Stora Enso restructures around packaging and biomaterials amid global paper market decline

07 Sep 2021 --- Stora Enso is restructuring its business due to a global decline in the paper market, increasing its focus on packaging and biomaterial innovation. The Finnish paper and pulp specialist will be making divestments and closing some of its paper mills while investing in new sites to ensure continued competitiveness.

Speaking to PackagingInsights, Satu Härkönen, head of media relations at the company explains the paper market has been steadily declining for over a decade.

“The graphical paper demand has been in structural decline since 2007, driven by digitalization and changed consumer behavior.”

“The structural decline further accelerated due to the COVID-19 pandemic. In 2020, European paper consumption fell by 18 percent,” she says.

Closures and divestments
The decline in paper demand led to “historically low” price levels, and despite a slight recovery this year due to increased economic activity, Stora Enso decided to close two of its paper plants and divest in a third.

In order to accommodate these market changes, the company closed its Veitsiluoto mill in Finland and Kvarnsveden mill in Sweden, and divested its Sachsen mill in Germany.

Stora Enso says the moves are part of its transition from a traditional paper company to a renewable materials growth company.

In 2020, European paper consumption fell by 18 percent, according to Stora Enso.“We have converted the Varkaus (Finland) and Oulu (Finland) paper mills to produce kraft liners for packaging, where demand is growing. The share of paper in the company’s turnover is clearly below 20 percent today,” remarks Härkönen.

After the ongoing restructuring, the paper division’s share of group sales will be reduced to slightly above 10 percent. These actions will have “significant effects” on its business: paper production capacity will decrease by 42 percent to 2.2 million metric tons per year.

The closures of Kvarnsveden and Veitsiluoto will also improve environmental performance by reducing its carbon emissions annually by 8 percent, says the company.

Adapting production
As part of its closures and divestments, Stora Enso is aiming to adapt production for the declining paper markets to improve the competitiveness of its total business.

“The role of the paper division in Stora Enso’s strategy is to provide strong cash generation through cost reductions and active capacity management. This is why ensuring competitiveness and profitability are a top priority going forward,” says Kati ter Horst, executive vice president at the paper division.

Stora Enso recently revealed investments to modernize two paper sites: Anjala-Ingerois in Finland and Nymölla in Sweden.

“These investments will improve the competitiveness of both production units and at the same time contribute to our sustainability performance,” adds ter Horst.

The company’s focus is on packaging, building solutions and biomaterials innovations.

“These are the areas where we see strong growth potential and where renewable materials can best meet demands for eco-friendly and circular products. In these areas, we already have leading positions and can build on existing strengths to grow more rapidly.”Innova Market Insights reports a majority of global consumers recognize paper-based packaging for its exceptional recyclability.

Fiber frenzy amid traditional paper decline
While the paper market has undergone a steady decline, the use of fiber material in packaging has shot up in popularity amid efforts to reduce the use of fossil fuel-based materials like plastic.

Innova Market Insights highlighted this by selecting “Fiber-based Frenzy” as a top trend for 2021. The market researcher’s 2021 survey revealed that half of US consumers (49%) regard packaging’s recyclability as its most important sustainability credential, followed by reusability (44%) and recycled material use (35%).

Meanwhile, 72 percent of global consumers and 62 percent of US consumers recognize paper’s exceptional recyclability.

Härkönen explains that the packaging sector is a key element in growing the paper economy amid the global decline in paper sales.

“Packaging is a major feature of all modern economies, enabling efficient logistics and preventing waste of food and other valuable goods. At the same time, packaging might be the most tangible example of a throwaway, linear economy. Making packaging sustainable is clearly imperative.”

“We talk about the rise of carton board or corrugated board-based packaging. Economic growth, sustainability and food safety are key market drivers in the packaging business. Increasing use of e-commerce clearly contributes to a growing market,” she concludes.

By Louis Gore-Langton

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