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SCA plans to invest in pulp and close paper production at Ortviken mill

Swedish forest industry major Svenska Cellulosa Aktiebolaget (SCA) has announced that it intends to invest SEK 1.45 billion (≈EUR 140.58 million) in the production of chemically pre-treated thermo-mechanical pulp (CTMP) at its Ortviken paper mill in Sundsvall. In parallel, SCA is initiating consultations with trade unions and employee representatives to discontinue the production of publication paper at the mill.

An aerial view of SCA’s Ortviken paper mill in Sundsvall, Sweden (photo courtesy Bergslagsbild).

According to a statement, SCA intends to invest to achieve an annual production volume of 300 000 tonnes of CTMP pulp at Ortviken, using the existing mill infrastructure. The expected start of production in the new mill is the beginning of 2023.

SCA currently has a production capacity of 100 000 tonnes of CTMP pulp at its Östrand pulp mill in Timrå. This production will be phased out when the new line starts up, which will allow a future increase in the production of kraft pulp at the Östrand Pulp mill.

Our pulp customers want us to grow with them in product segments such as packaging board and hygiene products, segments with healthy growth. In line with our strategy, we have gradually reduced our exposure to publication paper. We now initiate negotiations to leave this product segment completely, said Ulf Larsson, CEO, SCA.

Exit publication paper

Currently, SCA produces coated and uncoated publication paper on three paper machines at Ortviken paper mill with an annual capacity of 756 000 tonnes and annual sales of approximately SEK 4 billion (≈ EUR 387.76 million). Demand for publication paper in Western Europe has declined by approximately 5 percent per year since 2008.

During the coronavirus (COVID-19) pandemic, demand for publication paper decreased by a further 30-40 percent, and production at Ortviken paper mill has been adapted to the weak order level. This low demand, combined with a weak price development, results in negative profitability for the operation.

The closure of publication paper manufacturing at Ortviken paper mill, proposed by SCA, will affect about 800 employees, primarily at Ortviken paper mill, but also in other parts of SCA’s operations.

The paper production closure would result in non-recurrent costs with cashflow effects which are estimated not to exceed SEK 0.9 billion (≈ EUR 87.28 million) and impairment of about SEK 1.1 billion (≈ EUR 106.68 million).

Through today’s proposals, we intend to continue to develop a strong, sustainable, and profitable industry based on our renewable forest raw materials. This will have a significant impact on many people and we will in a responsible way seek the best possible solutions for those affected, said Ulf Larsson.

Negotiations under the Co-determination at Work Act (MBL) with trade unions will now begin regarding the plans to discontinue paper production at Ortviken paper mill, the investment in CTMP production at Ortviken and the impact on other SCA operations.

In other jurisdictions, affected employees and their representatives will be informed and consulted in line with the legal framework.

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