases external engineering firms had not been able to cope with the engineering of the flash smelting process. Metallurgical Engineering – Outokumpu’s own engineering department – was established in 1966. Its first director was Kauko Kaasila, who had previously worked as an engineer at the Harjavalta flash smelter. After that, he participated in the Kokkola pyrite smelter project, and upon its



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completion, became the smelter’s chief engineer under Heikki Tanneri – the director of both factories.

Kauko Kaasila was first joined at Metallurgical Engineering by Kauko Kuosmanen and Akseli Lindeman, whose design for the flash smelting furnace had been used at the plants in Baia Mare, Romania. They were followed by Håkan Hakulin from the Koverhar mine, Kara Kärkkäinen from the Kokkola cobalt plant project, Olli Murto from Pori, and Jorma Kerttula from Finlayson in fall 1966.157

Copper House – Outokumpu’s still relatively new headquarters on Töölönkatu Street in Helsinki – soon began to be too cramped. This problem was quickly addressed by chief executive Petri Bryk, who ruled like a potentate. First he transferred the company’s IT department out of the headquarters. Rumor has it that this was because the department was full of young bearded men wearing clogs, which was the fashion at the time. Bryk could not stand any of them. Second, the engineering department, which required a lot of space with its large drawing boards, was gradually divided into separate smaller units located all around the city. The following year, Kemira vacated its premises at Kamppi in Helsinki. The Metallurgical Engineering team, which consisted of fewer than ten people at the time, moved into the premises, slightly apart from the rest of the company.158 The division’s operations included preliminary process engineering, cost structure assessment for finance and technology, actual process engineering, plant engineering, planning and implementation of process automation and IT, as well as forward planning related to industrial construction.

The establishment of Metallurgical Engineering led to a major change in Outokumpu’s culture. Previously, Petri Bryk had personally guided the company with an iron fist, paying attention to even the smallest of details.



The establishment of metallurgical Engineering in 1966 led to a major cultural change.

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The new expert organization for engineering and computing began to take responsibility for defining the guiding principles with a solid factual basis. It developed project assessment methods that allowed Outokumpu to be fully ready, including financially, when it was time to make decisions. A typical example of this change was the renewal of the ore concentrating process in conjunction with the engineering of the Tornio ferrochrome plant at the end of the 1960s and beginning of the 1970s. A new process that would revolutionize the plant’s operations was added to the project in 1967 in order to increase the chromium content and the original plant unit was quietly forgotten.159 By the beginning of the 1970s, in addition to the engineering of the Tornio plant, Metallurgical Engineering had been in charge of the expansion of the Kokkola zinc plant and the Harjavalta nickel refinery as well as of the engineering of the Kylmäkoski and Hammaslahti concentrators.

Since the 1930s, Outokumpu had abided by the principle that a company had to do the engineering for its own production plants. The lessons learned during the failed Hybinette adventure in the 1910s remained with the company for generations, while the competitive, economic, and political situation during World War II had made it impossible to turn to external engineers. It was only at the end of the 1960s that Metallurgical Engineering was able to bring in an external party to help with production planning. The construction costs for the zinc plant in Kokkola were calculated based on the Valleyfield plant in Canada. The issue was not just technical and already involved a dispute which may have been the first sign within Outokumpu of the birth of a new technological knowledge culture.

Outokumpu’s pilot plant in Pori had questioned the production planning for the new zinc plant because its research offered new possibilities for the implementation of said process. At first, however, the suggested changes were met with resistance from the zinc plant engineering organization, but later accepted. Only a few years earlier, discussions of this kind would not have been possible due to Outokumpu’s more rigid engineering organization and its restrictions.

The zinc plant was completed according to the original schedule, and despite the critics, its production was a financial success from the start.


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In a situation where the technological and financial importance of the old copper mine to Outokumpu gradually diminished, zinc gave a major financial boost to the company.160

A special department was established to oversee Outokumpu’s technology exports in 1968. The department was simply named ‘Process Sales Division’. Rauno Seeste, who had already been working in technology sales for years, served as director of the small division. The division made its revenue from licenses, equipment, engineering, and consulting. In 1968, revenue was generated by five projects, the largest of which were the engineering of a nickel plant for Nickel Enterprises (300,000 US dollars) and the engineering of a copper process for Etibank in Turkey (500,000 US dollars). These projects generated some 3.8 million Finnish markkas between them.

Erkki Ryynänen – Outokumpu’s first technology sales engineer – was hired in 1971, marking the beginning of the company’s active technology sales. The 1970s, however, were a time of low activity on the sales front. Four engineers went on a sales trip to South America in 1974, while a year later, Ryynänen traveled to the USA alone. Despite being alone, he secured four deals during the trip. Ryynänen traveled again to the Far East later that year. The journey took him to Taiwan, the Philippines, and Korea, where an agreement was signed with Onsan for the construction of a copper smelter.

An important step forward was taken in 1979, when Finland and China established a joint commission on trade. Erkki Ryynänen served as chairman for the commission’s non-ferrous metallurgy workgroup. Despite his influential position, sales work was often based on pure improvisation. For example, during one of his trips to China, Ryynänen realised at the airport that he did not have a visa at all. The problem was solved when Ryynänen showed a picture of himself with the President of the People’s Republic of China.161


161) Erkki Ryynänen May 7, 2012.

Outokumpu’s first technology sales engineer was hired in 1971, marking the beginning of active technology sales.

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Establishment of export officesAn important step for Outokumpu’s internationalization was the establishment of export offices, which began in the 1970s. The first sales office abroad was established in Canada in 1975. In the same year, Outokumpu also opened a representation office in Moscow, where the Norilsk project led to considerable exports. Ten years after the establishment of the first office in Mississauga, Canada welcomed Outokumpu Mines Ltd., which, together with Hudson Bay Mining and Smelting of Manitoba, concentrated its efforts on the Namew Lake mine.

Outokumpu expanded into South America at the end of the 1970s. At this stage, the company was actively looking for opportunities to import foreign raw materials for Finnish production plants. By 1980, new export offices had been opened, first in Mexico City and then in Peru, where operations were initially handled through the Finnish Embassy in Lima. A subsidiary

was established in Peru to investigate the potential of the country’s mining industry. In the 1980s, similar offices were also opened in Chile and Brazil.

During the 1990s, Outokumpu expanded its operations into Australia and Apartheid-free South Africa.

The Australian business was handled by Supaflo Technologies Pty Ltd., a previously acquired thickener supplier based in Sydney and Perth. The global spreading of Outokumpu’s technology sales network had taken two decades.

Export product rangeThe most important export products at the end of the 1960s and beginning of the 1970s continued to be licenses of Outokumpu’s proprietary knowledge, which accounted for nearly half of the total sales volume between 1968 and 1973. A major breakthrough in the company’s equipment sales only occurred in 1972, when revenue from equipment sales began to increase to levels comparable to those of license sales. The first pieces of equipment sold were a series of anode casting machines, a submerged combustion

The first sales office abroad was established in mississauga, Canada.

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evaporator, and a copper upcasting machine, which became one of the main export products of the company a few years later. The process sales division and the electronics division were merged in 1975 and subsequently incorporated into the Technical Export Division.

The Technical Export Division’s years of success coincided with the decline of Outokumpu’s basic business into a long recession. This did not prevent research from continuing to be carried out at a high level – in the mid-1970s, the share of metallurgical research represented 1.8% of Outokumpu’s turnover. As they could no longer be recognized under the company’s general expenses, research operations obtained their own closely monitored budget. Despite the fact that metallurgical research is hard to monitor by nature, the budget was rarely exceeded. A single flash smelting test run, however, may have accounted for about 10% of research operations’ entire annual research budget, and the realization or cancellation of single projects had a material impact on actual research costs.162

At the end of the 1960s, Outokumpu did not have the capabilities and self-confidence required to export the plant engineering work with wider scope. The company’s ability to take risks was inadequate, and the company had to rely on foreign engineering firms for larger projects. Its cooperation with Germany’s Lurgi and Lummus Co., an engineering firm based in the USA, which had taken off at the beginning of the decade in conjunction with the engineering of the Kokkola zinc plant, continued as exports were launched. With Lummus Co., efforts were made to sell a pyrite smelter of the same model as the one in Kokkola to New Brunswick Mining and Smelting in Canada and a copper smelter to Anaconda Copper Mining Company in Chile. A copper flash smelter was also sold to Turkey and began operation at the beginning of the 1970s.

Engineering operations grew rapidly. The number of personnel in Metallurgical Engineering, later renamed as Technical Engineering, was already about 500 at the beginning of the 1970s. The engineers’ self-confidence grew with each successful export operation. Both Lurgi and Lummus seemed to be acting in their own interest, and Outokumpu believed that they were trying to get their hands on its process knowledge in order


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to gain the expertise required to handle other engineering operations independently. This lead to more independent actions by Outokumpu, and the value of Outokumpu’s engineering operations increased markedly. Outokumpu’s engineering office was soon able to take on larger plant engineering projects. In practice, the difference between the companies was that Outokumpu was a large engineering and technology company with its own production facilities, while Lurgi, on the other hand, was a plain engineering firm. When Outokumpu expanded its operations and became more independent in engineering, the longtime partners turned into competitors. Outokumpu’s separation from its foreign partners occurred surprisingly quickly, within just a few years.163

Designing a flash smelter was based more on practical experience and the application of engineering skills rather than on scientific calculations. Even if the process equipment had been copied, it would have most likely not worked as expected in different conditions, at different capacities, and with different raw materials.

The issue of technology management was fundamental for the profitability of Outokumpu’s entire business. In the early 1970s, for example, the responsibility for engineering flash smelting processes rested on a group of experts that also included the company’s top management. There were many different views as to what the dimensions of the oven’s reaction shaft should be, and its diameter and height always varied according to the expert’s personal opinions. The same applied to the height of the lower oven. According to Eero Löytymäki, engineering changed direction many times over the years – often rightly so, but sometimes also randomly.164 The number of experts in various fields involved in technology management decreased significantly only when the reduction method of the Kokkola pyrite smelting process started to be applied to the flash smelting of copper and nickel concentrates.

An open-minded spirit prevailed in Outokumpu’s engineering operations all the way into the mid-1970s. The operations were very scattered, but significant risks were taken even knowingly. For example, the idea that the process could produce metallic copper directly without the converting phase

163) Markku Kuisma 1985. p. 354. Eero Löytymäki 1991. p. 8. Markku Kytö November 8, 2011.


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was presented in conjunction with the flash smelter sold to Poland. Despite the fact that nobody had tried it in practice, the idea was sold at a high-level meeting also attended by the Polish Prime Minister. Tapio Tuominen, the director of the Pori research institute, personally guaranteed the success of the process by stating that they could hang him if the process did not work. Tuominen got to keep his life.165

Metallurgical Engineering quickly expanded from a division handling Outokumpu’s own industrial engineering into an export business. The division’s first projects abroad included a copper smelter for Karadeniz Bakir Isletmeler in Turkey, a nickel smelter for Western Mining Corporation in Australia, and a nickel smelter for Bamangwato Concessions in Botswana, Africa. As a result of these successful projects, process engineering became one of Outokumpu’s growing businesses within a surprisingly short period of time.

PROCESS AND EQUIPMENT SALES (1968–1973) (Million Finnish markkas)166

License sales

Project reports and test runs

Equipment sales

Engineering & consulting

Total

1968 3.8 0.1 3.8

1969 6.4 0.5 0.9 0.5 8.3

1970 3.4 0.7 0.4 0.7 5.2

1971 16.6 0.3 1.1 3.1

1972 6.8 0.5 4.5 0.1 11.9

1973 14.1 0.3 17.1 0.1 64.0

165) Tapio Tuominen June 7, 2011.

166) In the table, the figures for 1973 are partially estimates and only include actual sales. There is some confusion between the figures for license sales and those for engineering and consulting sales. Outokumpu Oy, Technology Exports. Annual revenue from process and equipment sales. September 13, 1973, ETR/mlv. Erkki Ryynänen’s archive.

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Process engineering was mostly related to license sales for the flash smelting method. The following flash smelter licenses were sold before 1972 (year of commissioning):

■ Furukawa Co., Ashio, Japan 1956 ■ Combinatul Chimico-Metalurgic, Baia Mare, Romania 1966 ■ Dova Mining Co., Kosaka, Japan 1967 ■ Sumitomo Metal Mining Co., Tokyo, Japan 1971 ■ Hindustan Copper, Ghatsila, India 1971 ■ Nippon Mining Co., Saganoseki, Japan 1972 ■ Peko Wallsend Metals, Mount Morgan, Australia 1972 ■ Hibi Kyodo Smelting, Tamano, Japan 1972 ■ Norddeutsche Affinerie, Hamburg, Germany 1972 ■ Nippon Mining Co., Hitachi, Japan 1972 ■ Western Mining, Kalgoorlie, Australia 1972

In addition to the Romania-based Baia Mare, a number of Japanese companies represented the largest user group during the preliminary phase of the flash smelting method. The Furukawa deal was probably the first Finnish export deal based on the knowledge of the technology industry after the war reparations. This marked the beginning of the paper machinery industry’s exports, which would go on to become a significant part of the Finnish export industry. However, in the 1950s, paper machinery engineering was still mostly based on the application of old licenses.

The license sales to the Japanese companies were long and exciting projects for the Finns, who were unfamiliar with export operations. The Japanese corporate culture was characterized by extreme silence as well as by trial-and-error testing at the production plants. The Finns waited, wondering how the projects of the Japanese were progressing. They even expected new major competitors to rise in the Far East, but the end result turned out to be long-term and fruitful cooperation.167

Some competitive situations required the negotiation of agreements that would guide technology development and competition in the sector with


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far-reaching consequences. One such agreement was signed by Lurgi and Outokumpu in 1973.

The agreement concerned the fluidized bed roasting technology of sulfidic ore. The fate of Outokumpu’s own zinc process had to be decided during the construction of the Kokkola zinc plant. The company could have easily used its own fluidized bed roasting technology as the basis for engineering, but Jorma Honkasalo – contrary to his company’s recommendation – agreed to sign a non-competition agreement between Outokumpu and Lurgi Chemie und Hüttentechnik on April 28, 1973. The agreement stated:

“Lurgi Chemie has nothing against Outokumpu using, upon its own consideration and at its own operations in Finland, fluidized bed equipment for roasting sulfidic materials in future. Outokumpu is not, however, allowed to build fluidized bed roasting equipment for the roasting of sulfidic materials based on Lurgi designs for third parties without Lurgi Chemie.”

The agreement caused long-term resentment among Outokumpu’s engineers as they believed that Outokumpu had turned down too readily one of the biggest opportunities to sell its technology. Further, Lurgi tried to prevent Outokumpu from spreading the technology it gained from the deal with Lurgi. Outokumpu was only allowed to copy the purchased technology for its own purposes and could not sell it outside of the company. The chief attorney of Lurgi’s patent department wrote similar agreements for each of the sales made. In the absence of alternative suppliers, the agreement was a compromise for Lurgi. It was based on long-term good relations, and in Frankfurt nobody was aware of the fact that the Helsinki engineers would have been willing to apply the technology they had developed in conjunction with the sulfur and cobalt roasters.168

The non-competition agreement remained in force for several decades and contributed to Lurgi’s success as a developer of the zinc fluidized bed process. The agreement did not cover all branches of fluidized bed technology. For example, in the 1990s, Outokumpu’s subsidiary EcoEnergy had its own fluidized bed technology. This, however, was based on

168) Hans-Jochen König and Hans-Georg Thielepape on June 1, 2012 in Oberursel.

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a completely different kind of raw material processing, for which Swedish competitor Boliden also had its own technology.

In the 1970s, Outokumpu and the State Fuel Cooperative (Vapo) intended to build a new industrial branch that used peat as raw material. The Pori pilot plant developed a method where peat coke was used to reduce the ferrochrome process. Suomen Sokeri, which had tried to convert coke into activated carbon, also participated in the tests. The process planned for Tornio’s ferrochrome production did not prove to be economically viable in the calculations. However, in the fall of 1973, peat drying and coking processes were built in Haukineva on the basis of Outokumpu’s research and engineering. A power plant, a horticultural peat plant, and greenhouses were added at a later stage to utilize waste heat. Like

the Ilomantsi peat briquette plant, the project was mainly realized for regional policy reasons. In Ilomantsi, milled peat was used in fluidized bed combustion to produce drying gases. The plants were later shut down as unprofitable.169

In 1973, Kokkola’s pyrite smelter was also closed down as unprofitable. Efforts were made to find new jobs for

the plant’s employees. Eero Löytymäki and Esko Järvinen, who managed the plant’s power division, obtained partial funding from the Ministry of Labour to turn the fluidized bed boiler of the sulfur roaster into a milled peat boiler. Their new combustion technology led to several boiler plant deliveries. At the same time, it was observed that almost any kind of waste could be burned with the new technology. The project formed the basis of Outokumpu’s environmental and waste processing technologies, as well as its technology deliveries and knowledge related to the beneficial use of waste. The new technology became a huge commercial success.

Outokumpu’s success in the modern boiler technology field could not be foreseen. The line of new technology had begun with failure and


It was observed that almost any kind of waste could be burned with the new fluidized bed boiler technology.

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the innovation underpinning only came about following a decade of stubborn perseverance. This case is a clear example of how the customers of a technology development company are not always right, but the market may sometimes be.

Working on boiler projects proved that Technical Engineering had what it took be developed into an independent division. Toward the end of the decade, Outokumpu discussed several times the idea of turning Technical Engineering into an independent engineering office that would coordinate, where appropriate, the activities of external engineering firms and other Outokumpu divisions. The idea, however, was not met with any favor.170

Having failed to develop Technical Engineering into an independent engineering office, at the start of the 1970s, Kauko Kaasila suggested merging process engineering and technology exports into the same division with the Pori research institute.171 By 1970, the research institute in Pori had nearly doubled the number of its employees to 40 before rapidly growing to 250 just two years later, with 165 people working at the pilot plant.172 Until 1967 the division operated directly under the company’s top management, but then became an independent department.

The early 1970s saw a change in the Pori metallurgical research center’s personnel structure that anticipated the impending change in research culture. The number of operating personnel decreased relatively quickly, while the number of clerical employees – especially researchers – increased as the operational focus shifted. The customary pilot plant runs focused on technical-scientific research work.173 Outokumpu’s research operations were unified with the establishment of Outotec Oyj in the 2000s in order to benefit from the removal of internal boundaries.





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A separate entity dedicated to technologyWhere Outokumpu failed to unify its research operations, it did manage to gradually bring its engineering operations together in a single entity. In the summer of 1978, Technical Engineering was merged into Technical Export Division, which together with Outokumpu’s Electronics department created within the group a separate entity dedicated to technology. This restructuring was driven by two factors. First, the persistently low metal prices, which took away the companies’ willingness to invest, and second, the importance of a customer being able to deal with a single, large enough supplier. The latter had come about as trade with the Soviet Union and the Communist Bloc grew and Outokumpu was negotiating with the Russian government to help develop the large Norilsk project in Siberia. The requirements of the

Norilsk project were the decisive factor in the profitability of Outokumpu’s entire technology export operations. The decision to merge the divisions was made, after brief consideration, at the Hotel Metropol Moscow, where CEO Kauko Kaasila informed Eero Löytymäki after breakfast.

