Major Moves in the P&P Industry that Occurred in 3Q2022

Fisher International
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With so much activity that has occurred in the pulp and paper industry over the last quarter, it’s difficult to keep up with some of the major developments that could impact various segments across the industry.

To provide a high-level snapshot of some of these major industry moves, we’ve rounded up some of the leading headlines below.

After a Year in Production – Klabin’s Puma II Project Exceeds Expectations

At the end of last year, we looked at Klabin’s Puma II project, discussing all it entailed and whether its Eukaliner product could replace traditional kraftliner. The Puma II project was initially announced in 2019 and was designed with the intent to produce 920,000 tons of high quality kraftliner board annually. However, in the second half of last year, Klabin decided to take the project a step further and invest in producing Eukaliner – the world's first kraftliner using 100% eucalyptus fiber.

Traditionally, kraft linerboard has been produced using long-fiber softwood pulp. While attempts to produce kraftliner with alternative fibers have largely fallen flat, Klabin’s innovation to use 100% eucalyptus was presented as a possible game-changer for this segment of the P&P industry. So after of year of operation, how did it fare?

After 365 days of operation, Klabin’s first paper machine (the MP27) of the Puma II Project – the biggest investment in Klabin’s history, which includes the construction of two paper machines with integrated pulp production – surpassed expectations and produced over 330,000 tons of Eukaliner and Eukaliner White. The highly impressive machine, which has the capacity to produce 450,000 tons per year, surpassed the learning curve, instilling a trajectory that stands out above many other machines and projects.

Within the short time that Eukaliner has been on the market, Klabin has already seen positive feedback form various customers. For example, Eukaliner helped Chile to save 20% in the volume of paper used when replacing a product with similar characteristics. “This is an example that shows how the gains for customers are diverse, ranging from the economic issue, due to the lower volume of paper needed, to the attributes of sustainability, since less product results in less CO2 emissions for its production and transport. In addition, Eukaliner uses 40% less planted area than products developed with other fibers," stated Francisco Razzolini, Director of Industrial Technology, Innovation and Sustainability at Klabin.

In addition to the PM27, which started operations in 2021, the Puma II Project continues with its progression towards the implementation of the PM28, the second paper machine foreseen in the project. The machine startup is scheduled for the second quarter of 2023.

Global Capacity Growth Rate

The containerboard sector is an area within the Pulp and Paper industry that should constantly be paid attention to as it’s one of the hottest grades in the market. As many of us are aware, since the global Covid-19 pandemic supercharged the popularity of e-commerce, demand for packaging and corrugated has been skyrocketing since early 2020. Between the US containerboard sector reaching record production levels in 2021 to the overwhelming number of boxplant investments, there is a lot to talk to talk about and discuss in regards to the future of this sector.

Compared to 3Q2020, 3Q2022 (as of September 15, 2022) experienced an 8% growth in global capacity. However, it’s interesting to note that while we saw a huge jump in capacity in the beginning of 2021, the significant growth percentage each quarter has begun to taper out towards the end of 2021 and into 2022 – with capacity growing less than 1% each quarter.

Actual Global Containerboard Capacity 2020, Q1 - Current

 FI 4oct22 2Source: FisherSolve

Looking forward, 4Q2022 is expected to exceed 3Q2022 capacity levels as we’ve seen with each quarter, but will we see a familiar pattern of a growth rate of under 1% or could we see another spike in capacity growth like we did at the beginning of 2021? With increasing inflation and a looming recession that could negatively impact the e-commerce sector, a few additional questions to keep in mind include:

  • Will we see growth in global containerboard capacity diminish within the next few quarters?
  • What other factors are impacting the growth of containerboard capacity?
  • How long can we expect this sector to continue growing?
  • Will fiber availability eventually curb the growth we’ve seen thus far?

Stora Enso Acquires De Jong Packaging, Continuing Its Push in the Packaging Sector

Stora Enso recently announced that is acquiring De Jong Packaging Group, based in the Netherlands, for an enterprise value of approximately EUR 1,020 million. De Jong Packaging is one of the largest corrugated packaging producers in the Benelux countries, with 17 sites in the Netherlands, Belgium, Germany and the UK. Its product portfolio and geographic presence will complement and enhance Stora Enso’s offering, specifically in the e-commerce and industrial packaging sector, and will additionally significantly strengthen and advance Stora Enso’s strategic direction, accelerate revenue growth and build market share in renewable packaging in Europe.

This acquisition will also increase Stora Enso’s corrugated packaging capacity by approximately 1,200 million m2 to more than 2,000 million m2, including De Jong Packaging Group’s ongoing expansion projects.

“In line with our strategy, we are investing in growing our market share in renewable and circular packaging solutions. De Jong Packaging has a solid presence in the corrugated packaging sector and an impressive customer base. Acquiring their operations supports our future strategic direction to advance renewable packaging solutions within Europe,” stated Annica BreskyPresident and CEO at Stora Enso.

Fisher International can provide you with a deeper analysis into these industry developments and how they might impact your business and influence your decision-making. Our consulting services help provide you with answers to important questions by explaining market movements in verifiable, fact-based and common-sense terms that industry professionals find useful. To learn more about how Fisher’s consulting team can help you prepare for new opportunities, contact us today.

Source: Fisher International