Fibre customer magazine 2020/2021

2020

2021

METSÄ FIBRE CUSTOMER MAGAZINE

THE GROWING TISSUE MARKET TOWARDS A FOSSIL FREE FUTURE ENSURING PRODUCT SAFETY

Contents METSÄ FIBRE CUSTOMER MAGAZINE

FIBRE CUSTOMER MAGAZINE 2020–2021 | METSÄ FIBRE, PO BOX 30, 02020 METSÄ | WWW.METSAFIBRE.COM | PUBLISHER: METSÄ FIBRE | EDITOR-IN-CHIEF: EVA MARTIN | EDITORIAL BOARD: ARI HARMAALA, RAILI KOPONEN, MIKAEL LAGERBLOM, TOM NICKULL, TUOMO NIEMI, TIINA TASSI JA HARRI VERTANEN | PRODUCTION: HUBE HELSINKI | ACCOUNT DIRECTOR AND PRODUCER: SANNA LAAKKONEN | LAYOUT: KATRI SULIN | COVER PHOTO: METSÄ GROUP | PRINTING PRESS: PUNAMUSTA OY | ISSN: 2670-0050 (PRINT), 2670-3831 (ONLINE) | THE MAGAZINE IS PUBLISHED IN FINNISH, ENGLISH AND CHINESE | ADDRESS SOURCE: METSÄ FIBRE’S CUSTOMER AND STAKEHOLDER REGISTER | IF YOU DO NOT WANT TO RECEIVE THE MAGAZINE, PLEASE SEND US AN EMAIL: METSAFIBRE.MARKETING@ METSAGROUP.COM | COVER: METSÄBOARD PRIME FBB BRIGHT 210 G | INSIDE PAGES: GALERIEART MATT 150 G

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EDITORIAL Ensuring the continuity of business operations PAGE 4

RESPONSIBLE ACTIONS Ensuring product safety is essential to us PAGES 64–69

WORLD OF FIBRE About pulp and our business in brief PAGES 5–7

PULP TECH Fines optimisation with Fines Management Audit PAGES 70–71

SUSTAINABLE FORESTRY Turning softwood into logs is long-term work PAGES 8–15

CARBON FOOTPRINT Towards fossil free production PAGES 72

MEGATRENDS Many opportunities for wood and fibre products PAGES 16–17

PERSPECTIVE Esko Pekuri has worked at Metsä Group for 45 years PAGES 73

GREENER CAR TYRES WITH CST, PAGES 23–25

VISITING A FOREST ESTATE IN SOUTHERN FINLAND, PAGES 8–15

PULP MARKET Specialty papers sets demand for the fibre raw material PAGES 18–22

ENABLER OF A GOOD LIFE DRT wants to make environmentally friendly tyres with CST PAGES 23–25

PROFESSIONAL Jukka Kiuru knows how to build a pulp mill PAGES 62–63

METSÄ FIBRE World-leading producer of pulp, timber and bioproducts PAGES 74-75

INNOVATIONS & INVESTMENTS Metsä Fibre is planning to build a new bioproduct mill in Kemi PAGES 26–31

INFLUENCER Professor Orlando Rojas wants promote the use of local fibre PAGES 42–46

COOPERATION Akihito Kataoka from Itochu speaks for diverse cooperation PAGES 32–33

CLOSE-UP OF A CUSTOMER Nouryon continues CP Kelco’s CMC business in Äänekoski PAGES 47–49

PASSIONATE ABOUT PLANTS AND SCIENCE, PAGES 42–46

PLANNING A NEW BIOPRODUCT MILL IN KEMI, PAGES 26–31

HOW IT WORKS Reducing transportation costs by opti- mising shipping PAGES 34–37

SUSTAINABLE SOLUTIONS The circular economy is an essential part of pulp production PAGES 50–53

CLOSE-UP OF A CUSTOMER Century Pulp and Paper wants to be the number one in India PAGES 38–40

VISION CEO Ismo Nousiainen: Aiming for excellence PAGES 54–57

HOW WE SERVE YOU Customers interested in digitalisation PAGES 41

REGIONAL FOCUS China is leading tissue markets in Asia PAGES 58–61

WELCOME

ENSURING BUSINESS CONTINUITY THROUGH COLLABORATION

Dear reader, the first Fibre magazine appeared in autumn 2019. At that time, nobody anticipated what 2020 would bring.

It has been a challenging time for us all – and we will certainly see new structural changes in the coming months. Demand for printing paper is falling, but the demand for hygiene products and packaging materials continues to increase. We are confident that there is still enormous potential in the production and processing of pulp. Pulp is becoming increasingly important as a raw material, and new business opportunities are worth seeking out. Together, we are part of value chains that will continue and develop. Now it is even more important to work together and ensure the continuity of business operations. We ensure that our mills run safely and that our supply chains can be trusted.

In this issue, we explain in more detail, the possibilities of pulp and its processing.

It is great to have you on-board on our shared journey!

ARI HARMAALA Senior Vice President, Sales and Customership

World of fibre

THE HIGHEST ECOVADIS SUSTAINABILITY RATING FOR METSÄ FIBRE Metsä Fibre has been awarded a Platinum level rating by EcoVadis for the company's corporate social responsibil- ity. The company was ranked especially high on environ- mental topics. “We are all proud to receive the highest level EcoVadis rating, and we will utilise the feedback as one tool to further improve our operations,” says CEO Ismo Nousiainen.

