Trends and the business environment

Short-term business cycle

Over the past couple of years, we have seen a drastic change from good to challenging market conditions in our industry. Around the world, there is higher inflation, energy prices, and interest rates.

Consumers have lower disposable incomes and in 2023 we saw a drop in demand for both consumer and industrial products. Sales also slowed down due to an overstocking situation among customers who had built up higher inventories following the strained supply chains experienced during the pandemic. In addition, the EU sanctions on imports from Russia have led to greater competition and price hikes for pulpwood in the Nordics and Baltics. This too has affected our business as we source fiber from forests in these regions.

Longer term market prospects and megatrends

Nonetheless, in the long term, the demand for fiberbased materials is expected to continue growing.  The global packaging market is forecast to grow by about 4% per year to 2028, according to Smithers. Virgin fiber packaging materials are expected to grow at a similar rate. Of Billerud’s product areas, growth is forecast to be highest for cartonboard, which will outpace the growth of rigid plastic packaging.

Urbanization and population growth

Urbanization and a growing population continue to drive the demand for packaging, while an urgent need for circularity and sustainability are increasing the demand for recyclable and resource-efficient packaging materials such as our own. Consumers are increasingly looking for products and packaging that won’t harm the environment.

Reducing carbon footprints

Brand owners and retailers around the world are looking for ways to reduce their carbon footprints by purchasing materials with a lower climate impact. The development of new packaging solutions and innovative applications from wood fiber products is enabling them to shift from plastic to paper-based solutions with a lower CO2 footprint. Billerud can also provide customers with products backed by declarations containing detailed environmental information.

Stricter legislation

Stricter legislation, as well as incentives for green investments in both Europe and North America, are also driving the transition towards a more circular society. In the EU, regulations that impose higher demands on recycling will increase the material circularity of packaging and reduce packaging waste. Climate policy measures and other legislation within the scope of the European Green Deal are changing the ground rules for the forest industry and raising an interest in new solutions such as carbon capture.

Forest as a valuable resource

The forest is extremely valuable for biodiversity and carbon absorption. It also provides raw material for renewable products that contribute to the green transition as they replace alternatives with a larger carbon footprint. As the need for forest resources increases, industry must use trees and wood fiber as efficiently and sustainably as possible, extracting their maximum value, and promoting the recycling of fiber-based products. Billerud’s paper and packaging materials are recyclable and we only source wood from growing forests that are sustainably managed, with respect for biodiversity.

Digitalization and e-commerce

Digitalization is increasing the need for packaging for e-commerce, while it is having a negative effect on the long-term demand for graphic paper as electronic media replaces print media. This is resulting in capacity reductions and restructuring within graphic paper. Billerud is a cost, quality and service leader in the North American graphic paper market, and as such will continue to supply these products, but plans to successively transform part of this business to paperboard production. We also supply specialty paper products, with e-commerce as a demand driver of, for example, labels and mailing bags.

Product safety and hygiene

An increasing consumer focus on product safety and hygiene is also positive for Billerud’s business. Our virgin fiber packaging materials have the necessary properties to meet the demands of food safety and long shelf life for food and beverage packaging. We are also in an excellent position to supply producers of medical products with safe and hygienic kraft papers. A growing and aging population, along with increased spending in healthcare, will continue to drive up the demand for safe and hygienic medical packaging.