PaperFIRST Mag #2 - Spring 2020 by ENP Publishing

SPRING 2020

Prospective insight for the global paper industry

EDITOrial

Microorganism vs. Mega trend: Anybody’s guess really

T Stéphane Richard

PaperFIRST Mag is produced by ENP Publishing Group 36, rue Stanislas Julien 45000 Orléans (FRANCE) Tel : +33 238 42 29 00 - www.paperfirst.info info@groupenp.com RCS n°34303773500044 Publishing Director Stéphane RICHARD Editorial Contributors Pekka AARNISALO, Pierre BACH, Amelys BRITO Marcello GIORGI, Dr. Ronalds GONZALEZ MBA Nicole HENSLEY MBA, Dr. Hasan JAMEEL Dr. Stephen KELLEY, Martin KOEPENICK Valérie LECHIFFRE, John NELSON Tero PÄRSSINEN, Vesa PUOSKARI, Jonas REHNBERG, Dirk STEINICKE, Dr. Richard VENDITTI, Franklin ZAMBRANO Consulting Editor Teresa PRESAS Revision Sally O’SHEA Graphic Design Gessica CAMBI Administration Mathilde SEVESTRE Marketing and Sales François HENIN Printed in Europe © 2020 ENP Publishing – All rights reserved Legal Deposit May 2020 No reproduction allowed without permission of the publisher, who will not be held responsible for the contents provided by third parties. PaperFIRST Mag - ISSN n°2679-7240 Also by ENP Publishing: La Papeterie, El Papel, Pasta e Papel, Turkiye Kagit Sanayii, Paper MiddlEast, PaperFIRST Web, PaperFIRST App, TissueFIRST App. PaperFIRST Mag is dedicated to pulp and paper professionals. Those who work for a paper mill can be entitled to a free copy. To make sure you receive your own copy, apply for a subscription by sending an email to: paperfirst@groupenp.com.

he pulp and paper sector, like all industries, will be affected by the pandemic situation we are facing at the time this article is being written, as well as the tough lockdown and sanitary measures taken by governments all over the world. In the short term, segments like containerboard, tissue and specialty papers seem to have been relatively spared, and have even benefited from the crisis to some extent, as our industry has been widely recognised as essential. In the long term, the outcome is still unpredictable. Whatever becomes of the pulp and paper sector, like all manufacturing industries, it will depend on the resilience of the free market economy in an interconnected and interdependent world. One thing is for certain, we will witness a reshuffling of the global pack with even stronger competition when international solidarity finally fades away. The world’s dependence on China is now clearly seen as a weakness and a risk by most Western countries. The need to relocate some strategic industries is particularly glaring. In the near future, we will hear officials calling for the development of smaller manufacturing units serving their national markets. The challenge will be to prove their economic viability. Beating the “world’s factory” in terms of competitiveness without imposing import taxes will demand ingenuity from industrial strategists, and strong capital commitment. Innovation will also be a key factor, as well as the sustainability issue that will have to remain a major driver. In this edition of PaperFIRST Mag, you will read a lot about sustainability and innovation. The fibre-based industry has proven its capacity to be a major player when it comes to supporting a “green deal” policy. From Australia to Africa, from India to Europe and the Americas, our federations across the globe are making sure it is seen as a solution by policy makers. Resource management, ecodesign, decarbonisation and circularity are some of the aspects that are contributing to a bright future for pulp and paper products. The fundamentals and prospects of our industry have never been so strong. This mega-trend should prevail in the long run, with or without a nasty virus. Stéphane RICHARD

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CONTENTS 26

30 EDITORIAL 3 FINANCIAL OUTLOOK Forest product companies and market challenges 6

MARKET OUTLOOK Paper industry embraces the potential of sustainable packaging On global tissue markets, pulp demand, and the looming recession Is sustainability shaping the hygiene tissue industry? Evidence from the field BUSINESS DYNAMICS Traditional forecast methods are unable to predict the turning points in cyclical markets THE C-LEVEL INTERVIEW Hans Sohlström, CEO of Ahlstrom-Munksjö GLOBAL CHALLENGES Crossed viewpoints from Europe, Africa, Asia, Australia and the Americas PRODUCT BREAKTHROUGH Paperboard powers the future MILL STORIES How Voith and BillerudKorsnäs build the world’s most modern board machine

10 15 19

INDUSTRY 4.0 AI-based business models by Valmet 49 TECHNICAL INSIGHT Value stream for sustainability by Kadant 52 Towards energy-efficient and economical tissue production by Runtech 53 57 The new polyurethane roll cover SupremeFilm by Voith CALENDAR OF EVENTS 58 PAPERFIRST MAG SPRING 2020

FINANCIAL OutLook

Forest product companies and market challenges Article by Dirk Steinicke, Analyst at Moody’s

Forest product companies are likely to focus on executing capital spending projects and cost-cutting given market challenges

oody’s predicts that 2020 will be a difficult year for most paper and forest products companies in Europe, especially the first half of 2020. Firstly, demand for communications papers is continuing to decline, especially for coated woodfree paper, which calls for ongoing production capacity reductions. Secondly, the pricing level for hardwood and softwood pulp grades is currently relatively low and we believe it is below the cash cost of production for a significant portion of global production capacity. Slower economic growth in major economies also puts pressure on paper packaging mainly because the growth in demand becomes insufficient to fully absorb capacity additions, which leads to lower corrugated container prices. In our view, flat consumer packaging and tissue prices will not offset pricing pressure in the corrugated container segment. Following a prolonged period of deleveraging, the rating agency thinks that many companies across the pulp, paper and paper-packaging sector in Europe are likely to turn their attention to executing recently announced new investments and reducing costs in response to the currently challenging demand and pricing situation in most market segments. The coronavirus outbreak has diminished optimism about prospects of an incipient stabilization of global growth this year. While logistics disruptions may temporarily slow paper and forest product exports from China and other areas of significant outbreaks like Korea and Italy, the impact on global demand is likely to be far worse (than the impact on global production), resulting in oversupply across many regions, which will also drive prices lower. Moody’s expects consolidated operating income for the 42 paper and forest product companies that we rate globally to decline by 5%-7% over the next 12-18 months. However, many Moody’s rated European companies in this sector, in particular UPM-Kymmene (UPM), Progroup, Smurfit Kappa (SKG), Mondi and Metsä Board, have built up financial flexibility to execute their capital investments in new projects without putting significant pressure on their credit quality. Over the past few years the companies have benefitted from a fairly benign operating environment that has supported volume growth in all segments aside from graphic paper, where demand is structurally declining owing to the shift to digital media. Investments to optimise the level of vertical integration, increase productivity and reduce the overall cash costs of production have also played an important role. Even companies with graphic paper exposure, such as UPM, Sappi and Stora Enso, have increased their earnings. Despite declining graphic paper volumes, these companies have continued to shift their business mixes away from margin-dilutive paper operations towards structurally growing and more profitable segments, such as pulp (Stora Enso, UPM), paper-packa-

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FINANCIAL OutLook

ging (Stora Enso, Sappi), and labelling or other specialty papers (UPM, Sappi). The EBITDA of the vast majority of companies in Moody’s peer group of European Ba and Baa-rated pulp, paper and paper-packaging companies has grown since 2012. For example, the combined EBITDA of this peer group increased by 12% between 2012 and 2017. Moreover, for the 12-month period ended September 2019 EBITDA was even 32% above the 2012 level, as companies benefitted from structurally better positioned paper businesses. However, as trade tensions increased, global growth slowed and the demand for pulp significantly deteriorated during 2019. As a result, the average EBITDA margin has started to decline (see Exhibit 1), reflecting the more challenging market environments. Aggregate EBITDA margin of Moody’s rated European pulp, paper and paper-packaging companies is declining

Exhibit 1

Source: Companies financial reports

European pulp, paper and paper-packaging companies rated by Moody’s have started to increasingly focus on cost reduction programmes and more selective growth investments in order to protect profitability and financial flexibility. Many of these companies, in particular those with structurally declining paper operations, have remained focused on strengthening their balance sheets. This has enabled them to keep investing in strengthening and diversifying their operations while staying free cash flow positive. In addition to investments, companies have used excess cash to reduce debt by roughly one-third to an equivalent of around $20 billion in the 12-month period ended June 2019 from an equivalent of almost $30 billion in 2012. Such debt reductions combined with increased EBITDA generation have resulted in a Moody’s-adjusted debt/EBITDA leverage ratio of around 2.1x for the 12-month period ended September 2019 down from 4.1x in 2012 on average.

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FINANCIAL OutLook

Moody’s thinks that because these companies’ balance sheets are stronger on average there is some capacity for growth investments, even though the rating agency has a negative industry outlook for the global paper and forest products industry. As Exhibit 2 shows, the average debt level for the Moody’s rated European peer group is close to a record low. Moody’s rated European pulp, paper and paper-packaging companies’ aggregate debt is much lower than in 2012

Exhibit 2

Source: Companies financial reports

However, Moody’s thinks that the companies’ balance sheets are likely to weaken further over the next 12-18 months. This development is mostly driven by our expectation of declining EBTIDA generation and to a lesser extent by increased debt loads used to fund strategic growth investments. Nevertheless, Moody’s observes that most companies are still within the range of their self-imposed leverage targets (see Exhibit 3), which they have tightened during the last couple of years, or will take measures to do so if the market Most rated European pulp, paper and paper-packaging companies’ reported leverage is within their own ranges remains challenged for a prolonged period. Therefore, Net leverage target/ Reported net leverage for 12-month ceiling [2] period to December 2019 the rating agency further exStora Enso below 2.0x 2,1x pects that the current market Metsä Board below 2.5x 1,1x situation will compel compaMondi [1] none 1,3x Sappi below 2.0x 3,0x nies to optimise their cost SKG 1.75x - 2.5x 2,1x structures in order to remain UPM below 2.0x -0,2x ENCE (Pulp) below 2.5x 1,8x compliant with their respecENCE (Energy) below 4.5x 4,3x tive financial policies. Progroup

For example, Stora Enso has extended its cost savings programme to €275 million per year from €200 million

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Exhibit 3

2.5x - 3.0x

2,6x

Source: Companies financial reports

(1) Mondi does not have a specific target, just a commitment to maintaining an investment-grade rating (2) These are internal self-imposed targets/ceilings

FINANCIAL OutLook

from 2021 onwards. Sappi is currently working on the Vision2020 programme aimed at reducing its operating costs by a total of $140 million per year by 2020 compared with 2018. Sappi’s management already realised $87 million of savings during fiscal 2019, which ended in September 2019. At the same time, the company is continuing its transformational strategy by adjusting production capacities in graphic paper and newsprint with the closure of 620,000 tonnes of graphic paper and 240,000 tonnes of newsprint production capacity. Sappi has also cut its dividend to protect its cash flow. Meanwhile, UPM continues to gradually optimise its cost structure and has announced plans to build a new 2.1 million tonne pulp mill in Uruguay for around €2.8 billion (including infrastructure investments) to strengthen its market position in a structurally growing product. Furthermore, Metsä Board is also going to revamp its Husum mill for about €320 million in order to reduce production costs so that it can continue to offer competitive products. Elsewhere, SKG currently plans to invest as much as €1.6 billion between 2018 and 2021 on projects aimed at generating additional volumes, improving the level of vertical integration and reducing cash costs. Similarly, Progroup has started building a new 750,000 tonne testliner mill in Germany at a cost of around €465 million and four additional corrugated plants in Europe. A number of other companies, such as ENCE, Mondi, and Sappi are planning to debottleneck their pulp and packaging operations as well as make investments in renewable energy in a response to continued increases in demand. Although pulp prices are currently at a low level, Moody’s expects that they will start to increase again over the next two quarters given that global demand is still robust and major production capacity additions will not enter the market before 2021.

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Market OUTLOOK

Paper industry embraces the potential of sustainable packaging Article by John Nelson, Editor, Smithers

he following article explores some of the fundamental trends within the paper industry, and the opportunities for suppliers, printers and converters. While the outbreak of coronavirus continues to disrupt global supply chains and financial markets, the underlying trends within the paper look set to continue. In the short-term looking at China there was a shutdown of paper mills in Hubei for several weeks as the province went into a lockdown. Given its role in global manufacturing and logistics there has been a rise in demand for recovered paper (RCP) in China, and Beijing has already removed tariffs on imports of recycled paper pulp shipments from the US for this year. It is likely that as other states go into lockdown paper mills will be slowed or idled. In the longer term there is likely to be a global recession and the evidence of the 2008 Great Recession is that this will affect different paper segments differently. In developed markets demand for packaging is generally fairly resilient to economic downturns, though the expansion of consumption of packaged goods in developing markets is liable to slow. Publication and graphic grades are likely to feel more of an impact, and advertising print will certainly see a drop in demand as marketing budgets get squeezed.

At the dawn of the 2020s the global paper industry is having to adjust to an evolving set of market conditions. Demand for printing papers continues to drop. As a result paper firms are being challenged to diversify into other markets, such as specialty papers; and expand their fibre-based packaging portfolios.

NEW DYNAMICS IN PAPER SUPPLY Volumes of printed papers are progressively being eroded by the digitisation of information. From 2018-2019 woodfree paper shipments in Europe dropped by roughly 1.3 million tonnes, with around two thirds of this in coated grades. Data from the latest Smithers report â&#x20AC;&#x201C; The Future of Global Printing to 2024 [1] â&#x20AC;&#x201C; shows that in 2019 overall demand for woodfree and newsprint was 72.1 million tonnes worldwide, having dropped from 86.7 million tonnes in 2010. The decline has been sharpest in newsprint as total volumes of printed newspapers fell from 17.3 trillion A4 print or equivalents in 2010 to 13.5 trillion in 2019. This has prompted multiple mill closures or refits to produce papers for new applications. The closing or repurposing of these assets has barely kept pace with the decline in demand however and future machine changes are likely. For example, in Q4 2019: â&#x2013; R esolute Forest Products stopped production of its 215,000 tonnes per year newsprint line paper machine at Augusta Georgia

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Market OUTLOOK

â&#x2013; I nternational Paper cut output of its P3 newsprint machine at Kwidzyn in Poland â&#x2013; U PM has struggled to divest its Chapelle Darblay newsprint mill in France. Smithers forecasts publication print will continue to fall through the first half of the 2020s, with the exception of books. Book publishing was hit hard through the 2010s, but is now being reinvigorated by the arrival of new digital printing presses opening up opportunities in long-tail publishing and print-on-demand services driven by e-commerce platforms. Overall this is not enough to counter the decline in other publication media such as newspapers, catalogues and directories, and a further falling off of demand for graphic papers.