FEEDBACK IN A NEW WAY Metsä Fibre has been evaluating customer satisfaction with a survey for several years. The survey provides us detailed information on what is working well and where further development could be made. In 2020 we made changes to the survey questions and expanded the sample to cover our entire customer base. Our customers also have the chance to give an overall grade, as well as to freely comment on topics of their choosing. “Our work is based on listening to and understanding our customers. With the new model, responding to the survey is easier and quicker, and we have received feedback on more sub-areas,” says Harri Vertanen , VP, Sales in Asia. European customers are particularly satisfied with product quality, cooperation and reliability. Negative feedback was mainly related to the flexibility of delivery and payment terms. “Customers feel they can trust us, and that we keep our promises. In addition, the respondents hoped for lower pulp prices. From a sales perspective, we still need to improve our interaction with customers in relation to price discussions,” says Mikael Lagerblom , VP, Sales in Europe. The feedback from Asian customers was largely similar to previous years. Some criticism was aimed at individual issues, many of which have already been ad- dressed in daily operations. “As our strengths, the respondents mentioned the good quality of products and guaranteed delivery reliability. Our technical customer service also received positive feedback,” Vertanen says. Vertanen and Lagerblom were satisfied with the response rate of the survey. “The fact that a customer takes the trouble of responding to the survey is in itself a sign of respect for our collaboration. We are very happy to be considered an important and valued supplier,” says Lagerblom.

PRODUCTION STARTED AT DEMO PLANT The textile fibre demo plant in Äänekoski, Finland, has reached the stage where the first batch of product, wood- based textile fibre, has been produced. The plant is owned and operated by MI Demo, a joint venture of Metsä Group’s innovation company Metsä Spring and Japanese Itochu Corporation. “Reaching this stage is a sig- nificant milestone within the overall demonstration project. I am very proud of our team and all the partners involved for their professionalism,” says Niklas von Weymarn , CEO of Metsä Spring and Chair of the Board of MI Demo.

52%

Fibre Magazine has won an honourable mention for redesign in the prestigious Ozzie Award 2020. The concept of the magazine was renewed in 2019, and in connection with the redesigning, the magazine got a new name, Fibre. “This recognition was a pleasant surprise for us. We are proud of the success of our customer magazine, as we have worked hard to meet the needs of our pulp customers in this area,” says Eva Martin , VP, Marketing, Metsä Fibre.

Over a half of consumers would buy more products with sustainable packaging if products did not cost more than conventionally packaged ones, says McKinsey’s survey on US consumers, October 2020. Around 35 per cent would buy sustainably packaged products if they were more available in stores, for more products, and better labeled as ‘green’.

NEW FIBRE-BASED BIOPRODUCTS WITH ECOSYSTEM SUPPORT

NEW PACKAGING FOR SAMPLES Metsä Fibre’s pulp sample packaging has been updated to reflect the new, more unified Metsä brand. At the same time, we have made the packaging more environmentally friendly. The updated packaging was designed in col- laboration with Metsä Board, and it uses Metsä Pine, Metsä Birch and Metsä High Yield pulp as its raw material. “Our aim was to create a premium packaging experience with an especial- ly appealing and eye-catching package," says Eva Martin , VP, Marketing at Metsä Fibre. The design of the packaging is stylishly minimalist, and all parts of it are made of uncoated material, giving it a natural feel. In addition to the effects created through embossing, the silver Metsä logo created by hot foiling adds an attractive contrast. “We wanted to create sample packaging that showcases Nordic wood fibre in the best possible way and highlights the best qualities of folding boxboard and corrugated board,” says Ilkka Harju , Packaging Services Director at Metsä Board. The inner packaging of the box is made from micro-corrugated paper- board. The packaging is finished with an outside sleeve made from Metsä Board folding boxboard (MetsäBoard Natural FBB 325 g/m 2 ). Sustainability principles are behind the choice of materials for the recycla- ble packaging. The inner packaging is completely glue-free, with glue being used only on the sides of the sleeve part. There are two different types of packaging, one for pulp and the other for pulp sheets.

MILL OF THE FUTURE AWARD FORÄÄNEKOSKI Metsä Fibre’s bioproduct mill in Äänekoski has won the Mill of the Future Award at the 2020 Pulp & Paper Industry (PPI) Awards. The mill was evaluated based on the implementation of modern and innovative solu- tions that improve efficiency, production and environmental performance. The jury were pleased with the mill’s solu- tions for material, energy and environmental efficiency, and its bioproduct concept. “We are grateful to have received this award. Äänekoski mill is an example of the large- scale implementation of the bioproduct concept. It reflects our operating method based on continuous improvement, and our leadership in the sustainable bioeconomy,” says CEO Ismo Nousiainen .

