Stora to start feasibility study on €800m Skoghall expansion

Richard Stuart-Turner
Thursday, November 12, 2020

Stora Enso is set to commence a feasibility study and environmental permit application process on enhancing and expanding the pulp- and board-making capabilities at its Skoghall Mill in Sweden.

Renewable packaging materials are manufactured at the Skoghall Mill
Renewable packaging materials are manufactured at the Skoghall Mill

The Finnish paper manufacturing group said the investment would leverage the already strong mill into an integrated, highly cost-competitive and environmentally-friendly producer of packaging board and bleached softwood market pulp. It would serve customers globally, the company added.

The feasibility study will evaluate a possible upgrade and expansion of existing integrated pulp capacity from 370,000 tonnes to 780,000 tonnes annually and a possible increase of 120,000 tonnes in board capacity.

After the investment, the mill would be integrated close to 100%, with an additional 220,000 tonnes of softwood market pulp. This would enable a further increase in cost-competitive board production, Stora Enso said, while the project would also significantly lower the fossil CO2 emissions of production.

If the investment is approved following the feasibility study and environmental permit application process, the capital expenditure for the upgrade and expansion is estimated to be approximately €800m-850m (£718m-£763m).

The feasibility study is expected to be completed by the end of 2021 and production would start in Q4 2023 at the earliest. Skoghall Mill currently has an annual production capacity of 885,000 tonnes of packaging board.

“Skoghall Mill is one of our core integrated platforms for packaging materials. The investment would allow us to grow and be more flexible in serving our customers and meet an increasing demand for sustainable packaging among consumers,” said Hannu Kasurinen, executive vice president of Stora Enso’s Packaging Materials division.

“The investment would be in line with our strategy to accelerate growth in the packaging business as well as to develop the competitiveness of our mills based on economies of scale and integration benefits.

“It would also bolster the potential of profitable growth in attractive packaging end-use segments, such as liquid packaging board and coated unbleached kraft. The possible decision regarding an expansion of Skoghall Mill will be made once the feasibility study has been completed and pending the outcome of the environmental permit application process with local authorities.”

Stora Enso has also updated its strategy and certain financial targets, to support the group’s focus on growth and value creation.

During its Capital Markets Day webcast yesterday (11 November), the business outlined three focus areas for growth – packaging materials and packaging solutions, building solutions, and biomaterials innovation – and also covered market growth drivers, the recent forest fair value change, and new selective capital allocation.

“Our innovation initiatives will be concentrated in the areas of new sustainable packaging materials, sustainable barriers and our biochemical platform in lignin,” said Stora Enso president and chief executive Annica Bresky.

“Our forest, traditional wood products and market pulp make up the foundation for value creation in our company.”

The business has set new group-level targets for growth and return on capital employed (ROCE). It is now aiming for growth of more than 5% per annum, excluding its Paper division – the previous target was “to grow faster than the relevant market”.

It is also now targeting an increase in operational ROCE, excluding its Forest division, of more than 13%, compared to the previous target of an increase of more than 13% including Forest.

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