MARKET REALIGNMENT The challenge for the paper industry as it enters this new decade is thus one of diversification. The global packaging industry continues to expand into new markets, especially in Asia; and there is new interest in paper packaging formats from brand owners, as consumers and legislators look to reduce the use of plastics. Another option is repurpose existing machine assets to produce more specialty grades, for use in industries such as decor, filtration, industrial applications, labels, and packaging. Specialty paper typically need to be designed to meet specific end-use requirements and consequently have more demanding technical specifications. There are many reasons for moving into the specialty segment, but the leading ones are the higher profitability specialty grades offer compared to commodity products that could be made on the same equipment; and reduced competition as fewer paper machines are configured to deliver specific grades. Smithers forecasts specialty papers demand will rise at a rate of 2.3% year-on-year. Having reached a projected 25.03 million tonnes in 2019, annual global consumption is forecast to exceed 28 million tonnes for in 2024.[2] In this market, papers for flexible packaging applications are now growing well above the market average, in particular for machine glazed, waxing base and CS1 grades. Overall packaging (not including labels and release liners) consumed an estimated 7.09 million tonnes of specialty papers in 2019, with the market forecast to increase to 8.03 million tonnes in 2024. Label papers will grow at a slower rate from 3.82 million tonnes to 4.10 million tonnes across this period. This is a very diverse segment however and the future outlook is often linked to broader technological developments and the suitability of paper compared to other materials. Consumption of non-specialty paperboards is also showing robust PAPERFIRST MAG SPRING 2020

Market OUTLOOK

growth at 3.6% year-on-year. Demand for printed packaging paperboard will be 175.8 million tonnes in 2024, up from 147.1 million tonnes in 2019; and 113.4 million tonnes in 2024. The majority of this expansion is accounted for by developing economies, China in particular, where consumers are moving from traditional wet markets into western-style supermarkets, buying packaged goods for the first time.

A SUSTAINABLE FUTURE For developed markets the paper industry is seeing a major opportunity from the current backlash against plastics pollution. Paper and pulp is readily understood to be a sustainable product by consumers and has become the preferred alternative material for a brand to demonstrate its sustainability credentials. Europe has taken the lead on the issue with the adoption of the Single-Use Plastics Directive in June 2019 [Insert Box Out]. The Canadian government of Justin Trudeau has committed to a phase out of similar disposable plastics from 2021, and Japan will to cut its consumption of single use plastics by 25% by 2030. India announced similar plans in Q3 2019, but then stepped back from what were very ambitious timelines. In January 2020, China also published draft plans for reducing use in packaging and other applications through to 2025. In the US, California however has looked to introduce a bill with similar requirements. Initially rejected in Q4 2019, a revised version is expected to be passed in 2020. Several states and cities have also acted to outlaw expanded polystyrene (EPS) cups and take-out trays. This is creating a direct impetus to develop alternative paper-based formats to replace singleuse plastics; mainly in food service formats, such as cups, straws and trays.

BRAND OWNER COMMITMENTS

John Nelson

Brand owners are also showing a new commitment to the environment. The majority of the biggest FMCG companies have commitments to reduce their use of plastic packaging. Supermarkets and retailers – such as Walmart, Kroger, and Tesco – are also pushing for more sustainable solutions in own brand and third-party goods. As taking responsibility for the environment becomes a more central part of global corporate citizenship goals, packaging in particular has become an area of focus. It is part of the brand experience that customers directly handle, and are responsible for disposing of. Consumers typically view paper formats as sustainable and easy to recycle. This is a broader trend than that directed by single-use plastics legislation on specific products. Combined these present a major opportunity for paper suppliers and packaging converters to diversify their product portfolios and secure new markets.

SUSTAINABLE DESIGN The challenge is to develop paper and pulp concepts that can match the performance of existing plastic packaging formats – for which brands and retailers are willing to pay a price premium. This trend is now accelerating. In several recent industry surveys Smithers has identified the following market opportunities:

Beverage cups Europe’s 13 largest markets consumed 16 billion EPS and 32.5 billion other plastic cups in 2019.[4]

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Market OUTLOOK

Substituting paper cups for plastic faces many of the same challenges and the need for recyclable moisture barrier technologies, especially for hot-fill beverages. In response several companies have also developed cupstocks coated with the biopolymer polylactic acid (PLA), which enable biodegradation at end-of-life. Global capacity for this material remains limited. The nascent bioplastics industry is looking to shift from the first generation of PLA made from crops, like sugarcane, to formulations made from resources that do not require prime agricultural land to produce. For hot beverages thermal insulation is again a concern. The paper or kraft sleeve is a common sight in the takeout coffee segment, but there is pressure to phase these out as they are seen as another piece of superfluous packaging. In response double wall paper concepts have been developed.

Barrier pouches Several companies are advocating coated papers as an easier to recycle solution to replace flexible plastic pouches. Japanese paper firms are active in this area. ■M itsubishi has the BarrierCote platform for aqueous coated papers. This are being marketed at several applications, including heat-sealed bag packaging of dry and greasy foods. ■N ippon Paper is beginning trial line production of its SheildPlus coated papers with development partner Jujo Thermal of Finland. Commercial runs are set to begin in June 2020. Nippon reports that these can have oxygen and water vapour permeation levels equivalent to aluminium deposition films. ■F utamura also has its NatureFlex line of cellulose films and coatings. In Q3 2019 Koehler Paper announced a €300 million investment in a new paper machine aimed mainly at applications in dry foods. There are remaining challenges in this segment. First barrier papers are not suitable for all applications, especially those that include high heat sealing, high pressurisation, or retort cooking. So initial entry will be for products that do not require the highest level of barrier performance, such as confectionary, dry soups, coffees, and flour bags. Second to adapt flexible papers to run on existing flexible packaging machinery and printers it is important to improve surface evenness to match these of polymer films. This can be done via advances in curtain coating machinery. Third transparency is important for flexible packaging – allowing customers to examine the goods inside. This is particularly desired by healthy or natural brands.

Paper straws Plastic straws are a product that is named specifically in the single-use plastic directive and will be banned in the EU from July 2021. Brands are simultaneously embracing pulp based drinks straws: ■ Starbuck’s has already committed to using only paper straws in its outlets ■ Freisland Campania will replace 100 million plastic straws with paper straws by the close of 2020 ■ Mc Donald’s also trialled the concept in multiple markets in 2019. There are still technical performance issues to address. BillerudKorsnäs has developed the U Bend paper straw, which can be bent through 180°, using its shapeable paper technology. This makes it a viable alternative for drinks cartons, and has already undergone trials with Tetra Pak in mid-2019. The outstanding issue remains that paper straws still dissolve in contact with liquids. The current goal is to have a straw that lasts at least an hour, but there is still scope to innovate to extend this. PAPERFIRST MAG SPRING 2020

Market OUTLOOK

Specialty paper market shares by paper type, by tonnage, 2019

CONCLUSION Both specialty grades and innovation for more packaging formats are liable to be on the radar of decision makers at paper companies in the next five years as they look to evolve their businesses. The specialty paper segment offers the opportunity for greater profitability than commodity graphic grades. Companies that take this route will need to bear initial capital expenditure in new equipment, and retrain staff to produce more technically exacting grades. As the market Source: Smithers becomes more crowded however, increased competition is liable to put a renewed emphasis on innovation moving forward. Specialty paper grades for packaging in particular will see good growth, as will non-specialty grades into this industry. Expansion in developed markets is increasingly being shaped by the sustainability agenda. Led by Europe, single-use plastics bans are already providing a strong initial impetus for new concepts. This is being welcomed by brands, which have their own sustainable packaging commitments. The majority of these green citizenship goals have a deadline of 2025. Combined these two influences will underpin further innovation and market applications for paper packaging to this date. Whether this continues into the second half of the decade will depend on the appetite for further commitments from both end-users and governments. As there is no one solution to making packaging more sustainable, paper makers face the challenge to exploit their current advantage now, before re-engineered plastic concepts are ready for a full market rollout. This will generate an impetus for closer collaboration with packaging suppliers, converters and coatings developers. As this happens there will be more mill closures for graphic papers, and there will be price competition as more commodity paper firms move into the speciality space. This will place higher priority on certain more specific growth areas.

MAIN IMPLICATIONS OF THE EU SINGLE-USE PLASTICS DIRECTIVE: The EU Single-use Plastics Directive 2019/904, will introduce the following restrictions on plastic food and foodservice packaging formats: ■ B ans on single use plastic cutlery, plates, beverage stirrers and drinking straws from July 2021 ■ Bans on takeaway food containers and beverage cups made of expanded polystyrene (EPS) from July 2021 ■ A ban on all products made from oxo-degradable plastics as of July 2021 ■ C uts to consumption of single-use non-EPS plastic beverage containers and trays, to hit new mandated targets by 2026. ■ E xtended producer responsibility schemes (EPR) for suppliers of the single-use plastic products, applying a “polluter pays” principle, from December 2025.

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[1] The Future of Global Printing to 2024 https://www.smithers.com/en-gb/services/market-reports/printing/the-future-of-global-printingto-2024 [2] The Future of Specialty Papers to 2024 https://www.smithers.com/en-gb/services/marketreports/paper/the-future-of-specialty-papersto-2024 [3] The Future of Functional & Barrier Coatings for Paper & Board to 2024 https://www.smithers.com/en-gb/services/marketreports/paper/barrier-coatings-for-paper-andboard-to-2024 [4] The Future of European Food & Drink Packaging to 2023 https://www.smithers.com/en-gb/services/marketreports/packaging/european-food-and-drink-packaging-to-2023

Market OUTLOOK

On global tissue markets, pulp demand, and the looming recession Article by Hawkins Wright

Since 2009, the use of bleached chemical market pulp in the tissue sector has grown from 13Mt to 23.6MT; tissue has accounted for 95% of BCP demand growth in the last ten years. This remarkably steady expansion over the past decade is driven in part by supportive global consumer trends and economic growth, but also because the tissue production is largely non-integrated.

ince 2009, the use of bleached chemical market pulp in the tissue sector has grown from 13Mt to 23.6MT; tissue has accounted for 95% of BCP demand growth in the last ten years. Some 40% of all bleached chemical market pulp shipments went to the tissue industry last year as the sector’s global output surpassed 38Mt. This compares to just 27% of all BCP shipments in 2009, when tissue production totalled 28.4Mt worldwide. This remarkably steady expansion over the past decade is driven in part by supportive global consumer trends and economic growth, but also because the tissue production is largely non-integrated.

With the world on the brink of a major recession, the fate of pulp markets looks more tied to that of tissue markets than ever before. Even during the recession of 2009, tissue production grew by 0.5%, and quickly recovered to average 3.4% p.a. in the decade that followed. In this month’s Industry Focus, we offer an overview of the sector’s fundamentals and try to gauge the extent to which tissue can shield pulp markets from a protracted downturn.

MARKET GROWTH Tissue markets can be segmented either by region or by end-use: at-home (AH) or away-from-home (AfH). Regional differences abound, particularly between mature and emerging markets. Note that we use production figures (as reported by associations, complemented with our own estimates) as PAPERFIRST MAG SPRING 2020

Market OUTLOOK

a proxy for demand because shipments statistics are scarce and it is usually safe to assume that production equals demand over the long run. Amongst mature markets, the North American market remains the largest, with production of almost 9Mt last year. Production in Europe (as defined by CEPI) amounted to 7.6Mt last year, while in Japan output totalled 1.8Mt. Excluding Japan – for which growth has been virtually zero over the past decade – growth in these mature markets has averaged 1.3% p.a. over the past decade. This steady expansion is a result of sizeable investments in AH private labels and AfH capacity which have steadily taken market share away from incumbent branded products.

Even during the recession of 2009, global tissue production grew by 0.5% and quickly recovered to average 3.4% p.a. in the decade that followed.

The rest of the world is categorised as emerging, and for good reason: growth in these countries has averaged approximately 6% p.a. since 2010, and they account for 82% of global growth during this period. China alone accounts for 38% of global growth, with output reaching 8.7Mt last year, compared to just 5Mt in 2010 (+6.9% p.a.) Latin America is the second biggest market but has the slowest growth rate of the group – at 4.4% p.a. during the past decade. Other Asia, the Middle East & Africa and Eastern Europe together represent the remaining 2.8Mt of growth, expanding from 4Mt in 2010 to 6.8Mt last year. The tissue segment’s growth in these emerging markets are driven by population growth, rising income levels and increased product penetration – these stand to drive further growth in the years ahead.

OVERCAPACITY AND TRADE Following a slowdown in tissue capacity investment through 2016 and 2017 after years of oversupply across most markets, capacity growth surged in 2018, reaching a record-high +2.5Mty. Following a period of low operating rates and tight margins during 2018, the pace of investment has cooled significantly. For example, last year global tissue capacity additions amounted to +1.7Mt whilst this year we expect growth of just 1.2Mt This includes large investments from Sofidel and First Quality Tissue in the US, Kimberly-Clark in Brazil, and APP Hongye, OJI Nepia and Mancheng Paper in China. One of the symptoms of the overcapacity during the past few years has been rapid growth in tissue exports, with local suppliers increasingly having to compete for market share with offshore producers.

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Market OUTLOOK Supermarket shelves empty of sanitary products such as toilet paper or facial tissues suggest that consumers succumbed to a degree of panic buying.

Global trade of jumbo rolls (HS code 4803) has thus expanded from just under 2Mt in 2010 to almost 3.2Mt last year, growing by 51% in the ten-year period, at +5.4% p.a. Even if Italy remains one of the largest exporters, growth from Indonesia (+13.2% p.a.) and Turkey (+22.2% p.a.) have relegated it to second or even third place in some years. In fact, Indonesia’s staggering export growth since 2015 has made it the top exporting country, with volumes reaching 0.8Mt last year. This is the result of aggressive capacity expansions on the part of integrated players in Indonesia, such as APP. The situation is clearly unsustainable for some as the fight for market share rages on. Since 2017, there has been virtually no growth in the global trade of jumbo rolls. Exports from countries included under “Other” in the chart, and from Canada, Germany, Sweden, and even Turkey and China have declined by 0.23Mt – meanwhile Indonesia’s exports have increased by… 0.23Mt

LOOMING RECESSION? It will be many months before the short- and long- term economic implications of the global Covid-19 pandemic can be fully appraised and appreciated. What is clear is that a global economic recession is at hand, one that will likely surpass the fallout of the global financial crisis of 2008-09. Supermarket shelves empty of sanitary products such as toilet paper or facial tissues suggest that consumers have succumbed to a degree of panic buying, fearing a shortage of daily necessities and anticipation of home confinement. Until now, reports from the market suggest that these fears of a shortage are largely unsubstantiated, as tissue operations worldwide have been uninterrupted. Even in China at the height of the crisis, only mills located within the Hubei province were shut by government mandate, but these comprised mostly small-scale local players with total capacity of about 1Mt of tissue. Elsewhere mills continued running full, some even helped by the authorities keen to ramp-up the output of sanitary products in their fight against the spread of the virus. The epicentre is now located in Europe, and governments have enacted restrictive measures ranging from the nation-wide confinement of their population to the closing of borders or declaring a full-blown state of national emergency. While these restrictions promise to cripple the economies of Europe and cause logistical bottlenecks for many months to come, tissue mills are deemed strategic and are benefitting from increased demand over the near-term. Even in Italy, the worst afflicted nation at the time of writing, all tissue producers are reporting very high operating rates and extremely strong demand. Producers in Germany, France, Spain, the UK, and Eastern Europe are all reporting a similar trend. To cope with demand, some are even reducing the number of articles produced and are selling the same product to all their private label customers, who are willing to ignore the usual specifications

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Market OUTLOOK

Although there seems to be no imminent threat to tissue operations, there are certain risks to consider.

as long as the product keeps coming. Mills that are more labour-intensive are reporting a slight loss in productivity associated with the imposition of more stringent safety measures which obliges them to reschedule shifts, keep workers two meters apart, wear masks etc â&#x20AC;&#x201C; but overall, the sector is churning out tissue at a record pace.

