In December 2021, Swedish pulp and paper manufacturer BillerudKorsnäs AB announced its acquisition of North American coated papers producer Verso Corporation.
The $825 million acquisition of Verso’s outstanding shares is fully in line with BillerudKorsnäs’s strategy to drive profitable growth in paperboard, along with its ambition to expand into North America.
However, what exactly is BillerudKorsnäs going to do with their newly acquired Verso mills?
Verso is a leading producer of coated papers in North America with a reported net sales for the period ending September 30, 2021 of USD $264 million and an adjusted EBIDTA of USD $158 million. BillerudKorsnäs is planning to build one of the most cost-efficient and sustainable paperboard platforms in North America by converting some of Verso’s assets into paperboard machines with the goal to maintain its position as a quality and cost leader in specialty and coated woodfree paper.
Verso’s strategic assets are positioned in the Upper Midwest region of the US which contains an abundant and cost-effective fiber supply that is suitable for the production of premium packaging materials, and its location also presents favorable export opportunities to both Asia and Europe. As a result, this acquisition is expected to result in one of the largest providers of virgin fiber paper and packaging with a cost and quality advantage.
“The combination of BillerudKorsnäs’ expertise in high-quality virgin fiber packaging materials and Verso’s attractive assets creates an excellent platform for long-term profitable growth,” said Christoph Michalski, President and CEO of BillerudKorsnäs. “We also plan to sequentially transform part of the business into paperboard production while continuing to serve US customers.”
BillerudKorsnäs’ current plan is to convert Verso’s largest facility, its Escanaba mill, into a world-class, sustainable, fully integrated paperboard production site, with the first machine expected to be converted by 2025 and another by 2029. However, while the Escanaba mill undergoes conversions, the Quinnesec mill will continue operations – it has an annual capacity of around 400 ktonnes of paper and 200 ktonnes of market pulp.
However, since demand is decreasing for Solid Bleach Sulfate (SBS) paper – the highest quality and most expensive paperboard substrate that is used as a moisture barrier in liquid and food packaging – will BillerudKorsnäs invest in new Folding boxboard (FBB) capacity in Escanaba?
FBB is a paperboard grade made up of multiple layers of chemical and mechanical pulp and is a low-density material with high stiffness that is mainly used for health and beauty products, frozen or chilled foods, pharmaceuticals, cigarettes, and more. FBB is common outside of North America and the preferred substrate for these applications in many regions.
Assuming BillerudKorsnäs moves forward with a conversion to FBB – leveraging its existing expertise with the substrate – a number of questions may potentially be answered regarding the future of paperboard in North America.
Some European FBB producers have been targeting the North American market with export volumes as they look for a foothold in this SBS-dominated market. However, with the entry of the domestic production in the North American market, will it turn out that imports have paved the way for rapid growth in this efficient substrate? If so, in which products?
On the other hand, if existing converters are unwilling or unable to transition quickly to an FBB substrate, how dependent will Escanaba be on an export market for its volume? Does the recent instability in the global supply chain factor into the company’s long-term plans or cost position as an export player? Ultimately, what does this mean for domestic producers of competing substrates, and end consumers?
For a deeper look into answering the questions, talk with an expert at Fisher International who can help your business formulate an actionable plan with a high degree of accuracy. You can also learn more about how Fisher International’s analytics platform, FisherSolve NextSolveFisherSolve Next, can provide you with detailed information on every paper and pulp mill in the world for both market and competitive analyses.
Source: Fisher International