The Development of the Finnish Mining Industry
The nickel mine at Petsamo in the far north of Finland has already been noted in passing. Given the growing importance of mining to the Finnish economy through the entire decade of the 1930’s, the entire mining sector is worthy of further examination, following which we will in the next section look at other areas of the economy that grw together with the financial and social ramifications of the rapid growth and industrialization of Finland’s economy – particularly on state income from taxation and from state-owned companies – and the flow-on effects for the defence budget.
Nickel was an important strategic resource, potentially of great importance for production of munitions, tanks and other war-related materiel as it was used to make alloys of steel (particularly stainless steel) important for improved corrosion resistance (shipbuilding) and outstanding high temperature performance (aircraft engines), armor plate and ammunition. The first Finnish nickel deposits were found in the Petsamo area on the Barents Sea, the northernmost part of Finland in the early 1920’s and were Europe’s richest nickel deposits. Finland had gained control of Petsamo in the Tartu Peace Agreement reached with the USSR in 1920. An early assessment of the region's natural resources revealed that the forest and mineral exploitation would be expensive and risky, and unlikely to attract sufficient capital. An early proposal for a rail link to Rovaniemi was rejected by the Government.
The Government conducted a geological survey of the area in 1921. On the Norwegian side of the border an iron ore field had already been found, and it was hoped that the ore would continue on the Finnish side. In the summer of 1921 the survey identified Neck Kolosjoelta Fell, near the Norwegian border and about 40 miles from the coastm as a nickel-copper ore deposit. In 1922, the Finnish Geological Commission mapped out the preliminary size of the orebodies and explained the content of the ore. The ore was calculated at about two million tons, and was estimated to contain 1.3 per cent nickel and 1.6 percent copper. A preliminary assessment determined that while the result was modest, the ore might still be enough to start mining. The calculated concentrations later proved to be significantly below those of the actual nickel content, which proved to be 3.9 percent over a thirty kilometer trendline.
The deposit was first offered to a Finnish state-owned mining company, Outokumpu Oy, but Outokumpu was already heavily committed and had insufficient resources for two projects. Early interest was shown by several international mining companies, including German companies Krupp and IG Farben and the Canadian International Nickel Company of Canada (Inco), which controlled 90 percent of world nickel market and owned most of the world's known nickel resources. Demand for nickel on the world market was growing rapidly during the 1930s due to the use of steel/nickel alloys, used to improve the strength of the steel as well as humidity and temperature stability characteristics. Negotiations with Inco were long and thorough, but the agreement was approved in June 1932 At this stage, the ore was estimated at double the original calculation. The contracting parties were the State of Finland and the UK registered subsidiary of Inco, Mond Nickel Company . Mond held the right to the Kolosjoen orebodies for a fifty year period. Work began in 1933 to build a mine to Canadian plans. A three mile long underground tunnel was built, with work going on in 3 shifts. Kolosjoen nickel mine entrance in the mid 1930s
Initially, the ore was shipped to the United States from the small Finnish Barents Sea port of Liinahamari (which was ice-free all year round) for smelting, but when it became clear that electric power would be available, Inco decided to build a smelter in Petsamo, where ore was processed to semi-finished 50% nickel (matte). The high brick chimney of the smelter, when completed, was the highest in Europe at 163 meters (the Masons were Americans). By 1936 the mine, powerplant and smelter were fully operational and producing approximately 3,000 tonnes of pure nickel annually (although it was processed and shipped as matte - the refined so called "Matte" contained about 50% of nickel. There were usually other metals with nickel, particularly copper, gold and silver). The mine employed about 1,400 employees.Kolosjoen mine smelter - the165-meter high chimney when completed was the highest in Europe
When development started, the area was untouched wilderness. To accommodate the employees, an entire town was planned, with roads, utilities, a market, cinema, tennis courts, workshops and administration buildings. The town was designed by architects Kaj Englund and Olav Hammarstrom and was completed over a two year period from1934-35 with 140 homes. The buildings were modern, with central heating, bathrooms and modern kitchens. Building material used were new porous concrete hole bricks. The site of the town was also connected by road to the south in 1931 (construction of the road from Sodankylä through Ivalo to Liinahamari started in 1916 and was completed in 1931. After that Petsamo became a popular tourist attraction as it was the only port at the Barents Sea that could be reached by an automobile). Residential Units at the Kolosjoen Mine
At this stage Finland was also of increasing interest to Germany, who saw Finland’s nickel deposits as a vital war industry in any major conflict. In 1937 the Germans expressed an interest in purchasing nickel from Petsamo. This was of concern to the British Government, who were again concerned when they found, in September 1938, that the the German General Staff’s Economic Representative had traveled to Finland to investigate materials available for use in the production of munitions and had expressed the wish that Finland would sell all Nickel production to Germany (at this stage, Nickel was a major source of concern to Germany –their nickel self-sufficiency was only 5 per cent). At the same time, Finland was also seeking to raise revenue to finance further defence spending and pressured Inco to increase production at the Petsamo facility. Smelter capacity was expanded, port capacity Liinahamari was increased and, with open-cast mining introduced, by 1939 production had expanded to 220 000 tons of ore, (8,000 tonnes of pure nickel). Of this, more than than half of ore was smelted into matte on site, while the remainder was shipped out as ore to Britain and the United States. This was a valuable source of foreign exchange for Finland and, increasingly, was carried on Finnish-built and owned merchant shipping.