The increase in technology sales was a global phenomenon. The re organization

implemented by Outo kumpu in Finland was also implemented in Frankfurt where there was a strong need to develop pilot plant operations. In Germany, Metallgesellschaft’s Gwinner strasse pilot plant facility in the eastern half of Frankfurt, established in the 1940s and 1950s, continued to undergo extensive development in the 1960s and 1970s. According to director Meyer’s vision, process localization was one of the most important areas of expertise in the processing industry. The pilot plant facility’s equipment started to be actively used around the world to test the process equipment and test batches of future customers. At the same time, efforts were made to develop new technologies in cooperation with research institutes and scientists. Among Lurgi’s most important partners were Lothar Reh, a professor from Zürich who is considered to be the father of circulating fluidized bed technology, and Fred Cappel, who developed the sintering process.

metallgesellchaft’s pilot plant facility in Frankfurt had over a hundred testing units and many laboratories.

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At the beginning of the 1980s, the pilot plant facility already consisted of 60,000 m², which included over a hundred testing units as well as many laboratories. About 300 people from various research projects, the central laboratory, management, and several workshops worked in the area. The overall annual budget for the Gwinnerstrasse pilot plant facility increased to 25–30 million euros.

Even though the Gwinnerstrasse pilot plant facility was very big, Lurgi and Outokumpu could not compete under any circumstances with the extensive experimental activities and research of the German steel industry. Its research work was applied research by nature and its starting point were the practical needs of the company and its customers. The administrative organization of the pilot plant reflected this goal, being managed by a dedicated division, which placed it at the same level as the production divisions within Lurgi Group. In addition to the CEO elected from among Metallgesellschaft’s Board of Directors, the division’s Board of Directors in the 1970s included representatives of Lurgi Mineralöltechnik, Lurgi Verwaltung (administration), Lurgi Apparatetechnik, and Lurgi Chemie und Hüttentechnik. In particular, the latter was represented by Professor Kurt Meyer, who was responsible for Research & Development operations. The Board of Directors also included a member responsible for handling special duties. Each of Lurgi’s subsidiaries also had its own Research & Development director, who belonged to the division’s Board of Directors.

In 2001, when Outokumpu Technology acquired Lurgi Metallurgie, most of the Gwinnerstrasse pilot plant facility became part of Outokumpu Technology and then Outotec. Many of Lurgi’s subsidiaries discontinued their research and development operations and their associated workshops and some laboratories were sold to other companies.

As part of Outotec, the Gwinnerstrasse pilot plant continued to develop the sintering and pelletization processes and carried out further testing on its raw materials. In addition to the metallurgy laboratories, the test equipment for circulating fluidized bed technology is also located in the area.

A study on environmental protection began in the 1960s, when Lurgi’s Abgas, Wasser und Luft (AWALU) department investigated wastewater treatment at laboratory scale. The department was established in 1964 as part of Lurgi Apparatentechnik, and its line of business included the

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processing and treatment of both industrial and municipal wastewater, as well as waste incineration, drying, and crystallization.

Lurgi acquired Berlin-Anhaltinischen Maschinenbau (BAMAG) right after the German reunification in 1991. AWALU was subsequently incorporated into BAMAG.

The ever-stricter legislation on environmental protection was already forcing industry to invest more resources in development of environmental protection. The main principle was that research of industrial water treatment processes did not try to interfere with the municipal water treatment field. At that time, research of the waste water treatment work already consisted of the routine application of engineering skills.

Eastern trade and turnkey plant deliveries

T he Norilsk project was a decisive turning point in the development of Finnish technology exports. The construction project for the Norilsk copper and nickel smelters proved highly profitable. It represented not

only a typical example of trade between Finland and the Soviet Union in the 1970s,174 but also of how the Soviet Union’s interest in the West’s knowledge of the metals industry remained unchanged despite the Cold War.

The Norilsk project was based on another industrial project that lasted for decades. After the Continuation War, nickel production at Pechenga continued using technology dating from the 1930s whose detrimental effects on the environment were already starting to be visible. The need to limit environmentally detrimental emissions and make production more efficient was obvious, and in the fall of 1969, a delegation from the USSR Ministry of Non-Ferrous Metals, led by Nikolai Gluschkoff, visited the research institute in Pori. The discussions covered sulfur recovery plants in addition to nickel and copper production technology suitable for the Soviet Union’s purposes. A formal protocol concerning scientific and technological cooperation was

174) Risto Virrankoski 25.9.2012.

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signed during the meeting. The Soviet party soon expressed its interest in Outokumpu’s flash smelting method for the modernization of the Norilsk smelters.

Mining operations in the Norilsk area, which is located in the Taymyr Peninsula in Western Siberia, commenced in the 1920s during the Soviet era. The actual construction of the Norilsk nickel combine began at the end of the 1930s and production was launched just before the outbreak of World War II. The local mining industry became one of the most important raw material suppliers of the metals industry in the Soviet Union. By the beginning of the 1960s, the technology used at the Norilsk production plants was quickly becoming outdated.

The Soviet Union’s trade policy was based on the stipulation that large state agreements were made in cooperation with its trading partners’ state actors. In Finland, the state could not participate in the trade or trading agreements of independent companies. During the trade negotiations in 1972 and 1973, Techmashimport – the Soviet foreign trade association – expected Outokumpu to handle the operations related to the offer as well as the engineering and construction work of a huge industrial plant. The project was, however, too big for Outokumpu. As a result, Outokumpu turned to Ahlström and Rauma-Repola, other Finnish companies operating in the metals industry, and they began to cooperate on the project. When drawing up the agreement during the negotiations, both Outokumpu and Ahlström had doubts about its profitability and wanted to withdraw from the project. Rauma-Repola’s director Väinö Lassila, who had extensive experience in Soviet trade, led the negotiations. He was in favor of continuing the project.

Making a commercial offer to the Soviet Union required accurate forward planning. The offer included a huge number of engineering documents drawn up at Outokumpu by Technical Engineering’s director Eero Löytymäki and project manager Jorma Kerttula.

making a commercial offer to the Soviet Union required accurate forward planning and a huge number of engineering documents.

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The main agreement concerning the delivery of the Norilsk industrial plants was signed in 1974, after negotiations had stretched on in the face of pressure for a higher price as a result of the oil crisis. Oil was one of the main import items from Soviet Union to Finland and the trade was bilateral, so oil price had a direct effect to the negotiations. The Soviet Union required a single responsible signatory from the Finns. Instead of Outokumpu, Rauma-Repola, or Ahlström, the choice fell to METEX, an export cooperative established to continue the operations of the War Reparations Delegation at the beginning of the 1950s. The coordinator of Finnish trade with the Soviet Union during the 1950s, METEX’s importance had begun to decline by the end of the decade. When Kauko Uusitalo, the director of METEX, signed all of the trade agreement documents on behalf of the Finnish participants, the Norilsk deal effectively rehabilitated the cooperative and restored its ailing fortunes.

As per the agreement, the largest Finnish supplier was Rauma-Repola with a nearly 60% share of the 1.1 billion Finnish markka trade agreement. Outokumpu’s initial share was 18% for which Outokumpu delivered flash smelting licenses, engineering work for metals processes, and automation systems for the plants. The supplementary agreement signed a year later increased the overall cost estimate for the project to 2 billion Finnish markkas. With the integration of a converter and an anode foundry into the agreement, Outokumpu’s share rose to 300 million Finnish markkas.

Even though the Soviet party was responsible for the construction of the production plants, Norilsk was a highly profitable project for both Outokumpu and the other subcontractors involved, despite the fact that the technology delivered to the customer was more advanced than what they would have needed.175 The construction of the combine at Norilsk was a multinational project where Finland had a major role, also thanks to its connections with other suppliers. For instance, the nickel plant’s instrumentation was from Siemens, but spare parts maintenance was handled entirely in Finland.

Based on the experiences of the Norilsk project, Ahlström, Outokumpu, and Rauma-Repola established the AOR Industries Group in 1978. Trade with the Soviet Union had to be centralized at a state-level division, so AOR took on the role in Finland. The new company’s management needed


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someone capable of talking with all parties and building a constructive atmosphere within the organization. The choice fell to Tapio Tuominen, who guided the joint venture for about five years.

AOR was established to handle the construction work towards the end of the Norilsk project. The situation was peculiar in that, as AOR’s organization was formed during the engineering phase of the Norilsk project with the people they already had from Ahlström, Outokumpu, and Rauma-Repola, the personnel did not change at all in practice despite the new name. The Soviet party, however, accepted this without problems.

Efforts were made to continue AOR’s operations after Norilsk was completed by looking for new large construction projects, offering the company’s knowledge to Poland and the Soviet Union in particular. AOR’s vision was based on overall engineering and turnkey plant deliveries, which included process engineering and structures. The same concept was also offered to the West. In Panama, for example, negotiations progressed to a relatively advanced stage, even though no deal was made in the end. AOR was having difficulties and its vision was becoming outdated. Norilsk remained the Group’s only major deal.176

Nevertheless, at the beginning of the 1980s, this approach was still suitable for trade with Communist Bloc states and developing countries. In the West, however, it was already customary to divide construction projects into parts and to tender out one part at a time. When Outokumpu’s technology sales manager Rauno Seeste, who had approved the creation of AOR, died at the beginning of the 1980s, he was replaced by Raimo Monni, who opposed the idea of cooperation with Outokumpu’s competitors. As a result, AOR’s operations began to decline and following the financial collapse in the Communist Bloc, the volume of orders quickly evaporated. AOR also lost one of its partners when Rauma-Repola collapsed and was taken over by Ahlström and Outokumpu at the end of the 1980s.

AOR was not the only company with this kind of corporate structure in Finland at the end of the 1970s and beginning of the 1980s. A similar corporate structure had already been created in the paper machinery industry about ten years earlier, when Tampella, Valmet, and Wärtsilä


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signed the TVW agreement to promote the sales of their machines for the paper industry and to increase their financial profit by combining the resources for product development, engineering, production, and marketing. The difference between the AOR Industries Group and TVW was that TVW was mainly a marketing company operating in the North American market. Equipment deliveries were handled by paper machinery suppliers independently.

Both AOR Industries and TVW faded away as the international market structure changed very quickly at the beginning of the 1980s. Technology-purchasing companies strived to compete for technology suppliers and there was no longer any willingness to order large industrial plants. Finnish suppliers also had to compete with each other, which obviously prevented new joint ventures from being planned.

The termination of the Norilsk project posed a series of problems for Outokumpu. As the project neared its completion, the only remaining potential sales were those to Bulgaria, Ireland, and Oman. Outokumpu’s entire technology business organization had to be modernized, but the options were limited. New product lines had to be developed, the natural consequence of which was the establishment of a product line organization within the Technical Export Division. Outokumpu’s mechanical engineering business was launched around the same time.177 The aim was to find work for the maintenance personnel and mechanical engineers of decaying mines, so that they could use their professional skills in a new context.

Despite the pessimistic outlook, Outokumpu’s technology exports continued to flourish in the 1980s. This was due to the realization of delayed or deferred flash smelter projects as well as to the fact that whole plants were now being sold in addition to licenses, equipment, and processes. The single most important deal may have been the Amacan mine and its concentrator on the island of Mindanao in the Philippines. Rauma-Repola and Kone also took part in the project. During the decade, a series of ferrochrome plants for stainless steel producers were built in Europe, the Far East, and India. Ferrochrome plant deliveries were one of Outokumpu’s single most important sources of revenue in the 1980s. A


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selling argument for ferrochrome plants was that Outokumpu’s technology had closed electric furnaces, which meant lower energy consumption and environmental emissions. This is something the competitors could not offer.178

Germany’s trade to the Soviet Union was also based on high technology knowledge exports to single industrial plants. These projects were not affected by export restrictions as they were mainly related to the construction of basic industrial processes. For almost the entire duration of the Cold War, Lurgi had a sales office in Moscow that maintained contacts with the state industry. Most big companies in West Germany, such as BASF, Degussa, and Bayer, had sales offices in the Soviet Union, and by the beginning of the century, had also established subsidiaries in most East European countries.179

For example, Lurgi, Salzgitter, Korff Engineering, and Siemens participated in the tender for the engineering of an iron pelletization plant and a MIDREX direct reduction plant. The customer signed separate agreements with various companies and ordered the pelletization plant from Salzgitter, with both Lurgi and Siemens serving as subcontractors. The MIDREX plant was ordered directly from Lurgi Metallurgie.

The distribution of work for these agreements was simple. The German party was in charge of engineering, equipment, installation, and work supervision. The Soviet party, on the other hand, had to build infrastructure, buildings, pipelines, and some of the largest pieces of auxiliary equipment, which were made in compliance with the Soviet GOST standard. Mekhanobarcheme and Gipromesh were involved in engineering and practical construction work, respectively.

The economic and political structure of the Soviet Union and its satellite states began to change rapidly in the 1980s. In the early years of the decade, Outokumpu sealed major deals for the Apatity concentrator and the renovation of the Pechenga concentrator. The nature of Soviet trade suddenly changed in 1986, when the reformer Mikhail Gorbachev, whose glasnost and perestroika policies launched a new era in the country’s


179) Hans-Jochen König October 11, 2011.

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economy, was elected as the new Party Secretary. Over the course of the 1980s, Outokumpu developed plans for the construction of a copper scrap combine near Leningrad (today St. Petersburg) with the Soviet Ministry of Non-Ferrous Metallurgy. In the new economic situation that followed the collapse of the Soviet Union, the decision was made to abandon the project as it was seen to belong to times of stagnation,180 but the project was realized during the 2000s.

In 1984, Outokumpu decided to split the Technical Export Division into two separate divisions, namely the Electronics and the Mechanical Engineering divisions. The old name Technical Export Division was discontinued, and technology sales became the new Outokumpu Engineering Division.

Selling technology to competitorsThere were two different methods to compete in the global market for metals production processes. Some companies, such as International Nickel Company of Canada, closely monitored who had possession of their knowledge and kept their product development confidential from competitors. Another option was to license their processes and create a large knowledge cluster for process development work.

Technology sales were also a fundamental issue that required clear guidelines. How could a production company that sold its best knowledge to competitors be competitive internationally? Profitability was based on the consideration that the company’s production plants were always slightly ahead compared to the technology to be sold. Sales of the copper upcasting technique were hotly debated at Outokumpu in the 1990s. Both the Upcast and Cast & Roll technologies were sold by Castform, an Outokumpu subsidiary. However, Outokumpu’s own copper production used and developed the same technologies and was reluctant for them to be sold to competitors.

The situation caused significant controversy within Outokumpu. The fact that technology was being sold to competitors through agreements under which Outokumpu’s engineers had to keep confidential all information


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about the competitors’ processes was the subject of extensive debate within the company. As a result of the discussions, Outokumpu’s management drafted a ‘black list’ of technologies that were not to be sold or disclosed to external parties.181

The balance between selling technology and protecting it was based on studying the competitors’ operations and understanding that competitors also had their own Research & Development organizations. Their work generated competing technologies whose launching on the market could not be prevented. Among the main competitors for Outokumpu’s flash smelting method were Mitsubishi from Japan, International Nickel Company of Canada and Noranda from Canada, Asarco from the USA, and Mt. Isa from Australia. Most competitors, however, only had one key technology, which constituted the basis for their sales. Outokumpu’s sales range was based on the marketing of several key technologies. The company had gathered knowledge from various sectors into the same division, whose personnel exceeded the critical mass of knowledge. The same personnel were able to plan a wide range of different products and sell them to the customers.182

Flash smelting congressesMetals production employs complex technology systems whose development requires basic scientific and technological research. Various processes can be developed by refining their use to increase efficiency, but there is always the possibility – sometimes fully unforeseen – that something new will appear. Basic scientific and technical research has collected an amount of information that, if processed into a functional format in an economically favorable situation, gives the possibility to contemplate other types of policy

181) Markku Kytö, November 8, 2011.

182) Markku Kytö, Asmo Vartiainen May 21, 2012.

Sales of the copper upcasting technique to competitors were hotly debated.

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options. This is why the development of metals production and of the processing industry cannot be halted by restricting the adoption of certain technologies or the transfer of technology.

In many cases, the effect of restrictions on technology transfer proved to be the opposite of what was intended when setting the restrictions. This was so with South Africa, where the government’s Apartheid policy resulted in severe international restrictions on technology sales and transfer. Finland respected the restrictions scrupulously, but this would have an unexpected impact within a few decades.

The embargo on scientific and technological sales and transfer to South Africa forced the country to develop its basic scientific and

technological knowledge. Once it was at a sufficiently high level, South Africa was able to develop its own processing industry to the highest international level, for example, in synthetic fuel production and metals processing. Mintek, a state research institute established in the country to support the minerals and metallurgical industries, became one of the best in its field worldwide. At

the turn of the 21st century, Bateman, a South African engineering firm later merged into Tenova, is now at the turn of the 21st century one of Outotec’s main competitors.

Outokumpu’s disclosure of its technological knowledge – at least to its license holders – came about in response to the debate about the disclosure of proprietary information to its competitors. During the process engineering of its zinc plant at Kokkola, Outokumpu investigated the possibility of using Imperial Smelting’s zinc manufacturing process. Tapio Tuominen, who was in charge of the discussions with Imperial Smelting, part of Australia’s Rio Tinto – Zinc Corporation, noticed that the company held IS congresses on a regular basis in order to receive direct customer feedback from the companies that were using the process. In the 1970s, the companies that held or were trying to attain a dominant market position worldwide organized

The First International Flash Smelting Congress was organized in 1972 just as Outokumpu’s technology exports started to pick up.

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similar events in order to develop their positions and create cooperation networks. In Finland, for example, Valmet organized similar seminars on paper machinery on a regular basis.

Outokumpu’s First International Flash Smelting Congress was organized in Helsinki in October, 1972,183 just as Outokumpu’s technology exports started to pick up and the Technical Export Division became a profitable independent division. The congress, hosted by Jorma Honkasalo, was attended by the twelve customers that had obtained a license up to that point as well as by Petri Bryk and John Ryselin – the inventors of the method.

The Finns and the Japanese stole the show at the first congress. S.K. Biswas and H. Duran presented Hindustan Copper’s new smelter and a Turkish smelter, respectively. The other presentations about smelter operations were given by attendees from Japan. Outokumpu’s employees gave all but one of the presentations related to the theoretical management of the flash smelting method – and continued to do so at future congresses. The aim was to highlight the fact that the process was controlled by Outokumpu all the way from its scientific foundations to its practical applications. The event also gave Outokumpu the opportunity to present its own operations.

The second congress was held in 1974 in Japan, where the first flash smelting license had been sold twenty years earlier. The invitation to Japan was issued by Masamichi Fujimori from Sumitomo Metal Mining Co. After the congress in Japan, further events were organized once every three years, often in two locations, as the program included a visit to the hosting company’s smelter in addition to presentations by license holders and researchers as well as panel discussions. The meetings quickly became a success as everybody felt that they were benefiting from each other’s experiences. Outokumpu’s license sales agreements contained a clause under which license rights and restrictions were to apply to the improvements carried out at each production unit. In other words, all flash smelters around the world worked to develop the process. The procedure gave rise to some debate as people feared that, with the disclosure of information, their knowledge would leak to competitors. However, the end result was as expected. There were also presentations related

183) Proceedings of the First International Flash Smelting Congress, Finland October 23–27, 1972. Rauno Seeste & Tapio Tuominen Eds. Satakunnan Kirjateollisuus Oy, 1972.