Metsä Fibre is participating in the ExpandFibre programme, which aims to develop technologies and business concepts around new bioproducts. The four-year programme initiated by Metsä Group and a Finnish energy company Fortum focuses on utilising pulp fibre made from wood and straw. According to Anna Suurnäkki , VP, Research at Metsä Fibre, the programme represents a new form of cooperation and network building. “We want to create a new buzz about the programme’s focal areas. The aim is to strengthen the ecosystem around this topic to ensure it can create added value in the form of new busi- nesses, products and further research,” Suurnäkki says. All the value chains relevant to the programme are based on new and sustainable raw materials – straw and Nordic wood. The common goals of Metsä Group and Fortum, which serve as ExpandFibre’s leading companies, include developing the textile value chain and biocomposite products. “Developing a new fibre-based bioproduct is one of Metsä Fibre’s long-term goals. This is what we will engage in with our research and business partners during the programme.” Of the other Metsä Group companies, Metsä Board has assumed the role of a leading company for packaging materi- als, while Metsä Spring focuses on developing the use of textile fibres. The EUR 50 million programme is a public-private partnership, part of which is funded by a public sector party. Business Finland has granted the programme EUR 20 million in funding in its challenge competition for leading companies. www.expandfibre.com

RESEARCH ON BIOCOMPOSITE USAGE Metsä Fibre and a German independent research company, nova-Institut, have conducted a market research about trends regarding cellulose pulp fibres in biocomposites. According to research, the total business volume of natural fibre-based composites was approximately 140,000 tonnes in 2019. All kind of recycled fibres, cellulose fibres and visible wood fibres have increased in composites the most during the last three years. The main areas for expected increase in the next few years are in packaging (boxes, transport pallets, reusable items), electronics (casings, other large parts) and consumer goods.

DEVELOPING A NEW WOOD-BASED PRODUCT

Metsä Group’s innovation company, Metsä Spring, aims to develop a new wood-based product and an entirely new kind of production method in coop- eration with a Finnish company, Valmet, which is a global developer and supplier of process technol- ogies, automation and services for the pulp, paper and energy industries. “Our goal is to develop a product which replaces plastic with fibre-based solutions. It involves 3D products, such as food packages that reduce food waste and are safe, recyclable, and biodegradable,” says Jarkko Tuominen , Metsä Spring’s Project Lead. Regarding the development work, Metsä Spring and Valmet are building a new demo plant in Ääne- koski, Finland, and its operations are planned to begin in late 2021.

READ MORE ABOUT SUSTAINABLE FORESTRY

Growing the seedlings of coniferous trees into proper log wood requires long-term work. At the Finnish Sipari estate, the forest management measures for different stands are planned in cooperation together with a Metsä Group specialists. The forest work itself is also carried out with the help of a partner. GOOD CARE GUARANTEES FOREST GROWTH

SANNA LAAKKONEN, photos KATRI LEHTOLA

Forest owners Hanna-Maija Anttila and Timo Vehmas run a family estate called Sipari in rural Forssa, Southern Finland. The estate provides year-round employment to its owners, given that it is consists of not only a hundred hectares of forest, but nearly 200 hectares of fields and a piggery. The fields are used for the cultivation of barley, oat and wheat, with a few hectares set aside for growing hay for the pigs. The forest represents the source of both income and recreation for the couple. That is why they want it to be managed as well as possible. Due to all the other farm work, the owners do not have the time to take care of all the forest work themselves, which is why they buy some of the work in the form of services. “Although forest work can be enjoyable, we feel fortu- nate that we do not have to have the time and skills to do everything by ourselves. It is great to be able to turn to the specialists for advice and guidance,” says Anttila. In this estate, too, forest management has changed quite a lot over the years. “When my grandfather was alive, you could not touch the forest at all. You fetched wood when you needed it for the household, but otherwise you did not harvest a single trunk. And at the time my grandfather was far from being alone in that line of thinking.” Now the estate’s forests are no longer untouched. How- ever, the measures carried out there are always planned with a long-term perspective. A well-managed forest is not only a pleasure to behold, but a source of income, even for future generations.

“From an economic point of view, it would be ideal to own a lot of forest of varying ages. What happens in prac- tice, though, is that when we harvest old trees, our children will be cultivating the seedlings we plant to replace those old trees. But if we did not regenerate the forests at all, at some point their growth would peter out and eventually stop altogether,” says Anttila. A FOREST PLAN LOOKS IN TO THE FUTURE There is plenty to do in all seasons. Thinning, for example, is performed almost year-round, depending on when var- ious sections of the forest are ready for harvesting. “One of the factors that impacts the harvesting time is weather. In terms of harvesting, a dry summer is better than a frost-free, mild winter,” says Tauno Tuuppa , a For- est Specialist at Metsä Group. Like in most other forest estates, the focus at the Sipari estate in the spring is on planting the seedlings. Given that the planting work often coincides with spring sowing in the fields, outside help is a must. “Traditionally, most of the seedlings of coniferous trees are planted in the spring or early summer. But you can plant seedlings starting from the frost melting all the way to the autumn, as long as you account for the soil, tree spe- cies and the seedlings’ cultivation method,” says Tuuppa.

Anttila and Vehmas are customers of Metsä Group’s for- est asset management service. They have been provided with an estate-specific forest plan that views forest man- agement from a long-term perspective. In the plan, the forests are divided into stands according to the development stages and growth locations of the trees as well as future management and harvesting needs. The plan also displays valuable habitats on the estate, such as herb-rich forests and sunlit slopes, or any other areas different from the surrounding forest. “Before, a forestry plan was valid for ten years at a time. Nowadays, a plan in digital format in the Metsäverkko service is good for up to 20 years,” says Tuuppa. Monitoring and updating the plan is included in the service and taken care of by the forest specialist. In addi- tion, the forest specialist updates changes to the stands and any suggestions for further measures. Many management activities and harvesting carried out by Metsä Group are updated into the plan automatically. PRACTICAL PLANNING TAKES PLACE IN THE FOREST The annual plan is a tool with a shorter range than a forest plan. It includes entries on the stands that are next up for harvesting or management measures. The required meas- ures are specified for one year ahead.