Logistical challenges are the biggest near-term risk to operations. Not only are outbound logistics congested due to the high demand, but any cross-border traffic, both in- and out-bound, is suffering delays as border checks even within the Schengen Area have been imposed. Truck drivers are having to wait in line for hours, and some countries have even decided not to let Italian trucks in. This has forced some Italian producers to establish new distribution hubs in countries where their trucks can still go in order to ultimately tranship the goods to their final destination. For now, this is only increasing costs for tissue producers, but any further restrictions could ultimately pose a greater risk to the flow of goods. Although there seems to be no imminent threat to tissue operations, there are certain risks to consider. For starters, the short-term boost to demand is driven by increased purchasing of AH products and at hospitals is at least partially offset by plummeting demand from the AfH segment as bars, restaurants, hotels, schools, offices etc. Furthermore, many suppliers are bracing themselves for an almost symmetrical downturn to hit once the effects of the panic buying subsides. There will likely follow a period where consumers that have hoarded sanitary products during the early weeks of the outbreak will revert to normal buying habits once their stocks are depleted, implying weakness in demand relative to consumption. Some of this may be offset by a recovery in demand for AfH products, which is bound to occur as and when restrictions are lifted, and life returns to normal. Some also believe that there may be scope for improved demand in the medium- to long-term as some of the more stringent hygiene measures adopted by consumers during the crisis may persist. Before the coronavirus crisis, tissue prices were at best stagnating or even coming under pressure in most markets around the world, as cheap pulp prices bolstered margins and exacerbated oversupply across local and export markets. Already the crisis has staved off any near-term deflationary pressures, and even if tissue suppliers could possibly increase prices in response to the exceptional demand scenario, most prefer not to be seen benefiting from the crisis and understand that this may well be short-lived. Still, rising logistical costs throughout the supply chain could prompt some pricing upticks, especially if pulp prices rebound. Ultimately, this will also depend on the quickly deteriorating macroeconomic outlook, on currency movements, and on the fate of other P&B segments that are likely to be more impacted from a protracted economic downturn.

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Market OUTLOOK

Is sustainability shaping the hygiene tissue industry? Evidence from the field Article by 1Nicole Hensley MBA, 2Amelys Brito, 1Franklin Zambrano, 3Dr. Hasan Jameel, 3Dr. Richard Venditti, 3 Dr. Stephen Kelley & 3Dr. Ronalds Gonzalez MBA 1. 2. 3.

Ph.D. student focused on consumer perception, North Carolina State University (NCSU) Ph.D. student focused on sustainability, NCSU Professor, Co-Director Tissue Pack Innovation Lab, NCSU

Based on cutting-edge data collected by the Tissue Pack Innovation Lab at North Carolina State University

he world is demanding more sustainable materials and processes to power the economy and improve lives. Global megatrends, e.g., sustainability and changes in demographic behavior (Fig. 1), are shaping the way we conduct business 1, and consumers are relying on companies to lead the path forward in addressing these trends 2. Sustainability-conscious consumers are driving changes in the market by simply purchasing products and services marketed as â&#x20AC;&#x153;green.â&#x20AC;? Consumer goods and service industries have responded with unprecedented and massive changes in their product offerings, along with a critical review of their manufacturing processes and supply chains 3,4,5. The hygiene tissue industry is no exception, leading producers to explore alternative technologies, raw materials, and additives to meet this new demand and drive innovation 6. In the last few years, we have seen dramatic increases in the number of tissue products making claims around sustainable attributes. Some players in the industry have looked at these market developments as an opportunity to create product differentiation, accompanied by significant price premiums.

MARKET DYNAMICS AROUND THE SUSTAINABILITY MOVEMENT AND CLAIMS IN THE HYGIENE TISSUE INDUSTRY Shifts in the market will be determined by gaining influence from generational groups, e.g., Boomers to Gen Z, who have different priorities and behaviors. Millennials are attracted by the environmental aspects of a sustainable lifestyle, while Gen Z is more concerned about social impacts such as human rights and poverty 7. The older generations, namely Baby Boomers and Generation X, still

Modly, T. (2016). Five megatrends and their implications for global defense and security. PwC Report on Megatrends, 1-27. Cone Communications. (2017). 2017 Cone Communications CSR Study. Boston, MA: Cone Communications. Retrieved from www.conecomm.com/2017-cone-communications-csr-study-pdf `

Nike Purpose: Supply Chain Sustainability Index. (2020). Retrieved 20 February 2020 from https://purpose.nike.com/supply-chain-sustainability-index

Where to Begin & Overview | 3M Sustainability. (2020). Retrieved 20 February 2020, from www.3m.com/3M/en_US/sustainability-us/

Marriott International. (2020). 2025 Sustainability & Social Impact Goals. Retrieved from http://serve360.marriott.com/wp-content/uploads/2019/10/Serve-360-goals-page-tabloid_2-updated-20180916-English.pdf

Fisher International. (2019). Could Consumer Focus on Sustainability Disrupt the Tissue Business? Retrieved from www.fisheri.com/ images/features/webinars/Fisher_Webinar_Could_Consumer_Focus_on_Sustainability_Disrupt_the_Tissue_Business.pdf.

Cone Communications. (2017). 2017 Cone Gen Z Study: How to Speak Z. Boston, MA: Cone Communications.

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Market OUTLOOK

represent the greatest amount of disposable income . Most baby boomers use TV as their main source of news while the majority of younger generations use online sources (including social media) as their main source of news9 (Fig. 1). Currently, sustainable products are not a large portion of the tissue marketplace, but they are expected to grow with generational shifts and the corresponding response by corporations seeking market share and profits 10,11. 8

While there is clear interest from consumers, there is a great deal of ambiguity in what should be considered a sustainable product. With no set legal restrictions, companies can and do create their own claims or attributes. Some of these changes may be brands simply remarketing or renaming existing products to align with current sustainability values, while some represent brand new, impact products or processes that can move the market.

Figure 1: Characteristics of Genarations 7,8,9

Nowadays, tissue companies are using different approaches to convey some sort of sustainable attributes (Fig. 2), which could be classified into three different types of environmental product declarations (EPDs). Without agreed-upon sustainability standards, consumer confusion and greenwashing are rife, allowing companies to profit from products that do not effectively meet consumers’ needs. We believe this is a temporary situation (6-8 years) while the market self-corrects by demanding rigorous evidence and cradle-to-grave analysis to create credible “sustainable scores”.

BRINGING DATA INTO THE DISCUSSION

Figure 2: Claims on Sustainable Products

The Tissue Pack Innovation Lab at NC State University has been bringing reproducible, peer-reviewed data to the discussion. The Tissue Pack team has been collecting detailed product performance and attributes for bath tissue and kitchen towel products for the last three years.

The Generational Breakdown of Purchasing Patterns. (2020). Retrieved 19 February 2020, from https://revelsystems.com/resources/generational-breakdown-purchasing-patterns/

Newman, N., Fletcher, R., Kalogeropoulos, A., Levy, D., & Nielsen, R. (2020). Reuters Institute Digital News Report 2017 (p. 10). Reuters Institute for the Study of Journalism. Retrieved from https://reutersinstitute.politics.ox.ac.uk/sites/default/files/Digital%20News%20Report%202017%20web_0.pdf

Kimberly Clark. (2018). 2018 Sustainability Report. Retrieved from www.kimberly-clark.com/en/responsibility/annualreports

Georgia-Pacific. (2018). Georgia-Pacific Sustainability Highlights. Retrieved from www.gp.com/wp-content/uploads/2019/11/sustainability-highlights-brochure-georgia-pacific.pdf

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Market OUTLOOK

In addition to analytical performance data, the team has been researching how consumers perceive sustainability and how the marketing of sustainability drives purchasing with a focus on the hygiene tissue industry. Findings from this research will help the industry by enabling companies to make data-based decisions and connect with sustainabilityoriented consumers.

SUSTAINABILITY AND PRICING ON THE SHELF Given market dynamics, companies wonder what attributes and magnitude in performance influence consumers to purchase specific products. It is well-known that softness is correlated to shelf prices for bath tissue, while water absorFigure 3: Kitchen Towel Water Absorbency and Pricing in North America (2017 & 2018) bency is the major performance attribute for paper towels 12,13 . As expected our observations from the (kitchen towels) field show that shelf prices of products that are perceived to be sustainable tend to be higher than those of traditional products. Specific data for the kitchen towel market segment suggests that sustainable products have higher shelf prices (48% higher) and lower water absorbency (37% lower) compared to the average product offering (Fig. 3). The samples used in this study were collected in 2017 and 2018, with products representing over 90% of the U.S. kitchen towel market. From our detailed product analysis, we found that shelf price for “sustainable products” within the kitchen towel category increased ca. 7% from 2017 to 2018 and ca. 2% from 2018 to 2019. More recent and complete data is available for 2019, if interested please contact the authors. State-of-the-art market research has found that the greatest barrier to purchasing eco-friendly tissue paper products has been related to higher relative price, availability in stores, and poor communication of product attributes14. Previous studies also neglect the effect of product performance on the purchase decision process. It seems that consumers might be unsure of the trade-off (perceived benefits versus higher price) and do not

De Assis, T., Reisinger, L. W., Pal, L., Pawlak, J., Jameel, H., & Gonzalez, R. W. (2018). Understanding the effect of machine technology and cellulosic fibers on tissue properties–A review. BioResources, 13(2), 4593-4629.

Wang, Yuhan, Franklin Zambrano, Richard Venditti, Sudipta Dasmohapatra, Tiago De Assis, Lee Reisinger, Joel Pawlak, and Ronalds Gonzalez. «Effect of Pulp Properties, Drying Technology, and Sustainability on Bath Tissue Performance and Shelf Price.» BioResources 14, no. 4 (2019): 9410-9428

Barbarossa, C., & Pastore, A. (2015). Why environmentally conscious consumers do not purchase green products. Qualitative Market Research: An International Journal.

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Market OUTLOOK

Figure 4: Relative price of sustainable products per performance tier in North America

Figure 5: Kitchen Towel Technology in North America

take initiative to research product attributes except for a narrow segment of consumers15. In our annual hygiene tissue benchmark analysis, we have classified tissue product offerings (consumer tissue) into three tiers, Economy, Premium, and Ultra (using those product performance metrics with higher correlation to pricing). We found that almost all sustainable products were located within the Economy tier, a few in the Premium tier, and none in the Ultra tier (Fig. 4). The few sustainable Premium products had lower average prices than those in the Economy tier, showing an expected inconsistency in the price-attribute-performance relationship. We know that for those “sustainable products” price does not correspond to performance but also found that manufacturing cost does not align with the price. The least expensive tissue production technology, light dry crepe (LDC), is the most commonly used technology for sustainable kitchen towels (Fig. 5)16. While sustainable products typically fall into the Economy tier with lower performance, we expect a shift towards higher-quality manufacturing technology and in turn, better performance of sustainable products.

BUSINESS STRATEGIES AND IMPLICATIONS BASED ON FINDINGS While the larger national brands do not aggressively promote their products as sustainable, they appear to be working to improve their perceived sustainability by enhancing their manufacturing processes, through corporate giving or other strategies. A strategic approach that national brands are implementing is to use more recycled and alternative fibers in Away-from-Home products where attributes such as absorbency are less valuable. This approach is illustrated by Kimberly-Clark’s GreenHarvest Products 17. Another example can be seen from Georgia-Pacific, the largest national producer to create a new line for sustainable bath paper called Aria in addition to their existing EcoComfort line. Both of these product lines incorporate sustainability at a number of steps in the production process including materials selection and process improvements . Each of the large producers is taking a different approach but all are beginning to make sustainability a priority. The tissue industry is in a transition as it adapts i) to the behavior of the next generations driving demand and ii) the increasingly competitive nature of the industry. All companies are interested in being perceived as sustainable, but there are clear needs for a better understanding of the standards that can be uniformly used and accepted across all stakeholders. It is still not clear what specific factors are driving the purchase of sustainable tissue and towel products, and what performance/price trade-offs consumers are willing to risk. It is also not clear how consumers will reward market leaders who develop new product lines that are truly sustainable and that have documented performance advantages. The Tissue Pack Innovation Lab at NC State is currently leading scientific research to answer these questions.

Cone Communications. (2015). 2015 Cone Communication/Ebiquity Global CSR Study.. Boston, MA: Cone Communications. De Assis, T., Reisinger, L. W., Pal, L., Pawlak, J., Jameel, H., & Gonzalez, R. W. (2018). Understanding the effect of machine technology and cellulosic fibers on tissue properties–A review. BioResources, 13(2), 4593-4629.

Kimberly Clark Professional. (2020). Kimberly-Clark Professional Launches Innovative GreenHarvest Products Made With Rapidly Renewable Plant Fiber. Retrieved 2 February 2020, from https://www.prnewswire.com/news-releases/kimberly-clark-professionallaunches-innovative-greenharvest-products-made-with-rapidly-renewable-plant-fiber-300073191.html

Georgia-Pacific. (2018). Georgia-Pacific Sustainability Highlights. Retrieved from https://www.gp.com/wp-content/uploads/2019/11/sustainability-highlights-brochure-georgia-pacific.pdf

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Business dynamics

Traditional forecast methods are unable to predict the turning points in cyclical markets Article by Pekka Aarnisalo, STE Analytics Ltd.

Simulation based modelling methods offer a fundamentally new and a different view as compared to many traditional, well established, concepts.

Simulation based modelling methods offer a fundamentally new and a different view as compared to many traditional, well established, concepts. These models imitate the real market structure and decision-making. At their heart the models are based upon accurately portraying the existence and role of this dynamic structure. Most of the operating structures in industries are formed around human decision-making. These decision-making policies and principles

cover the demand chain from the producers to brokers and to end customers. In addition to the decision-making rules, the structure also includes the physical properties of the industry like production facilities, inventories, etc. The structure follows the real industry practices in every aspect which means that no economic or other theories are included in the structure, unless it can be clearly shown that both the real market and the actors in the market also behave accordingly. In simulation modelling market forecast is derived from the industry operating structure in three steps. First, the industry structure is translated into a set of mathematical equations. Secondly, these equations are programmed as a computer model. Thirdly, simulation of the model produces numerical market forecasts. Accurate

Figure 1. The main causes for business cycles are the decision making practices. Example is from consumer board industry and represents end consumption growth rate. Market circumstances at each moment are a result of actions taken in the industry. These actions are determined by the decisions made by the industry players. The decisions are typically driven by the short-term market status.

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Business dynamics

predictions are possible due to the strong inertia that the structure forms.

A NEW DYNAMIC PERSPECTIVE TO ENSURE SMART DECISIONS IN COMPLEX SITUATIONS Globalization, AI, ML and digital economy are now challenging the dynamics and the current earning logics in businesses and public services. The transformation in businesses may force companies to rethink and modify not only their strategies, but also the existing business

models. The transformation is often based on a complex dynamic structure, with several interactions, cause-effect chains, self-reinforcing loops, time delays, constraints and spirals in it. With mathematical simulation models you are able to discover and visualize the structure - the true cause-effect patterns and causal loops - in your business. Models enable us to understand the complexity. They provide a framework for seeing the big picture and understand the structure that is behind all the future growth, turning points, cycles, positive multiplier effects, and also cumulative problems.