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to environmental protection or the organizational development of companies, but they were just a few compared to those about process technology and metallurgy. Right from the start, Outokumpu made the important decision to publish the presentations of the flash smelting congresses as books. These publications were not openly available and remained in the license holders’ possession. Therefore, process development became an integral part of the license holders’ scientific literature related to research in the sector.

Although the congresses were not open to academic researchers or consultants, part of the research was gradually published thanks to the cooperation between companies and universities. This has set pressure on basic research in the sector.

The congresses proved to be popular and Outotec continues to organize them on a regular basis for its flash smelting customers and ferrochrome producers as well as for the users of alumina calcination technology.

The beginning of the 1970s brought with it a potential new adventure for Outokumpu. After the first flash smelting congress in 1972, a Romanian state company operating in the metals industry approached Outokumpu with a simple proposal based on the recognition of the borders during the Cold War. The Romanians thought they had the possibility to develop, maintain, and market their own flash smelting method. They proposed to divide the rights to the new method between themselves and Outokumpu. They would be responsible for sales and marketing behind the Iron Curtain while Outokumpu would be responsible for sales and marketing in the West.

The proposal led to Rauno Seeste and Tapio Tuominen traveling to Bucharest to clarify the matter. The discussion, however, did not yield any results as there were disagreements even about how to conduct the negotiations. All negotiations were held in English as requested by the author of the presentation, but the agreement drafts were drawn up in German. Due to the language barrier, it was often difficult to understand what the discussions were about. The entire structure of the negotiations was unclear for the Finns. However, it was obvious that the Romanians could not tackle the related engineering issues by themselves. Therefore, the choice was easy: Outokumpu’s representatives decided to solve the problems by simply going home.184


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Oil crisis and stricter energy-efficiency requirementsThe 1960s are often described as a golden period of continuous growth. After the expansion of the Finnish export industry to new technology sectors, the devaluation that hit Finland in 1957 and the subsequent political decisions in support of industrial investments marked the start of a period of major changes in the industry that lasted until the end of the 1960s. The favorable situation changed abruptly at the beginning of the 1970s, when energy issues and the need for environmental protection began to have a material impact on both industrial and human operations.

The economic factors that would determine the development of the global economy in the 1970s began in 1973 when the upward trend of the global economy came to an end within a few months. The change was surprising as economic development for the whole year was still positive and the gross domestic product of the member countries of the Organisation for Economic Co-operation and Development (OECD) grew by about 6.5%. However, inflation began to skyrocket in summer 1973, affecting especially the price of raw materials.

One of the most important reasons behind the volatility of the global economy was the phenomenon known as the oil or energy crisis, which started after the Arab-Israeli conflict in the fall of 1973. The price of crude oil increased fivefold over a short period of time and the price of other raw materials skyrocketed, driven by the rise in energy prices. The crisis became a global catastrophe that not only affected energy prices, but also those of the raw materials for food and feed, which rose by 56% within a year. For the product group including metals, wood, and crude rubber, the price increase was a staggering 105%. This had a major impact on the industrialized world.185

185) The figures are from the raw material price index of the HWWA-Institut für Wirtschaftsforschung, Tauno Tepora, Metallien hintakehityksen taustatekijöitä ja tulevia näköaloja, Presentation at the Economic Geology Negotiation Days in Olari, April 18–19, 1974.

The oil crisis and following long-term recession led, however, to rapid technological development.

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Even though the oil crisis slowed down economic growth and caused a long-term recession, its effects on industrial planning and raw materials production were actually positive. As in times of war, the economic crisis led to rapid technological development in an attempt to meet the evolving requirements of the global economy. At the same time, long-forgotten environmental issues became again important social and political factors.

The impact of various crises on the metals industry is significant. For example, the price of gold follows the development of the international situation (graph from Outotec’s archive).

GOLD PRICE 1913–2009 (USD/oz.)

The high levels in prices during World War I and World War II are clearly visible, but the actual peaks in the prices occurred after the oil crisis in 1973, followed by a decrease and a new increase in prices due to the collapse of the Soviet Union.

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Growing environmental awareness

E ven though the Industrial Revolution had already highlighted the limited ability of the environment in major cities and industrialized areas to withstand the impact of human activities, these remained

local problems. After World War II, the environmental problems caused by industrial and urban development grew into untenable measures. This was partly due to the fact that during the war, technology had been mainly developed in order to increase the efficiency of industrial output. Known pollution problems had been generally swept under the carpet as production changed focus and was geared toward the war effort. For example, the use of coal combustion and liquid fuels became increasingly common at a time when efforts should have been made to use cleaner energy sources. Methods and materials continued to be used despite their effect upon the environment being known. For example, tetraethyl lead, whose harmful effect was already well known in the 1930s, became a common additive in gasoline in many countries.

World War II clearly prevented environmental issues from being taken into account in industrial operations. During the reconstruction and the Cold War, the problem was not a top priority for decision-makers. The consequences of the indifference were felt within a few years. Among the first known catastrophes was the Great Smog of 1952, which nearly brought London to a halt. It originated from the combined effect of air pollution and variations in weather conditions and took the lives of thousands of people and caused incalculable financial losses. Similar phenomena soon became increasingly common in the largest cities of the industrialized world, where traffic overtook industry and energy production as the worst air polluter. Soil and water pollution also began to affect everyday life throughout Europe. The problem was at its worst in the most densely populated areas. There was a general saying in the 1960s that one could develop a film by dipping it in the River Main, passing through the industrial areas of West Germany.

As environmental issues began to have an impact on everyday life, environmental protection became a political question. The industrialized world began to legislate on environmental protection and this legislation had an immediate concrete impact, more so than society’s growing acceptance

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of the need for environmental protection and recycling. A clear and visible connection between industrial emissions and pollution had to be found in order for the industry to be forced to meet the emission limits. The first restrictions on process emissions related to the protection of nature and the environment were implemented in 1970 in Botswana, where Outokumpu delivered a nickel smelter as well as the sulfur recovery equipment developed at the pyrite smelter in Kokkola. An essential requirement of the World Bank, which had been financing the mining industry in Botswana, was that sulfur compounds must not be discharged into the Kalahari Desert.

In Germany, Staubtechnik, a professional publication specialized in dust prevention in industry, was revived by the Association of German Engineers (VDI) after World War II. However, at least ten years had to pass before environmental protection began to receive any attention at either state or federal level. Reinhaltung der Luft (Protecting the Air), a new professional publication issued as a supplement to Staubtechnik, was founded in 1955 by VDI. As far as is known, the Bundestag, Germany’s constitutional and legislative body at the federal level, only officially discussed air protection for the first time a year later.

The VDI established its air quality monitoring team in 1957 and the first relevant standards were issued as early as the following year. VDI 2091 Staunauswurf von Dampferzeugern uber 10 t/h Leistung (about dumping steamship sewage), VDI 2090 Katalog der Quellen fur die Luftverunreinigung (about sources of air emissions), VDI 2094 Zementindustrie (about the cement industry), VDI 2097 Braunkohle-Rostfeuern (about heating with lignite), and VDI 2092 SteinkohleRostfeuerungen (about coal heating) were all published in 1958. A similar workgroup for the prevention of industrial noise began operating in 1964.

By the start of the 1970s, work had already been carried out on the further development of standards and the supervision of industrial processes was starting to get tighter. For a long time, the industry was able to abide by the given standards by developing its production and processes as well as by gradually modernizing its production technology. Even though it would have been possible for engineers to quickly develop the sector, the development of environmental technology was delayed due to lack of funding.

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A crucial question has been whether engineering firms can maintain their knowledge in those technology sectors that are not ready for commercialization but may represent vital knowledge in the future as the industry develops. It is about the interaction and division of work between universities and research institutes on one hand and organizations carrying out practical engineering work on the other.

The idea that the world’s natural resources will run out was introduced by the Club of Rome, a research group founded in 1968. The group dealt with issues such as the global economy, human population growth, and the adequacy of natural resources. The idea raised considerable public attention when it was published in the report Limits to Growth in conjunction with the third St. Gallen Symposium, which was held in Switzerland in the summer of 1972.186

Even though the ideas presented seemed far-fetched, the report’s proposal to prevent pollution and save natural resources was taken seriously throughout the technical and industrial world. In Finland, the matter had already been the subject of extensive debate at the end of the 1960s, having transcended the student movement level to be a matter of concern for the country’s industrial and scientific communities. For example, The Finnish Academy of Technology, established in Finland as a technological and industrial science academy at the end of the 1950s, organized the first seminar on environmental issues as early as January, 1972.

At the beginning of the 1970s, people were at least aware of environmental contamination and the world’s limited natural resources. The mood among the general public was changing. The first UN environmental summit was

186) The series of annual meetings dealing with international politics and economy had begun two years earlier as a consequence of the radical student movement. The meetings were organized by the International Students’ Committee (ISC), an independent, non-profit association of students of the University of St. Gallen.

The idea that the world’s natural resources will run out was introduced by the Club of Rome, a research group founded in 1968.

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held in Stockholm in 1972. Over one hundred countries participated in the preparation of the summit.

At the summit, the committees discussed three main topics: the residential environment as well as educational, communication, social, and cultural issues related to environmental protection; the use, development, and environment of natural resources; and major international pollution and organizational issues. An unprecedented number of protests and political demonstrations were organized in conjunction with the summit. The event was the first time that radical environmental organizations and Vietnam War protesters had showed their strength in Europe. The largest security operation in Sweden since World War II was deployed for the occasion.

A total of 350 basic documents – or 12,000 pages – were drawn up as a result of the meeting, and a 25-point environmental declaration was approved at its conclusion. Statement 21, which emphasizes the sovereignty of states over their natural resources and the use thereof, emerged as the most important point of the declaration. At the same time, however, it was pointed out that each country was responsible for ensuring that its actions would not damage the country’s living environment or the living environments of other countries. The meeting was the starting point for the United Nations Environmental Program.

Turning discussions and announcements into practical measures also required a change in both global and national economic conditions and production systems. Fundamentally, the mining and metals industry could not implement changes to its production systems based solely on principles as their decision-making was guided by economic realities. Further, the restructuring of industrial investments required significant changes in the global economy. One such change occurred unexpectedly during the following summer, when energy prices quickly rose as a result of the Oil Crisis. Energy-saving measures were taken immediately under strong financial pressure, while those for the reduction of industrial emissions were implemented over a longer period of time.

The switch to environmental awareness and sustainable production requires cultural changes rather than single events if they are to occur. The changes in sound levels are a good example. In many developing countries, noise has traditionally been a sign of life and activity, in particular of industrial activity

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and potential prosperity, while silence has often indicated economic death. This was also a question about the positive influence that the industry was expected to have on social wealth as well as about preserving industrial competitiveness. In some countries, process engineers were even required to achieve a certain noise level until the 1980s. So noise was not only acceptable, but expected, as after all, it was also a question of investment profitability. In the face of this intransigence, the only way to make a difference has been legislation and in this regard, the situation in Europe only changed after the 1970s.

In the 1970s, process engineers in both Germany and Finland already had the tools to reduce or eliminate industrial emissions into the environment. The development of automation and system engineering had a huge impact as it allowed better control of complex processes. This also resulted in significant savings through the recovery of substances such as sulfur and heavy metals that would have previously spread uncontrolled into nature. After all, several emission types could actually be valuable resources if recovered. However, the industrial processes had to be modified or totally changed at the turn of the 1980s with the formulation of the concept of emissions-free production. VDI’s environmental technology development division was established in 1987, and the main theme at the engineering conference held in Aachen two years later was Technology to the Environment’s Rescue.

Taking environmental issues into account became a routine for engineers, at first especially where clean technology was needed the most. For example, a special division at Klöckner-Humboldt-Deutz, one of Europe’s leading manufacturers of diesel engines and heavy-duty transportation vehicles, was already designing wastewater treatment technology at the beginning of the 1970s. The company manufactured water treatment equipment suitable for transportation by truck, among other things. This equipment and its associated knowledge were sold internationally throughout the 1970s.

The development of automation and system engineering had a huge impact on environmental protection as it allowed better control of complex processes.

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For the first time, new technologies also provided a real opportunity to do something about, for example, the environmental impact of mines. The development of the occupational safety for the production plants’ personnel also played a role in this. For example, labor unions put pressure on their members’ employers to make their working environments healthier and safer. This also highlighted the impact of legislation on further industrial development.

The environmental problems caused by Outokumpu’s old copper mine reached their peak at the beginning of the 1950s. Measures were taken as soon as the country’s financial situation allowed it. The worst polluter of all – an old concentrator – was closed in 1954, but by then the environment had already been damaged. Over the next twenty years, this would lead to multiple damage claims being filed and eventually a juridical investigation into the plant’s contamination of the local groundwater. Eventually the Attorney General ordered the company to solve its wastewater problems without delay. Even though the measures to clean the most polluted water bodies led to significant improvements in the environment by the end of the decade, clear signs of contamination remained. The situation caused by the contaminated groundwater soured the relationships between local residents, environmental protection activists, and Outokumpu for a long time.

The government’s intervention into the pollution caused by Outokumpu and similar cases in Finland led to a change in industrial culture which in the long term would help prevent further environmental damage. Outokumpu’s negative experiences with the environmental impact of its mines led to changes in the planning of the operations of new mines during the 1950s. The need to process wastewater was already taken into account during preliminary process engineering and the recycling of process waters from mines was already well organized at the beginning of the 1970s. For example, the rate of recycled process waters at the Hammaslahti copper and zinc mine in Pyhäselkä was a perfect 100%.

Social pressure also forced the mining and metals industries to organize themselves to address environmental issues. An Environmental Protection Committee was established at Outokumpu’s headquarters in 1969 to maintain relations with the authorities as well as to provide assistance and guidance in matters related to the lines of business of various plants.

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Chief engineer Erkki Hakapää, who was transferred to the headquarters after serving as Outokumpu’s mine manager, was also put in charge of environmental protection. Only two years later, a new full-time position for an environmental protection engineer was created within the company. Sakari Seeste, who had served as chairman of the Environmental Protection Committee, was the first to take on the role.

During the 1970s, Outokumpu initiated a program that aimed to ensure its continued environmental sustainability. Its goal was to be a good corporate citizen that cared about social welfare in a comprehensive manner. This was already a given for the personnel of the various production plants as, for example, the one in Harjavalta was next to a soccer field. Direct feedback was promptly received on all emissions.

The company’s environmental protection organization was restructured at the beginning of the 1980s to meet the requirements of the new environmental legislation and to obtain the necessary environmental permits. The restructuring led to the creation of the position of environmental protection director within the company. In addition to environmental issues, the director’s responsibilities included occupational health and safety. The responsibility for environmental protection arrangements had already been transferred to those plants that were taking the environment into account as an integral part of their operations.

For the Finnish raw material refining industry, the increase in environmental awareness was an excellent reason for developing new technologies. Environmental protection was given its own section in Outokumpu’s annual report for the first time in 1980. One of the topics discussed was the completion of the exhaust gas cleaning system and wastewater processing equipment for the pilot plant at the metallurgical research center in Pori. In addition, it was acknowledged that the Kokkola cobalt plant had obtained good results by improving the process and enhancing raw material processing, and that the Harjavalta plant had modernized copper concentrate handling.

Finland did not have many resources for industrial process design. However, major developments in automation and system engineering made since the 1960s could now be put to the service of building cleaner production systems. For example, Finnish industry had always tried to use energy

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sparingly due to the scarcity of resources and this knowledge could now be sold to the great industrial powers, which were dealing with energy issues for the first time. Environmental protection technology was becoming a new business. However, its development into a commercially profitable business of its own took some two decades. In the late 1980s, Outokumpu attempted to become one the three most important designers and suppliers of energy production plants. However, this project was never realized. At the same time, efforts were made to develop scrap metal processing and municipal waste management services. For example, the agreement signed with Suomen Ongelmajäte for the construction of a hazardous waste processing plant in Riihimäki, Finland, represented a significant expansion for Outokumpu. The company name was later changed to Ekokem.

The construction of the plant began in the spring of 1982. Even if it relied on basic Danish technology, the process was a remarkable pilot project in Outokumpu’s application of environmental engineering knowledge. Drawing on the experience gained during the previous few years, the process was further developed, including, for example, a new type of barrel crushing line.

The Sulfred desulphurization process and the slag wool process for mineral wool, whose handling proved to be an important part of construction waste processing as the post-war building stock began to need renovation, were also developed during the decade. However, the commercialization of both methods failed. The company also developed other technologies for processing construction waste and scrap, such as the metal and metal alloy extraction technology based on X-ray analyses, the technology for the magnetohydrostatic separation of metals, and technologies for exploiting metal waste and making it harmless.

The tests carried out with the Kokkola sulfur plant’s roaster showed that almost any kind of waste could be burned using fluidized bed technology. When the scrubber based on the company’s own design was added to the equipment, Outokumpu made a significant step forward in the development of waste combustion technology.

The USA, where the growing environmental movement was putting pressure on industry to modernize its structures and operations, was now the largest growing market area for scrap metal and municipal waste processing. Environmental engineering emerged as the core of Outokumpu

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Engineering’s 1989 growth strategy. In order to achieve this goal, Outo-kumpu’s market share was increased through a series of acquisitions and by developing the operations of existing subsidiaries.

In the 1990s, legislative and social demands in the industrialized world, that is, in Europe, Japan, and North America, led to industrial emissions being taken into careful account at the process engineering phase. Many of the environmental protection technologies were expensive and for this reason, industry was slow to adopt them for many years, but environmental protection became a mandatory part of industrial modernization at the turn of the 21st century. A forerunner in the development of emissions-free industry was Japan, which due to its demographic and industrial growth had already stretched its natural resources to the limit shortly after World War II.

Due to the increasingly strict environ mental protection requirements in Europe and North America, the processing industry moved to coun-tries where environmental protection had yet to become an issue. Industrial investments in fast-developing China and India as well as in South America were partly based on the fact that the need for expensive environmental technology could be ignored when making the investments. However, environmental protection awareness quickly increased in developing countries as well.

Kennecott – an American copper producer – had to discontinue its operations at its Garfield smelter in Salt Lake City upon request by the authorities in the mid-1980s. The company’s production license was only renewed when the old technology was replaced with new, clean technology. Kennecott had been developing a new converting technology since the end of the 1970s and smallscale tests began in the mid-1980s. The method gave in the first place rise to a patent dispute between Kennecott and Outokumpu, but the dispute was settled when Kennecott and Outokumpu agreed to work together, and as a result of the cooperation, a new, clean flash converting method was developed at Outokumpu’s research center in Pori. When combined with Outokumpu’s flash smelting method, it became

Environmental engineering emerged as the core of Outokumpu Engineering’s growth strategy.

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the world’s cleanest copper production process, which replaced the old Peirce-Smith converting technology with a closed process. The technology was commercialized at Kennecott’s own smelter in 1995 and marketed after that by Outokumpu as Kennecott-Outokumpu Flash Smelting – Flash Converting process.

Kennecott’s new plant in Utah was indicative of the fact that by the 1990s, Europe was no longer leading the way in environmental protection development. This gradually began to come up during normal interactions with customers. For example, during a presentation about one of its processes to some Indian customers, Lurgi used a large plant as reference site to which the Indians’ first comment was that the plant was dirty and untidy and that they did not want anything like that for themselves.187

Since the beginning of the 21st century, both China and India no longer approve the construction of polluting industrial plants. For example, China requires the use of European standards in its new production plants and has purchased the flash smelting – flash converting method for copper processing. In both countries, the problem is the huge volume of the existing – and often outdated – industry. Even though emissions have already been reduced considerably, it will take years before this starts having a concrete effect on the environment.

