Biomaterials May Be Next Growth Engine for Paper Industry

Enocell Pulp Mill

Enocell pulp mill operated by Storo Ensoo Oyj, Uimaharju, Finland. Photographer: Lentokuva Vallas Oy/Stora Enso via Bloomberg

As the digital age curtails use of newsprint and stationary, European paper makers are retooling their factories to produce more profitable materials that go into everything from fuels to sweeteners and even hair dye.

That’s because global growth in pulp and paper consumption plunged 80 percent in the seven years through 2014, forcing companies such as Stora Enso Oyj and UPM-Kymmene Oyh to find new uses for the raw materials coming from trees that they manage.

The shift is creating a business selling so-called biomaterials, defined as goods created from living things. In industrial terms, it’s the science of making products from plant sources instead of conventional sources. While paper companies have long used waste wood as a power generation fuel, turning to biomaterials opens a wealth of new possibilities.

We’re “looking for an engine of growth, and biomaterials is it,” said Juan Carlos Bueno, head of a unit working with the products at the Helsinki-based paper maker Stora Enso. The company got 38 percent of its earnings from paper last year, down from 70 percent in 2006. “We are working toward being a renewable materials company instead of a paper company.”

Stora Enso now produces ingredients used in ketchup, salad dressings, baked goods, hair dye, diapers, sponges and car tires. UPM-Kymmene Oyh, another Finnish pulp and paper company, makes wood-based fuels, gels for medical research and plastics.

Fuels are another big product for the industry, which generates waste from processing wood. Those ventures will continue to grow along with the investments in biomaterials, said Claire Curry, an industry analyst at Bloomberg New Energy Finance in New York.

Paper maker Norske Skogindustrier ASA in July said it plans to invest 150 million kroner ($18 million) to build a biogas facility next to its Saugbrugs mill in southern Norway. The plant will convert the mill’s raw-materials waste into renewable fuel to sell to AGA, a unit of Germany’s Linde AG.

“The pulp and paper industry has every reason to move into biomaterials, particularly biochemicals as they are more valuable than biofuels,” Curry said. “We can expect to see pulp and paper companies playing a significant part in this industry.”

Stockholm-based forest products maker Holmen AB meets 70 percent of its thermal-energy needs by burning bark from trees and wood-derived biofuels. The company is researching how to raise energy extraction levels and use its by-products to make chemicals, according to its website.

“Over the next 10 years, we are projecting an 8.2 percent annual growth rate for wood pellets, the most important traded biomass commodity,” said Seth Walker, bioenergy economist at RISI. He said he “expects paper companies to develop significant biomaterials businesses, especially in Europe.”

Pulp and paper companies need to counteract the modern world of digitization, where information is increasingly consumed on computer screens and mobile phones instead of paper, said Derek Mahlburg, an economist at RISI, a data and information company focused on the forestry products industry.

The market for all paper grades from printing to packaging and tissues is increasing, mostly from packaging demand linked to online shipping from companies such as Amazon.com Inc., according to Stora’s Bueno. Printing and writing paper declined 1 percent to 2 percent annually over the past four years, Mahlburg said by Phone Aug. 10.

“Biomass is a given, but biomaterials is a strategic decision,” Bueno said in an interview “Instead of burning everything, we can create value out of it.”

Stora Enso earned 1.1 billion euros ($1.2 billion) from biomaterials in 2014, about 15 percent of its revenue. Bueno seeks to double that in 10 to 15 years. The paper maker, which is developing bioplastics and synthetic resins, has a demonstration plant in Louisiana that produces 10,000 tons of xylitol sugar, a natural sweetener, from plant waste a year.

About 15 years ago, UPM saw that the graphic paper market was “maturing and started considering different options on how to best add value to our main raw material,” said Kari Ståhlerg, executive vice president of corporate strategy.

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