Pekka Aarnisalo, Managing Partner and Co-Founder STE Analytics Ltd. «A visual simulation model is an effective way of communicating decision backgrounds to stakeholders.» “Dynamic models are made for decisions in pricing, risk management, large scale investments and financial planning.”

Pekka Aarnisalo has been building mathematical models a little short of twenty years and is the Managing partner and one of the founders of STE Analytics. STE Analytics is a management consulting company headquartered in Helsinki, Finland. The main expertise is in solving complex business problems in industries and the public sector, utilizing mathematical models based on system dynamics and systems thinking. Company has a wide range of customers in Europe and the USA.

04 24 PAPERFIRST MAG SPRING 2020

THE C-LEVEL INTERVIEW

Hans Sohlström: « More than ever, Ahlstrom-Munksjö’s mission is to expand the role of fiber-based solutions for a sustainable and safe everyday life » Interview by Valérie Lechiffre

The specialty and technical paper segment is more buoyant than ever! In the midst of the coronavirus pandemic, Hans Sohlström, President and CEO of the Finnish group AhlstromMunksjö, explains his strategy and positioning on the market.

1. What are your production and sales volumes and how many mills do you operate globally?

HANS SOHLSTRÖM: Ahlstrom-Munksjö is a global leader in sustainable and innovative fiber-based solutions. Our offering includes filter materials, release liners, food and beverage processing materials, decor papers, abrasive and tape backings, electrotechnical paper, glass fiber materials, medical fiber materials and solutions for diagnostics as well as a range of specialty papers for industrial and consumer end-uses. In 2019, our annual net sales were around €3 billion and the Group generated an Ebitda of €313 million.

In 2019, our annual net sales were around €3 billion and the Group generated an Ebitda of €313 million.

Last year, our production was about 1.5 million tonnes (- 4% compared to 2018). In the last 5 years, our production volume has declined slightly as a result of increased customer and product focus in order to increase profitability. However, in our specialty business, value is much more important than volume! In a nutshell, our core competence is about combining fibers into high-added value products. The more technically-advanced the product is, the better it is for us! Our key strength is that we have leading global positions in chosen segments. The Ahlstrom-Munksjö share is listed on the Nasdaq Helsinki and Stockholm. Our head office is based in Helsinki.

2. W hat are your main markets geographically? For which segments do you see the best prospects at the moment? HS: In 2018, our Group has acquired the US company Expera (net sales: €616 million) as well as the Brazilian company Caieiras (net sales: €76 million). Recently, we have also sold the Glass reinforcement and Fine Art Paper Businesses. We are also in the process of acquiring Minglian, a Chinese decor paper manufacturer. We have a global network of sales office. Our group is composed of 45 plants located in 14 countries in Europe, North America, South America and Asia. We employ about 8,100 people (48 nationalities) and we serve more than 7,000 customers in over 100 countries.

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THE C-LEVEL INTERVIEW

Our group is composed of 45 plants located in 14 countries in Europe, North America, South America and Asia. We are operating on growing markets, very much driven by sustainability trends. We are operating on growing markets, very much driven by sustainability trends. Our exposure is geographical balanced with a broad range of end-uses. Our consumer businesses are diverse: Medical and Health-Care products, Customer goods, Transportation, Home Building & Furniture and Industrial (steel, glass…). Our cornerstones are local accountability, efficiency and agility, customer value and profitable growth. According to me, Medical and Life Science, Safe and sustainable food packaging, Label materials, Flooring and reinforcement Industrial filtration media offer the best prospects for the time being.

3. How did you react to the Coronavirus crisis in terms of production, organization and offer ? HS: Our response to this unprecedented pandemic was very rapid and coordinated. At the very beginning of the crisis, all of our 45 manufacturing plants have been operating. As soon as January 23, 2020, we initiated a centralized crisis alert team to carry out a Global Pandemic Contingency and Preparedness Response Plan. We have established a COVID-19 Safety Protocol to ensure safe operations and customer service. In addition, we made local adjustments where necessary according to country level or local health & safety regulation and guidance. One-of-a-kind collaboration started also with the universities of Turin, Milan and Bologna to offer Ahlstrom-Munksjö’s materials and testing capability in Italy to support all the requests the local authorities were asking to assure good quality of masks. We have taken strong and active measures to protect the wellbeing of our employees, operate our plants and serve our customers simultaneously. We experience strong demand in the enduser segments catering to health care and life science industries, which corresponds to 9% of our net sales. Our offering includes solutions for personal protection equipment such as face PAPERFIRST MAG SPRING 2020

THE C-LEVEL INTERVIEW

masks, drapes and gowns, as well as diagnostics materials for rapid test kits and venting filters for devices used in the treatment of patients with respiratory disorders. We fight the epidemic also by increasing production of face mask materials with machines used for filtration and nonwoven materials. Our technology is unique and generates protection that is better than what was available in the market at that time. For decades, our medical business has been making fabrics used to construct surgical gowns and drapes, pleated surgical face masks, protective apparel and sterile barrier systems. These high performing medical fabrics are used around the world in operating rooms and clinical environments to protect health care workers and patients against viruses, bacteria and fluids. In addition, our medical business unit’s average coverstock fabric production contributes to an estimated 50-60 million finished face masks per month.  As a result of the increased demand from the COVID-19 pandemic, that number has nearly tripled. In April, Ahlstrom-Munksjö has produced the coverstock fabric being used to make over 150 million face masks per month. Besides, our Liquid Technologies business produces high-quality filters for laboratory sample preparation and life science diagnostics materials, used by laboratories and manufacturers of rapid test kits, in addition to high-performance media for water purification devices. This activity also produces components used in rapid test kits for fast detection (for blood samples) and medical conditions, filter media for artificial respiratory device used in respirators, screening of infection disease, virus and contaminants removal for safe drinking water. Developing a rapid test for COVID-19 is one of the key areas that researchers around the world are targeting in order to quickly isolate those infected. Some of these tests are based on the lateral flow immunochromatographic assays prin-

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In one way or another, around €260 million in our global sales are connected to medical and health activities. ciple, where simple cellulose-based devices are intended to detect the presence of a target analyte in liquid samples, blood for instance, without the need for specialized and costly equipment. Our Medical and Liquid Technologies Business Units generate, respectively, an annual TO of €90 million and €70 million. But other products that are serving the medical life and healthcare segments, such as release liners or packaging materials, are also included in our portfolio. These activities generate an additional turn-over of €100 million. As a result, in one way or another, around €260 million in our global TO are connected to medical and health activities, which represents around 9% of our global sales.

4. What have been the latest innovations introduced in your products lately? HS: Our Group offers tailor-made customer solutions. Our value proposition is based on innovation, quality and service. Around €300 million (10% of our turn-over) come from products which have been developed in the market over the last 3 years. For instance, in our French Research Centers in Pont-Evêque and Apprieu, we have indepth information about 30,000 different fibers (95% are natural whereas 5% are synthetic). Recently, we have developed many value-added products in various segments, such as : TrustShieldTM, a single use fabrics for ultimate protection; CelluStrawTM, a fiber-based solution for paper drinking straws; LamiBakTM, a release base paper certified for food-contact or Tex-StyleTM, an extra resistant composite abrasive backing.

THE C-LEVEL INTERVIEW

5. What are your current preoccupations and what could make your life easier at the moment? HS: Last year we experienced some contraction in global demand and consequently in our volumes. This was also the main factor impacting our profitability. But our deliveries and comparable EBITDA in Q1/2020 are expected to be higher than in Q1/2019. Moreover, the company’s liquidity is strong with no major refinancing needs before 2022. The early signs of improving demand that we experienced in the beginning of 2020, has also turned into year-over-year growth in deliveries in January and February. However, due to the current market circumstances, the Group had to move to a quarterly guidance.

6. Sustainability is definitely a concern for consumers these days, and thus your clients by extension. How do you respond to these requirements? HS: All of our businesses are very much driven by sustainability. We have implemented 30 Sustainable KPI within our group. In terms of sustainable environment, we are oriented towards several objectives: better performance, safer materials, less resources and less impact. For instance, Ahlstrom-Munksjö is involved in the United Nations program (UN Global Compact) as well as in EcoVadis (we received gold for the 3rd consecutive year). What is also important is considering sustainability in our product offering. All of our products have an important sustainability aspect. In addition to the solutions we offer in medical matters as we have seen previously, our offer includes many other products which take into account the environmental dimension. For instance, Ahls-

We have implemented 30 Sustainable KPI within our group. trom-Munksjö was the first company in the world to produce a formaldehyde free abrasive backings and fluor free food packaging materials. We were also the first company in the world to launch complete plastic free and compostable tea and coffee materials. Finally, we have also developed a special tool, EcoDesign. For each product that we launch, this tool allows us to verify that it is more sustainable than the previous one in our offer and that the one it will replace on the market.

7. What kind of technological breakthrough would be a game changer for your activities? HS: Not one single actually because we have such a wide exposure and broad offering! Generally speaking, our product complexity is good because we have a lot of knowledge in fiberbased materials, e.g. we have, for instance, a large offering that supports in combating COVID. We also give a large offering in sustainable solutions.

8. Are you planning any investments in the near future? HS: We have invested heavily in our production facilities during recent years. We are implementing an organic program of 13 major strategic investments of almost €200 million in four years from end 2017 to end 2021. In the current environment which is much more uncertain today than in 2019, we believe our operating model based on a common global platform and local accountability, as well as our balanced exposure to a broad range of end-uses in multiple industries and geographies, provides us clear strength. PAPERFIRST MAG SPRING 2020

Global Challenges

Visions from Europe, Asia, Africa Oceania and the Americas Many countries are implementing new regulations in order to favour circularity, recyclability and sustainability. Clearly, paper-based products can profit from this trend.

CANADA

FPAC (Forest Products Association of Canada) Mr Derek Nighbor President & CEO

USA

AF&PA (American Forest and Paper Association) Mrs Heidi Brock President & CEO

BRAZIL

IBA (Brazilian Tree Industry Association) Mr Paulo Hartung Executive President

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Global Challenges ICFPA statement on COVID-19

EUROPE

Cepi (Confederation of European Paper Industries) Mr Jori Ringman Director General

Members of the International Council of Forest and Paper Associations (ICFPA) are staying in close contact to share information and leading practices on how our respective markets are managing through COVID-19. Our top priority is the health and wellbeing of forest sector workers and their families around the globe. The weeks ahead will be critical as operations adjust to changing circumstances and as governments deliver worker, contractor, and business support programs. Our network representing 28 countries from around the world has much to share and learn from each other. We will continue to work together so we can weather this storm and hopefully soon turn our minds to recovery and stimulus. Derek Nighbor President International Council of Forest and Paper Associations

INDIA

IPMA (Indian Paper Manufacturers Association) Mr Rohit Pandit Secretary General

SOUTH AFRICA

PAMSA (Paper Manufacturers Association of South Africa) Mrs Jane Molony Executive Director

AUSTRALIA

AFPA (Australian Forest Products Association) Mr Ross Hampton Chief Executive Officer

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Global Challenges

1. How is evolving the legal environment in your area on that topic and what is the timeline for the implementation of new rules if any?

AF&PA • remaining waste products, including mixed Neither the U.S. government, nor the states are paper and cardboard, by no later than 30 June enacting regulations specifically to implement 2022. circularity or sustainability at this time, although measures to regulate aspects of circularity and Cepi sustainability have been adopted. The European Since the start of the new European executive in Union has adopted a directive on circularity that December 2019, the EU regulatory environment does impose requirements, for example, on has been focused on unfolding the European single use packaging. Green Deal and its climate neutrality goal. On Importantly, AF&PA members voluntarily have the table there is the revision of major initiatives taken a leadership role in sustainability. In 2011, impacting circularity, recyclability and sustainawe launched our sustainability initiative, Better bility of products. Some very relevant initiatives Practices, Better Planet 2020, that includes have already been published in February and the most extensive collection of quantiMarch 2020 such as the European Cli«AF&PA fiable sustainability goals for a major mate Law, the New Industrial Stramembers U.S. manufacturing industry. We tegy, the Circular Economy Action voluntarily already have achieved two of those Plan 2.0 and Sustainable Products have taken a goals and we currently are develoInitiative. ping new goals for 2030. Furthermore, circularity is a key leadership role in While plastic packaging remains a principle for us: the recycling of sustainability» primary focus of recyclability, more products made from renewable maattention is being given to plastic alterterial ensures that valuable resources natives, such as paper. We have noticed remain in the loop as long as possible and a pivot toward discussions about broader seglinks circularity of products to cycles of nature. ments of packaging, like single-use packaging. Our industry has a very relevant role in supSome state governments are considering reguporting the EU Green Deal: we can help Europe lations that would prohibit the sale of single-use reach climate neutrality thanks to our sustaipackaging that is not recyclable or compostable. nable raw materials, to large extent fossil-fuel free products and energy efficient operations. AUSFPA The new legal context in which we are now enteOn 8 November 2019, Australian Federal and ring is a real opportunity to push our model even State Environment Ministers met to discuss a further in a final goal of providing innovative waste export ban and agreed to put forward a sustainable solutions for a range of new sectors proposed timetable for the progressive phase through new wood fibre-based products. out of problem waste exports applied from July 2020. FPAC Ministers agreed the phase out should be comIn Canada, recycling programs are administered pleted by the following dates: at the provincial government level and we are • all waste glass by July 2020 seeing a growing trend to Extended Producer • mixed waste plastics by July 2021 Responsibility. This brings with it new pieces • all whole tyres including baled tyres by Decemof legislation, policies, and regulations that we ber 2021 need to stay on top of.