The Oil Crisis of 1973 that led to an increase in raw material prices caused the metals trade to thrive. Confusion prevailed in the global metal market after the start of the Oil Crisis, partly due to investors’ growing interest toward raw material stock exchanges. For example, about a fifth of the amount of gold available for global trading ended up in investors’ hands. Similarly, the prices of non-ferrous metals were expected to quickly increase after the Arab countries started investing their oil revenues in the stock market. However, price development was stabilized by the Soviet Union, which was increasingly present in Western markets, particularly as a gold trader, to increase its currency revenue. In 1973, sales to the Soviet Union totaled 280 tonnes and the amount of gold traded was 1,450 tonnes.188

187) Hans-Jochen König, Hans-Georg Thielepape on June 1, 2012 in Oberursel.

188) Tauno Tepora. Metallien hintakehityksen taustatekijöitä ja tulevia näköaloja. Presentation at the Economic Geology Negotiation Days in Olari April 18–19, 1974.

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As a result, between 1973 and 1974, while the rest of Finnish society was fighting against the long-foreseen recession, the operations of Finnish metals industries were highly profitable. This was due to the high prices of copper and zinc on the global market. However, the financial reality of the depression following the Oil Crisis soon began to depress the metals industry as well. Outokumpu, which had been receiving stable support from the state, had to pay more attention to its financial management, and as a result the company launched a general savings campaign under the name ‘Operation Laihia’.189

Outokumpu’s financial situation remained relatively weak until the early 1980s, mainly due to the low profitability of stainless steel production and the large ongoing investments in the construction of new production plants. The company had no resources left for the development of its other business lines. Both the financial structures of the industrialized world and Outokumpu’s business environment changed radically in the 1980s. As a result, Outokumpu’s various divisions were incorporated in 1990 and their responsibility for their own operations increased significantly.190 After their incorporation, the technology sales companies started looking for growth opportunities.

The nature of international trade changed quickly at the beginning of the 1980s in two important ways. On the one hand, the third world countries that had experienced a period of favorable economic development in the 1970s descended into economic crisis, thus preventing industrial investments. Meanwhile on the other hand, new economic liberalism that emerged in the USA led by Ronald Reagan and in the United Kingdom under Margaret Thatcher led to the opening of the international financial markets. The business world and the industry were under pressure to change management and industrial structures in response. Thus the early years of the decade were characterized by high volatility in the financial markets, which was nearly impossible to forecast.

The European Economic Area, which had been developing since the 1950s, became stronger in the 1960s, when the newly established European Free Trade Association (EFTA) launched the economic integration process. The European Union (EU) was created with the Treaty of Maastricht in 1992.


190) Risto Virrankoski September 25, 2012.

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Under the leadership of France and Germany – the Union’s economic powers – the Union quickly expanded to the East and to the North. Finland joined the EU as a full member in 1995. Europe’s national customs borders were eliminated as a result of the Schengen Agreement in 2001, and most European countries joined the euro – the common currency – at the turn of 2001 and 2002. Even though this was a revolutionary turning point in European economic history, no major changes occurred as a result in either the metals industry or the mining industry. The mining industry had been operating in an international environment for decades, and raw material trade had its own established patterns.

Perhaps the biggest surprise in Finland’s changing industrial environment occurred when natural resources were again made available for research. Finnish mining legislation made soil surveying possible, not only for domestic companies, but for international companies too. Just like in the 1930s, intensive ore prospecting of the geological formations of Eastern and Northern Finland was conducted, there being grounds to believe that economically viable ore bodies could be found in Finland. Soil surveying proved its worth once again. Even though the process of ore prospecting was very expensive,191 the information on the regions’ bedrock acquired through long-term and systematic geological research made the work profitable.

Geology and international metal trade started blooming in the mid-1990s, when China, which was enjoying years of sustained high economic growth, began to actively purchase metals around the world. The price of non-ferrous metals rose quickly, and mining operations became highly profitable no matter the distance the ore had to be transported or the quality of any one deposit. Rare earth elements became a strategic raw material group whose availability was a recurrent topic of research and political debate.

The situation in Germany at the dawn of the new millennium was the same as that in Finland. The nearly forgotten, financially unprofitable Minette ores in Alsace and Lorraine as well as the copper deposits in the Harz Mountains were once again the center of economic interest.192 The situation was not, however, completely unprecedented. A similar phenomenon had

191) Asko Parviainen January 1, 2012.

192) Eila Paatela, Asmo Vartiainen, Markku Kytö, Hans-Georg Thielepape November 15, 2011.

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led to the amendment of mining legislation at the beginning of the 1930s. Once again, the basic mapping of Finland’s soil and bedrock proved to be fundamental in the search for new deposits. Old deposits were brought back into production when the increase in metal prices at the dawn of the 21st century changed the cost structure of metals production.

Perhaps the biggest structural change in business was related to capital movements and the change in the structure of financial systems. Finnish state companies had been established to protect national interests in a situation where the budding Finnish industry had to compete with foreign companies for Finland’s natural resources. On the other hand, the availability of raw materials and products had to be guaranteed for political reasons as well. The solution proved to be essential for the country’s existence during World War II. Notwithstanding a few exceptions, national values were not taken into account in corporate development after the 1990s. The company’s goal was to achieve financial profit.193 Increasing wealth had also been one of Outokumpu’s goals in the past, but the methods were different then. In the 1970s, when asked why the company did not share more information about its operations, Petri Bryk said:

“We share dividends, not information!”194

The goal was now to quickly achieve high returns on capital. Under Pertti Voutilainen, Outokumpu’s unofficial motto was:

“Think bigger!”195

Unfortunately, the achievement of quick financial profit was in conflict with the basic laws of the sector. Projects in the mining industry usually lasted 15 to 20 years, which was the time required to assess their profitability. The mining industry always involves a high degree of risk. Exceeding

193) Karri Kaitue September 25, 2012.

194) Pertti Voutilainen September 2, 2011.

195) Asko Parviainen January 11, 2012.

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the productivity level always meant great profits. Even though the capital intensity of the mining industry and of metals production slowed down decision-making in the sector, the decision-making environment had also changed for Metallgesellschaft and Outokumpu.

The desire for quick financial profit in the mining industry would have an unsettling effect in the 1990s. At the end of the 1980s, large international oil companies began to invade the territory of traditional mining companies, for example, by purchasing mining engineering firms and directing their operations to new sectors. Although this brought new investment into the industry, the subsequent withdrawal of these oil companies from the engineering operations in the mining industry in the 1990s caused unrest in the sector and its basic structures. In a sector characterized by long-term operations, quick organizational movements often weakened knowledge management.196

Soon thereafter – at the turn of the millennium – Europe began to financially network in a way that reminds of the situation at the end of the 19th century, and the opening markets offered possibilities for rapid capital movements. Now the slower-moving Outokumpu benefited from its clearly more cautious strategy.

Independence of technology sales

T he operations of Outokumpu and Metallgesellschaft followed the changes in the overall industrial structure of the industrialized world. The companies centralized decision-making and resources, although

organizational development depended on the amount of capital available. Major financial decisions that led to the separation of the technology business from production operations and related process engineering were made in the 1980s and at the beginning of the 1990s.

The old Metallgesellschaft, established in the 1920s and then cautiously modernized, still had its headquarters in Frankfurt, now one of the main

196) Markku Kytö November 9, 2011. Eila Paatela, Asmo Vartiainen, Markku Kytö, Hans-Georg Thielepape November 15, 2011.

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centers of the nascent European Economic Area. At the end of 1970’s, its core consisted of four companies: Lurgi Kohle- und Mineralöltechnik, Lurgi Umwelt- und Chemotechnik, Lurgi Chemie- und Hüttentechnik, and Lurgi Verwaltung. The company also had dozens of subsidiaries and joint ventures abroad.

In 1984, Metallgesellschaft began a period of rapid structural change. First, the group structure was simplified by merging together the companies operating in Frankfurt to create Lurgi GmbH, which consisted of nine different divisions. Three years later, Lurgi moved to new premises in the Heddernheim district of Frankfurt in the so-called Mertonvierteil, named after the founder of the company. Lurgi had been torn from its roots, but the new premises elevated its operations to a completely new level. After the fragmentation of the company’s operations in the center of Frankfurt into smaller divisions over the decades, all divisions were now in the same building, where the employees got to know each other and to take advantage of the knowledge and services of various divisions. The conglomerate created a bigger, more close-knit family, which controlled a significant part of the key technologies and patents. Further, all Lurgi companies shared the same patent portfolio, with the patents being managed by MG Technology, a subsidiary established for that purpose. This structure for the management of patents and intellectual property rights was, in practice, the same as the one adopted by Outokumpu at the beginning of the 2000s. The structure meant that all of the patents created or previously owned by the group’s subsidiaries were now in the possession of the parent company.

The shared interests that had made Outokumpu and Lurgi both competitors and potential partners were now becoming more evident. Outokumpu and Lurgi continued to discuss various forms of cooperation as the new business environment took shape. In addition to more informal interactions, there were also formal contacts between the companies. In 1983, a delegation from Lurgi traveled to Espoo to discuss issues related to

The shared interests that had made Outokumpu and Lurgi both competitors and potential partners were becoming more evident.

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licenses and engineering in general. The visit was reciprocated a few years later with a delegation from Outokumpu visiting Frankfurt. Even though the main focus was on the implementation of single projects, cooperation between the two companies was also extensively discussed from a general point of view. However, no progress was made as the highly conflicting goals and interests in the various financial and risk management issues involved could not be resolved.197 Nevertheless, visits and discussions continued to the point that they became routine. Taking into account that the companies were also each other’s biggest competitors in several sectors, their cooperation was perhaps surprisingly close.

As the 1980s were a time of fast financial transactions, industrial operations were often affected by stock market speculations and lending activities, which sometimes led to major failures. Part of Metallgesellschaft was involved in these global stock market speculations. In the boom following the globalization of the capital market, Metallgesellschaft’s financial management decided to join the New York raw material stock exchange. Metallgesellschaft had considerable knowledge in the mineral industry, and therefore the crude oil market was the natural choice as its line of business in the USA. Klöckner-Humbolt-Deutz (KHD) also selected to enter the same market.

However, the New York raw material stock exchange proved to be too unpredictable. Development in the oil market could not be monitored using the traditional methods known by Lurgi, and the German companies found themselves in serious financial difficulties in 1986. The consequences for Lurgi were dire.198

Lurgi GmbH’s ownership structure was renewed on October 1, 1990, when the company’s shares were listed on the stock exchange. The company name was changed to Lurgi AG, and the company was restructured to include three operating companies, namely Lurgi Chemie, Metallurgie und Industriebau, Lurgi Energie- und Umwelttechnik, and Lurgi Gas- und Mineralöltechnik. The number of companies increased to four a year later, when Zimmer AG was incorporated into the group. Following the German reunification, three East German companies operating in Chemnitz, Leipzig, and Dresden

197) Hans-Jochen König’s statement through Hans-Georg Thielepape August 6, 2012.

198) Manfred Beilstein, Hans-Georg Thielepape, Hans-Werner Schmidt October 10, 2011.

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were also incorporated into the group. Of these, the Leipzig-based Lurgi Umwelttechnik was actually an old subsidiary established in 1928.

After the restructuring, Lurgi focused on engineering its customers’ processes. At this stage, environmental issues and issues related to the sustainable development of processes were fundamental to the work of engineering firms.

In Frankfurt, Metallgesellschaft and Lurgi had a tradition of being great workplaces whose employment benefits and social services were among the very best in Germany. Employees were offered good vacation benefits and healthcare services. The policy led to Lurgi becoming a highly attractive workplace where it was easy to recruit skilled labor. Furthermore, not many wanted to leave such a reliable employer. The philosophy toward personnel well-being also became an export product. TATA, a new competitor from India, copied most of the basic ideas of Lurgi’s well-being policy. Personnel commitment to Lurgi as an employer had been excellent for decades and continued to be excellent into the 1990s.

However, the situation changed in the blink of an eye in 1994 following increased uncertainty in global financial markets. The huge losses incurred by the USA oil market at the beginning of the 1990s led to a revolution in Metallgesellschaft’s capital structure. In the 1993–1994 accounting year, Metallgesellschaft operated at a loss for the first time in its history. The losses were so high that radical measures had to be taken immediately in order to fix the situation. This began with the appointment of a new CEO in 1993. With the assistance of Deutsche Bank, Metallgesellschaft’s CEO, Heinz Schimmelsbusch, was replaced by Doctor Karl-Josef Neukirchen, who was best known as one of Klöckner-Humboldt-Deutz’s fiercest innovators. Deutsche Bank took control of Klöckner-Humboldt-Deutz and sold most of it.

High losses forced the Metallgesellschaft to lay off labor and to eliminate unproductive divisions. This forced the company to undergo yet another restructuring and its subsidiaries were renamed once again. Lurgi Metallurgie GmbH was thus born. The names of the other divisions were also slightly simplified.199 Almost one hundred years after its establishment, the company was leaving the name Metallgesellschaft behind. Lurgi AG was


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turned into a holding company and all corporate management tasks were transferred to it. Thus the management started looking for possibilities to reduce the group’s size by selling parts of it.

The year 1994 was a turning point in Metallgesellschaft’s history. The old group was dismantled and the new company was named ‘MG Engineering’. The group’s organization had now been broken down and the parts gradually began to be sold.

In practice, the old corporate structure played a part in this restructuring for many reasons, including the difficulty of managing its social cooperation. The parts that were to become independent remained in the Lurgi building within the large Mertonvierteil building block, with the personnel mainly retained in their old roles. This ensured that the old contacts between the various parts of the group were not affected and it was very easy to call an old colleague within the same building, to have informal discussions about work, or to solve technical problems.

The fact that Lurgi maintained ownership of the patent portfolio of the group’s metallurgy and environmental technology divisions proved to be important for the future. This was a key issue in the trade negotiations between Outokumpu and MG Engineering a few years later.

Outokumpu’s difficult years

T he high volatility in the financial markets at the beginning of the 1980s had a limited impact on Outokumpu’s operations thanks to the rigidity of the company’s production structure. This was in part due

to the state’s large share of ownership which slowed down decision-making. The economic growth in all Western countries from the mid-1980s quickly increased Outokumpu’s volume of orders. The concurrent rise in metal prices led to the surprisingly fast growth of the business. 1988 was the most successful year in the company’s history. Profit before extraordinary items increased to 1,203 million Finnish markkas, ten times the previous year’s figure.

The profitable year provided the opportunity to implement two significant measures in the company’s finances. The pension plan of its employees had been putting a strain on the company’s operations for a long time. The

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pension plan was a holdover from a time when most employees worked in mines. Outokumpu’s retirement age was extremely low – sometimes as low as 52 years – even though most employees now worked in offices rather than in the mines. In the spring of 1988, the employees were offered the right to renounce their supplementary pension rights in exchange for Outokumpu’s shares – and most of them did so.

At the same time, preparations were made for the company’s listing on the stock exchange. Outokumpu’s role as a state-owned limited company had already been under scrutiny for a long time, and additional recapitalization was needed for the company in a situation where significant investments and operational restructuring were expected.

Outokumpu’s shares were first listed on the Helsinki Stock Exchange on October 27, 1988. At the same time, the company’s management made the crucial decision to incorporate the company’s divisions in order to streamline decision-making and to dismantle the old, stiff corporate structure.

As per the short strategy drawn up in the spring of 1988, the company’s objective was to develop products in a goal-oriented way, as well as the technology business in the high-tech and high-grade sectors. In order to develop new technologies on the production scale, the Okmetic pilot plant was established in Espoo together with Nokia Corporation, among others. In cooperation with Professor Veikko Lindroos of the Materials Engineering Department at the University of Technology, the Okmetic pilot plant developed a method for manufacturing high-quality silicon wafers. The pilot tests to develop the method were carried out at the Materials Engineering Department of the University of Technology. Okmetic became one of the worldwide market leaders in the sector. Outokumpu also established a company200 to manufacture permanent magnets. However, after being eliminated from Outokumpu’s portfolio during the restructuring of the mid-1990s, the company was sold.201

Those involved in defining Outokumpu’s strategy strongly believed in new technologies. The technology business also had immaterial goals.

200) Later Neorem Magnets Oy.

201) Outokumpu Annual Report 1988. Outokumpu Engineering Strategic Plan 1989–1993. Spring 1988.

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Outokumpu’s management expected the technology business to develop the company’s brand and to boost its image.202

The starting point for all of Outokumpu’s operations was to understand the narrow market in a situation where industrial production was expected to continue to grow. The implementation of the large orders already received in the new business environment of the mid to late 1980s gave Outokumpu some two to three years to breathe and to launch a new technology-oriented corporate culture. This was simply not enough time to develop new technologies, and business growth had to be achieved through acquisitions and more effective marketing, with new major orders being necessary each year. As time was running out, several acquisitions had to be made within a short period to bring the situation under control.203 The idea was spot on in terms of business economy, but Outokumpu’s growth was so strong that it led to the breakdown of the organization.

In conjunction with the 1990 incorporation, Outokumpu Engineering Oy became an independent technology sales and engineering company with three operating subsidiaries: Outokumpu Engineering Contractors, Outokumpu EcoEnergy, and Outokumpu Engineering Services. Outokumpu’s mechanical engineering division, which manufactured mining and metallurgical equipment, was incorporated and made independent under the name Unimec Oy in 1989. The electronics division, which originated from the physics department, followed suit in 1990, when it became Outokumpu Electronics Oy. The arrangement was, however, short-lived. At the end of the same year, Outokumpu’s management made the important decision to merge together the company’s technology divisions under the new parent company Outokumpu Technology Oy. At the same time, Outokumpu’s business was reorganized into four main business areas, namely basic metals production, copper products industry, steel industry, and technology.

Outokumpu Technology was not a small company. Its expected turnover for the first year was 2 billion Finnish markkas. The company employed 3,200 people, about half of whom worked outside Finland. From a Finnish perspective, it was a large international company.

202) Erkki Ryynänen, Kalevi Nikkilä, May 7, 2012.

203) Outokumpu Engineering Strategic Plan 1989–1993. Spring, 1988.

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Outokumpu Technology now had seven divisions:

■ Outokumpu Mintec (mineral technology equipment and plants, analyzers and automation)

■ Outokumpu Engineering (metallurgy and metal forming, equipment and plants)

■ Outokumpu Ecoenergy (environmental protection and energy, equipment and plants)

■ Rammer (hydraulic hammers and breakers) ■ Roxon (belt conveyor components and bulk solid material processing

equipment) ■ Candor Group (galvanizing plants and chemicals) ■ Outokumpu Engineering Enterprises, Inc. (USA) (Ecoenergy, Inc., H-R

International, Inc.)

Outokumpu Technology was Outokumpu’s multi-sectoral portfolio division. Its CEO was Timo Salovaara with Raimo Monni – Outokumpu Engineering’s former CEO – appointed as its deputy CEO. The company started polishing its operations by organizing a strategy seminar for its management in Mont Pélerin, Switzerland. The world’s leading experts in economics and business were invited to the event to assess the company’s potential to be globally competitive in its niche market.

Outokumpu’s management wanted the technology division to become the figurehead for the whole group and enhance its image. Outokumpu Technology’s organization, however, could not live up to these expectations and the general idea failed. The deep recession that hit the country in 1991 also played a major role in this. Over the next few years, however, the conclusion was reached that the attempt to modernize the technology operations had been too cautious.