“It is great to be able to turn to the specialists for advice and guidance.” Hanna-Maija Anttila, forest owner

“We plan the management measures with a forest specialist during walks in the forest. A visit to the forest gives you the best idea of what needs to be done and when.” Timo Vehmas, forest owner

Thinning carried out at the right time serves to ensure that the trees have enough space to grow.

Tauno Tuuppa, Timo Vehmas ja Hanna-Maija Anttila taking a walk through the forest of the Sipari estate.

Before seedlings grow into sturdy log wood that provides a source of income for their owners, their habitat needs to be tended quite a few times.

“In practice, it is pretty much about following the forest plan on an annual level. When you get things done on time, you will not be left with a backlog of management and thinning work. At the same time, we are ensuring as good a profit as possible for the forest owner,” says Tuuppa. The annual planning is based on walking through the forest with the forest specialist twice a year. “During the walk, we can view the forest plan in the Metsäverkko service with a tablet or phone. We plan harvesting, preliminary clearing, the tending of seedling stands and planting. Being there, on location, gives you the best idea of what needs to be done,” says Vehmas. In the spring, you should at least map out the seedling stands that need to be managed in the summer. The best time for this is the middle of summer, because that is when the broadleaved trees put out the least amount of shoots. This means that the stumps of felled trees put out less shoots to compete with the seedlings. An early clearing is the first clearing to be carried out in a seedling stand. Depending on the soil, it is carried out roughly 4–8 years after the seedlings have been planted. It is important to carry out the clearing on time, to ensure that the seedlings get enough light and room to grow prop- erly. This is when the seedling stand will be cleared of any broadleaved trees disrupting its growth. When necessary, dead seedlings are replaced with new ones. “Many forest owners are happy to carry out the prelimi- nary clearing themselves, provided that they have enough time. It is a fairly simple and straight-forward job that also serves as good exercise,” adds Tuuppa. TENDING SEEDLING STANDS IMPACTS FUTURE PROFITS Before seedlings grow into sturdy log wood that provides a source of income to their owners, their habitat needs to be tended quite a few times. The second clearing, or thinning, of a seedling stand is carried out 10–20 years after the planting. The purpose is to improve the quality of the cultivated stands. This hap- pens by removing any poor seedlings and any broadleaved trees competing with the seedlings for growing space.

“It is important to time the thinning correctly. If the broadleaved trees grow too big, they will hamper the growth of the coniferous trees. This, in turn, will have a direct im- pact on the forest owner’s future profits, in both the initial thinning and the subsequent harvesting. A well-managed seedling stand also grows more quickly,” says Tuuppa. Depending on site and the tree species, the initial thin- ning takes place 25–40 years after the planting. It needs to be done before the tree tops have a chance to contract as a result of the competition. Initial thinning ensures that the trees grow into proper log wood. Depending on the growth location, tree species and the forest owner’s goals, another thinning or two will also be carried out between the initial thinning and the regen- eration of the entire stand. The first one of these is often carried out some 15–25 years after the initial thinning. “The correct time for this should be estimated with a specialist. It depends on both previous management meas- ures and the forest owner’s financial goals,” says Tuuppa.

Forest management aims to ensure that around 10 per cent of the trees in any stand are broadleaved trees. Mixed forests – forests with several species of trees – are more sustainable and biodiverse than forests consisting of a sin- gle species of tree. They are also less susceptible to forest damage, such as storm, snow, wind or insect damage. A CLEARING SAW FITS A FOREST OWNER’S HAND The field work at Sipari keeps the estate’s owners busy from spring to October. After this, they are set to take their second walk through the forest with Tauno Tuuppa. In the autumn, the focus lies on planning the harvesting and the measures related to it. “After the fieldwork is over in October or November, we also carry out the preliminary clearing,” says Anttila. Preliminary clearing is a stage of work preceding harvest- ing during which you remove any undergrowth – in other words, trees that are too small to be sold or that obstruct visibility during harvesting and impede soil preparation.

METSÄLIITTO COOPERATIVE

Metsäliitto Cooperative is Metsä Group’s parent company, which can be joined by private individual or organisations holding at least three hectares of forest in Finland. 3 Metsäliitto Cooperative has some 100,000 members. 100 ,000 ha

0 EUR

There is no separate entrance fee, nor an annual membership fee. cooperative’s participation shares. Interest is paid on the capital invested. In 2019, the interest on owner-members’ capital was 6.5 per cent. 6.5 Members invest EUR 12.50– 65.00 per forest hectare in the %

“A clearing saw is a forest owner’s most important tool. Preliminary clearing is a perfect example of something you can do on your own,” says Tuuppa. The time for winter harvesting is at hand when the ground freezes. Some of the forests on the Sipari estate are located behind the fields. The work must be planned with one eye on weather forecasts. The fields must be frozen to carry the weight of the harvesters. The correct timing is carefully thought out with the spe- cialist. The time for regenerating an entire stand comes when the trees no longer grow. What is referred to as a regeneration harvesting is usually carried out in the form of clear cutting, during which nearly all trees in the stand are harvested. To safeguard biodiversity, the retention trees required for the forest certification are left in the stand. Following the regeneration harvesting, the soil is pre- pared for new seedlings and the foundation for a new forest is created. If the planting is carried out in the spring, the soil preparation usually takes place in the preceding autumn. Thanks to the preparation, the growth of the seedlings can get off to a fast start. In late autumn and in the winter, when there is less farm work to do, Anttila and Vehmas not only have the time to chop wood for their own heating needs, but also to enjoy their forest as a source of relaxation. “We take walks with our dogs, follow the tracks left in the snow by wild animals, and enjoy nature. The air in the forest is warmer and good to breathe,” says Vehmas. “When you look at a well-managed forest, what you see is not more work to be done or an income source, but the great nature and scenery,” adds Anttila. •

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Owner-members are provided with a designated forest specialist from the municipality in which their forest is located. The forest specialist can be requested to visit the estate free of charge.

