Metsä Board’s regional focus and demand drivers


Geographical split of Metsä Board's paperboard deliveries and demand outlook



AMERICAS
EMEA
APAC
​Share of Metsä Board’s paperboard deliveries in 2020​27%
​68%
​5%
​Delivery volumes in 2020
  • 274,000 tonnes of folding boxboard
  • 210,000 tonnes of white kraftliner

  • ​866,000 tonnes of folding boxboard
  • 369,000 tonnes of white kraftliner
  • ​83,000 tonnes of folding boxboard
  • 9,000 tonnes of white kraftliner
​Regional focus
  • ​Continued growth in North America
  • ​Maintaining strong market position in Europe

  • ​Focus on high quality packaging in selected end use segments
​Demand outlook for folding boxboard
  • ​Limited local availability of highquality lightweight cartonboard such as folding boxboard
  • Growth in ecological packaging for food and food service
  • ​Environmental awareness and regulatory requirements support demand for recyclable packaging materials
  • Food safety requirements favour pure fresh fibre-based cartonboards

  • ​Middle class growth increases purchasing power and demand for packaged consumer goods
​Demand outlook for
white kraftliners
  • ​Limited local availability of highquality coated white kraftliners
  • A growing demand for retail-ready packaging
  • Product brand promotion and differentiation in growing e-commerce
  • ​Continued growth of retail-ready packaging
  • Growing e-commerce




Fresh fibre paperboard as a packaging material

Fresh fibre paperboards support sustainable consumption

An eco-friendly product, providing an alternative to fossil-based packaging materials

Global megatrends, such as population growth, globalisation, urbanisation and climate change are supporting the demand for fibre-based, recyclable and lightweight packaging materials and solutions. Sustainable fresh fibre paperboards offer alternatives to fossil-based materials. Threats of oceans being filled with plastics and growing awareness of resource scarcity highlight the importance of environmental issues. Paperboards can reduce or replace the use of plastics in many packaging end uses. Packaging design can reduce environmental impact, e.g. optimising the use of the material, ensuring that the packaging is fit for purpose, and designing the packaging for recycling after use.

Paperboards have a high recycling rate

Paperboard is made from renewable, biobased wood fibre and is highly recycled. For example, in Europe, the recycling rate of paper and paperboard packaging is 83%, while the corresponding figure for plastic is 42 per cent (Eurostat). All Metsä Board paperboards are recyclable and/or compostable, depending on the local recycling infrastructure. To keep the fibre loop alive, a constant inflow of fresh fibres is needed: wood fibre cannot be recycled an unlimited number of times because the fibres become shorter and weaker with each cycle. in Europe, wood fibre is recycled an average of 3.6 times in a year (CEPI). Metsä Board is active as part of the 4evergreen and European Paper Packaging Alliance communities, which promote the recyclability of fibre-based packaging and food and food service packaging.

Fresh fibre paperboards are clean and safe

Fresh fibre paperboards provide good properties for packaging in which high quality printing and special effects are required. Because fresh fibres contain no unknown chemical substances, they are the safest fibre choice for food packaging. They do not alter the taste, smell, colour or composition of the food that is packaged or served in them. Recycled fibres are best suited to end uses in which premium quality, product safety or high hygiene is not the key criteria.

Metsä Board's position in paperboard market

Metsä Board focuses on sustainable and premium fresh fibre paperboards. Company's product portfolio consists of folding boxboards and white kraftliners. Metsä Board's folding boxboard is mainly used for consumer packaging, such as food and food service, cosmetics, pharma and electronics packaging. White kraftliners are used to for various retail purposes, such as retail-ready solutions and point-of-sale-displays. Metsä Board's white kraftliners also support the promotion and differentiation of product brands in the growing e-commerce. Metsä Board is the leading producer of folding boxboard and white kraftliners in Europe and largest producer of coated white kraftliners globally.

In general, the profitability of the paperboard industry is driven by general macroeconomic factors, industrial production, the competitive situation and naturally by the profitability of customers and end users. Demand is relatively independent of economic fluctuations due to the stable nature of end uses of fresh fibre paperboards, such as food and pharma packaging.

The European market for folding boxboard and white kraftliner is quite concentrated. The five largest producers account for more than 80% of total European production capacity.