Clear profit targets were set for Outokumpu’s business divisions. In addition to traditional production branches, environmental engineering was included in these targets. The traditional heavy industry in the Western World had found itself in a situation where major investments in creating the foundations for sustainable development were necessary in order to continue production. The industrialized countries had simply run out of options.

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Surprisingly, the general recession of 1991 had a positive impact on the operations of the Pori research center, which after being incorporated as Outokumpu Research Oy in 1988 was trying to figure out which direction to take. Despite Outokumpu’s weak financial result during the early 1990s, the company made significant investment decisions in 1993 and 1994. The processes of the Kokkola, Harjavalta, and Tornio plants were renewed, and new plant sections were built at them. As a result, the research center was hit by a wave of new orders, the largest of which were the renovation of the Harjavalta nickel plant and the expansion of the Kokkola zinc plant. This clearly made the research center’s operations profitable.204

Despite its stronger position, the Pori research center’s funding and role within the company were long debated. Maintaining and operating the research center was expensive and none of Outokumpu’s business divisions were willing to cover its costs in full. This is why the Pori research center remained directly under corporate management for years, until Outokumpu Technology took it over in 2005.

Doubling of technology sales

O utokumpu experienced a series of incorporations at the end of the 1980s, most of which were realized in 1990. Outokumpu’s operations, which were previously handled under one parent company, were

split between several small, and in principle, independent subsidiaries. This was a new trend in Finnish business in general. In all industrial sectors, financial administration efforts were made to find new ways to develop the company’s operations. This change in emphasis meant that technological development became a secondary concern despite it being the basis of the company’s operations.205

In order to build a solid base for the return on capital, Outokumpu’s management gave the Outokumpu Technology division an unambiguous directive – that it had to double its turnover as quickly as possible.

204) Heikki Mäntymäki, 1999, p. 104.

205) Erkki Ryynänen, Kalevi Nikkilä, May 7, 2012.

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It took only a few years for Outokumpu Technology to expand its technology operations, mainly through acquisitions. These operations broke down into various independent subsidiaries which quickly siloed.

Outokumpu’s search for possible technological acquisitions was mainly directed to areas that complemented the company’s existing operations, though entirely new ones were not ignored. The metallurgy division was expected to grow strongly in the industrial waste processing sector and significant growth was also expected from municipal waste and wastewater processing sectors. The search for new market areas was intensified, for example, in the industrializing areas of French-speaking Africa and the Far East, while the USA was expected to become Outokumpu’s area of strongest growth.206 Several studies were conducted into the potential growth areas, but perhaps surprisingly, the results showed that the more remote areas did not offer many opportunities. Despite high expectations, Australia’s potential growth was weaker than that of the USA economy. As a result, North America was selected as the main target area for acquisitions. The same basic idea was adopted as the company’s strategy in 1989.207

At first, Outokumpu Technology looked for companies to acquire in the Central USA, especially old companies serving the mining industry that would be a good fit for the existing business. However, by the summer of 1989, it was clear that finding a suitable target company would prove to be extremely difficult. Even if a target company had been found, Outokumpu Technology lacked the resources and knowledge of the legislation and taxation practices of the USA to take full advantage of the new acquisition. Instead, the decision was made to establish two companies in the USA. Outokumpu Engineering Enterprises was a holding company whose aim was to pave Outokumpu Technology’s way into the American domestic market, whereas Ecoenergy was an operating company that provided services, particularly those around its peat-based energy production technology. During the first year of their operation, both companies built up their personnel and defined their strategies. The initial situation for both

206) Outokumpu Engineering Strategic Plan 1989–1993. Spring, 1988.

207) Outokumpu Engineering Strategic Plan 19990–1994. Summer, 1989. Asko Parviainen. PM Case: USA, Enterprises. Outokumpu Technology Seminar, 1993.

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Outokumpu Engineering Enterprises and Ecoenergy looked promising as new market research gave reason to double their profit targets.208

In spring 1991, H-R International was acquired in support of Outokumpu Technology’s American operations. Founded in 1957, the engineering firm specialized in boiler design. Its past work included notoriously difficult construction projects for the oil refining industry as well as the construction of a plant for Interamericana de Alúmina (Interalumina) in Puerto Ordaz, Venezuela in the early 1980s. Purchased from the bankruptcy estate of the MMR Group, as far as Outokumpu Technology was concerned, H-R International had not been affected by its parent company’s difficulties and was expected to continue operating without any hindrance. This, though, would prove not to be the case and it would have a disastrous effect on Outokumpu Technology and its North American operations.

Unfortunate turn of events in 1991Ultimately, Outokumpu Technology’s attempt to enter the North American market as a provider of the new technologies acquired failed. No one saw the financial crash of 1991 coming. Taking into account its relatively cautious investments in the American operations, Outokumpu Engineering Enterprises had no real chance to survive. The change in the economic climate was dramatic in many countries, but in the USA in fall 1991, it felt like,

“the plug had been pulled.”209

Outokumpu Technology quickly made the decision to discontinue its operations and subsidiaries in the USA. The plan was to sell the environmental protection business, Ecoenergy’s peat-based energy production technology, and other assets in their entirety by 1997. Outokumpu’s first attempt to promote environmental engineering in the difficult North American market had failed.

The change in the local economy was not the only reason why Outokumpu’s expansion into North America failed. A strategic problem was also partially

208) Asko Parviainen. PM Case: USA, Enterprises. Outokumpu Technology Seminar, 1993.

209) Asko Parviainen, January 11, 2012.

1950sOutokumpu’s technology sales began when the first flash smelting license agreement was signed with Japanese Furukawa in 1954.

Furukawa’s flash smelter was inaugurated in Ashio in 1956.

B1

1950sEnvironmental legislation developed in Europe and the first environmental protection standards were introduced.

Knowledge of flotation control and online X-ray analyzers, developed in the 1960s, has played a fundamental role in strengthening Outotec’s market share.

B2

1960sOutokumpu established Engineering Division in 1966 to provide engineering for the company’s new metallurgical plants.

Metallgesellschaft started developing circulating fluidized bed technology in the 1950s to produce very pure alumina.

B3

1960sOutokumpu closely followed the advances made in automation and electrical engineering and developed its own measuring instruments.

1970sControl desks for automatic anode casting machines were assembled in Outokumpu’s instrument plant in Espoo.

The drawing board was a key tool for engineering in the 1970s before computer aided design (CAD) became more common in the 1980s.

B4

A potential customer visiting Outokumpu Engineering in early 1970s.

B5

1970sMetor metal detectors and Courier 300 X-ray analyzers were important export products for Outokumpu.

The nickel flash smelting furnace was started up in 1981.

Outokumpu’s project team in front of their self-made sauna in Norilsk.

Norilsk Nickel’s industrial plants located in the Taymyr Peninsula in Western Siberia in the 1970s.

B6

1970sThe turnkey delivery of Norilsk copper and nickel smelters in Siberia was a major effort. The design phase lasted 31 months.

The agreement concerning the delivery of the Norilsk industrial plants was signed in 1974.

Installation of anode furnaces.

B7

1970sThe first overseas sales offices established in Canada, the United States, Mexico, Brazil and Peru. Metallgesellschaft had dozens of subsidiaries and joint ventures abroad.

A Leitz MM-5 microscope was used for studing mineral samples or metals.

B8

1980sOutokumpu Technology’s internationalization continued with the establishment of sales offices in Peru and Chile as well as acquisitions:■ Aisco Systems■ Supaflo

1980sOutokumpu’s technology portfolio expanded with the ferrochrome process and ceramic filters. Lurgi launched a gold roasting process.

The automatic anode casting system developed by Outokumpu in 1973 soon became a market leader.

B9

1980sHydrometallurgy became more common in process metallurgy, and various leaching processes were developed at the Pori research center.

Lurgi designed its first gold roaster with circulating fluidized bed technology in 1987.

Lurgi’s first Circored plant for direct reduction of iron ore fines was built in Trinidad.

B10

1990sLurgi Metallurgie GmbH was formed in 1994, dedicated to metallurgy and sulfuric acid plants.

1990sAcquisitions:■ HR International■ Rammer■ Roxon■ Galvatek■ Wennberg■ Indepro■ Carpco■ Eberhard Hoesch & Söhne■ Carpco

Codelco’s Radomiro Tomic solvent extraction and electrowinning plant under construction in Chile in 1997.

B11

2000sMerger of two major players: Outokumpu Technology acquired Lurgi Metallurgie in 2001.

The first commercial flash smelting - flash converting application was commissioned in 2007 for Yanggu Xiangguang Copper in China.

Lurgi Metallurgie’s employees gathered to a townhall meeting after the merger in 2001.

B12

2000sAcquisitions:■ Royal Pannevis■ KHD Aluminium Technology■ Nordberg grinding mills■ Lurgi Metallurgie■ Boliden Contech■ Auburn Group

Outokumpu’s research center was integrated into Outotec’s business.

B13

2006Outokumpu Technology was separated from its former parent Outokumpu and listed on the Helsinki stock exchange.

CEO Tapani Järvinen was ringing the bell to start the trading with Outotec shares on October 10, 2006.

Lurgi Metallurgie’s Frankfurt research center became part of Outotec in the 2001 merger.

B14

2000sThe global phenomenon of production companies reducing their operating personnel propelled the growth of Outotec’s sales as well as its expansion into the service business.

In 2007 the company’s name was changed to Outotec Oyj.

After the separation from Outokumpu, Outotec signed technology cooperation agreements with customers to maintain contact with practical production work.

B15

2010sSustainable use of Earth’s natural resources was chosen as Outotec’s mission going forward.

Outotec’s goal was set to deliver sustainable lifecycle solutions, guaranteeing the best return for the customers in the entire production chain from ore to metal, as well as innovative solutions for the energy sector and industrial water treatment.

B16

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to blame for the failed project. The expansion of Outokumpu’s technology operations mainly occurred through acquisitions that, in retrospect, were made too quickly. There was not enough time to examine in detail the companies being purchased and in too many cases, certain aspects of these companies turned out to be different from what was originally thought. In particular, their operations and finances were found to be full of surprises, and in the case of the latter, some of the companies quickly proved to be financial disasters for Outokumpu Technology.

For example, the acquisitions of Princeton Gammatec and H-R International were made without fully examining the circumstances of either company, that is, without Outokumpu Technology doing its due diligence. Princeton Gammatec buildings were built on heavily contaminated soil and the high cost of decontaminating the area had to be borne by Outo kumpu. Where Princeton Gammatec simply presented Outo kumpu Technology with unexpected costs, H-R Inter-national was found to be financially wanting. The bankruptcy of its former parent company had led to a hidden deficit, which became apparent only when the new owner installed its own financial monitoring system . In order to cover the hidden deficit HR International had to close down its branch office in Houston. The company quickly lost its core customers and the company’s key employees were so frustrated that they resigned one after the other. By the summer of 1991, however, the new director had succeeded in consolidating the company’s operations, albeit at a reduced level. In addition, the company had received two significant orders, one of which was a production plant for Jamaica to be designed together with Lurgi/Alpart.210

In retrospect, it is clear that neither this situation nor Outokumpu Technology’s North American operations could continue. In the wake of Outokumpu Technology’s failure and the effect of the 1991 recession, all

210) Asko Parviainen. PM Case: USA, Enterprises. Outokumpu Technology Seminar 1993.

Ultimately, the attempt to enter the North American market as a provider of new energy technologies acquired failed.

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that remained was the skeleton of a good business idea and of an established engineering firm. In an examination of the North American initiative that took place a few years later, business-related cultural differences between Europe and America were mentioned as one of the most important reasons behind its failure. Fundamentally Finnish decision-makers were not used to the business culture of the USA where two things in particular caught them by surprise. Firstly, American corporate laws were extremely complex, and Finnish companies had to deal with claims for damages related to issues that were completely unexpected from a European perspective. Second, the shortsightedness of competition in the USA was in total contrast with the European way of thinking. The Finns were used to building long-term cooperation partnerships, whereas the Americans seemed more inclined to make as much profit as quickly as possible using all of the means at their disposal.211

Despite the difficulties encountered in the USA, elsewhere some of Outokumpu Technology’s acquisitions were certainly profitable. Indepro, an engineering company acquired in Chile, proved to be vital in the difficult South American market thanks to its local knowledge and contacts; Supaflo, an Australian company that markets thickeners, was integrated into the company’s technology offering; and Wennberg, a Swedish manufacturer of electrolysis equipment, turned out to be a highly profitable business. Successful companies like these purchased during the late 1980s and the early 1990s continued to be an important part of Outotec into the 2010s. The problems arose from the financial effects of Outokumpu Technology’s expansion. Decision-making related to technology management could not keep up with the overheated economic reasoning, and costly mistakes were made.

Although the economic downturn at the beginning of the 1990s had a disastrous effect on Outokumpu Technology’s operations in the USA, it did not have any direct impact on Outokumpu’s operations. Instead it just led to less ambitious production targets. Nevertheless, the real problem behind the structural change in the company could not be ignored and Outokumpu’s financial situation quickly began to deteriorate when the mining industry – the basis of the company’s operations – gradually headed towards default. The old ore bodies had been exhausted, and the low price

211) Asko Parviainen. PM Case: USA, Enterprises. Outokumpu Technology Seminar 1993.

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levels in the global metals trade market made it impossible to launch new mining projects – especially since all of the known ore deposits were poorly exploitable resources due to their composition and location.212

In an unusual turn of events, it became evident that Outokumpu had never actually utilized the mining engineering knowledge of its Mining and Concentrating Technology Team for technology sales, perhaps with the exception of the Metorex metal detector, which was a major breakthrough in safety engineering. One of the things that was developed was a probe-like analyzer designed to be inserted into test boreholes. However, its commercialization was unsuccessful. Instead, knowledge related to concentrating technology was extensively utilized in technology sales, and the majority of Mining and Concentrator Teams’ experts – mostly experienced managers from Outokumpu’s former concentrators – were transferred to the research center in Pori or to technology sales in Espoo.

While Outokumpu was trying even harder to expand into new technology sectors, the company continued to study mineral deposits that were previously considered unprofitable. This was not a new idea, but as ore deposits began to run out, Outokumpu’s operations had been more successful and profitable in using copper production waste as a source of raw materials in metals production. The interest of the company’s researchers now turned their attention to poorer deposits in the soil and how to exploit them. Among them was the Talvivaara black schist deposit in Sotkamo, which contained small amounts of nickel, cobalt, copper, and zinc. The deposit was owned by Outokumpu between 1970 and 1982.

At the end of the 1970s, in order to exploit the increasingly poorer ore of both the Talvivaara deposit and of the Hitura mine, it was decided to try out a novel hydrometallurgical method which had never been used outside of a lab in Finland.213 Tests with the leaching method continued for several years at both sites, albeit with no convincing results. As a result, investment in exploiting both sites remained on hold, waiting for metal prices to increase. Ultimately, the technology had been developed enough to function, but not enough to be profitable. Nevertheless, the large development project

212) Jyrki Juusela August 19, 2011. Markku Kytö November 9, 2011.

213) Outokumpu Oy Annual Report 1980. Heikki Mäntymäki 1999. p. 116.

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gave birth to many important technologies including atmospheric pressure leaching, which were later successfully applied to Outokumpu’s own plant investments and subsequently technology sales.

Outokumpu continued to be actively involved in ore prospecting into the early 1980s. However, prospecting gradually diminished hand in hand with the diminishing profitability of the mining industry. The attention of Outokumpu’s ore prospectors thus turned abroad, often in cooperation with local companies. For example, Outokumpu discovered the Trout Lake deposit in the Canadian province of Manitoba at the beginning of the 1980s. When the deposit’s exploitation began a few years later, Outokumpu’s share of the mine was 10%.214

At the turn of the 1990s, geological surveying in Finland was practically handled by the Geological Survey of Finland alone.215 The situation was similar to what had happened in the Finnish mining industry a century earlier. Few believed that profitable deposits would ever be found in Finland again.

The belief that profitable ore deposits would never be found again and its effect upon the industry was not restricted to Finland – it was a global phenomenon. Establishing and maintaining new mines, especially world-class mines, and thus maintaining the mining industry required huge amounts of capital, and the capital-intensive market of the 1980s offered faster, easier ways to make profits. The mining industry was no longer the sector of the future in the same way it had been a few decades earlier. The mining industry, by now considered to be ‘smokestack industry’ – a traditional industry that produces large machines or materials used in other industries and creates pollution in doing so – which had been born at the end of the 19th century, gradually went into decline in the Western countries. The same development also seemed likely in the minerals and metals production industries.

In the USA, the competitiveness of mining and metallurgical companies was only improved by slowly refining their production processes. At the same time, these companies shut down their research institutes one after the other and actual technological breakthroughs to improve profitability

214) Outokumpu Oy Annual Report 1980. p. 44.

215) Tapani Järvinen August 4, 2011.

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were no longer made. This led to companies like the American Smelting and Refining Co. (Asarco), which had been the copper market leader for years, having to fight against profitability problems.216 Outokumpu’s situation was not particularly good either. Although Outokumpu had secured the continuation of its research operations, modernized its production processes, and been developing technology in a goal-oriented manner, throughout the 1980s, the company was only using about 2% of its turnover for research and development. This had been enough for several decades, but this was because the close cooperation with Finland’s universities was an integral part of the data acquisition system. The link between Outokumpu and the universities was now being severed in the geology and mining engineering sectors, right at the same time as there was a generational change among professors of the educational institutes.

The belief that profitable ore deposits would never be found again and the gloomy outlook for the metals and mining industries soon spread to universities. This pessimistic mindset led to resources for education in economic geology and mining engineering being cut. Lecture rooms were empty as students had been told that the mining industry would vanish entirely from Finland in the near future.217

With domestic ore deposits declining, efforts were made in the 1990s to solve the issue of raw materials acquisition by purchasing them from abroad. This was part of Outokumpu’s globalization, which had begun with the establishment of sales offices, but continued through international acquisitions aimed at procuring raw materials. The situation was very similar to what had happened over a hundred years earlier, when Metallgesellschaft had acquired mining shares from the same areas.

216) Tapani Järvinen August 4, 2011. Markku Kytö, Asmo Vartiainen May 21, 2012.

217) The author’s personal memories of the Geology Department at the University of Helsinki.

The mining industry, considered to be ‘smokestack industry’, gradually went into decline in Western countries.

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However, creating a system for the acquisition of raw materials was by no means an easy task. Outokumpu took a decisive step toward its internationalization in 1991, when it purchased a copper semi-product plant in Spain in order to replace its mining business. Soon after taking ownership of the company, it became clear that the acquisition was not fit for its purpose. The project failed probably because Outokumpu, which had no experience in projects of this kind, was – as would also be seen with Outokumpu Technology’s acquisitions in the USA – not able to anticipate the cultural and financial problems it encountered. Even though Outokumpu quietly withdrew from the company a few years thereafter, the experience had a profound impact on it both financially and spiritually.218

At the same time, as the prices of raw materials increased, the demand for scrap metal skyrocketed. Then something unexpected happened that took the markets by surprise. With the collapse of the Soviet economy and the opening of trade with Western Europe, scrap metal began to flow from the East at a relatively cheap price.219 Given the efficiency of metals recycling in Western Europe, this newfound supply of metals was readily welcomed by Western markets. Meanwhile, in the former Communist Bloc, collecting and trading scrap became a social movement that compensated for the widespread lack of basic income. The scrap consisted partly of waste metal collected from the ground, but structural parts of buildings as well as artworks stolen from urban parks also ended up in the material shipped westward. This caused some problems in the West due to the gray market that sprang up alongside the actual trading systems.

