Competitive environment

Best growth potential in wood fibre based packaging 

M-real produces both paperboard and paper as well as pulp which is mainly used as raw material in own production. The main grades of M-real are folding boxboard (FBB), uncoated fine paper (WFU) and speciality papers. M-real is the largest folding boxboard producer in Europe with in excess of 30% of the capacity and the fifth largest uncoated fine paper producer with about 9% of the capacity. Additionally, M-real is the largest white-top kraftliner and wallpaper base producer in Europe.
 
The demand growth slow down in North America and in the main European markets as well as the production capacity increases clearly exceeding the demand in Asia have augmented the overcapacity in European paper industry. After the turn of the millennium, the profitability of the industry has significantly weakened, mainly due to the decline in paper prices and the heavy cost inflation. Since 2006, significant capacity reductions have been implemented in Europe. Capacity closures are presumed to continue during the next few years.
 
The market balance in Europe for primary fibre board is better compared with the paper grades. The demand for primary fibre board has continued to grow and the industry has not over-invested in new capacity. In addition, during the past few years, some of the weak capacity has been closed. The global competitive position of the European primary fibre board producers is better than that of the paper producers. However, the severe cost inflation has also put pressure on Europe’s primary fibre board producers. The implemented capacity closures and the industry’s structural changes so far provide a sounder basis for operations also during a possible economic downturn.
 
Companies in the industry continue to focus and specialise on certain grades where they intend to improve their market positions. In all main paper and board grades, there is a clear need for price increases to cover the cost inflation experienced during the past few years. Thus, the required basis for new innovations is created which, also in longer term, will improve the competitive edge of the products.
 
Through print media and fibre packaging, new growth paths can be discovered. Environmental aspects play an increasingly important role in consumer decision-making. The industry will have a clear advantage in the future as the main raw material is fully renewable, the majority of the energy the industry consumes is produced by the industry itself, and the products can be recycled several times before being utilised as energy at the end of their life cycle. The best potential to expanding to new end uses appears to be in the fibre packaging business.