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
1%
BUSINESS & COMMUNICATION
4%
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.
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