Market shares 

Largest Folding Boxboard Producers in Europe*

by Production Capacity and Capacity Share (1,000 tonnes per annum)

Company Capacity % Capacity: tonnes/year (thousand)
Metsä Board 35 1350
Competitor 1 21 810
Competitor 2 10 400
Competitor 3 9 350
Competitor 4 6 250
Others 19 740
Competitor #3 has announced acquisitions of competitors #2 and #4.
*Total capacity: 3.9 M tonnes
Source: Metsä Board estimates

 

Largest White Fresh Fibre Linerboard Producers in Europe*

(1,000 tonnes per annum)

Company Capacity % Capacity: tonnes/year (thousand)
Metsä Board 28 675
Competitor 1 23 543
Competitor 2 15 370
Competitor 3 13 320
Competitor 4 8 200
Others 12 290
*Total capacity: 2.4 M tonnes
Source: Metsä Board estimates

Near-term risks and uncertainties 

 

A prolongation of the coronavirus pandemic may cause disruptions in Metsä Board's production and supply chains. On the other hand, the stimulative monetary policy during the pandemic, combined with the positive economic impacts of the recovery from the pandemic, may lead to overheating of the economy. The unwinding of the situation may have sudden negative effects on the world economy and thereby on the demand for Metsä Board's products and the company's profitability. In addition, customers' weaker cash position or slower payment behaviour may have an impact on Metsä Board's cash flow and lead to credit losses.

A weakening in the availability of global freight capacity may result in additional costs or restrict paperboard and pulp deliveries altogether, thereby having a negative effect on the company's profitability.

There are also other considerable uncertainties in the global economy. If realised, they may result in weakened demand and reduced prices for paperboard and pulp products. An imbalance in supply and demand may impact the prices of end products and Metsä Board's profitability.

Various countries have imposed import duties and other trade restrictions on each other's products, but these have not had a direct impact on Metsä Board's business operations so far. Negative developments in world trade could, if continued, weaken Metsä Board's profitability.

There are several geopolitical risk concentrations around the world, and forecasting developments in them is difficult. Changes in these areas may be very sudden and unpredictable. There have been, and will continue to be, international sanctions related to these crises, and they may also have a direct or indirect impact on the demand for paperboards and, therefore, on Metsä Board's profitability.

Metsä Board is focusing on the active development and growth of its paperboard business. The growth of the paperboard business and the introduction of new products to the markets depend on the success of sales. Increasing sales on a global scale also involves cost and exchange rate risks. In addition, the acceptability and taxation of various packaging materials involve regulatory risks.

A majority of Metsä Board's production is located in Finland. Finland has a history of labour disputes in both the forest industry and the distribution chain of forest industry products. These may have a negative impact on production volumes and customer deliveries, and weaken the company's competitiveness and profitability.

Wood accounts for more than a quarter of Metsä Board's total costs. The availability of the wood raw material becoming more difficult or a sudden increase in prices would have a weakening effect on Metsä Board's result.

Metsä Board's climate risks mainly concern forests and the use of energy and water. Regulation may steer the future use of forests. Increased regulation aiming to mitigate climate change and reduce greenhouse gas emissions may, furthermore, increase costs and result in substantial change requirements applicable to production technology. The supply and demand of products in a low-carbon economy may differ from the current situation. Climate change may cause an increasing number of extreme weather phenomena, such as storms, floods and drought, and weaken the availability of the process water and electricity required by mills and result in breaks in production. Extreme weather conditions may also limit the availability of the wood raw material. Should they materialise, climate risks could have a negative impact on Metsä Board's profitability.

Changes in the market price of pulp have a significant impact on Metsä Board's profitability. The company's annual overall pulp position shows a surplus of roughly 400,000 tonnes. A 10% decline (increase) in the price of market pulp would have an approximately EUR 30 million negative (positive) impact on the company's annual operating result.

The US dollar strengthening by 10% against the euro would have a positive impact of approximately EUR 72 million on Metsä Board's annual operating result. Correspondingly, the Swedish krona strengthening by 10% would have a negative impact of approximately EUR 42 million. The British pound strengthening by 10% would have a positive impact of approximately EUR 9 million. The impact of weakened exchange rates would be the opposite. The sensitivities do not include the impact of hedging.

The forward-looking estimates and statements in this interim financial report are based on current plans and estimates. For this reason, they contain risks and other uncertainties that may cause the results to differ from the statements concerning them. In the short term, Metsä Board's result will be particularly affected by the price of and demand for finished products, raw material costs, the price of energy, and the exchange rate development of the euro compared to the company's other main currencies.

Further information on long-term risks and risk management is available on pages 53–55 of Metsä Board's 2020 Annual Report.

Source: Metsä Board's Interim Report for January–March 2021


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