Paperboard – Excellent growth potential globally
Demand for paperboard has been relatively insulated from economic downturns as it is generally used as packaging for many consumer products the demand of which has historically been stable by nature, such as food, cigarettes, pharmaceuticals and cosmetics. Other factors that impact the long-term demand of paperboard include increasing disposable income, urbanisation, aging populations, increased health awareness, heightened packaging regulation and an increasing focus by consumers for environmental issues.
Paperboard products can be made with either long fibre or short fibre chemical pulp, mechanical pulp, BCTMP or recycled materials. Long fibre chemical pulp is primarily supplied to Europe by the Nordic countries whereas short fibre chemical pulp is generally used in Latin America. Paperboard can also be produced from recycled fibre. Many packaging companies, however, are reducing the use of paperboard made from recycled fibres, especially food companies amidst concerns of food contamination from mineral oil present in recycled fibre. Furthermore, initiatives by many global corporations to become more environmentally friendly have driven increased demand for lighter weight paperboard products as these products are manufactured with fewer resources and are more cost effective to ship.
Of the different types of paperboard produced, Metsä Board produces and sells folding boxboard, which is used to package consumer goods such as high quality food, beauty care and healthcare products, and white-top kraftliner, which is used to package heavier goods, e.g. in the food and electronics industry and is also commonly used in presentation packaging in sales promotion activities. Both folding boxboard and white-top kraftliner are produced from primary fibres.
The European folding boxboard market remains concentrated with the five largest producers representing approximately 85 per cent of the total European capacity of folding boxboard in 2016. The European white kraftliner market is also well concentrated with the five largest producers representing approximately 85 per cent of the total European capacity.
The profit cycles of the paperboard industry reflects the fact that consumption and pricing are influenced by the state of the economy, industrial production and, in particular, the balance between supply and demand for the end-use products.
Pulp – Global pulp demand-supply balance is good
Pulp is manufactured by breaking down the cellulose or fibre in the wood obtained from trees and the lignin that holds the wood fibres together. Pulp can be turned into mechanical, chemical or BCTMP depending on the process applied. Chemical pulp separates the fibres by means of a chemical reaction and is used in finer paper and paperboard primarily. Mechanical pulp is generated by milling wood and is predominantly used in publication paper grades. BCTMP production method combines the chemical and mechanical treatments of fibres. Pulp prices typically fluctuate more than prices for paperboard or paper according to global demand and supply situation.
Demand drivers for pulp are paper and paperboard production volumes. Demand is declining in the traditional markets, e.g. Western Europe, and growing in developing markets, e.g. Asia.