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Global Challenges

On the circular economy and sustainability federal, state, and municipal levels that also work fronts, similar to the European Union, the Canato eliminate landfills in the country. dian government has embarked on a ‘zero plasDespite its relevance, the PNRS is being impletic waste’ agenda to ban ‘harmful’ single-use mented slowly. We need attention from governplastics by as early as 2021. Details are still to ments in all areas, investments in reverse logisbe worked out and it is hard to say how the COtics, customer awareness, and collaboration with VID-19 pandemic is going to impact the timing of the private sector. For example, this would allow these plans. packaging to be considered throughout its lifeAs we move to ‘zero plastic waste’, Cacycle, just like paper, which has an envinada’s forest products sector sees ronmentally responsible origin and «a ‘zero great opportunity to provide enviafter its working life can be recycled plastic waste’ ronmentally-friendly solutions in and returned to the production agenda to ban a couple of ways – to replace cerchain. ‘harmful’ singletain plastic products with paper, Today, the rate of paper recycling use plastics by as where it makes sense to do so; is high (68%), for several reasons. and by collaborating with partners This is an industry that from the early as 2021» in the chemistry sector to use wood beginning has included recycling as fibre to make new sustainably sourced part of its culture, the recovery rate for bio-products. paper packaging in Brazil is one of the best in When it comes to the circular economy, many the world, and the country has a broad network people forget that Canada’s forest products and of people who live off collecting this material; paper sectors has been one of its earliest adopover the years this network has developed and ters – from replacing what we harvest in the transformed into cooperatives which extend forest to paper recycling rates that now stand in into various regions of the country, separating the 70% range. recyclable materials to put them back into the In Canada, our strong record of sustainable production chain. Furthermore, there are comforest management – annually harvesting less panies across the country that specialize in the than 0.5% of Canada’s harvestable forests, retrade in waste paper, buying, separating, clasplacing what we harvest, managing for biodiversifying, and selling this material. sity, retaining 90% of our original forest cover, and having the most third-party certified forests IPMA in the world – holds our sector in good stead Some sector-specific regulations have been in to meet the public’s expectations that we are place in India for some time now, like those for taking good care of our forests and forest ecomanaging e-waste enacted in 2011, made more systems – not only a renewable natural resource, stringent in 2016. But, specific regulations for but one that is shared by all Canadians. promoting circularity, recyclability and sustainability are still evolving in India, and it may IBA take some time for the new rules to be put in Since 2010, a Brazilian law called the Natioplace after stakeholder consultations, and once nal Solid Waste Policy (Política Nacional de some kind of a detailed roadmap is finalised for Resíduos Sólidos, PNRS) has established goals implementation. India is also formulating a new and responsibilities for the government, private industrial policy which will promote the circular initiative, and consumers to eliminate and reduce economy and sustainability. waste, encourage recycling and environmentally Last year, the Indian central government ancorrect disposal of waste that cannot be reused. nounced that it plans to completely ban singleThis was an initial step for Brazil with regard to use plastic products, which are not recyclable, by solid waste, since it created mechanisms at the 2022. It has also launched a campaign to create PAPERFIRST MAG SPRING 2020

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of Australian government to boost awareness. There are some defi«Both local the ensuing opportunities post this nitional issues which are being and State waste export ban. discussed, apart from identifying Governments can Both local and State Governand developing suitable alternaimprove the sorting ments can improve the sorting of tives. Several state governments of recyclable recyclable waste to ensure clean and municipal authorities in India waste» resource streams. This can be done have already banned single-use through increased recycling infrastrucplastic, but are grappling with its enture investment, and community education to forcement in their respective jurisdictions. reduce contamination. The Federal Government has an opportunity to PAMSA facilitate investment to increase the domesWhen the Paper Recycling Association of South tic recycling rate as well as increase the use of Africa (now RecyclePaperZA) was established recycled material. This can include potential 2003, recycling was a voluntary initiative imtax incentives, support for new sorting technoplemented by the producers. The South African logy, emission avoidance credits, support for paper industry has been using recycled fibre recycling manufacture, as well as support for since 1920 and has seen a steady increase in the research and development. recovery of recyclable paper fibre. In 2019, PAMSA launched a new producer resCepi ponsibility organisation (PRO) - Fibre Circle The CEOs representing the European paper which will administer and drive various projects industry outlined their plans to reach a climatethat will promote the circular economy and imneutral Europe by 2050 in a declaration which prove the diversion of paper and paper-based was handed over to European policymakers at packaging from landfills. A voluntary extended our annual conference “Paper&Beyond” in Noproducer responsibility (EPR) fee is now being vember 2019. levied on producers and importers of paper and The EU Green Deal is a crucial opportunity to paper packaging to implement projects. South provide the right conditions that facilitate the African paper and packaging PROs are currently execution of this plan and enable our industry to in consultation with Government around a praccontribute greatly to help Europe reach climate tical and viable EPR framework. neutrality while staying competitive on the global scene. 2. What improvements do you think To reach this goal, we believe an improved marcould be made to boost the ensuing ket access for recyclable and fossil-free proopportunities? ducts is necessary and can be done through a coherent product policy framework. If consumers are not able to differentiate our products AF&PA from the more CO2-intensive alternatives on In any circularity regime, we will want to ensure the market, they are not able to make greener that since forest products are manufactured choices. from trees—a renewable resource—they should This should go hand-in-hand with a policy frabe recognized as such. Therefore, they are difmework that enables availability and access to ferent from the finite resources that are the foresponsibly sourced nature-based raw matecus of the circularity paradigm. rials, through more support to sustainable forest management and high quality recycling in the AUSFPA paper industry. Improvements can be made at all three levels Our raw materials are wood pulp and paper for

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recycling which are intrinsically renewable if coming from properly managed forest sources. We have expanded sustainable forest management practices in Europe and globally. Furthermore, reaching completely fossil-free value chains would require a plan for innovative solutions, with clear milestones for a timely and cost-efficient decarbonisation of the European energy system. We expect the European Green Deal to be a deal where we can deliver!

ring high-quality, organized, and ongoing recycling programs. The private sector has to continue moving forward, as the paper packaging industry has done, investing in technology, creating solutions, and developing products with less environmental impact that are easily incorporated back into the production chain after their useful life is complete. At the end of the chain, the consumer has to be taught how to correctly separate materials. It may seem simple, but they need to learn that medication boxes and candy packaging should not go into the normal trash. By combining government organization with the strength of all the links throughout the production chain for recyclable materials, corporate investments, and proper separation of solid waste by the purchasing public, we will have a much stronger movement.

«Municipalities have to adapt to this reality, offering high-quality, organized, and ongoing recycling programs»

FPAC The opportunity to replace certain plastic products with alternative wood fibre or paper based products is a clear one. But the opportunity we are most excited about in Canada is the conversations that are now happening between forestry companies and oil and gas, chemistry, and consumer packaged goods companies. This transition to lower carbon materials and ‘zero plastic waste’ presents an opportunity to IPMA bring new partners together to advance posiWe need to adopt the circular economy model, tive environmental outcomes. In the and focus not only on Reduce, Reuse, building sector, we are already seeing Recycle, but also on Redesign, Remainnovations whereby wood fibre nufacture and Refurbish. We need «some state can be used by cement companies to focus on new and innovative governments to lower their carbon footprint in products which can be viable and in India have production; similar innovations are cost-effective alternatives to probanned paper happening in the packaging, fuels, ducts from other industries which cup» and materials space. This presents may not be environment-friendly and some exciting new uses and markets sustainable. For example, some state for wood fibre based materials. governments in India have banned paper So, providing the forums to connect these difcups due to their plastic coating, but there are ferent parties, and accelerating public and no alternatives readily available. Unlike other private funding supports to advance these intypes of paper waste, paper cups can be truly novations will be key to maximizing the opporbiodegradable and recyclable only if these are tunity before us. collected and the plastic coating extracted from the paper. Bioplastics / biopolymers have been IBA developed in some countries, which are stated Brazil has 5,570 municipalities, but only 1,227 of to be fully biodegradable, but are relatively an them are collecting recyclable materials alongexpensive option. side trash, according to the Corporate Commitment to Recycling (CEMPRE). Because of our PAMSA large population (currently over 210 million), we With many government policies, there can be generate large volumes of waste. In other words, unintended consequences. PAMSA aims to work municipalities have to adapt to this reality, offewith government to ensure these are mitigated. PAPERFIRST MAG SPRING 2020

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ception of renewable fibre-based products. We are also working with public and private secMany businesses are electing to supply retor to ensure the waste economy falls within a newable fibre-based single use products such circular value chain approach and that all waste as paper bags, wooden cutlery, and other forest is beneficiated. A risk-based approach has been products as a substitute for plastic products. taken to beneficiating commonly beneficiated These changes often have legislative drivers. An wastes e.g. ash. Government has recognised that example of this is many Australian states have waste licences can inhibit small entrepreneurs now banned single use plastic bags. Major Ausfrom using waste and through working with the tralian supermarket chains and many smaller private sector generators of ash exclusion from retailers have embraced this change. the definition of waste has been offered provided the risks are well managed. This will lead to Cepi a number of jobs being created. Absolutely, it is vital that consumers As a mechanism to strengthening ÂŤThe shift towards more sustainable proour value chains, various sectors European ducts, as that is one of the key steps together with the Department of paper industry to decarbonise the economy by Trade, Industry and Competition is in the perfect 2050. are developing Sector Master position to respond The European paper industry is Plans to promote sustainable in the perfect position to respond socio-economic development to this market to this market demand: not only and the waste economy will form demandÂť through the many fibre-based products part of these. everybody is familiar with, but also through innovative solutions. Did you know that new ge3. The consumption pattern is changing neration textile made from wood-fibre are also fast in some countries with a demand recyclable and can make also old textiles recyfor more sustainable products. clable? Is it really a game-changer for the Furthermore, we are introducing innovations industry in your zone and how does it in terms of the application of by-products from materialize? our processes. For example, valuable ingredients from lignin can now be utilised to make many important products, such as drilling fluids, thermoAF&PA plastics, disinfectants, detergents, medication We are confident in the value proposition that and cosmetics, just to name a few. It could even our products offer customers: cost effective be used in the production of batteries, as its strength, visual appeal and functionality comintrinsic qualities make it a candidate to replace bined with market-leading sustainability attrigraphite. butes. Our products are made from renewable wood fiber sourced from sustainably managed forests and recycled paper. FPAC We have been trending in this direction for some AUSFPA time in Canada. That said, our federal governThe global phenomenon of consumer rejection ment has put forward a very aggressive agenda of plastic products, and the associated increased in this space and the issue of addressing plastic demand for sustainable fibre-based products waste on land and in water has become a tier helps promote the forest industry within Austraone priority. lia by recognising its renewable and sustainable What Canadian consumers have been demancredentials. This is changing community perding, Canadian retailers and manufacturers

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IPMA Yes, it can be a game changer but only in the medium to long term and provided people are made aware of the facts and we can develop innovative and sustainable products. The paper industry continues to be afflicted with the misinformed notion that the industry is destroying natural resources. Many other myths continue to slur the image of the industry. We need to aggressively undo this image and present the true picture of paper as an environment friendly industry. Few industries in India can match the sustainability that paper offers. IBA It is fully biodegradable and made from We are currently in the midst of a green resources which are renewable and revolution. Consumers are increacan be easily regenerated. Paper singly conscientious, and this is «Consumers industry is not only conserving the changing their consumption habits are increasingly environment but also regenerating as they look for products that are conscientious» natural resources. Paper industry environmentally correct throuhas struck a fine balance between ghout the supply chain: from origin growth and sustainability, unmatched through manufacturing to post-use, by many other industries. This message recyclable and even biodegradable, like needs to be transmitted to the general public in paper packaging that breaks down naturally in an effective manner. only a few months. Today this change is even more noticeable when PAMSA we see large companies looking for replaceIt is indeed a game changer in that retailers are ments for fossil-sourced materials like cups, looking for alternates to plastic packaging. Desistraws, and packaging. But for the future, new gning for recycling has become more important products are being developed from wood like than ever. Although consumers are becoming bio-oils, biofuels, and biochemicals. Nanocellumore aware of ‘’green packaging” options, green lose has opened up a wide range of applications, washing prevails. Particularly around composand is already replacing fossil-sourced polyester table packaging – most is only industrially comwith cellulose-fiber textiles like viscose, while postable and some of it will take many years to new technologies like microfibrillated cellulose biodegrade. Instead we focus on recycling (MFC) offer entirely new possibilities. difficult to recycle products and are currently looking to develop simple equipThis is a great opportunity for the in«we focus ment for small entrepreneurs to be dustry to position itself as a leader in on recycling able to add value to the likes of used the bioeconomy, especially in Brazil. Here, 100% of pulp and paper difficult to recycle beverage cartons, ie they can on-sell products» as pre-processed pulp to small tiscomes from trees grown for indussue mills. trial purposes; the entire industrial Locally severe drought in some fruitprocess has been thought through to growing regions and tough economic climitigate environmental impacts, and the mate have meant that this increased demand end product is easily reintegrated into the profor sustainable packaging has not yet translated duction chain after use. In Brazil, recycling cominto increased demand for our products. plements the use of virgin fiber pulp. have been responding to. The curve is clearly accelerating and there is definitely more opportunity ahead. Beyond setting up the right conversations, we need to turn these science projects into action, do the appropriate de-risking and scaling up. This takes commitment on the part of governments, the private sector, and academia to come together, and we are doing some exciting work in this space in Canada through organizations like FPInnovations and others.

«Few industries in India can match the sustainability that paper offers»

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4. Is the shift from plastic to fibre-based products already affecting the production and/or import volumes? To what extent?

AF&PA Consumers are showing a lot of interest in sustainable paper alternatives. It is difficult to attribute any specific volume to material substitution, but it is certainly a contributing factor and a trend.

«I don’t think there is anything stopping the success of our companies»

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FPAC While I don’t have any numbers at this time to quantify the shift in Canada, it is happening. And while the federal direction to move to ‘zero plastic waste’ is definitely bringing more focus to the matter, Canadian consumers have been moving in this direction for years. It is presenting the opportunity for new product development and production in Canada, but also increased imports of products that are not currently in significant production in Canada at this time, like paper straws.

AUSFPA IBA «The volume Australia’s forest industry exports A global movement is underway to fibre which are used to manufacreplace single-use materials with low of fibre exported ture a range of products that are levels of recycling or which are truly from Australia replacing plastic products. The non-biodegradable. In some Brazihas on average volume of fibre exported from lian states (such as São Paulo and Rio increased» Australia has on average increased de Janeiro), plastic straws are already over the past ten years. banned and are being replaced by other Several of the fibre-based alternatives materials with less environmental impact, like for single-use plastic materials are currently paper. It is a great opportunity, as are paper cups, produced overseas and imported into Austrawhich are also in greater demand. lia, which is increasing import volumes of these In Brazil we can also see that demand is products. It is expected that as demand for fibregrowing for paper packaging. According to based products in Australian increases, more of Cenários Ibá (the quarterly statistical bulletin for these will be made domestically. the forest-based sector from Ibá, the Brazilian Tree Industry), in 2019 production of cardboard Cepi and corrugated cardboard for packaging grew Indeed we can see a significant shift of interest 2.4% and 2.8% over 2018, respectively. It is imtowards our industry as the provider for alternaportant to note that most of this growth comes tive solutions in many value chains. We believe from exports, since international sales of cardthe products offered in the wider forest-based board and corrugated boxes grew 10.3% and sector have an important positive impact in paperboard grew 12.3%. helping the society to become fossil-free. Our In addition to increased demand for renewable estimate is that this substitution effect of our materials, this shows the international market’s product can easily be as significant as the carconfidence in Brazilian paper products, which bon sink of the whole European forest, together are certified by the foremost international cercorresponding to 20% of the annual total CO2 tifying bodies and even help other countries emissions in Europe. achieve goals set in climate agreements such as the Paris Accord. Once brand-owners and consumers truly beFinally, projections of increased population come aware that they can have plastic-free growth should also be taken into account, as this and fossil-free option in the same, I don’t think is expected to boost demand for products made there is anything stopping the success of our from wood. Today we use 3 billion cubic meters companies. of wood per year; in 2050 10 billion cubic meters

Global Challenges

will be required. In order to meet this need, the industry is already investing in research to increase productivity and produce more using less chemicals, energy, and land. Recently Klabin (an Ibá member company with more than 100 years of history that produces kraftliner) announced that it is moving towards large-scale production of the world’s first kraftliner made exclusively from eucalyptus fiber. This creates lighter papers, which will in turn lead to gains in logistics, an important attribute to compete with some plastics. Furthermore, eucalyptus forests have a shorter production cycle. IPMA In India, the shift from plastic to fibre-based products is happening slowly but surely. It is still early days here and has not significantly impacted as yet the production volumes much. There is an uptake in the demand for paper bags, paper straws, paper food-grade containers and packaging, etc., but change in consumer preferences and habits take time.