However, while the nickel deposits at Petsamo were important, there were two other nickel mines in Finland that had entered operations in the mid to late 1930’s, one of which, the Kotalahti mine, was almost as significant as the Petsamo deposit. The Kotalahti mine in Leppävirta was mined from 1934 to 1967 and the Makola Mine, near Nivala, entered production in 1937. The Makola Mine yielded around 500 tonnes of Nickel annually, the Kotalahti Mine was producing 424,000 tonnes of ore annually by 1939, yielding 2,800 tonnes of pure Nickel. Both of these deposits were mined by the state-owned mining company, Outokumpu and a political decision was made to sell a good part of this production to Germany. Accordingly, in early 1937 the Government signed a contract for the supply of 3,000 tonnes of Nickel annually, sourced from the Kotalahti and Makola Mines and generating substantial revenue for the Government (and for Outokumpu).
Outokumpu Oy itself had, by the late 1930’s, become a significant player within Finland’s economy. Outokumpu was a mining and metallurgical company, headquartered in Espoo and managed by Eero Makinen. The company took its name from the town in the eastern part of Finland where a rich copper ore deposit was discovered in March 1910. The deposits owners, both the Finnish State and private players, could not agree on a clear direction for the project and WW1 then intervened, with financial difficultiues and limited capital hindering the launch of efficient production. From 1913, copper ore was smelted and refined in a small copper works next to the mine. While the process was inconsistent, sufficient raw copper was produced to meet domestic demand together with some exports.
Things began to take off in 1924 when the State became the sole owner of the deposit and then when, as part of the Industrialisation Legislation of 1926-27, the deposit was transferred to the ownership of a state-owned mining company, with Eero Makinen appointed as manager. The old copper works was closed in 1929 as Ourokumpu began drafting plans for an integrated copper chain. The first step in Outokumpu’s integrated copper chain was completed in 1931 when an electric smelting plant, the largest of its kind in the world at that time, was built in Imatra to take advantage of the power from the newly completed Imatra Dam. The next step was the building of a metal works in Pori, where the raw copper produced in Imatra was refined into semi-finished prodicts such as wire ingots, sheets and rods (Outokumpu's "concentrated copper ore" contained 4% copper, 28% iron, 25% sulphur, 1% zink, 0,20% cobolt and additionally 0.80 grams of gold and 9 grams of silver per ton of ore).Harjavalta Nickel Works Furnace Aisle
The opening of new nickel, zinc and copper mines in Finland in the 1930’s enabled Outokumpou to develop into a multi-metal company, with a new nickel works built at Harjavalta in 1934 and zinc and cobalt works in Kokkola in 1936. Outokumpu was also the owner of the newly constructed Tornio Steel Works, in the small town Tornio on the coast of Gulf of Bothnia, with up to 85 pct of the product exported. In the late 1930’s, Outokumpu also opened another major Copper mine at Ylöjärvi, near Tampere. Outokumpu also started down the road to stainless steel in 1937, when it began to exploit a large chrome ore deposit in Kemi. The construction of a ferrochrome smelter in Tornio (a joint venture with the Swedish firm Avesta), combined with the nickel works in Harjavalta, provided Outokumpu with the key raw materials for stainless steel, and the production of this was a natural next step, with 10,000 tonnes annually being produced by late 1939. The company’s net sales increased tenfold between 1930 and 1939, by which time Outokumpu was Finland’s third largest export company.
As the pressure from the USSR grew ever more pressing in the late 1930’s, Finland began to use it’s position as a key supplier of Nickel to Germany and an important supplier to the UK as leverage in negotiations for the purchase of weapons, munitions and technology. In the case of Germany, this resulted in Germany supplying Finland in early 1938 with some two hundred 88mm Anti-Aircraft guns together with ammunition, designs and a manufacturing license as well as shiploads of coal (as Finland began to build up strategic reserves of coal and oil). The 88mm guns were pressed into service as Anti-Tank Guns in the Winter War, first used in the Battle of the Summa Gap with devastating effect on Russian armor. In the case of the UK, Finland was able to exert less pressure (the Inco Mine in Sudbury, Canada, supplied the bulk of the Nickel needed for the USA and the UK) but was able to pressure the UK into selling aircraft, including a limited number of Hurricane Fighters, as well as the transfer of technology. This included a license for the State Engine Factory to build the Rolls Royce Merlin engine, export licenses for the De Havilland Wihuri and designs for the Miles M20 Fighter, all of which would be invaluable to Finland in the Winter War.
At the same time, increasing amounts of metallurgical products from Outukumpu and other Finnish companies were going into the expanding Finnish Maritime Construction Industrial Complex. Both merchant ships and warships demand large quantites of steel, and between the demands of the new Finnish shipping lines, the ongoing Finnish Naval construction program, sales of merchant ships to the Soviet Union and the building of both Baltic and transoceanic ore carriers and Oil Tankers, the Finnish Maritime Industrial Complex was expanding rapidly. There were other internal demands – for the burgeoning automobile industry as well as for the internal Armaments Industry that had been slowly developing through the 1930’s to meet Finland’s defense needs.
But besides the keystones of the Finnish economy of the 1930’s – Lumber, Pulp and Paper, Metallurgical and the heavy industrial companies (The Maritime Complex, Sisu, Neste and othere) - there were other Companies within Finland that were beginning to emerge, less significant in terms of pure percentages, but significant in terms of technology and knowledge.