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SCA invests SEK 7.5 billion in kraftliner capacity expansion at Obbola mill

In Sweden, forest industry major Svenska Cellulosa Aktiebolaget (SCA) has announced that it will invest in 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 (≈ EUR 697.3 million).

Forest industry major SCA has announced that it will invest SEL 7.5 billion (≈ EUR697.3 million) in new kraftliner capacity at its Obbola paper mill in Umeå, Sweden (photo courtesy Bergslagsbild).

According to a statement, the total investment amounts to SEK 7.5 billion (≈ EUR 697.3 million) over a five-year period. The investment replaces necessary reinvestments in Obbola of approximately SEK 2.5 billion (≈ EUR 232.4 million).

The investment will be mainly financed by operating cash flow, complemented by regular group financing activities and the new paper machine will start operation in the first quarter of 2023.

A profitable investment

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 percent. 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.

This is a profitable investment in a growing segment. 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, said Ulf Larsson, CEO, SCA.

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.

With the investment in Obbola we can meet the increased demand for sustainable packaging. 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, said Mats Nordlander, President, Paper.

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 (≈ EUR697.3 million) includes investments in environmental improvements of approximately SEK 1 billion (≈ EUR 93 million), including a reduction in the need for oil by 8 000 m3 per annum cubic and improvements in the water treatment capacity. Following the investment, SCA’s own industrial processes will be 97 percent fossil-free.

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