In the early 1990s, Pertti Voutilainen began restructuring Outokumpu’s technology operations by purchasing several workshops, such as Roxon, Rammer, and Galvatec, which were incorporated into Outokumpu. Behind the acquisition of these mechanical engineering businesses was the need to find work for the professionals of the maintenance departments of the discontinued mines so that their knowledge could be used in new production sectors.

Although Outokumpu Technology succeeded in doubling its turnover, why did it not succeed in its growth strategy at the turn of the 1980s and 1990s?



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The answer may be found on the list of things that could have been done differently drawn up by the company’s Board of Directors in spring, 1992.220

The basic principles of the growth strategy were going in the right direction. However, the outbreak of the US economic crisis came as a surprise. The main criticism was that although the first signs of the upcoming recession had already appeared in 1990, they had not been acted upon. In spring, 1991, the management group for US operations wondered why the economic indicators had not been as expected on the verge of a change in economic conditions. The indicators, however, were wrong. The impending crisis remained undetected in the overoptimistic atmosphere and no steps were taken at the strategic decision-making level.

Outokumpu Technology’s strategy monitoring problem originated from the fragmentation of the research & development system. For example, communications between Outokumpu’s top management and Outokumpu Technology’s engineers and salespersons were inadequate. When analyzing the matter, it became apparent that information was not being adequately shared even within the technology sales division, let alone at the group level.221 In other words, the corporate management had become over time what CEO Kauko Kaasila called “bureau metallurgists.”222 They had distanced themselves from those abstract engineering skills that were important for production and its development. The previously centrally managed company, whose problems were often related to management being too strict at the corporate level, was now too dispersed. Feedback from the production plants stated:

“If cooperation were good and we could be sure that Outokumpu Technology will not send to its competitors the ideas developed within 3 to 4 years, Outokumpu Technology could provide us good ideas and information about competitors.”223

220) The intra-Group criticism was presented at the Strategy Seminar in spring 1992.

221) Outokumpu Engineering Enterprises. Some observations. Undated memo in its entirety, Outokumpu Strategic Plan 1993–1997. Spring 1992. Asko Parviainen. PM Case: USA, Enterprises. Outokumpu Technology Seminar 1993.

222) Proposal for Outokumpu Technology’s organization. Final proposal June 30, 1994. S.A.M.I. Oy.


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Negative feedback about the management culture was received from within the company at all levels.

The production plants involved in practical operations had lost or were losing their faith in Outokumpu Technology’s management. It was difficult for the technology sales and development units to justify their work at the production plants, which were believed to possess the best engineering skills regardless of the matter at hand. They were easily seen as taking advantage of other people’s knowledge. An anonymous critic wrote:

“Outokumpu Technology is interested in what happens at the plant only when we invent something the world needs!”224

The lack of adequate takeover plans for the companies to be acquired was the first and foremost reason for the unsuccessful acquisitions. All decisions were profit-driven, but at the operational level there was uncertainty about what was being done and why. There was insufficient familiarity with the products and line of business of the companies to be acquired. Economic constraints were also a problem. The impact of fast growth on the company’s solvency was too great. The companies to be purchased were not examined in depth. Therefore, the financial risk was too high. Investment feasibility calculations were inadequate in every respect. In other words, the finance function did not participate in the purchasing phase actively enough. The synergies generated by the deal could not be utilized in marketing, and the organization was not able to approve the expansion strategy. The responsibility for the operations was left in the hands of a small group of people. When one also considers that the companies to be purchased from abroad operated in cultures the Finns were unfamiliar with and that cultural differences were in practice underestimated, there was no chance of success. Outokumpu recorded the worst financial losses in its history in 1991.225

All in all, a few years of growth had taught Outokumpu Group the importance of organizational management also from the point of view of practical industrial operations. The assessment of the previous few years


225) Asko Parviainen. Memo Case: USA, Enterprises. Outokumpu Technology Seminar 1993.

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led to the simple conclusion that the concurrent changes in the business environment and corporate organization were modifying the operational requirements faster than the Group was modernizing its strategy. Careful operational planning takes so much time that the plans would have to be renewed anyway before their completion.226 An employee’s feedback included the following simple question:

“…is there something wrong in our planning systems?”227

The answer was to be found in the feedback of an employee working at a production plant collected by the management in summer 1994.

“We Outokumpu employees know all of the world’s most important plants. We know what happens there. We attend all major conferences on new technologies. We have open relations with our competitors’ managers. We do not believe that Outokumpu Technology could bring anything new to this.”228

226) Outokumpu Engineering Enterprises. Some Observations. Undated memo in its entirety, Outokumpu Strategic Plan 1993–1997. Spring 1992.

227) Outokumpu Engineering Enterprises. Some Observations. Undated memo in its entirety, Outokumpu Strategic Plan 1993–1997. Spring 1992.


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PART 3p. 141


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PART 4

NEW BEGINNING: TECHNOLOGY AS A KEY SUCCESS FACTOR

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PART 4: NEW BEGINNING: TECHNOLOGY AS A KEY SUCCESS FACTOR

A lthough it is difficult to establish the exact point in time when Outokumpu’s new strategy was born, it was sometime in 1994 that the company’s operations began to take a new direction. Throughout

the spring of that year the corporate management had examined the restructuring of the end of the 1980s and its consequences. Even though it was clear that economic development had been driven by external factors, it was no longer possible to continue with the old corporate structure and strategy approach. Therefore Outokumpu needed to be restructured. The restructuring program under consideration, whose aim was to simplify the company’s operations, was named ‘Forward to Basics’. The biggest threat at the planning stage was the possibility that the company could turn too much to its past. The whole company could have become a slow-moving, mammoth-like conglomerate unable to tackle future challenges.229 Its production and technology sales were now under the same organization, but this could not be the case in the future.

Presented in October 1994, the ‘Forward to Basics’ program redefined, as a result of Risto Virrankoski’s and Jyrki Juusela’s work, the role of technology in the company to become the key success factor throughout the company’s business operations. Its primary role was in the business and technology development in Outokumpu’s own production plants. Further, the concept of technology within the company was also redefined. Technology now also meant technology sales, including the development of new technology for sales purposes. This was to become a unifying factor for the whole company as well as an important criterion when assessing Outokumpu’s future operations. Therefore, technology had to be developed in a new way.

The need to redefine both the role and concept of technology in the company was because prior to the redefinition, Outokumpu sold technology that it had developed for its own purposes, which gave a competitive advantage to other companies. In order to remain competitive, this problem could only be solved by developing yet more new technology. Even though this was a tall order, it was still possible as long as the entire company, including its top management, remained committed to solving its technology challenges.230


230) Reorganization of Outokumpu’s technology operations October 4, 1994.

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The restructuring outlined in ‘Forward to Basics’ raised some organizational problems. The management feared that the company would turn back into the old slow-turning mammoth that was not able to act proactive in the future challenges. These problems were solved by creating the positions of Technology Director and Research & Development Director at the corporate management. Both positions were assisted by the technology committee and the technology management team. Doctor Juho Mäkinen and Doctor Jussi Asteljoki took office as Technology Director and Research & Development Director, respectively.

Following the restructuring, Outokumpu also adopted a new policy on industrial intellectual property in 1997. After this, the group’s parent company owned the patents and license rights produced by the various divisions, as well as all of the renowned technologies. The system was based on the concept of ‘potluck’ in that as long you contributed to the pot, you had access to everything that was in the pot. What this meant was that each of the company’s divisions had access to the knowledge, patents, and license rights held at corporate level as long as each division contributed with its own assets. In other words, in order to get into the ‘party’, a division had to focus on Research & Development. Fortunately, Finland’s taxation system actually favored investment in Research & Development.

The adoption of the new technology policy was a radical step for Outokumpu’s business and a major rationalization was necessary in order to develop both its technological sector and culture. However, Outokumpu had not been just a mining and metallurgical company in a long time, and its technology operations in the old organizational model had become too wide and scattered. Moreover, technology sales had a different earning logic compared to the other operations. The weak importance of the technology division with respect to other business areas was partly due to pressure from other divisions, which feared the negative impacts of selling out the technological knowhow.231

Harsh measures were taken to cut back the sprawl of Outokumpu’s business. The intention was to make the technology business clearer and

231) Risto Virrankoski September 25, 2012. Karri Kaitue September 25, 2012. CF. also Markku Kytö’s memo December 2, 2012.

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more manageable as quickly as possible. To this end, an independent company that, in practice, served as Outokumpu’s bad bank was established. The company was named Outokumpu Technology. The position of each technology sales company came under careful scrutiny and some of them were sold off as quickly as possible.

The technologies used by Outokumpu in its production were transferred to a new division under Outokumpu Technology, named Outokumpu Engineering. The division was structured as a holding company and managed the technology operations of its subsidiaries (Engineering Contractors, Engineering Services, Galvatec, Wenmec, Castform, and Mintec). The division focused on developing and selling vital machinery and equipment for the process technology and processes used by the mining and metallurgical industries and in the further refining of metals. Its operations were based on knowledge related to minerals processing and metallurgy. Doctor Kalevi Nikkilä, a metallurgist who had previously worked as director of the Imatra steel plant, was appointed as the division’s Director.232

The reorganization resulted surprisingly quickly in a new corporate culture built on research, which was ultimately adopted by the company in 1997. The reintroduction of the name Outokumpu Technology was a sign of a new beginning. Turulan Konepaja was changed into Outokumpu Turula, and Wenmec Systems into Outokumpu Wenmec. The names of the other Outokumpu Technology companies were changed in the same way. After the reorganization, Outokumpu Technology’s turnover amounted to about 1 billion Finnish markkas a year, which represented a 50% reduction compared to the early 1990s.

Galvatek, Candor Sweden, EcoEnergy, H-R International, Rammer, and Roxon were all sold between 1994 and 1997. The change led to faster growth for Outokumpu Technology, which is precisely what the company had been trying to achieve earlier. The new goal of the corporate management was to double the previous strategy’s annual turnover, which amounted to about 1.5 billion Finnish markkas. Kalevi Nikkilä gave clear instructions to his division to focus a relatively large portion of the company’s resources on

232) Erkki Ryynänen, Kalevi Nikkilä May 7, 2012.

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measures that would bring significant growth without jeopardizing the company’s everyday operations. When defining the task, it was stated that organic growth was not to be forgotten. New growth had to be based on old paradigms, and success was conditional – at least at first – on technological connection to Outokumpu’s production operations.233

Towards the end of 1997, the expansion of technology sales through acquisitions had already taken center stage in planning. A study carried out while planning growth targets showed that, since the late 1980s, Outokumpu Technology’s turnover had grown by about 9% through product development and by as much as 29% through acquisitions.234

233) Memo of meeting at OTG November 14, 1996. Memo OTG’s growth project March 12, 1997, Seppo Rantakari.

234) Memo OTG – Growth Project. O. Lampela November 12, 1997.

Sales, million EUR (Finnish markka figures converted using 5.9 exchange rate)

Personnel

DEVELOPMENT OF OUTOTEC’S SALES AND PERSONNEL

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1,500

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100

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1990

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Clean technology was now emphasized as one of the pillars of Outokumpu Technology’s operations. Environmental aspects had to be taken into account in planning without exceptions. It was not only a matter of principle and policy, but also a matter of preserving the company’s image. Nobody wanted polluting companies and their technology. However, the idea was not that simple. A commissioned survey pointed out once again the high potential of environmental technology, but also noted the massive risks – especially as the whole of the environmental technology sector was uncharted territory for Outokumpu Technology.235 The cautious consulting firm did not necessarily see the benefits of process knowledge opening for future business opportunities with the new ideology.

Acquisitions and divestmentsFollowing the first wave of acquisitions in the 1980s, Outokumpu Technology now made a second wave of acquisitions. USA-based Carpco, a manufacturer of physical separation equipment, was purchased in 1997. This was followed by the acquisition of Inprosys, another American manufacturer of physical separation equipment, as well as of Eberhard Hoesch & Söhne from Germany and Royal Pannevis from the Netherlands, both suppliers of filter technology.

In the mid-1990s, Klöckner-Humboldt-Deutz (KHD) was broken up into smaller companies to be put up for sale. The aluminum business became an independent company mostly owned by Deutsche Bank. The company’s diesel engine division continued along the lines of the old parent company under the name Deutz. In 2001, Outokumpu Technology acquired KHD Aluminium as part of its growth strategy. The old Frankfurt-based electrochemistry group, dating back to the beginning of the 20th century, was stepping into a new beginning inside Outokumpu Technology.

At the same time, Outokumpu Technology also acquired part of the business of Nordberg Mills from Metso. In 1989, Nordberg Manufacturing, originally founded by Finnish-American Bruno Nordberg in Milwaukee at the end of the 19th century and subsequently manufacturer of ball mills

235) Memo OTG’s growth project. March 12, 1997, Seppo Rantakari. Erkki Ryynänen, Kalevi Nikkilä May 7, 2012.

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for the mining industry, was incorporated into Metso Group as a result of Metso’s Svedala acquisition. At the request of the competition authorities, Metso had to sell part of Nordberg and its grinding mill business was incorporated into Outokumpu Technology.

In the 1990s, Outokumpu Technology also explored the possibilities of expanding its various filter technologies. The company already had its own ceramic filter technology (Ceramec), which it had developed to its current state after acquiring it from Valmet. Outokumpu Technology also acquired Eberhard Hoesch & Söhne, a German company specialized in pressure filters, and Pannevis, a Dutch company specialized in belt filters. Larox, a growing Finnish family business that specialized in filter technologies, was also considered as a possible acquisition. However, Outokumpu Technology did not make this acquisition. In 2002, when organizing its product range, Outokumpu Technology discontinued the filter business and sold it to Larox due to financial difficulties.

Larox was born after World War II as a result of Nuutti Vartiainen’s work. After completing his studies to become a technician, Vartiainen emigrated to Canada, where he worked in various industries. He returned to Finland in 1952. Drawing on his extensive experience in sales and engineering, he established his own company – Murskaussuunnittelu – in Lahti ten years later. The business grew quickly, driven by its soil processing and mechanical engineering operations. Vartiainen then established another company – Murskauskone. By the early 1970s, Vartiainen’s businesses had expanded to several mining locations and the company employed some 400 people.

In 1974, Murskauskone changed its name to Roxon, which was sold to Kone Corporation three years later. Roxon was incorporated into the Outokumpu Technology business for a few years in the early 1990s. Vartiainen also acquired the Lappeenranta workshop, which marked the home and headquarters of Larox.

The Lappeenranta workshop had some previous experience with capillary filters and thickeners. The company took an important step toward becoming

Clean technology was now emphasized as one of the pillars of Outokumpu Technology’s operations.

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the market leader in filter technology when it signed a license agreement with USSR-based V/O Lisensintorg for the manufacture of a new type of pressure filter. Funding was obtained from the Finnish Innovation Fund Sitra. Support was also provided by Kemira and Outokumpu, the latter attracted by the possibility that it could try out the filter at its plants. This provided an important link between production, basic technological research, and product development.

Larox was highly successful as a developer and marketer of filter technology and Nuutti Vartiainen played a major role in the swift development of this international company. Unfortunately the rapidly changing capital market also had an impact on development in the sector. In 2002, after eighteen months of negotiations, Larox acquired the filter technology operations of Outokumpu, which had decided to focus on stainless steel. In addition to the Ceramec capillary filter business, these operations included the Hoesch pressure filtration business in Germany and the Pannevis belt filtration business in the Netherlands. Outotec purchased the filter businesses back from Larox in June, 2010.

Quest for a new operating modelIn the 1990s, competition was fierce in all areas of industrial process engineering around the world. Market globalization had led to a knockout competition between companies previously operating in specific small market areas. Outokumpu’s technology business had become the market leader in copper anode casting machines and upcasting, but competition for orders was fierce in a market consisting of once local, but now globalizing companies. More efficient product development work soon yielded concrete results that could be utilized in marketing. The solvent extraction method for copper, nickel, and cobalt, which was being launched on the market at that time, along with the ferrochrome production process, would go on to become one of Outotec’s most successful products in the 2000s. In minerals processing technology, the flotation method gained a competitive edge when the cell size was increased.

The company also had an unexpected competitive advantage. Outokumpu’s swift expansion in the 1980s had resulted in many new

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employees being hired, especially young engineers fresh out of college. Compared to many foreign competitors, the atmosphere at the company was youthful. However, metals production technology had not grown into a global business and it remained a fairly small community. There were still only a few hundred experts in the world and everybody knew each other. Finnish sales representatives and engineers were typically about forty years old, while the representatives from foreign companies were usually already in their sixties and close to retirement age.236 The generational change occurred at the right time in Finland, even though it progressed in a slightly different way than was anticipated at the beginning of the decade.

Development of technology in use in the process industry on 1990s did not always follow logical paths. Many large production companies around the world discontinued their Research & Development operations due to increased competition. During the international boom and the subsequent recession of the turn of the decade, the metals industry became, along with most of the production sector, more business-oriented and had set the quick achievement of high returns on capital as its primary goal. At that time, engineering was seen as unprofitable or loss-making in strategic decision-making terms. In the short term, outsourcing Research & Development work seemed to be cheaper. For example, American metals industry giants Kennecott, Anaconda, and Asarco discontinued their development work almost entirely. Companies instead purchased Research & Development services from external research institutes and engineering firms. Rio Tinto moved all of its research operations to England. Profit was also emphasized in Metallgesellschaft’s operations, which severed Lurgi’s link to industrial production. Within ten years, these decisions would have a decisive impact on technology development and the ability of these and similar companies to adapt to new challenges.

At the same time, a radical change in the education also had an impact upon the development of the entire sector. The universities of the industrialized world approved major cuts to research and training in metallurgy as IT studies became increasingly common.

Inspired by the business world, scientific and technical universities tried to optimize their operations. Both research and education efforts were now


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expected to be profitable. Their profitability was measured by means of global ranking lists, even though the information itself no longer carried as much weight as it used to. The new mindset spread to Finland after the beginning of the 2000s. Metallurgy was often associated with the old smokestack industries, and from the point of view of the governing bodies of universities, was an old and unprofitable research field. Professorships in the field were abolished and modernized. When metallurgy became material technology at the world’s top universities, its industrial development began to slow down. Of the old educational institutions, only the University of Aachen and the University of Toronto maintained their traditional level of expertise in the field. In Finland, the University of Technology

modernized its mining engineering subjects at the beginning of the 21st century.237 The number of courses available began to plummet at the same time as the aging personnel at the various companies in the metals and mining industries began to retire. When production companies reduced their operating personnel to streamline their organizations, customers looking to buy from the

production companies had to face a shortage of skilled personnel. This global phenomenon propelled the growth of Outotec’s turnover in the 2000s as well as its expansion into the service business.

The growing problems of metals production only emerged at the end of the 1990s, as metallurgical product development typically requires five to ten years. The companies’ efforts to achieve a lighter organizational model and a cheaper cost structure quickly showed their vulnerability. In particular, Western metals production companies no longer had a data acquisition system related to production development and were ill-equipped to purchase new technology. In the West, major engineering firms, such as Bechtel, Davy McKee, Hatch, Kvaerner, and SNC Lavalin, mostly took over corporate


When metallurgy became material technology at the world’s top universities, its industrial development began to slow down.

