SCA to build a new paper machine for the production of kraftliner at its Obbola paper mill in Umeå. The annual production in Obbola will increase from the current 450,000 tonnes of kraftliner to 725,000 tonnes to meet the growing demand for renewable packaging. The investment amount is SEK 7.5 billion.
SCA produces kraftliner – paper for transport packaging – at the paper mills in Obbola (Umeå) and Munksund (Piteå). SCA has today decided to invest to increase kraftliner capacity to 725,000 tonnes of kraftliner per year, an increase of 275,000 tonnes. The new paper machine will start operation in the first quarter of 2023.
The total investment amounts to SEK 7.5 billion over a five-year period. The investment replaces necessary reinvestments in Obbola of approximately SEK 2.5 billion. The investment will be mainly financed by operating cash flow, complemented by regular group financing acitivities.
In addition to the Obbola paper mill, SCA also produces kraftliner at Munksund paper mill in Piteå. Over the past twelve months SCA’s kraftliner operations had an EBITDA margin of 35%. With a kraftliner trend price of EUR 600 per tonne, the investment is expected to generate an annual EBITDA improvement of approximately SEK 800-1,000 million after full ramp-up.
A profitable investment
Demand for paper based packaging is growing. This trend is being driven by a number of factors – increased e-commerce, a growing population and the ambition to reduce the use of plastic.
“This is a profitable investment in a growing segment,” says CEO Ulf Larsson. “We expect the investment to be profitable already during the first year of operation and to contribute positively to the return on capital from our industrial operations.”
“With the investment in Obbola we can meet the increased demand for sustainable packaging,” says Mats Nordlander, President, Paper. “We have access to high-quality wood fiber from Norrland. We have efficient and reliable supply of wood and logistic operations. As a result of this investment in the markets’s most advanced kraftliner machine with the best available technology, we will considerably improve the mill’s competitiveness, cost position and product quality.”
Full production during construction
The new paper machine is being constructed in a new building in line with the current paper machine. As a result the plant will be in full production during the entire construction period before switching over from the old machine to the new one ahead of the start up in 2023. The new plant’s ramp-up to full capacity is expected to take three years.
The total investment amount of SEK 7.5 billion includes investments in environmental improvements of approximately SEK 1 billion, including a reduction in the need for oil by 8,000 cubic meters per year and improvements in the water treatment capacity. Following the investment, SCA’s own industrial processes will be 97 per cent fossil-free.