When a stand is regenerated, the retention trees required for forest certification are left in the harvested area to ensure biodiversity.

Owner-members are entitled to a bonus paid in addition to the price of their wood trade when they have sold a minimum of 500 cubic metres of wood to the cooper- ative for four consecutive years. 500 m 3

Tauno Tuuppa Metsä Group’s forest specialist who has worked with the Sipari estate since the spring of 2020.

Environmental concerns, demographic changes, and evolving technology are the key megatrends of the 21st century. Their impact is also visible in Metsä Fibre’s strategy and day-to-day operations, as solutions for many of the world’s problems are to be found in wood or fibre-based products. MEGATRENDS ENCOURAGE THE USE OF PULP

In addition to megatrends like these, the COVID-19 pandemic has also resulted in a boost in the demand for pulp-based products, accelerating the sales of hygiene products all around the world. EVER MORE RAPID DIGITALISATION When it comes to technology trends, digitalisation is at the forefront, with developments coming at a rapid pace even before the COVID-19 crisis. The global pandemic has only emphasised this trend further, explains Metsä Fibre’s Senior Vice President for Business Development, Kaija Pehu-Lehtonen. “We have seen the switch to operating online taking place throughout society. Even consumers who prefer traditional stores have learnt to order products via the internet. As more and more products are being ordered online, the need for packaging materials is growing.” At the same time, demand for printing paper has fallen. “This downward trend has only intensified, and I cannot see the demand for printing paper ever returning to pre- vious levels,” says Pehu-Lehtonen. Digitalisation brings with it vast quantities of data that companies can use in their own operations. Pehu-Lehto- nen believes that aggregating data from different sources

is one particular area in which new business opportunities are opening up. “We can use data in production and maintenance, but we can also utilise it in our work with customers and in sales. Combining open climate and soil data helps us assess in detail when we should harvest the forests.” Artificial intelligence and automation are already used in pulp production, and soon they will be more widely used in sawn timber production. “At the Rauma sawmill, data coming from the various processes is combined with product data, making it ea- sier to ensure consistent quality. Customers also benefit from having even more detailed information about their products.” Pehu-Lehtonen believes that the manufacturing of sawn timber, various fibre products, and other new bioproducts will become increasingly common in future industrial ecosystems. “The aim is to make full and complete use of incoming materials in applications that provide maximum added value – but we cannot do it all by ourselves. To succeed, we need great partners who can convert our various side streams and pulp fibres into new value chains. This bene- fits every part of the ecosystem.” •

MARKKU RIMPILÄINEN, photo SHUTTERSTOCK

In terms of environmental issues, climate change is clearly the biggest challenge. Other factors, such as resource shor- tages, the circular economy, and increasing environmental awareness among the publics also mean that companies need to find new ways of thinking and new operating methods. “We source our raw materials from forests that grow more quickly than they are used. This helps us ensure that we have living forests with good vitality and that they can continue to absorb carbon,” emphasises Metsä Fibre’s CEO Ismo Nousiainen . Switching away from fossil fuels as quickly as possible is also an important element of combatting climate change. “We are aiming for 100 per cent fossil free production by 2030,” explains Nousiainen. The Äänekoski bioproduct mill is already entirely fossil free, and both the new sawmill being built in Rauma and the new bioproduct mill planned for Kemi will follow its lead. At the Joutseno pulp mill, biofuel will replace fuel oil. At the sawmills fossil fuels will be phased out in favour of biofuels. The third link in Metsä Fibre’s climate chain is the com- pany’s products themselves: sawn timber and pulp. They also represent climate-friendly solutions to the demands of the circular economy and scarcity of raw materials. Metsä Fibre’s products are used as raw materials in pro- duction chains and will eventually form consumer pro- ducts. “Consumers are becoming more and more environmen- tally conscious. We want to help our customers ensure that their production chains meet sustainable development objectives.” Pulp is also the basis for a brand new fibre-based business opportunity, as Nousiainen explains:

“We are already developing a textile fibre that could replace synthetic fibres in the textile industry. We are also exploring the potential for 3D fibre products made entirely from processed pulp fibre, which could be used in packa- ging solutions, for example.” DEMOGRAPHIC CHANGES FOSTERING NEW DEMAND Demand for sawn timber and pulp-based products is gro- wing in both low- and high-GDP countries, although for different reasons. Population growth is leading to increased construction in developing countries, in particular in rapidly growing major cities where populations are concentrated. “When it comes to construction, wood is the natural ma- terial of choice. Even construction using concrete requires wood,” explains Ari Harmaala , Metsä Fibre’s Senior Vice President for Sales and Customership. In developing countries, demand for products made from pulp is growing along with economic growth. As people’s standard of living improves, they use more paper, hygiene products and packaging materials. “Rising living standards are evidenced in particular by a heightened understanding of the significance of hygiene. As consumers become more affluent, the amount of pac- kaging that comes with their food also increases, and new demand for paperboard arises,” states Harmaala. In developed countries, the growth in demand for pulp and sawn timber can be explained primarily by environ- mental factors and the growth of e-commerce. “Wood is becoming widely used in construction, as sawn timber absorbs carbon throughout its entire life- cycle. Paperboard is being used in packaging to replace carbon-based plastics.”