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investment planning. Production companies detected the fall in the level of technology development only when it was too late to rectify the situation.238

During what was a period of fast global financial solutions, Outokumpu’s slowness and slightly old-fashioned character turned out to be an unexpected and significant advantage, allowing the company to avoid the worst financial effects of a market more focused on quicker and higher returns. Outokumpu’s development was based on the constraints of its relatively small size and limited financial resources.

In 1997 and 1998, Outokumpu Technology also investigated the possibility to expand into the manufacture of mining machinery and mining engineering in general. In the end, however, it was decided not to go down this road as ore prospecting, mining, and mining engineering started to be too difficult to manage. A lot of thought was given to the added value that could be obtained from process management by participating in mine planning from the beginning.239 Stainless steel was becoming more important at Outokumpu, and the company had already decided to gradually discontinue its non-ferrous metal mining business. The signs of a new change in the mining industry were quite clear. For example, information had been received from Australia about the financial difficulties of the mining industry. Mines had been sold, and there were no new investments in sight.240

The intention was to expand Outokumpu Technology’s business into the sales of larger projects. However, difficulties were encountered with the aforementioned major engineering firms, who were responsible for engineering and delivering whole industrial plants and made efforts to select their customers’ process technologies, thus freeing the customers of the burden of having to handle complicated orders themselves. In some cases, Outokumpu Technology could not even give sales presentations directly to potential customers, because the purchaser was no longer the end customer or the technology user. Through large engineering firms, Outokumpu Technology was only able to sell small technology packages as


239) Memo OTG’s growth February 26, 1997, Seppo Rantakari.


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partial deliveries within a wider scope. The outcome for the end customer may very well have been a plant with low efficiency.241

Efforts were made to expand the offering by developing knowledge packages consisting of more than just technology. Outokumpu Technology established a New Business Ventures group for this purpose with the idea of selling not only technology but also metals business knowledge to the customer.242

However, investigations into other growth possibilities for Outokumpu Technology showed that developing the mining processes was not the best way to achieve the growth targets. Technology development was slow. It would have taken about ten years of systematic development work before the company could have new technologies ready for sale. Developing hydrometallurgical processes instead of mining technology seemed to provide more attractive opportunities to expand the company’s offering. Among other things, cooperation on the development of electrolysis technology was discussed with Lurgi on a regular basis. Lurgi presented a technology development cooperation plan to Outokumpu Technology at the end of 1998. Even though no progress was made on the plan, the interest in hydrometallurgy led again to more interaction between the companies. At the same time, the possibility of finding a partner in the aluminum and steel industry for Outokumpu Technology was examined in order to both expand its product range and to map potential new customers.243

Independence

O utokumpu and Lurgi would continue discussing their business relationship in detail throughout the 1990s.244 The discussions did not set out to restrict cooperation or agree to operate in different

markets, but solely focused on aspects of both companies where they could cooperate on projects. Kalevi Nikkilä and Erkki Ryynänen, among


242) Memo Seppo Rantakari. OTG’s growth project. 12.3.1997. Erkki Ryynänen, Kalevi Nikkilä May 7, 2012.

243) Memo January 22, 1999. Growth strategy review at Hotel Scandic. Seppo Rantakari.

244) Markku Kytö August 22, 2011.

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others, participated in this preliminary exploratory phase as Outokumpu Technology’s representatives and the company’s CEO Timo Salovaara continued the discussions in 1994. Outokumpu’s CEO Jyrki Juusela also took part in the negotiations on occasion.245 These were years of financial hardship for both companies. The economic situation was putting pressure on both participants to reach an agreement on the cooperation, but the fear of rushing things and of making the same mistakes made during the recent financial crisis prevented either side from coming to any decision.

The discussions were not always amicable as competition between the companies continued and sometimes even threatened to bring them to an end. For example, in the early 1990s, when Norddeutsche Affinerie was planning a copper smelter in Indonesia, Metallgesellschaft tried to realize the project by copying Outokumpu’s flash smelter at Norddeutsche Affinerie in Hamburg without paying the license fee to Outokumpu. This soured the relationship between the companies for a long time, but the strain between them was eventually overcome.246

In 1997, Juhani Vahtola – Kalevi Nikkilä’s successor as Outokumpu Technology’s CEO – began to explore the possibility of more extensive cooperation between the two companies, in particular, the role of Lurgi Metallurgie within Outokumpu Technology’s expansion strategy. To that end, Outokumpu Technology commissioned a more detailed survey on Lurgi Metallurgie’s situation from an external consultant. Lurgi Metallurgie’s financial figures showed that the company was getting into a difficult situation.

As per the information provided in the notes to the company’s financial statements, Lurgi’s management immediately got the company back on its feet after the 1993–1994 catastrophe. However, the situation deteriorated in the following years. By the turn of 1995 and 1996, the turnover had more than doubled and the company was at full capacity, but net profit barely exceeded the break-even point.247 At the same time, Lurgi Metallurgie moved

245) Hans-Jochen König’s statement through Hans-Georg Thielepape August 6, .2012.

246) Markku Kytö November 9, 2011.

247) The information is based on a corporate analysis commissioned by Outokumpu Technology. Roland Berger & Partner Analysis/Interviews. Outokumpu Technology Group, Growth Scenario Evaluation and Discussion August 12, 1997.

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to become operationally independent from its old parent company. The company moved from Mertonviertel in the northern part of Frankfurt to the small town of Oberursel, about thirty minutes’ drive away, where new business premises were built for the company. Being an old industrial community, Oberursel was an excellent location for an engineering firm with about 400 employees. The patents and other industrial rights used by Lurgi Metallurgie continued to be owned by its parent company.

In a new survey commissioned by Outokumpu Technology, Lurgi was found to have slipped into a dangerous spiral. It was a similar situation to the one Outokumpu had managed to get out of during the previous decade. Lurgi was burdened by the extensive operations that it previously, as part of a larger organization, had had the support to conduct, but which as a downsized division it could no longer properly manage. For the same reason, the company was not able to properly price its operations. As the company had mostly worked on cheap projects in the Far East market over the previous years, single projects ran on extremely low financial margins. Furthermore, the company was found to have no established operating model. Unlike Outokumpu Technology, it was also an engineering firm that implemented projects in practice. Therefore, the implementation costs of single projects were often unnecessarily high. Lurgi Metallurgie was fighting to survive despite the fact that its technological knowledge was of the highest possible level.

The only true rising star of Lurgi Metallurgie’s future operations seemed to be the new CIRCORED process, developed by Lurgi for the production of direct-reduced iron. The previous direct reduction processes were mainly based on rotary kiln technology, the most used being the SL/RN (Stelco-Lurgi/Republic Steel-National Lead) method. This development work was also expected to become a commercial success only after a significant increase in the price of the end product. According to Outokumpu’s analysis, Lurgi Metallurgie did not have much room to change the course of its operations. As a partial solution to its problems, the company was expected to focus more on growth markets such as the former Soviet Union and Africa.

At the same time, Outokumpu Technology also investigated other possible acquisitions, mainly European companies that would have complemented the company’s operations. Once Outokumpu made the strategic purchase decision

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for a particular acquisition, it was just a matter of waiting for the right time to make the actual purchase transaction. This presented itself in the spring of 2000, when MG Engineering took the expected in-principle decision to discontinue Lurgi Metallurgie. The decision marked the end of a story that had lasted for about a century and in effect, meant that MG Engineering was dismantling a consolidated corporation, more or less the same type of company that the Finns were building in Niittykumpu, Espoo, though with a slightly different setting.

In practice, the decision accelerated Outokumpu Technology’s ongoing preparatory and investigative work. Concrete discussions between Lurgi Metallurgie and Outokumpu Technology began at the Achema fair in Frankfurt in the spring of 2000. Seppo Rantakari and Juhani Vahtola were at Outokumpu Technology’s stand when Hans-Jochen König, an acquaintance from Lurgi Metallurgie, approached them to inquire about Outokumpu’s willingness to purchase Lurgi Metallurgie. As soon as the first contact was established, the matter was submitted to the attention of Outokumpu’s chief executive Jyrki Juusela, who gave permission to continue the discussions and to show an interest in the acquisition.248 After that, the acquisition was handled through direct contacts.

After the preliminary meetings, the German party had to deal with intercultural differences. Even though the parties had known each other for a long time, significant differences in their practices emerged as soon as more concrete negotiations began. To the Germans, the Finns seemed to be very reserved and to show little interest in the progress of the project. The Finnish inner rigidity was very discouraging for the Germans. The Finns took their time to assess the situation without commenting too much, which made the German party wonder about their partner’s commitment to the negotiations, let alone to the deal. Progress was made only after Lurgi’s

248) Seppo Rantakari January 12, 2012.

Concrete discussions about the purchase of Lurgi metallurgie began at the Achema fair in the spring of 2000.

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management met Jyrki Juusela in London, where Juusela quickly reached an agreement on the purchase.

Why did Outokumpu Technology acquire Lurgi Metallurgie? The most obvious reason was to eliminate a major competitor for technology projects. This, however, was not the most important reason. The acquisition also supported Outokumpu Technology’s growth strategy. Furthermore, Lurgi Metallurgie’s excellent business contacts promoted marketing and the company’s technology offering, and experience in engineering and delivering large projects enabled it to grow as a supplier of industrial plants. On the other hand, Lurgi Metallurgie’s poor profitability, decentralized structure, unprofitable running projects, and aging personnel were considered negative aspects of the acquisition.

During the 1980s and 1990s, Lurgi Metallurgie had found itself in a similar situation as many other companies operating in the sector. When negotiations for the merger with Outokumpu Technology began, the company employed about 400 people in Oberursel, Germany and about 60 people in Australia. The biggest fear at Lurgi Metallurgie was the possibility of losing the company’s key personnel following the merger, a not unreasonable fear given that this had happened when Outokumpu tried to take over a key environmental engineering organization in the USA.249

Preparations for the acquisition were launched immediately by both Outokumpu Technology and MG Engineering. Lurgi’s data banks and the due diligence procedure were open and clear. Outokumpu’s representatives traveled to Oberursel and Frankfurt to familiarize themselves with Lurgi Metallurgie’s bookkeeping and technical archives.

Outokumpu Technology made a purchase offer in the fall of 2000, six months after the start of the negotiations. This would not have been possible without Outokumpu’s earlier preparations. MG Engineering, however, did not consider the offer to be adequate. In Espoo, Outokumpu’s management did not know that Lurgi Metallurgie had another potential purchaser, though it did come to suspect it. The negotiations with the Finns were interrupted for some six months, during which time MG Engineering held similar discussions with SNC Lavalin, one of Outokumpu Technology’s competitors.

249) Markku Kytö November 9, 2011. Kauko Laukkanen’s memo September 4, 2000.

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As no agreement could be reached on the price or the terms of the deal with SNC Lavalin, MG Engineering resumed negotiations with Outokumpu Technology. The preliminary agreement was signed in July, 2001, and the actual purchase agreement at the end of September.

At the same time, Outokumpu Technology completed the purchase negotiations for the aluminum technology business of Klöckner-Humbolt-Deutz, which was mainly owned by Deutsche Bank. In the late 1990s, Klöckner-Humbolt-Deutz experienced financing difficulties after its failed attempt to enter the cement business. The diesel engine division and the large cement business were separated from the company in conjunction with the deal.

Merger in 2001

W hen Outokumpu Technology purchased Lurgi Metallurgie, the management of Lurgi Metallurgie’s patent rights emerged as one of the most important aspects. It was agreed to transfer Lurgi

Metallurgie’s metallurgical patents to the new owner upon the transaction. The process was relatively complex and got even more complicated when Outokumpu purchased the metallurgy division of Lurgi’s Australian subsidiary, which held generic patents used by other Lurgi Group companies in their business. Furthermore, the former parent company owned general patents that were essential to Lurgi Metallurgie’s business and could also be utilized by other companies within the Lurgi Group. In the end, a solution was found with Lurgi AG and MG Engineering whereby the other companies were given the right to use Lurgi Metallurgie’s patents for non-metallurgical purposes and Lurgi Metallurgie was allowed to use Lurgi Group’s other generic patents for metallurgical purposes.

In July, 2001, uncertainty and expectations continued to weigh on Oberursel. Lurgi Metallurgie’s personnel did not know if the company’s operations would continue or if the purchaser would just eliminate its competitor. The turning point was the speech given in German by Tapani Järvinen, director of Outokumpu’s metallurgy business, which included Outokumpu Technology. The speech convinced Lurgi Metallurgie’s personnel that the future would

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be more stable. The idea that the purchaser and new owner spoke the same professional language spread among Oberursel’s personnel. Outokumpu Technology’s goal was to stabilize the operations of the division, which had been on an uncertain footing for a long time, and to integrate them into a larger whole with targets compatible with Lurgi’s traditions. One of the main points of Järvinen’s proposal was the identification of common synergies. In the end, though, the companies had very few overlapping functions250 even after decades of cooperation on various projects.

By September, 2001, the negotiations and discussions between the companies had progressed to the point where a meeting was held to start the actual technological cooperation between Espoo and Oberursel. The discussions mainly progressed without surprises, until the companies realized that they both possessed and were jealously holding on to nearly equivalent fluidized bed technologies. Different opinions quickly arose as to who invented the technology first. The dispute was settled within a short time thanks to the Finns’ flexibility.251

No quick changes were made in Oberursel as the community needed stability after many years of uncertainty. Christoffer von Branconi, who had been at the head of Lurgi Metallurgie for several years, continued to lead the division during the transition. He was assisted first by Jörg Stojan, and then by Seppo Rantakari. In the following year, von Branconi was fired and Hans-Jochen König, who had participated in the discussions between Outokumpu Technology and Lurgi Metallurgie over the years, was appointed in his place. König succeeded in stabilizing the situation at Lurgi Metallurgie during the transition and in the aftermath within a few years.

The efforts made to stabilize Lurgi Metallurgie were on the basis of its traditional operations. The merging of the companies began with regular visits between Oberursel and Espoo. Seppo Rantakari was the only Finnish employee to be transferred to Oberursel. Rantakari was able to build a relationship of trust with his new work community and he integrated well in Oberursel as the link between two different corporate cultures.

250) Tapani Järvinen: Outokumpu Technology Strengthened by Lurgi Metallurgie. Tapani Järvinen’s archive.


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The changes in Lurgi Metallurgie’s organization began in 2002 as a result of the restructuring that Outokumpu – its parent company – underwent in order to find a balance between the required reorganizations, investments, and production modernization. Outokumpu Technology’s transformation was led by Pekka Heikkonen, who was appointed as the company’s CEO in 2001 after working, among other roles, as the CEO of Rammer, owned by Outokumpu Technology in the 1990s, and later as a management consultant. Fast and radical changes were nothing new to him. Heikkonen’s goal was to internationally harmonize Outokumpu Technology’s functions and to make its operations more fluid. The first measure was to change Lurgi Metallurgie’s management.

Heikkonen succeeded in getting Outokumpu Technology’s organization on its feet even though his stint at the company only lasted two years. Nevertheless, the discussions that would lead to Outokumpu Technology’s independence began in the early 2000s.

Listing on the stock market

B y the end of the 1990s, Outokumpu had been split into four operating divisions. Avesta Polarit, which was owned together with Avesta Sheffield, handled the stainless steel business. The other divisions

were Outokumpu Technology, Outokumpu Copper, and Outokumpu Base Metals. Outokumpu began to discontinue its mining business with an operation called ‘Exit Mining’.

The simplification of Outokumpu’s decentralized organization and operations was completed during the first years of the 21st century. Having decided to focus on stainless steel production, the company had to take drastic measures in order to secure enough funds for it. The first two of these measures were historic. The company’s technology operations were made independent, while the mining and smelting operations were sold. It took some time for the metal mines to be sold. For example, the Kokkola and Odda zinc plants and the Harjavalta copper smelter were sold to Boliden, an old competitor from Sweden.

The sales agreement between Outokumpu and Boliden was a turning point in Finnish industrial history. It meant the transfer of the birthplace and

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flagship of the flash smelting method in Harjavalta to Boliden. The copper smelter – the basis of Finland’s economy for decades – was no longer part of the national metals industry. It was also a sign that Finland’s society and the industrial environment had changed. However, people hardly noticed anything, even though the media had covered it in the news.

When planning the Boliden deal, the possibility of selling Outokumpu’s technology business, or part thereof, also came up. The sale, however, never materialized as it was deemed unsuitable for the company’s strategy. The financial profitability of the technology business was not sufficiently clear at this stage.252 On the contrary, in the end it was agreed to merge Boliden

Contech, Boliden’s engineering and technology sales division in Skellefteå, into Outokumpu Technology.

Outokumpu’s decision to discontinue its mining and copper refining operations was made after careful consideration. Outokumpu was not prone to taking risks. The Group tried to keep financial risks at a reasonable level using a traditional approach. Amidst global competition, Outokumpu

believed that it was not large enough to be a mining company. In retrospect, risks should have been taken. By the turn of the millennium, however, no one could have anticipated the sharp increase in metals prices that would occur a few years later or the mining industry’s so-called super-cycle.

A significant cultural change had also taken place in the metals production industry. The industry’s management had changed in a way that limited its readiness to take conscious risks. The decision-making system had changed fundamentally compared to the situation of the 1930s. Strategic decisions were now made within large corporate bodies established to handle decision-making related to administration and management, where expertise was divided between industrial and administrative representatives. More often than not, companies used experts only for short periods of time.

252) Tapani Järvinen August 4, 2011. Risto Virrankoski September 25, 2012.

Boliden’s engineering and technology sales division in Skellefteå was merged into Outokumpu Technology.

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During Mäkinen’s and Bryk’s dictatorial management culture from 1930s to 1970s, decisions were made and presented by the same person, supported by a colleague with the same professional education and ideology who was fully committed to building a national production system. The possibility of a small group of experts to follow their intuition and view was a force that exceeded all limits of economic decision-making until the 1960s. The old system included the economic risk, but also the possibility of breakaways of new technology.

In the opening years of the 21st century, the global market prices of metals began to skyrocket as a result of strong economic growth and higher consumption in the Far East. By this time, Outokumpu had already sold its mines and deposits, so there was no going back.

In 2005, Outokumpu’s Board of Directors made the final decision to focus on steel production. The goal was to become “Undisputed No. 1 in Stainless.”253, the undisputed market leader in the field. A decision also had to be made about Outokumpu Technology’s fate as its turnover only accounted for about 7% of Outokumpu’s total turnover. Furthermore, the division’s revenue logic and environment had to be clarified for decision-making. At the same time, its value had to be maximized and the focus of its operations specified.254 The management group had to develop a strategy on which to build Outokumpu Technology’s future. The resulting operation was called Vortex.

During the discussions among Outokumpu’s Board of Directors, it soon became clear that finding a solution to Outokumpu Technology’s future would not be easy. The matter was discussed several times in 2005 and 2006. The options were to sell the technology business to an external party, to downsize it back to an engineering department supporting the main business, or to publicly list the company on the stock exchange. Selling the technology business or making it independent were the only real options as, based on past experiences, part-time technology development did not seem a reasonable solution. A number of potential buyers were considered, but negotiations did not progress.

253) Quote from Karri Kaitue.

254) Karri Kaitue November 22, 2012.

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The restructuring began with the appointment of a new Board of Directors for Outokumpu. The old Board of Directors, presided over by Jyrki Juusela, was removed from office, and Juha Rantanen was appointed as the new CEO. The final solution decided upon by the new Board of Directors was to make the technology business independent. The decision was made to list the company on the stock exchange to increase its capital. The Board of Directors of the new company was appointed in early 2005. Karri Kaitue was appointed as chairman, while Vesa-Pekka Takala and Risto Virrankoski were appointed as members. Tapani Järvinen continued as CEO.