– from consumers to collectors to materials processors to manufacturers. Recyclable paper and paper-based packaging is collected from residences as well as from businesses, schools and industrial facilities. Residential collection is accomplished by local governments, private sector companies contracted by local governments or private sector companies that contract with consumers directly. Collection from commercial and institutional locations is accomplished by private sector companies that contract with them. Public-private partnerships such as The Recycling Partnership, which AF&PA funds, are investing in increasing communities’ capacity to recover more mill-quality recyclable materials from residences.

«Paper recycling in the U.S. is a loosely connected but highly interdependent system»

AUSFPA There are several arrangements for the collection of waste paper in Australia. Domestic drop off centres are collection facilities located across Australia and enable the community to drop off paper and cardPAMSA «This process board materials, usually at no cost. Producers still need to be proactive This creates a clean source of fibre creates a in the design and manufacture of and is easily recycled by a collection large amount of packaging that reduce the volume of fibre recycling businesses across of waste generated and make the contamination» Australia. waste more recyclable. Kerbside collection is used across Examples include the small tomato many areas in Australia, collecting both boxes that are made of lightweight board with waste and recyclable material. Recyclable a plastic top rather than 100% plastic and the paper and cardboard material are mixed with ultrafine fluting into corrugated board for beer all other recyclable materials and collected by six pack carriers. local government. This process creates a large amount of contamination and can create difficulty in recycling the paper and cardboard mate5. How is the paper recycling process rial that is collected, with contaminated waste organised in your country and what are often ending up in landfill. Separation of paper the levels of collection? Do you see any and cardboard waste from the other classes of potential improvement? recyclables, particularly glass, would improve the ability to recycle paper and cardboard collected in this way. AF&PA Industrial paper and cardboard waste is genePaper recycling in the U.S. is a loosely connecrally collected directly from businesses and ted but highly interdependent system encomtransported to fibre recycling businesses across passing stakeholders across the value chain Australia. PAPERFIRST MAG SPRING 2020

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«The success of paper recycling in Europe should not make us too comfortable»

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Cepi We are the European champion of recycling: paper is recycled in Europe at a rate of 71.6%. In paper-based packaging, the rate is even higher, 84.6%, and in volume paper-based packaging is recycled more than all other packaging materials combined. However the success of paper recycling in Europe should not make us too comfortable. We believe there is still space to do even better, and we think we can do so in different ways. One way is to capitalise on the new collaborative networks we are developing. A perfect example is the new value chain alliance called 4evergreen. It is a forum to engage and connect industry members from across the fibrebased packaging value chain, from paper and board producers to packaging converters, brandowners and retailers, technology and material suppliers, waste sorters and collectors, and more. Its aim is to look at design for recycling, with a view to further boost the contribution of fibrebased packaging in a circular and sustainable economy that minimises climate and environmental impact. It will deliver a holistic approach to optimise the sustainability and circularity of the fibre-based packaging’s life cycle.

and programs across municipalities, across provinces, and more active engagement in the industrial, commercial, and institutional sectors – all those moves would contribute to greater clarity and an uptick in recycling rates.

IBA In addition to pickup of recyclables by municipal governments in some Brazilian cities, recycling is driven by individuals who collect reusable and recyclable materials, which were recognized professionally by the Ministry of Labor in 2002. Today there are more than 400,000 of these professionals throughout Brazil, according to the Institute of Applied Economic Research (IPEA). These autonomous workers have the opportunity to organize themselves into cooperative, which are encouraged in the PNRS, as a way to obtain better working conditions. From this point, the material is separated and paper is sold back to industry. In Brazil, 68% of paper is recycled, one of the highest rates among all the recyclable materials. But there is still room for improvement, since more than 84.7% of corrugated cardboard is recovered, while paperboard (which is used in candy boxes and medication packaging, for example) accounts for less of the paper produced and consumed, and depends on proper FPAC separation in homes and collection by the muniThis is done in Canada at the provincial governcipalities, unlike cardboard boxes, which are trament level and rules and operations vary from ditionally collected by recycling professionals in province to province. Actually recovery and profactories and retail outlets. cessing operations can vary from city to city. Recently, a reverse logistics system was estaWhile paper recycling rates in Canada are in the blished in the state of São Paulo through the 70% range, a recent study for the federal São Paulo State Federation of Industries government by Deloitte showed that «Actually (FIESP). The main goal of this model plastics recycling rates were at just recovery is to put post-consumer packaging, under 10% which was quite a surand processing which currently is going to landfills, prise to most Canadians – given operations can back into the productive cycle after the proliferation of residential recyvary from city use by the consumer; the reverse logiscling programs across the country. to city» tics system for packaging involves subsEducation continues to be critical to tantiation of data and targets by the manudriving improvement in terms of ensufacturers through acquiring recycling certificates ring that the right recyclables are going into the (CRE). What makes the difference here is the right boxes at the curbside of Canadian homes. traceability of this process, which will go through Additionally, and this won’t be easy in Canada, a private company appointed as the certifier. Ibá if we could see greater alignment on policies

Global Challenges

supports the idea that this system adopted in the state of São Paulo should be expanded to all states.

«A reverse logistics system was established in the state of São Paulo»

IPMA According to IPMA estimates, 58% of the total paper produced in the country is made from recovered paper / recycled fibre. Paper collection / recovery mechanism is not very strong in the country, and is largely in the unorganised / informal sector. The estimated recovery rate is only 38%. As a result, large amount of recovered / wastepaper is being imported into India. Lot of effort is required to boost consumer awareness so that post-consumer segregation at source takes place and recovery rate improved. We need to educate right from school children upwards. A concerted effort is required by all stakeholders, including municipal authorities, local government bodies, recovered paper collectors and aggregators, paper mills, non-governmental organisations and the like.

PAMSA South Africa recovered 1.285 million of recyclable paper in 2018 putting the country’s paper recovery rate at 71.7% – well above the global average of 59.3%. South Africa is in the enviable position of being able to use up to 90% of its recovered waste paper locally by recycling it into new paper, packaging and tissue. PAMSA, through its recycling arm RecyclePaperZA, represents processors of recycled paper fibre. These companies buy recovered fibre from informal recycling collectors as well as small, medium and larger recycling collection businesses. Some municipalities have rolled out separationat-source programmes. The market for recovered paper and paper packaging material has encountered several challenges in the past years, which has resulted in lower demand for this material by the producers and consequently lower rates paid for collected material. One negative impact in the market was the banning of import of wastepaper by China, which depressed the value of the material. In

addition, the current economic situation in South Africa (and globally) has reduced the demand for consumer goods and therefore packaging.

. Recycling means recyclability. 6 How do you address this issue?

AF&PA AF&PA defines “recyclability” as the ability of a paper-based product to be recycled into new paper, paperboard or other products. A paperbased product is recyclable if it can be collected, separated or otherwise recovered from the waste stream through recycling programs for use in manufacturing or assembling another item. AF&PA is developing technical guidance for members of the paper-based packaging manufacturing supply chain to use in designing and manufacturing packaging to meet customers’ needs in terms of recyclability. The technical guidance is intended for voluntary use and with a goal of enhancing paper recycling. AUSFPA Australia’s paper and cardboard industry supports sustainable design and recycling initiatives to promote landfill reduction and support circular economy projects, all of which increases the recyclability of the products that they make. In addition to this the Australian Federal Government is reviewing potential regulations to ensure packaging made both domestically and imported into Australia is recyclable in Australia. Cepi Making sure that our products are perfectly designed for recycling is one the key best practises in our industry. 4evergreen is an example of a cross-sectorial cooperation aimed at boosting recyclability, but we of course do not limit our efforts to this approach; for instance, for already two decades, the European Paper Recycling Council has been PAPERFIRST MAG SPRING 2020

Global Challenges

the hub for advancing recyclability in Europe. After our collaboration with the World Economic Forum and Ellen MacArthur Foundation in 2016 on circular design principles, we have also developed, together with converters, new recyclability guidelines for paper-based packaging. They give concrete guidance to designers to ensure functionality goes hand-in-hand with recyclability. With new products and innovations coming to the market, we are also looking into defining the collection and sorting systems to ensure nothing escapes the loop.

«Don’t assume just because the properties of your product are recyclable that they actually are»

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FPAC This is so critical. There continues to be a degree of confusion among Canadian households around what materials are actually recyclable and which are not. The first opportunity to address this is for education and awareness building at the community level. In Canada, programs can vary from community to community (what’s collected, which material goes in what box, etc.) Community and household-based education is very important. Likewise, it is important that our packaging innovators and implementers are having conversations with local governments and recovery facilities to ensure that the new product innovations are going to in fact become recycling success stories at the community level. Years ago, I recall seeing examples of polyethylene terephthalate (PET) materials not being recognized by optical readers at certain recovery facilities because they don’t have a ‘neck’. These optical readers had been programmed to only identify PET bottles, so changes had to be made at certain recovery facilities to modify these. This is a practical example that we should take heed of in the wood fibre base – don’t assume just because the properties of your product are recyclable that they actually are. The innovations must meet the practical tests at the community level. Those are words to live by as we consider the next generation of environmentally friendly products and sustainable packaging for Canadians.

IBA This is a key attribute for the circular economy and for the new low-carbon economy. We need to rethink our way of doing business, our consumption, and our habits. This is the only way that we can start a movement now to safeguard our future. And this involves a fundamental attribute: recycling. The industry has to invest and create solutions to ensure that products are environmentally correct from their origins, but are also not intended for a single use; in other words, after their useful life they will easily be reincorporated back into the production chain. The end consumer should be able to correctly separate trash, and the government needs to be ready to direct recoverable material toward recycling. Recycling needs to be part of our culture. In this regard, Brazil’s paper industry offers an example to be followed. It involves a renewable raw material, biodegradable products, and a high recycling rate. IPMA We need to put in place a nation-wide collection mechanism / infrastructure for paper which requires segregation at source and creation of a value chain for collection and disposal of paper and paper products. We also need proper gradation of various categories of post-consumer paper to ensure recyclability. Some of this also requires conducive government policies and rules, and also support, as enablers. PAMSA Yes, indeed, recyclable means that it can be recycled. However not everything that is recyclable is recovered for recycling. This could be due to apathy on the part of consumers and businesses and a lack of knowledge about what is recyclable. There is also a lack of infrastructure and technology. Municipal waste services are not geared for separation-at-source. In the current waste over-supply situation, materials are not recycled due to lack of demand as is the case with common mixed waste from households. We continuously drive the message around the recyclability of paper and packaging, and how to separate it for effective recycling.

Product breakthrough

Paperboard powers the future Article by Jonas Rehnberg - Photos by Anna-Clara Eriksson

Iggesund provides valuable expertise in the development of environmentally sustainable and costeffective battery technology that supports the transition from fossil fuels to renewable energy

he transition away from fossil-fuelled transportation and energy production to a society powered by renewable sources relies heavily on further development of battery technology. Traditional batteries based on electrochemical reactions are less sustainable from an environmental point of view and unsuitable for the rapid charging and discharging at high power over long time required by solar and wind farms.

NEW ENERGY SOURCES NEED EFFICIENT STORAGE

«The automotive industry needs to reduce the cost of producing electric cars in order to contribute to a fossil-free society. For electricity production from weather-dependent energy sources, such as solar and wind power, we need to create efficient storage and power buffer conditions”, says Nicklas Blomquist, PhD in Engineering Physics at Mid Sweden University.

COST-EFFECTIVE AND ENVIRONMENTALLY SUSTAINABLE Can something as “simple” as paperboard coated with graphene and immersed in saltwater offer a cost-effective and environmentally sustainable path to a fossil-free society? Yes, according to a pioneering project in which Blomquist and his team partnered up with Iggesund to develop a prototype of a so-called supercapacitor – a power storage device that can be recharged in a second and release a large amount of power. Instead of using chemical reactions like traditional batteries do, capacitors store energy in electrically charged fields Compared to traditional batteries, these supercapacitors cost a fraction to produce and have a much longer lifetime, although much lower energy density. This means their surface needs to be fairly sizeable and the coating of the electrodes – where the energy is stored – must have the right properties.

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Product breakthrough

Scientist Nicklas Blomquist from Mid Sweden University and Johan Lindgren from Iggesund with prototypes of the so-called supercapacitor.

INVALUABLE EXPERTISE In this pilot project, the researchers used graphene – an atom-thick layer of graphite – mixed with water and cellulose as binder, as electrodes. (Graphite is a crystalline form of carbon where atoms are arranged in a hexagonal structure like a beehive). Applying such a complex compound to a substrate, however, requires genuine expertise in coating, which made it natural for the researchers to turn to Iggesund. “Iggesund has been an important partner in contributing invaluable expertise and equipment to move from lab-scale tests to full-scale industrial production”, says Blomquist. At Iggesund, Johan Lindgren, PhD and Area Manager Development Projects, comments: “Iggesund has long been recognised for its deep expertise in coating. In collaborating with Mid Sweden University, we have gained an even deeper understanding of how different types of material behave when used as coating and how they react with paperboard.” Since the performance of a supercapacitor is highly dependent on the conductivity, surface area and structure of the electrodes, the coating expertise proved instrumental to the success of the project. “Iggesund knows a lot about coating and how the paperboard reacts to different types of coa-

ting colours together with various parameters such as the speed of the coating, the rate of absorption and the texture of the coating colour used. Coating colour made from nanomaterials is very shear-thinning, which means it changes from watery when stirred, to solid when not stirred”, explains Blomquist.

DECEPTIVELY SIMPLE While supercapacitors have been around for a while, the innovation lies in using only sustainable materials in producing the new capacitor, along with water-based solvents – instead of organic – in both coating colour and electrolyte. The raw material for the new “superbattery” sounds deceptively simple: Paperboard, graphite, cellulose and saltwater – powered by the sun, the wind and the waves. “It doesn’t get more sustainable or harmless to humans. You can even eat it”, says Blomquist. While it probably wouldn’t taste very good, the innovation provides appetizing food for thought on the road to a fossil-free future just around the corner: “In 2020 we believe full-scale demos are within reach. When nuclear power is being phased out, solar and wind power will assume a greater role in the energy mix. This makes storage and power buffering of renewable energy crucial and we believe our innovation may be instrumental in this”, Blomquist concludes. PAPERFIRST MAG SPRING 2020

Mill Stories 1

How Voith and BillerudKorsnäs build the world’s most modern board machine Article by Voith Group

he world’s most modern board machine is located in Gruvön, Sweden. The entire machine, from headbox to winder, was built by Voith for BillerudKorsnäs. With its high-end components, the BM 7 doesn’t just define the latest state-of-the-art installation. Thanks to the large degree of component interconnectedness and extensive monitoring of all process data, it is actually pointing the way to the digital future of the paper industry. Patric Romes is not inclined to exaggerate. But when he’s talking about the board machine that Voith built for BillerudKorsnäs in Sweden, even the voice of the seasoned senior project manager resonates with respect. “To my knowledge, such a fully equipped system for high-quality board has never been realized anywhere else in Europe in recent years. It is an outstanding achievement that is setting benchmarks,” says the 58-year-old. The BM 7 is an end-to-end system and the world’s most modern board machine. Romes and the Voith team installed the machine at the company’s mill at Lake Vänern in Gruvön, Sweden. It went into operation in June 2019.The standards it now has to meet are exacting. The BM 7 produces four different board grades with a total annual volume of 550,000 metric tons from virgin fibers from sustainably managed forests. To achieve this capacity, the machine works with a web width of 8,800 mm at the headbox and a design speed of 1,200 m/min.