Urbanisation has increased the demand for pulp products and sawn timber.

Specialty Paper and Paperboard Market Development 2015–2021

STEADY GROWTH IN THE SPECIALTY PAPER MARKET

MILLION TONNES

YEARLY GROWTH, %

MARKET VOLUME MARKET GROWTH

As demand for traditional paper grades declines, the significance of the specialty paper market is growing. Fibre-based products are increasingly replacing plastic, and raw material producers are being confronted by new development challenges.

HEIDI HAMMARSTEN

2015

2016

2017

2018

2019

2020

2021

What do paper straws, protective masks and an online store’s mailing label have in common? They are all spe- cialty paper products, and demand for them is growing. These examples also demonstrate the wide range specialty papers cover. While there is no single correct way to examine the spe- cialty paper market, Alexander Watson Associates (AWA), a consulting firm monitoring the industry, identifies 11 market segments and over 100 paper grade categories within it. In 2019, the size of the specialty paper market moni- tored by AWA was roughly 29 million tonnes, equivalent to approximately six per cent of the world’s paper and paperboard production. In terms of value, though, the significance of specialty papers is greater. “The figures we follow in some market segments include some non-specialty paper products as well,” says Corey M. Reardon , President and CEO of AWA. Specialty papers are produced according to each custom- er’s requirements. Nor is it unprecedented for a product that entered the markets as a specialty paper to gradually become a basic paper. This is what happened to copy pa- per, for example. “For Metsä Fibre, specialty paper producers represent an important customer segment whose needs also drive product development. A specialty paper often sets distinct

demands for the fibre raw material,” says Metsä Fibre’s De- velopment Manager Emilia Vänskä . “The quality of our softwood fibre is suitable for the production of materials with high added value. Specialty paper customers are very specific about the kinds of fibre they want. One customer may appreciate pulp with a high degree of brightness and purity, while another puts the priority on it being easy to refine the fibres and to achieve paper density rapidly.” WHAT WILL HAPPEN TO THE FORECASTED GROWTH? Whereas demand for printing papers has declined slightly over the past decade, the market for specialty papers has grown steadily. According to AWA’s report, the growth in recent years has been approximately 2.3 per cent a year. Before the COVID-19 crisis, AWA forecast that the markets would continue to grow at a rate of 2.6 per cent a year until 2021. “COVID-19 has really disrupted the entire paper industry, and its impact may last for several years. In the long-term, however, it will not affect the trends shaping the specialty paper industry. Once the pandemic has receded, and the global economy has recovered, I believe the specialty paper market will also get back on track,” says Reardon. Packaging and labelling form the largest segment of the specialty paper markets, covering 40 per cent of them.

Specialty paper and paperboard market forecast 2018–2021

COMPOUND ANNUAL GROWTH RATE 2018–2021 BY MAIN MARKET SEGMENT

PACKAGING & LABELLING

BUILDING & CONSTRUCTION

FOOD SERVICE

BUSINESS & COMMUNICATION

INDUSTRIAL

PRINTING & PUBLISHING

CONSUMER

FILTER

MEDICAL

ELECTRICAL

SECURITY

0.0%

0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

THE MARKET SEGMENTS ABOVE ARE IN MARKET VOLUME ORDER WHERE THE LARGEST SEGMENT IS ON THE TOP

Relative value and growth potential for each of the market segments

Regional shares of specialty paper and paperboard production 2018

NORTH AMERICA CENTRAL/SOUTH AMERICA AFRICA/ MIDDLE EAST ASIA EUROPE

34%

36%

SECURITY

FILTER

25%

MEDICAL

ELECTRICAL

CONSUMER

INDUSTRIAL

FOOD SERVICE

PRINTING & PUBLISHING

BUSINESS & COMMUNICATION

BUILDING & CONSTRUCTION

PACKAGING AND LABELLING

RELATIVE MARKET GROWTH

Specialty papers related to building and construction ac- count for 18 per cent, and those related to food services for 10 per cent of the market. Before the COVID-19 pandemic, AWA forecast the fastest growth to be in packaging and labelling materials. The food services segment was also expected to grow more quickly than average. Of the major specialty paper seg- ments, the one hit hardest by the impact of the COVID-19 is the papers used by the construction industry, given how closely that industry follows general economic growth. “Of course, governments may now invest in infrastruc- ture construction to an increasing degree in the interest of stimulating the economy in the wake of the COVID-19 pandemic, and this may bring a slight boost to the demand for construction papers,” Reardon explains. What the COVID-19 has positively impacted is the spe- cialty papers of the healthcare sector, such as the filter papers used in protective masks. On the other hand, this is a peak that Reardon does not expect to be long-lived. The restaurant takeaway food boom resulting from the pandemic may instead have a longer lasting effect on food service industry packaging. The food packaging segment is also doing well due to environmental reasons, as the search for more environmentally friendly solutions than disposable plastic continues.

ecological direction given that part of the plastic packaging can be replaced by renewable fibres,” says Vänskä.