The decision to make Outokumpu Technology independent and to list it on the stock exchange was made mainly to enable growth of the business. For this, the company had to leave its old parent company. The renowned Lehman Brothers and Nordea banks were asked to organize the sale of Outokumpu Technology’s shares in the spring of 2006. According to the listing particulars, the value of the company’s share was 12–15 euros and, given the number of shares on sale, the company was worth about 460 million euros. Outokumpu Technology’s shares were listed on the Helsinki Stock Exchange and the trading began on October 10, 2006. Only about one-fifth of the shares remained in Outokumpu’s possession for twelve months, after which Outokumpu sold them.255 The Outokumpu Technology business was now fully independent.

The listing particulars described Outokumpu Technology as one of the world’s leading providers of process solutions, technology, and services, especially for the mining and metals industries. Its business was organized into three divisions, namely Minerals Processing, Base Metals, and Metals Processing. At the same time, according to an estimate by Outokumpu Technology’s management, all three divisions were the market leaders in their key technologies in terms of number of deliveries.

The company’s unofficial motto was:

“We are not an engineering company. We do not want to become a manufacturing company or an equipment provider. Let’s be a technology company!”256

255) Karri Kaitue November 22, 2012.

256) Markku Kytö’s memo December 2, 2012.

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To set Outokumpu Technology apart from its old parent, the name was supposed to be different from the parent company’s name, but still recognizable to its customers. Thus the company was named Outotec Oyj in 2007. Despite the break from Outokumpu, the new name did contain a reference to the company’s background, that of the imposing Outokumpu ore mountain in North Karelia.

Vision of sustainable development

T he industrialized world’s relationship with the environment quickly changed at the turn of the 21st century, when the phenomenon known as global warming received attention first among researchers

and then among the general public.The first observations of the correlation between air temperature and the

atmospheric concentration of carbon dioxide were made in the 1950s and 1960s, after which the situation was closely monitored for several decades. Nevertheless, the theory that human activities are to blame for global warming was gradually accepted only after the 1990s. According to the theory, the consumption of fossil fuels leads to an increase in the concentration of carbon dioxide and other so-called greenhouse gases, which in turn affects global warming, ultimately causing the human environment to change more rapidly. Even though not everyone has accepted the validity of the theory, climate change seems to be progressing at an accelerated speed as indicated, for example, by the quick melting of mountain and polar glaciers.

A source of concern for financers was that the industrialized countries’ ability to retain their standard of living seemed to be directly linked to the industry’s ability to integrate sustainable development into their operations. Several organizations were established to combat climate change as well as to monitor and assess the operations of listed companies. Among them is Carbon Disclosure Project (CDP), which collects detailed information about climate change prevention, greenhouse gas emissions, and adaptation to climate change for investors, researchers, and suppliers.257.


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In the 1980s, the European Community began to issue recommendations and regulations in order to limit industrial emissions. The Council of Europe issued a directive on industrial pollution prevention in 1996. As a result, the Finnish Environment Institute published a series of reports on the recommendations of various industrial sectors, determining the Best Available Techniques (BAT) of that time for the regulation of the industry’s operations in Europe. Outokumpu Technology actively participated in the project, which resulted in a series of publications by Marja Riekkola-Vanhanen, among others.258 European process engineering companies could not influence the development of these guidelines as their operations were driven by customer orders and their establishment was driven by economic interests as described above. The directives were amended ten years later, when it was found that the previous recommendations had not achieved the desired effect.259

The efforts to reduce carbon dioxide emissions and air pollution in general have led to many new ideas for the modernization of industrial production, including the idea that emissions can be significantly reduced through advanced technology. During the 20th century the tendency was to build as large process equipment as possible to benefit from economy of scale. Thanks to the advancements in automation, electrical engineering and the development of material science and simulation technology, the improved accuracy of process control relating to energy generation, power transfer and production processes makes also smaller unit operations feasible. Establishing small modular units that use clean technology in conjunction with mines significantly reduces transportation needs, among other things.

The reduction of greenhouse gases became a clear global phenomenon that made Outotec’s line of business significantly stronger. The company’s operations as a pioneer of sustainable development technology were noticed not only by its customers, but also elsewhere in the industry. Among many

258) E.g. Marja Riekkola-Vanhanen. Finnish Expert Report on Best Available Techniques in Ferrochromium Production.

259) http://europa.eu/rapid/press-release_MEMO-07-623_en.htm. Retrieved on January 15, 2013.

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other recognitions, Outotec won the 2007 Cleantech Finland Award of the Confederation of Finnish Industries for its ferrochrome process.

After Tapani Järvinen’s retirement, Pertti Korhonen, who had had a long career within Nokia Corporation, was hired as Outotec’s new CEO as of January 1, 2010. He launched a new growth strategy based on a vision of sustainable development. The sustainable use of Earth’s natural resources was selected as the company’s mission and the starting point of its operations. The company’s goal was to deliver sustainable lifecycle solutions that would guarantee the best return for the customer in the entire production chain from ore to metal. The company also provides innovative solutions for the energy sector, and industrial water treatment.

Technologies of the new millennium

U pon publication of this book, the company is formally ten years old. However, in practice, Outotec’s human capital has been accumulated over a period of about 150 years. The company’s business is based on

selling knowledge. The mining industry, metals refining, and metals trade were left in the hands of other companies. Outotec’s financial profit derives from its sales of knowledge, engineering, technology, special equipment, and services for exploitation and refinement of natural resources. The company does not have its own metal production plants.

Outotec’s business is built on the experience and expertise of its employees, gained over the decades, as well as on the expectations and requirements of modern society. The company’s German and Finnish branches have developed ever-cleaner industrial production methods since the early 20th century. At the end of the century, efforts were made to turn environmental engineering development and sales into a stable and productive branch. However, it is only in the new millennium that a window of opportunity has opened up to focus on environmental pollution prevention technologies as well as on developing technology that would enable the emissions-free and efficient use of natural resources. This is simply due to the fact that the world’s consumers, industries, and policymakers have become much more aware of the limited resources of our planet.

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In spring 2011, Pertti Korhonen, who had joined the company’s management a year earlier, decided to expand the company’s operations into the energy and environmental business. This sector had already been envisaged and suggested as a growth area at the turn of the millennium, but Outokumpu’s management deemed it unsuitable for the technology business of a production group operating in the mining and metallurgical industries.

The decision was based on the idea that the need for technology would grow all around the world, especially in the sustainable development and new alternative energy solution sectors. After its listing on the stock market in 2006, Outotec’s stock exchange value surpassed that of its old parent company within a few years. This was due to a number of reasons that became stronger as the 21st century progressed. First among those

reasons was the growing demand for Outotec’s knowledge and expertise in the application and development of industrial processes in the newly changed markets.

However, with independence came the need for Outotec to earn customer trust again. In the decade since its independence, one of Outotec’s

absolute strengths has been its impressive list of references where the customers’ plants were commissioned within schedule and budget. Performance guarantees have also been given to secure customer trust. As the agreed deliveries included not only engineering but also technology, the process equipment for the entire value chain for processing minerals and metals, as well as comprehensive services, it has been possible to guarantee the functionality of the process, the plant’s completion within schedule, and the quality of the end product.

After the separation from Outokumpu, it has been easier for Outotec to do business with customers. Outotec does not have production plants of its own and no longer has access to those it had when part of Outokumpu. This means that any data belonging to Outotec’s customers remains clearly separate from their competitors’ operations. On the other hand, withdrawing from production has posed its own challenges and problems. How can

The expansion into the energy and environmental business was part of the new growth strategy.

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a company that develops technology maintain contact with practical work if it cannot perform plant-scale test runs at its own plants?260 The problem has been solved by signing technology cooperation agreements with customers. The growing service business and long-term operation and maintenance agreements also offered possibilities for practical production work.

With Outotec, the processing industry’s engineering operations related to the metal production chain have returned to a situation where everything is possible. Only time will tell how things will unfold, as no one can predict whether or not it will be possible to solve problems with technology. Thanks to its innovative technology culture, Outotec now has the opportunity to implement a nearly one-hundred-year-old vision of technical culture that is based on respect for and understanding of nature.


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Conclusion

The development of metals refining and technology has lasted for about 150 years. As the leading technology company in its sector, Outotec has become part of the global cycle of the metals industry. It is clear that development of technology is driven more by the technological needs brought about by political, economic, and ideological changes in society rather than by the possibilities to use existing information and knowledge.

The methods of the metals and mining industries changed surprisingly little from the late Iron Age to the Industrial Revolution. After hundreds of years of mining and metals industry, the history of the development of both metals production technology and of the technology industry can be divided into four periods. The first one included the creation and commissioning of systems and methods for metals production, raw material acquisition, and trading during the Second Industrial Revolution between the 1870s and 1914. It ended with the disruption of international trading and industrial production caused by World War I. The second period coincided with the reorganization of production means between the World Wars, which perhaps best describes the arms race between the great powers. The third and fourth periods were the Cold War, which broke out after World War II, and the mayhem it had caused to industrial operations, and the new era of globalization that commenced in the 1990s, respectively.

There are several versions of Kondratiev’s theory of major cycles, and their suitability for the history of metal production development is not necessarily clear. In conjunction with the cycle based on the introduction of the first steam engine, it should be noted that wood was the main construction material for engines well into the 19th century. It is only after the changes related to ferrous metal production that the true Iron Age of the West may have really begun. It is clear that the metals and mining industries have often played a pioneering role throughout industrial history. For instance, the extensive use of electricity and the construction of electrical systems were dependent upon the industry’s ability to produce copper. The advances in the electrochemical industry, which led to an unprecedented increase in the production of non-ferrous metals at the beginning of the 20th

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century, were attributable to the success of basic scientific and technological research carried out in conjunction with the metals and mining industries. The IT revolution after the 1970s had a minor impact on the metals industry at least in the early stages, but the later development of the IT industry has depended on the metals industry’s ability to produce rare metals and their alloys.

The industry continues to be based, to a large extent, on technical knowledge, which is extremely difficult to theorize. The impact of information technology on metals production and the project industry has generally been related to production enhancement and the streamlining of existing processes. It is only at the beginning of the 2000s that the new advances in material engineering, digitalization, and nanotechnology really changed the business environment of the metals industry.

The changes that occurred during the aforementioned two hundred years have had a radical impact upon the business environment, organization, goals, and research & development objectives of technology companies operating in the mining industry and metals production, such as Outotec and its predecessors. The changes also altered the way in which they used existing basic scientific and technological research. Due to political and politico-commercial reasons, the transfer of the results of this basic research seems to have occurred in three distinct phases.

The starting point was that the European metals refining and trading business, which had its origins in the Middle Ages, went global, thus benefiting from the scientific and technological innovations for achieving financial profit that were quickly developing in the mid-19th century. Family businesses turned into expert organizations that networked as Europe’s borders collapsed. Metallgesellschaft, which is part of the history of Outotec’s current organization, launched its metals sales and expert company amidst the globalization of international trade. As the demand for metals grew and transportation costs decreased, Metallgesellschaft expanded its operations into the mining industry. At the turn of the 19th century, only ferrous metals had a large market in place that was waiting for innovations related to steel production. It is only after their introduction that Western culture truly shifted to the Iron Age. This would change as new industrial applications created markets for previously marginal metals. For

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CONCLUSION

example, copper became a strategic raw material as demand in power-based industries increased exponentially after the 1880s. Acquiring raw materials from around the world and controlling their quality became essential parts of the production process.

The turn of the 20th century saw the creation of the modern paradigms in chemistry and physics, which served as the basis for the applications used by the raw material refining industry. In the USA and Germany, universities and industry worked in close cooperation at this stage and the results of the universities’ basic scientific and technological research were quickly transferred to industrial production systems. Behind the industrial processes still used in the 21st century are the patent chains and knowledge cultures born in the early 20th century.

After World War I, the Finnish metal production industry developed in a situation where the demand for copper and nickel was changing under the pressure of conflicting requirements of the country’s trade and foreign policies. Finland started with copper production and then increased copper’s degree of upgrading while nickel production and refining began as the crisis between the great powers deepened. Managing both production systems required specialized technical knowledge and expertise that could not have been acquired without fierce international competition.

The lack of capital hindered the creation of the required technology system. Capital was needed in order to build and maintain production plants and the required data generation system. The state’s role as an owner of companies in the sector and the director of the education system turned out to be a determining element in the resolution of this situation. In the 1920s and 1930s, strong, competing ideologies played a role in industrial decision-making and as the likelihood that these ideologies would clash grew, the role of the state in industry grew. Ultimately, this would result in the state owning and managing industrial operations. During the construction of its industrial systems, Finland was driven by a sense of nationalism and ‘Finnishness’, which like other forms of nationalism stemmed from national romanticism and natural values. As a result, the country’s natural resources were used to achieve long-term benefits and environmental protection was taken into account in process engineering even in the 1920s – decades ahead of other nations.

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The importance of energy consumption and prices in metals production became apparent after World War II. However, new solutions for basic processes could not be found in the basic principles of metals production. The only exception was the flash smelting method developed in Finland. The issue of energy consumption escalated again at the beginning of the 1970s with the Oil Crisis. In Finland, the sales of licenses for the flash smelting method and the development of the method itself led to an independent process development capacity – and ultimately, to the birth of Outotec. The new developments during the so-called Big Science era of the 1940s – here mainly in the measurement and automation engineering sectors – were adopted in order to increase process efficiency.

The economic requirements of World War II and the need for quick production development during the subsequent reconstruction at the end of the 1940s overshadowed environmental protection issues. Although environmental concerns were beginning to be addressed in the 1950s, the situation did not change until the end of the 1960s and beginning of the 1970s when environmental contamination started to become an important topic of discussion within society. This, together with the long-term increase in energy prices, which had begun during the 1973 energy crisis, continued to push industrial engineers and researchers to improve energy efficiency and reduce emissions. In this situation, the Finnish engineers, who had assimilated the values of clean nature already at the beginning of 20th century, could work more freely than their colleagues operating within the excellent economic networks of the great industrial powers. The fact that Finland became industrialized half a century later than its Central European competitors was now proving to be a competitive advantage, because Finnish engineers did not have the burden of huge early investments in the production technology.

Most of the changes in corporate structure related to mining industry and metals production have occurred because of how companies have adapted to the political and politico-commercial changes of each of the four periods. Two decisive factors have been the international trade restrictions that arose out of international rivalries, and on the other hand, trade liberalization in response to new commercial policies. When trade is liberalized as a result of political decisions, metal refiners always concentrate as quickly as possible

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CONCLUSION

on known raw material deposits and technology developers start selling licenses and equipment.

Business interests have always been quicker than governments in establishing new commercial relations. The lifting of trade restrictions after international crises has often required a long period of sustainable and peaceful development, like from the 1870s to the 1910s or from the 1950s to the 1990s. Every time political restrictions have been lifted, those companies operating in the metals industry already had networks in place to continue in the new politico-commercial situation. Despite the commercial restrictions placed on trade during the Cold War – especially those on high-tech exports – metals production companies selling technological knowledge, such as Lurgi and Outokumpu, were able to maintain relations with the governments behind the Iron Curtain.

In the 20th century, various defenses were quickly built to protect national or governmental interests. The fight between the great powers over raw material flow management can be considered to be economic warfare. From a historical perspective, the barriers to trade during both World Wars arose almost instantaneously.

In times of economic crisis and war, science and technology have come to the rescue to solve problems. The reorganization of industrial functions has led to new innovations, raw material savings, and the introduction of new raw materials.

At the beginning of the 20th century, industrial countries were facing a situation where scientists had predicted the depletion of some important raw materials in the near future. For example, crude oil depletion has been predicted since before World War I. However, soil surveying and the advancements made in raw material refining methods have made it possible to meet the needs of society for raw materials. Following advancements made in research methods, geologists have found new deposits in places where there was not believed to be any, and chemists and metallurgists have developed new methods for the more efficient use of the known supplies of raw materials. The advances made in metals processing methods have also enabled the exploitation of deposits previously considered of little value and even of ore dressing gangue. Doubts about raw material availability have often been overcome by application of both science and technology

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while problems related to the use of raw materials have been solved with new methods.

The ways in which mankind has exploited raw materials extracted from the soil have quickly changed within a short period of time. This has had a strong impact on culture. Even though iron has been known for thousands of years, it is only with the development of new industrial iron production methods that the use of iron experienced exponential growth in the form of steel. Correspondingly, the development of electrical engineering and the construction of electrical systems led to exponential growth in the need for copper. Both innovations had a practical impact on our everyday lives.

The components of the technological systems used in the industrialized world have been subject to development whenever problems related to the availability or the use of raw materials have arisen. Engineering work aims to address the objectives and requirements that mankind has set for technology. Industrial activity is only one factor in technology culture as a whole.

Human activities change the environment easily and visibly. The strive for a better quality of life can easily lead to the contamination of the industrialized and industrializing worlds. Production efficiency and the use of green technology are not conflicting ideas. On the contrary, industrial emissions are usually a sign that valuable raw materials are being wasted or a symptom of a problem in the production process.

By developing the processes used in the chemical and metallurgical industries, the use of natural resources has been enhanced to enable the use of goods while reducing – relatively or absolutely – industrial and domestic emissions to a fraction of their initial value. Correspondingly, at the beginning of the 21st century, it is clear that raw materials must be saved and recycled in order to preserve the environment. An increasing share of the raw materials used by the industry is obtained by reintegrating used products into the refining process.

The human population is growing faster than ever. Even though the upper limit of human population growth may be already in sight, the need for scientific research and technological development has been increasing constantly, and the ability to use natural resources correctly for the benefit of humanity is more important than ever before. In the 21st century, it is

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CONCLUSION

no longer possible to ignore the fact that the world has become small and that mankind, which relies on the world’s natural resources, must use its knowledge without forgetting to either accept or respect our planet’s values. Therefore, as the leading technology developer and supplier in its sector, Outotec incorporated the sustainable use of Earth’s natural resources into its vision in 2010 and continues to maintain that vision today.

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References and bibliography

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15, 2011 in Espoo.Parviainen, Asko. January 11, 2012 in Espoo.Rantakari, Seppo. January 12, 2012 in Espoo.Ryynänen, Erkki. January 19, 2012 in Espoo.Schmidt, Hans-Werner. October 10 and 12, 2011 in Oberursel.Siltari, Olavi. August 15, 2011 in Espoo.Taskinen, Pekka. November 27, 2012.Tuominen, Tapio. June 7, 2011 in Espoo. Virrankoski, Risto. September 25, 2012.Voutilainen, Pertti. September 2, 2011 in Espoo.Werner, Dietrich. October 12, 2011 in Oberursel.

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PANU NYKÄNEN

THE OUTOTEC STORY

150 YEARS’ EVO

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ISBN: 978-952-93-7721-3 OUTOTEC OYJ

UNDERSTANDING WHERE WE COME FROM GUIDES US FORWARDAs science and technology advanced in the industrializing Europe, new methods for the processing of natural resources were developed and environmental concerns began to emerge. From its roots in the German and Finnish mining and metals industries in the late 1800s to the modern day technology company that bases its operations on sustainability, Outotec’s story is one of a company striving for a cleaner, greener future.

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150 years’ understanding where we come from guides … · 150 years’ evolution toward a greener...

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