Thanks to the large degree of component interconnectedness and extensive monitoring of all process data, it is actually pointing the way to the digital future of the paper industry

SOFTWARE OPTIMIZES THE PROCESSES But the general parameters only provide a rough picture. In fact, it is primarily the precisely matched combination of high-end components and Papermaking 4.0 software that makes the machine

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Mill Stories 2

1. T he 350 m long BM 7 is accommodated in a new hall that had to be built on a particularly problematic subsoil. 2. The BM 7 is fitted with two DynaCoat AT coaters and two SpeedSizer AT film presses that offer good runability for long, steady production runs. 3. T he Sirius winding system gently winds the paper or board and is especially suitable for surface-sensitive papers and large winding diameters.

in Gruvön so outstanding. This is largely due to the digital solutions OnEfficiency and OnCare, which allow BillerudKorsnäs staff to manage all process data online. In the control room, they monitor more than 20 continually updated production parameters. Using the OnEfficiency Forming module, the operating team coordinates and stabilizes the de-watering, retention and flocculation at the same time, for example. The OnCare package handles the asset management and helps the paper manufacturer ensure the greatest possible machine availability through preventive maintenance, which ultimately reduces operating costs. The XcelLine board machine specifically tailored to BillerudKorsnäs also reflects the latest state-of-the-art at the component level. Various innovations have been incorporated from headbox though to winder. In the dryer section, for example, EvoDry steel cylinders are being used in a board machine for the first time. Their thinner walls mean that they transfer heat better and are particularly safe, because their flexible material prevents the spontaneous ruptures

that can occur in cast iron cylinders. In the finishing section, the BM 7 is the world’s first board machine to feature Curl Control, which is generally used to reduce paper curl in singletier dryer sections. Another new feature is the highly efficient VariFlex Performance winder, which will be increasing productivity in a European paper mill for the first time.

OBSTACLES OVERCOME WITH TEAMWORK Nevertheless, the project participants did have to overcome some obstacles first before the BM 7 could be commissioned. For example, the start of assembly with the foundation rails was scheduled for January 2018, as Patric Romes recalls. “However, they couldn’t be installed at that time because the building wasn’t ready.” This was due to problematic subsoil; the loamy soil had subsided unexpectedly, delaying the construction start for the foundations of the 400 m long hall. In addition, there were also problems with the cabling in the building. The digital control system (DCS) for monitoring machine functions could not be installed until these problems were resolved. All these delays had consequences: The stock on wire deadline, originally scheduled for November 2018, was achieved during April 2019, and first roll was produced early June. It is not unusual for unforeseen events to occur in a project of this scale. The large number of subPAPERFIRST MAG SPRING 2020

Mill Stories 4

contractors and suppliers involved increases the number of interfaces; this was the case for the Gruvön BM 7 project. Accordingly, the need for coordination was great, which created additional pressure and led to delays. However, the Voith team always found solutions through pragmatic discussions with the customer. “We got together and agreed on how to deal with obstacles. The collaboration was exceptionally good. Close communication was necessary and was genuinely put into practice on site,” emphasizes Voith manager Romes. “We found the collaboration to be very friendly and constructive,” adds Magnus Haldor Johansson. As Area Manager BM 7 at BillerudKorsnäs, he supported the construction work from start to finish. His colleague Maria Engnes, Director of the NEXT Generation Program, was also often involved on site to make sure that, despite all the hurdles, production could start as soon as possible.

STRATEGIC INVESTMENT For BillerudKorsnäs, the new board machine is not just the biggest investment in the company’s history but also an important strategic

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4. The standout features of the highly efficient VariFlex Performance winder include a high design speed and short set change time. 5. The finished rolls are transferred to the packaging facility on a conveyor belt.

move. When announcing the building plans at the end of 2016, former President and CEO Per Lindberg spoke of a “historic decision.” From their mill in Gruvön, the Swedes want to do their part to help satisfy global demand for board, liquid packaging, food board and liners. In doing so, they are focusing on the growing need for sustainable solutions on the part of increasingly more brand owners, food retailers and consumers. To be able to cover this demand, the group is increasing its production capacity through the BM 7. But it is not just about the volume. “The quality that the machine is producing is promising,” says BillerudKorsnäs’ Project Manager Göran Korsfeldt. For Voith, the BM 7 is not only a technological showpiece and impressive reference. The successfully completed, largescale project delivered many insights that will give the company a crucial lead – for example, when refining the Papermaking 4.0 concept and also in conjunction with the ongoing improvement and development of expertise in board machine construction.

INDUSTRY 4.0

AI-based business models Article by Vesa Puoskari - Photos by Petri Merta

Accumulation of high-quality data will be a key source of future business value. While machines and equipment are one part of a wider production system that creates value, software will play an increasing role in transforming data into digital services and solutions.

nalytics-based application development is bringing a new dimension to product development. It allows a holistic approach in optimizing production with advanced analytics tools. The key idea in this approach is to launch the first version quickly and then continue the development in constant cooperation with customers, which at the same time makes development work very agile.

“The Minimum Viable Product (MVP) approach offers customers a first-version solution incorporating only the required features. However, it’s already a functional application that can be used in production. Only some features are manual or simulated,” explains Valmet’s Arttu-Matti Matinlauri, Director, Analytics & Applications Development. During the development process, new functionalities and subsystems are continuously integrated with the software and then applied in practice based on customer needs. “When applications are being designed, it’s important to take into account different user groups (maintenance and production, for example) and their user experience, and to evaluate carefully how the new applications will create value for the user,” he adds.

FOSTERING MILL- OR PLANT-WIDE OPTIMIZATION At Valmet, the offering of Industrial Internet applications and services is based on know-how in process technology, automation and services. For example, paper machines can be equipped with features to predict failures and help control product quality. In future, machines and equipment will constitute one part of a wider production system that creates value, with software transforming data into digital services and solutions. The constant accumulation of high-quality data is a key source of business value. “Thanks to the accumulated data, it’s possible to take a holistic approach and optimize production Arttu-Matti Matinlauri, Director, Analytics & Applications Development, Valmet.

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INDUSTRY 4.0

Analytics-based application development allows taking a holistic approach to optimizing production.

by evaluating the whole production chain. Operating costs can be reduced while increasing output at plant and process level,” Matinlauri says. For instance, raw materials and energy make up some 80 per cent of paper machine production costs. In the new datadriven world, he adds, the objective is to optimize production to achieve the optimal overall profit margin. The target is to cut raw material and energy costs, minimize unplanned shutdowns and reduce the number of web breaks. “Downtime is often a grey area in operating costs. For example, paper grade changes on a machine result in low production time. Mill- or plant-wide optimization enable these operations to be better linked to the production schedule.” The focus is on ensuring the smooth operation of the machines. “The more machines can be kept up and running, the better the return on the capital investment. These principles and tools can be applied to all industrial operations.”

EMERGING ECOSYSTEMS Matinlauri describes his recent visit to a paper mill which aims to be fully Artificial Intelligence (AI)-controlled in two and a half years’ time. “Although the mill does not have well-developed automation solutions yet, this step change is a fully realistic and achievable target. It involves the development of advisory solutions based on data flows and the increased autonomy of machines. As they’re starting from scratch, they can avoid common mistakes and derive benefit from current tools and technical development.” The new AI-based systems will automatically classify and synthetize data from databanks. They will not need a huge amount of information to be able to learn, as they can draw

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INDUSTRY 4.0

ring companies will be able to take a quantum leap here and benefit from rapid AI development,” Matinlauri believes. The next step in digitalization will be to improve the visibility and profitability of a plant or mill by analysing and utilizing data even more widely for the benefit of the customer.

“During the development process, new functionalities and subsystems are continuously integrated into the software and then applied in practice based on customer needs,” says Matinlauri.

conclusions from one or two examples and then always recognize the same patterns exactly. Matinlauri confirms that AI applications are evolving rapidly, and the evaluation of data flows will enable the creation of new kinds of ecosystems. “Partners in the value chain can exploit this data in developing their products and boosting their existing business by creating innovative new services. Success requires not only new technologies, but also a customer-centric mindset for value to be created and captured in a new way.” In future, Matinlauri foresees technology providers playing an even greater role as “performance partners” for their customers.

A DIALOGUE WITH DATA The pace of product development is ever accelerating, fuelled by factors such as the rapid development of AI. “So far, manufacturing industries have fallen behind in development because there is a need to process a huge amount of accumulating data, and the tools for this haven’t been available. These tools are now available, so manufactu-

“We need new AI-driven applications that bring more transparency and understanding into the decision-making process. This is how humans will begin to trust the support of these analytics, and the time will soon be right for fully automated operations as well,” he explains. Advanced analytics provide good tools to evaluate indicators signalling a need for predictive maintenance, such as temperature and vibration measurements or energy consumption. In any case, there will always be unexpected deviations at the mill or plant, so we will need humans to solve these problems. Automation systems can take care of stable operation in the meantime. “The skillsets needed to operate the autonomous mill of the future are actually more demanding than those to operate a conventional one. So Valmet and our customers are constantly exploring ways to secure that skill and talent to serve a wider fleet of equipment,” adds Matinlauri. Ultimately, data analytics is just one of many methods available to support decision making. Other methods must also be brought into play to enable the analysis of variations and the comparison of different options. “Digitalization brings more transparency to decision-making processes. Perhaps the key quality we will need from future leaders is not just comprehensive experience, but also the ability to analyse and draw conclusions directly from the data in making decisions,” concludes Matinlauri.

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TECHNICAL INSIGHT

Value stream for sustainability Article by Marcello Giorgi & Martin Koepenick

Kadant’s Luca Baldo and ReLife’s Nilde Sisti present large rejected “contaminants”. Now that Cartiera di Bosco Merango and the Belfante Group have merged, this kind of troublesome material in OCC recycled waste is going away.

mportant to Cartiera di Bosco Marengo is a partnership with Kadant to develop innovations in stock preparation and plastics recovery. Fiber quality and yield of quality core board continue to rise. Energy consumption is down and productivity is up. Their new continuous stock preparation system eliminates steps in the process. A stealth project to turn plastic waste into a valuable raw material is also underway. In addition, their Dryer Management System® control systems (DMS control systems) from Kadant allows for considerable savings in natural gas and greater flexibility in running the paper machine. For this 100% recycled furnish pulp and paper mill to team up with a waste management company, Benfante ushers in “spherical” business model—not just circular. This means value from a better, controlled supply chain. Value from maximizing fiber, which isn’t always ideal. Value

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from turning what was landfilled into a plastic raw material for resale. Value from enhancing the environment for Italians in Northern Italy and providing global products that are sustainable. Not only does the pulp and paper mill receive OCC from Benfante, but together they are seeking ways to turn so-called contaminants—plastics—into a raw material they can sell. “When you gain more from fiber while dramatically reducing waste going to landfill, and turning plastic waste into a marketable asset, this is a winning idea,” says Alberto Ghigliotti, president of Cartiera di Bosco Marengo. Enzo Scalia, managing director of Benfante group adds, “Our multiple value streams are really spherical, more than circular. We produce traditional and entirely new products, while saving energy and environmental costs from start to finish. The sustainability gain is enormous.” “When you think of waste as valuable, everything changes in how you run a pulp and paper mill. Kadant always has a focus on stock preparation design to make this happen. ReLife is leading the way to maximize OCC and other value steams, which used to be viewed as contaminants,” comments Marcello Giorgi, Global Sales & Marketing Director, Kadant Lamort.

TECHNICAL INSIGHT

2 1. EP Turbo Blower is a key element in the RunEco solution. 2. Operating window comparison.

Towards energy-efficient and economical Tissue production with RunEco solution Article by Tero Pärssinen, Technical Director, Runtech Systems

Runtech RunEco solution is a fully adjustable, energy-efficient vacuum system for tissue production. It is a tailor-made solution equipped with optimal save-all and doctoring system and online dewatering measurements. RunEco can provide energy savings of 30 to 70%, and is applicable for both greenfield and rebuild projects.

acuum, which is a result of air being pulled through a restriction, is an expensive tool; it is one of the top three energy consumers in a paper mill. Historically, it has been excessively used. With today’s increasing cost of energy and environmental awareness, paper mills are demanding reduced specific energy levels and operational costs to help with their competitiveness. Runtech RunEco vacuum system is developed especially to take into account the challenges and demands related to the dewatering and runnability of paper and board machines. Tra-

ditional method of increasing vacuum levels is replaced with speed adjustable turbo blowers, optimal doctoring and save-all systems with online dewatering measurements. By using only the needed vacuum in the critical consumers, mills can fully benefit from the more efficient nip dewatering strategy and save energy.

RUNECO SOLUTION – OPERATING PRINCIPLES There are some principles, which govern the content and operation of an efficient and ecofriendly vacuum system. The primary function of a wire- and press section i.e. the removal of water needs to be carried out effectively and reliably. This requires speed-controllable turbo blowers to create the needed optimal vacuum level, robust dewatering equipment such as save-alls and doctoring and means to measure all this reliably to get the feedback for the energy-efficient control of the system. Vacuum is created as a result of moving air across a restriction. Fans, turbo blowers and liquid ring pumps can each be used to achieve this goal and are also often used in combination with each other. Turbo blowers have the benefit of being an inherently efficient way of

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TECHNICAL INSIGHT compressing air for the modest compression ratios (less than 3.5) faced in a paper machine. A turbo blower is, for a given rotational speed and impeller design, a constant compression ratio device as opposed to a liquid ring pump which is a constant displacement machine. The power consumption of a turbo blower is a function of the air flow that is being compressed to satisfy the pre-determined compression ratio. A constant speed turbo blower has a limited range of efficient operation since the paper machine vacuum adjustment outside of the designed level requires throttling.

TURBO BLOWER OPERATION Ecopump turbo blowers are designed to operate efficiently across a wide range of vacuum levels and air flows. It allows paper mills to optimize vacuum levels whilst taking advantage of the higher efficiency a blower has over a traditional liquid ring pump device. High speed motors, driven by frequency converters, allow a typical RunEco blower to provide paper machine vacuum levels between 30 and 70 kPa. A wider range of impeller designs allows highly efficient levels across the operating range. This means that the amount and the usage of throttling valves can be reduced to a minimum. The result is energy savings of 30 to 70% when compared with traditional vacuum systems. Single and two-stage turbo blowers are of the generic centrifugal compressor type. Air enters a centrifugal fan impeller axially then passes through the impeller radially. Air is collected in the volute casing and discharged at a right angle to the inlet flow. As the impeller rotates, the air contained within the blade passage is forced outwards by centrifugal force. This process produces a continuous flow through the impeller. Specifically, there are three stages to the pressure development through a centrifugal blower. First, air is forced through the impeller in a radial direction due to the centrifugal force. As the radius of the impeller increases the magnitude of the centrifugal force increases thus creating a pressure gradient i.e. an increase in the static pressure. Secondly, as the outlet area of the blade passage is larger than the inlet area the blade passage acts as a diffuser. The relative velocity decreases as the air flows through the

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blade passage leading to an additional increase in the static pressure at the impeller outlet. Finally, the motion of the blades adds rotational momentum to the flow increasing the tangential velocity of the air flow. The increase of the absolute velocity towards the end of the blade section in turn, increases the kinetic energy and dynamic pressure across the impeller.