“European companies operate more globally than their North American competitors,” says Reardon. The price level of specialty papers is often higher than that of high volume papers, and there is a wide price range. Reardon says that the price is largely influenced by three factors – the price of pulp, production capacity and the product’s technological demands. The price of softwood pulp has come down consider- ably since 2018, when demand for it peaked but, before the COVID-19, it was showing small indications of a rise. Reardon adds that the competition between producers is tougher in Europe than in North America. Technological development, on the other hand, results in products with increasingly high added value. “Their combined effect translates into a relatively steady price development in specialty papers.” According to Reardon, Asia was and will continue to be the growth engine for specialty papers. This applies to the time both before and after the COVID-19. But rather than a unified market, Asia is a combination of a number of areas in different situations. Yet local differences in specialty paper markets are levelling off. “The markets in Asia are still growing faster than the mature markets of Europe and North America, but the growth rate is slowing. New technologies are also being

DRIVEN BY THE ENVIRONMENT AND TECHNOLOGY What are the significant trends in the specialty paper market, then, which will remain unchanged despite the CODID-19 crisis? Reardon says that they are the growth in environmental awareness and technological development. “E-commerce, takeaway food and fast food are grow- ing trends that are increasing demand for packaging and wrappers. For environmental reasons, these are increas- ingly made from paper-based materials instead of plastic. Technological developments facilitate the replacement of plastic, films and plastic coating in these products,” adds Reardon. A recent example of the impact of environmental aware- ness is the EU directive (Single-Use Plastics Directive, EU 2019/90) banning single-use plastics such as plastic straws. Advancing technology may see the production of new kinds of filler or coating for specialty papers. Another con- tinuing trend is the lightening of materials, which enables the required properties to be met while saving on costs. Vänskä points out that technological development is also leading to a discussion of the boundary between plastic and paper packaging. “Many paperboard grades can already replace plastic packaging for example. Some paperboard grades still need to be laminated with plastic, but even that is a step in a more

PRODUCERS ARE CONSOLIDATING According to AWA, specialty papers are produced by some 300 manufacturers around the world. This group includes global forest industry companies with a wide product portfolio, but the specialty paper market has traditionally been dominated by small, local companies. “Specialty paper grades number in the hundreds, the volumes are smaller than for traditional grades, and the papers are often made with small paper machines. We are talking about ‘swing’ machines, which usually make more than one paper grade,” Metsä Fibre’s Vänskä explains . More than half of specialty paper companies make prod- ucts for one to four market segments, and very few operate in more than one or two geographical areas. Exporting is profitable only in respect of products with high added value. The situation is nevertheless about to change, says AWA’s report. As the market for basic papers contracts, an in- creasing number of major operators are becoming inter- ested in specialty papers. This means that big players are buying out smaller ones or converting their machines for the production of specialty papers.

“A growing environmental awareness is also creating pressure to give more consideration to the recyclability of specialty papers.”

Main specialty paper markets by share 2018

adopted in Asian markets. Environmental awareness might still be slightly stronger in Europe and North Amer- ica,” says Reardon. SPECIALTY PULP ON THE RISE For the producers of raw materials such as pulp, specialty papers offer a promising outlook. Reardon highlights es- pecially specialty pulps such as micro fibrillated cellulose, which is needed when specialty papers need to be given a barrier for liquids that does not include plastic. Most specialty papers require fresh fibre; recycled ma- terials can be used in sack papers, for instance. Vänskä says that growing environmental awareness is also creating pressure to give more consideration to the recyclability of specialty papers. “Sustainability is also having a strong impact on the field of product development,” Vänskä says. Metsä Fibre’s vision is to be the most preferred and prof- itable producer of products made of Nordicwood and a forerunner in the creation of sustainable growth. “We have first-rate technical expertise at Metsä Fibre and therefore the ability to support our specialty paper cus- tomers in their businesses on a global scale. We also want to provide our customers with new innovative fibre-based products and solutions in the future.” •

41%

10%

18%

PACKAGING AND LABELLING BUILDING AND CONSTRUCTION FOOD SERVICE BUSINESS AND COMMUNICATION INDUSTRIAL PRINTING AND PUBLISHING CONSUMER FILTER MEDICAL ELECTRICAL SECURITY

Emilia Vänskä Development Manager of Metsä Fibre’s R&D team in the centre of excellence for business operations develop- ment. The team mainly focuses on long-term research and development projects.

How green is your tyre? Crude Sulphate Turpentine (CST) is presently used in fragrances, adhesives, chewing gum – and yes, even in car tyres. Industry leader DRT believes that is just the tip of the iceberg.

SAMI ANTEROINEN, photo VESA TYNI

The Finnish forest industry prides itself on its “Green Gold”, but the treasures of timber go well beyond the average wood products. Metsä Fibre, for instance, is one of the world’s leading producers of pine-based bio- chemicals, such as Crude Sulphate Turpentine (CST), to be used in a wide range of applications and industries. Metsä CST is a compound which in its numerous fur- ther processing states can be found as aroma chemicals in fragrances and cosmetics as well as in industrial and household cleaners. One of the companies that has come to depend on Metsä Fibre’s CST-related expertise is DRT, a world leader in plant chemistry. DRT – part of the Firmenich Group – is the world’s number one operator in CST distillation. DRT’s forte lies in recovering and purifying alpha and beta pines present in CST – and then carrying out chem- ical transformations to address several markets ranging from fragrances to chewing gum. Rob du Chatenier , Marketing Manager for DRT, says that hygiene products and packaging are the biggest market segments from the perspective of CST. “The sustainability angle is more and more important to consumers and companies alike, and instead of oil-based products, the focus is turning to greener products,” he says. TYRE WITH A GREEN TWIST? An almost futuristic example of this is the automobile. With the advent of electrical cars, the attention is turn- ing to any and all features of the vehicle. Tyre performance requirements will change, and CST- based derivatives could enhance performance. Com- bined with the sustainability angle, this is an attractive value proposition, providing we can do it cost-effectively. Eric Moussu , Commercial Director at DRT, says that the sustainable vision of electric cars using green tyres is closer than we might think.

