Stora Enso shifts focus from stagnated European fibre-board market with €1.6bn China investment

By Mark Astley

- Last updated on GMT

Stora Enso shifts focus from stagnated European fibre-board market with €1.6bn China investment

Related tags Stora enso Pulp and paper industry

Global packaging firm Stora Enso has taken steps to cement its position in the ever-expanding Asian virgin fibre-based consumer board market, through a €1.6bn ($2.1bn) investment in China.

The investment will serve China’s fast-growing market for beverage packaging board - side-stepping stagnated growth in both Western Europe and North America.

The Finland-based company expect to begin construction on the plantation-based integrated board and pulp mill facility, which will be based at Beihai city in Guangxi, in the second half of 2012. Production is scheduled to start in the fourth quarter of 2014.

The operation, which will ultimately provide paperboard output capacity of 900,000 tonnes, will be managed by an equity joint-venture company established by Stora Enso and the state-owned Guangxi Forestry Group.

The board and pulp mills will be self-sufficient with wood supply from 120,000 hectares of self-managed eucalyptus plantations, established by the company in 2002.

China growth

“It’s a growth market, both geographically, but very clearly and very strongly because of the strengths and focus on food and liquid packaging,”​ said Stora Enso CEO Jouko Karvinen.

“The number of people who will start buying packaged food in the next 10 to 15 years in the world is 1.5bn. And, obviously a very significant part of that will be Asia, especially China. We say about one-half of the total growth is in China.”

CAGR (compound annual growth rate) for virgin fibre-based consumer board in Asia is expected to hit 6.9%, whereas, western European and North American growth per annum are forecasted at just 1.4% and 0.2% respectively.

According to Karvinen, demand growth for virgin-fibre based consumer board is expected to increase 7% per annum in China alone between 2010 and 2020 – taking the overall market demand each year to 12m units.

“On the core strengths area of Stora Enso with liquid and food packaging we expect the growth in China to be 10% - double digits.”

“We want to focus on growth markets both geographically but also segment wise. We have said renewable packaging is a growth area for us, as is biomaterial as we call them today.”

Plantation-based investment

“It’s an investment to sustainability through renewable packaging and also to biomaterials through the plantation-based pulp investment,”​ said Karvinen.

“As I said before we’ve been establishing plantations in Guangxi in the past 10 years. Today we hold about 90,000 hectares of plantation land. 70,000 of those are planted and we will increase that to a total of 120,000 hectares of plantations.”

The company’s other China-based operations include a 245,000 tonnes capacity coated fine paper mill in Suzhou, a 170,000 tonnes capacity mill at Dawang.

It also boasts five sales offices in the country and its recently acquired majority share in packaging firm Inpac International, which has a well-established presence in both China and India.

“Today we have about 4,500 people in China and obviously with this investment over the next several years China will grow very possibly to be the largest country of employment for Stora Enso,”​ Karvinen added.

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