RELIABLE DEWATERING THE BASIS FOR RUNNABILITY Each vacuum element in the machine, such as a suction box or a suction roll, requires a certain amount of air flow to operate at an ideal vacuum level i.e. at the minimum to maximize the energy efficiency while maintaining the runnability and dewatering capacity. The needed capacity is dependent e.g. on felt life and type, paper grade, basis weight, machine speed etc. To achieve this challenging goal we need reliable dewatering measurements. The water that is removed from the paper sheet is a multiphase flow containing solid particles as well as air, thus being often subject to foaming. Traditional magnetic liquid flow meters demand a homogenous flow and often will not be able to provide continuous accurate data from such variating circumstances. Runtech EcoFlowâ&#x201E;˘ meters are designed to measure water flow across a mechanical restriction and are not sensitive to entrained air or foaming. These devices are used both under vacuum (in a separator drop leg) and in atmospheric conditions. The third fundamental issue in an energy efficient vacuum system is the dewatering and doctoring. These are not only related to energy consumption, but also play a major role in paper machine runnability (profiles), efficiency (dirt and breaks) and profitability. Therefore, a welldesigned and operated dewatering and doctoring system is one of the key issues to a wellperforming and energy-efficient machine. The most economical method of water removal in a press section is nip dewatering, as opposed to felt dewatering requiring higher vacuum levels and thus energy demanding higher air flows. Fit-for-purpose doctoring and save-all equipment allows the felts to run wet collecting water in the pans enabling higher dewatering, higher felt lifetime and, for example better

TECHNICAL INSIGHT 3

3. C omparison of single and two-turbo systems operation and efficiency

moisture profiles to improve runnability. Suction rolls are often equipped with double doctors to prevent re-wetting and maximize void volume to allow best water removal. Save-all pans should be designed to manage the water that is removed from the nips, and engineered to be rigid enough to accommodate doctor holders. Runtech is one of the leading suppliers for the improved dewatering and doctoring solutions for all kinds of pulp, paper, board and tissue machines. In many cases, Runtech’s solutions have led to a 1-3% increase in dryness after the press section which saves considerable amount of energy in the dryer section (4-12% less steam).

TAILOR-MADE RUNECO SOLUTIONS NO COMPROMISES Depending on Tissue machine design and width the most efficient operation sometimes requires one and sometimes two Turbo blowers. The specified air flow capacity is typically quite high consisting of overall safety margin, felt life and type margin and with liquid ring pumps e.g. pump wear and seal water temperature variation margins. In normal operating conditions the needed air flow capacity is ~40…50% lower than the specified capacity. Regardless of the situation, RunEco system with a fully speedcontrolled turbo blower provides high operating efficiency at all times. During normal operation one single-stage turbo blower typically provides sufficient capacity. However, a system with two turbo units allows even higher operational flexibility, controllability and energy efficiency. As an example, often Tissue machines have three main vacuum consumers, namely the press suction roll and

two felt Uhle boxes (see Pic.3). Also often the vacuum level of the suction press roll is clearly lower than that of the Uhle boxes. And as air is a compressible medium the volume changes significantly with the surrounding pressure. These unavoidable facts lead to considerable energy losses in a one-unit system through two mechanisms. First, being the throttling losses in the suction press vacuum level control and, the second the loss due to the air expansion from the lower suction press roll vacuum state to the higher vacuum in the felt Uhle boxes and in the main vacuum header. An often used vacuum level difference of approx. 10 kPa between the suction press roll and felt Uhle boxes can lead to over 50% increase in the air volume through expansion and thus naturally to large increase in the energy consumption. A two turbo blower RunEco system, while offering a redundant air flow capacity, offers additionally a higher degree of controllability and less losses resulting in a more energy efficient vacuum system. Typical savings in energy consumption are 30…50% when the losses are eliminated in a two turbo system. Another advantage in a two-unit system is the existence of a back-up in the very unlikely malfunctioning situation as the machine can be run with one turbo unit only, though with less efficiency. Table 1. shows a typical calculation, including a long term cost of ownership, comparing the costs of a single turbo unit and two turbo unit RunEco system to a traditional vacuum system with liquid ring pumps. The absolute difference is naturally related to the local energy price. However, the table highlights the fundamental differences in the running method, controllability and losses between the systems.

Table 1. Typical calculation, including a long term cost of ownership, comparing the costs of a single turbo unit and two turbo unit RunEco system to a traditional vacuum system with liquid ring pumps.

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TECHNICAL INSIGHT RUNECO REFERENCE CASES Lee&Man Tissue TM9, 10, 11 & 12 are new double-width tissue machines installed in the Guangdong site in southern China. All machines are equipped with two EP500-D1 turbos to fulfil the capacity and enable controllability. Installed power in all cases is 1000 kW, however with the help of EcoFlow dewatering equipment the machines have been optimized to run only with one unit during normal operation having an energy consumption between 300â&#x20AC;Ś350 kW. All energy consumption targets have been fulfilled and the efficiency has been increased even further with exhaust air heat recovery system. In addition, turbo systems are naturally running without any sealing or cooling water.

energy efficiency and improve profitability. The old vacuum system consisted of five liquid ring pumps consuming altogether ~1300 kW. The new system was rebuilt with two EP blowers namely EP550-T1 and EP600-HF1. After start-up the turbo operation was optimized with the help of EcoFlow dewatering equipment enabling a reduction in the energy consumption up to 900 kW during normal operation. Naturally, all energy efficiency targets have been reached and sealing and cooling water consumption fully stopped.

Table 4. Results before and after the rebuild.

Table 2. Energy consumption targets are achieved at all four Lee&Man tissue machines

Lee&Man Tissue TM3 was a vacuum system rebuild project for a double width tissue machine in the Ruichang site in central China. In the existing system there were three liquid ring pumps consuming altogether ~800 kW. The new system was rebuilt with one EP550-T1 turbo unit replacing all the pumps. After start-up the turbo operation was optimized with the help of EcoFlow dewatering equipment enabling a reduction of ~50% of the energy consumption during normal operation. Naturally, all energy efficiency targets have been reached and sealing and cooling water consumption fully stopped.

Table 3. Replacing liquid ring pumps resulted in 50% energy savings.

Confidental Tissue machine TM11 is a double width tissue machine in Europe. A vacuum system rebuild project was started to improve

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Runtech Systems Ltd. is a Finnish-based company, today a part of Gardner Denver. With years of hands-on papermaking know-how, Runtech develops, designs and supplies equipment and related services for paper, tissue and pulp mills. Hundreds of delivered systems, such as dewatering meters, vacuum systems, tail threading equipment and doctoring solutions benefit our customers by enabling energy-efficient and economical production. Our integrated solutions result in significant operational cost savings, improved machine runnability and product quality, giving a competitive edge for our customers in the market.

TECHNICAL INSIGHT 1

1. Dietmar Muser, Manager Paper Mill at Sappi Ehingen in Germany, is continually trying to make his production more efficient and thus opted to use the new SupremeFilm development from Voith. 2. SupremeFilm combines the material-specific benefits of polyurethane with a new filler material concept.

Voith is extending its product range with the new polyurethane roll cover SupremeFilm Developed for film presses, SupremeFilm achieves very consistent 2-sigma profiles. In paper finishing applications, it complements other highly durable roll covers like OceanCoat for coater backing rolls. NEW TECHNOLOGY IMPROVES FILM PRESSES

ietmar Muser has a smile on his face. As the manager of the Sappi paper mill in Ehingen in southern Germany, his job is to constantly optimize production. Now he has valuable support with the coating process. Sappi is one of the first customers to use the new Voith SupremeFilm roll cover for the film press. “We aim to be constantly evolving and continually making our production more efficient. To enable this, new technologies were necessary,” explains Muser. “For this reason, we opted to use a promising new development from Voith.”

BENEFITS FOR FILM TRANSFER “At the heart of the innovation is a polyurethane material developed from scratch. With this development, we are meeting the specific requirements for film presses, especially with respect to profile accuracy and film transfer, better than

with any other polymer cover on the market,” says Ralf Moser, Global Product Manager Finishing Section, Voith Paper. Because the SupremeFilm roll cover combines the material-specific benefits of polyurethane (PU) with an innovative filler concept, which maintains the surface roughness over the entire service life, it achieves an especially homogeneous and consistent film transfer. The high abrasion resistance also means that paper producers can extend the intervals between regrinds. But above all, it achieves an absolutely uniform paper quality. “Thanks to SupremeFilm, we are able to maintain the 2-sigma profiles constantly over an unprecedented installation period,” says Sappi manager Muser. “In addition, we benefited from reduced maintenance costs and a longer running time between roll changes.”

SUITABLE FOR ALL FILM PRESSES Adang Supriatna, PM 2 Production Manager at Indonesian manufacturer Riau Andalan Kertas – another of the very first customers to use the new roll cover – confirms a further reason why it is well worth switching to SupremeFilm. “The performance of SupremeFilm met our expectations of reducing the need to use our grinding machine,” he says. Another advantage of the new polyurethane roll cover is its flexibility; SupremeFilm is not restricted for use in Voith film applicators like SpeedSizer AT, but can also be used in film presses from other manufacturers.

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AGENDA A SELECTION OF PAPER INDUSTRY EVENTS AROUND THE GLOBE You might well meet our team at some of them. CIDPEX Nanjing (China) 22/6/20 - 26/6/20 http://en.cnhpia.org

ABTCP Expo & Congress Sao Paulo (Brazil) 6/10/20 - 8/10/20 www.abtcp2020.org.br

Paper & Biorefinery Conference Graz (Austria) 28/10/20 - 29/10/20 www.paper-biorefinery.com

SinoPaper South Dongguan (China) 22/7/20 - 24/7/20 www.sino-paperexpo.com

ICEP 2020 Sao Paulo (Brazil) 6/10/20 - 8/10/20 www.9thicep.com

Paper & Tissue Asia Lahore (Pakistan) 8/11/20 - 10/11/20 www.papertissueasia.com

Paper Middle East Exhibition Cairo (Egypt) 5/9/20 - 7/9/20 www.papermideast.com

Tecnicelpa International Conference and Exhibition Coimbra (Portugal) 7/10/20 - 9/10/20 www.tecnicelpa.com

Paper Viet Nam Ho Chi Minh (Vietnam) 11/11/20 - 13/11/20 www.paper-vietnam.com

Tissue & Paper Bangkok Bangkok (Thailand) 9/9/20 - 11/9/20 www.tissueworld.com/bangkok

CIADICYP Congress Coimbra (Portugal) 7/10/20 - 9/10/20 www.tecnicelpa.com

Tissue World Miami Miami (USA) 11/11/20 - 13/11/20 www.tissueworld.com/miami/en-us

World Bioeconomy Forum Online event 9/9/20 - 11/9/20 www.wcbef.com

MIAC Lucca (Italy) 14/10/20 - 16/10/20 www.miac.info

Pap-For St Petersburg (Russia) 24/11/20 - 27/11/20 www.papfor.com/en-gb.html

Tissue World Istanbul Istanbul (Turkey) 15/9/20 - 17/9/20 www.tissueworld.com/istanbul

INDEX 20 - The world of nonwovens Geneva (Switzerland) 20/10/20 - 23/10/20 www.edana.org

Paper Arabia Dubai (UAE) 6/12/20 - 8/12/20 www.paperarabia.com

You can find our updated list of events on www.paperfirst.info or PaperFIRST App CONTRIBUTORS AND PARTNERS AF&PA is the American Forest & Paper Association serves to advance a sustainable U.S. pulp, paper, packaging, tissue and wood products manufacturing industry • www.afandpa.org AFPA is the peak Australian industry body representing the resources, processing, and pulp, paper and bioproduct industries covering the forest products value chain • www.ausfpa.com.au Ahlstrom-Munksjö is a major producer of paper products with the mission to expand the role of fiber-based solutions for a sustainable everyday life • www.ahlstrom-munksjo.com CEPI is the European association representing the paper industry. Through its 18 national associations, Cepi gathers 500 companies operating 895 mills across Europe • www.cepi.org FPAC provides a voice for Canada’s wood, pulp and paper producers nationally and internationally in government, trade, and environmental affairs • www.fpac.ca Haropa is the leading port complex in France, HAROPA is the 5th largest in northern Europe, with more than 120 million tonnes of maritime and river traffic • www.haropaports.com Hawkins Wright is an independent consultancy providing market intelligence and business information services to the international pulp,

PAPERFIRST MAG SPRING 2020

paper and bioenergy industries • www.hawkinswright.com Holmen is the promoter of an ecocycle in which the raw material grows and is refined into everything from wood for climate-smart building to renewable packaging, magazines and books • www.holmen.com IBA, the Brazilian Tree Industry association, is reponsible for institutionally representing the planted tree production chain. www.iba.org IPMA, the Indian Paper Manufacturers Association, is a national industry body representing the resurgent and organized face of paper industry in India • www.ipma.co.in Kadant is a global supplier of high-value, critical components and engineered systems used in process industries worldwide • www.kadant.com Moody’s provides tools that help leaders of organizations understand and process data • www.moodys.com The Tissue Pack Innovation Lab (TPIL) is a research partner and a source for industry training, hosted by the North Carolina State University • www.ncsu.edu https://research.cnr.ncsu.edu/sites/tissuelab/ PAMSA is The Paper Manufacturers Association of

South Africa (PAMSA), is acknowledged as the national ‘voice of the pulp and paper industry’ • www.thepaperstory.co.za Runtech/Gardner Denver is a reliable partner providing solutions to improve the runnability and efficiency of tissue, board, paper and pulp machines • www.gardnerdenver.com Siemens through its fiber industry division, aims at making pulp and paper production more environmentally friendly, resourceefficient and profitable • www.siemens.com Smithers is a recognized provider of strategic market research reports, uniting a global network of industry experts and extensive industry knowledge • www.smithers.com STE Analytics is a business intelligence company focusing in mathematical business models and simulation • www.steanalytics.com Valmet is a developer and supplier of technologies, automation and services for the pulp, paper and energy industries worldwide. www.valmet.com Voith is a global player offering real product solutions that facilitate intelligent, interconnected paper manufacturing. www.voith.com

PaperFIRST Mag #2 - Spring 2020

Articles inside

Value stream for sustainability by Kadant

CALENDAR OF EVENTS

The new polyurethane roll cover SupremeFilm by Voith

Towards energy-efficient and economical tissue production by Runtech

MILL STORIES

PRODUCT BREAKTHROUGH

GLOBAL CHALLENGES

BUSINESS DYNAMICS

MARKET OUTLOOK

THE C-LEVEL INTERVIEW

Is sustainability shaping the hygiene tissue industry? Evidence from the field

On global tissue markets, pulp demand, and the looming recession

FINANCIAL OUTLOOK

EDITORIAL