“The global tyre market is huge and there is an enormous amount of innovation present in the automotive industry.” Moussu acknowledges that the tyre market has its share of challenges: it is rather complex and very tightly regu- lated – as it needs to be, since it concerns people’s safety. Then there is the pipeline dilemma: developing a CST tyre takes 18–24 months, so time to market is far from instantaneous. And once fitted to cars, the tyres will be used, on average, for 5–9 years. “The tyre manufacturers need suppliers like DRT who can guarantee the quality and volume of the raw ma- terial in the long run. Therefore, security of supply is extremely important,” Moussu says. This implies that DRT need CST suppliers who can offer the same. Naturally, also stability and high product quality– as well as predictable pricing – are also required. From the perspective of the DRT and Metsä Fibre part- nership, tyres containing CST derivatives are one key area for future development. Both parties understand that over-night success is not on the cards in the tyre busi- ness, but with long-term effort it is possible to achieve great things. “Through proper commitment from the two compa- nies, CST as a raw material for the tyre market may prove to be very beneficial for both,” says du Chatenier. BOOSTING PARTNERSHIP Laurent Villain , Purchasing Director for DRT, and Guillaume Lamarque , Strategic Raw Materials Pur- chasing Manager, say that the company has collaborated with Metsä Fibre for well over a decade – and is now in the process of strengthening that partnership. “In order to sustain our growth plan for the next com- ing years, DRT is providing a global technical support service for our strategic suppliers such as Metsä Fibre.”

“The tyre manufacturers need CST suppliers who can guarantee the quality and volume of the raw material.”

This technical partnership involves, among other things, putting together technical teams featuring ex- perts from both sides. “This way, the pulp mills can have better control of the safety and environmental issues as CST recovery yields and qualities are improved,” Villain says. PERFECTING THE PROCESS Emmanuel Cazeils from DRT Technical Support explains that the collaboration with Metsä Fibre’s Äänekoski and Rauma pulp mills is aimed at making operations more ef- fective – as well as delivering a safer, sustainable process. “We started collaboration first at Äänekoski in May 2019, with the objective of significantly reducing the CST sulphur content, and, consequently, boosting safety,” he says. Deploying DMAIC (Lean /Six Sigma) methodology, alongside various technical measures, resulted in a 50 per cent reduction of the sulphur content within 3–6 months. “This process is now under control and stable,” says Cazeils. Similar collaboration has recently been launched at Rauma pulp mill, as well, with the double goal of im- proving both CST qualities and recovery yields. “We are reducing sulphur there, too, and looking to increasing volumes considerably.” SHOULDER THE RESPONSIBILITY Another cornerstone for DRT and Metsä Fibre coopera- tion is Corporate Social Responsibility (CSR). Christo- phe Marsan , CSR Managing Director, is convinced that responsible and ethical practices create added value in the long term. DRT wants to differentiate itself from its competitors by offering plant-based – and therefore renewable – prod- ucts to its customers, so that they can make their own environmental transition. “Furthermore, with Firmenich Group we have set a target of reducing CO2 Scope 1 & 2 emissions by 55 per

cent by 2030 compared with 2015. This is an important goal for us and our customers,” Marsan adds. DRT wants to involve all the partners in its value chain in a continuous process to reduce its environmental im- pact. Metsä Fibre is an important partner in this work, being a true industry forerunner in environmental per- formance with impressive results. For example, during the last decade Metsä Fibre has succeeded in halving its CO2 emissions per tonne pro- duced and has set itself an objective of running 100 per cent fossil free mills by 2030. “Metsä Fibre and DRT share the same commitment and mindset. We demonstrate on a daily basis that it is entirely possible to combine economic realities and environmental challenges,” Marsan says. EYE ON SUPPLIERS An important part of this collaborative effort is building certified evidence and indicators to monitor the compa- nies’ shared commitment to sustainable development. One tool for this is the EcoVadis supplier rating – and Metsä Fibre is a forerunner in this field, having been awarded a Platinum level CSR rating by EcoVadis. Firmenich Group has a Platinum CSR rating as well. “We began performing EcoVadis supplier ratings in early 2019, starting with our strategic suppliers,” ex- plains Marsan. Due to the COVID-19 pandemic, the issues relating to accountability and transparency are becoming more and more important, and big brands are very mindful of their suppliers. From the perspective of DRT customers, it is note- worthy that Metsä Fibre is a strong player in the field of sustainable forest management, presenting PEFC or FSC certificates for any and all purchases. “Green approach is very important for our premium customers,” Marsan concludes. •

DRT A French producer of ingredients derived from plant-based chemistry. With a global presence, DRT earns 80 per cent of its turnover from international business. www.drt.fr

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