M-real plans folding boxboard capacity increase on booming packaging demand

By Rory Harrington

- Last updated on GMT

Related tags: Paper, Ton, Finland, Germany

M-real has unveiled plans to invest €26m in boosting its folding boxboard capacity at one of its plants in Finland on historically high demand for the material from the food packaging sector.

It also revealed proposals to close speciality paper production at the same site because of overcapacity in the market and shift production to Germany. The move would save the company millions of Euros annually but would see scores of job cuts. Finnish law means the firm must consult with its workers before going aherad with the move.

Historically high demand

The Finnish company announced its scheme to increase annual capacity for folding boxboard at its Simpele plant by 36 per cent from 220,000 tons to 300,000 tonnes. The project, which will also see sheeting capacity expanded, is expected to be carried out during summer 2011.

“Demand for folding boxboard has been extremely strong throughout the year, with our order books at historical highs,”​ Juha Laine, vice president of investor relations and communications told FoodProductionDaily.com. “Demand has been especially high from the food packaging sector across Europe and that is why we are increasing capacity. We want to do this in a moderate way -so as not to disrupt the market but to offer more supply.”

Folding boxboard is widely utilised for confectionery, ice-cream, cereal and tea products – thanks to the high-quality virgin fibre used in its manufacture. It has full food contact status.

The company said that should the investment go ahead, the machine at Simpele would be “the biggest and most competitive folding boxboard machine in Europe”.

“We expect demand from food packaging to remain strong. There has also been a demand shift from recycled to virgin fibre board because of its purity and ability to be used as a direct food contact material,”​ added Laine.

Specialty paper overcapacity

At the same time M-real revealed proposals to transfer the Simpele speciality paper production to its Gohrsmühle mill in Germany. The move would result in the closure of the paper machine at the Finnish plant, with the loss of up to 80 jobs. Statutory negotiations with workers’ unions on both issues are due to begin this week, with an announcement expected by the end of the first week in November.

Laine said the specialty paper plan was a natural adjustment to market overcapacity and would reduce the company’s European capacity by 50,000 tons per annum (t/a) - out of a total capacity of 260,000 t/a.

The potential transfer paper production would save the company around €4 million per annum and will include a non-recurring €12m write off in its Q4 2010 results.

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