Rottneros has announced plans to permanently idle the groundwood pulp line at the Rottneros mill. Instead the company wants to increase CTMP production.
Following an extensive and long-term strategic analysis, Rottneros' Board of Directors has decided to discontinue groundwood pulp production at the Rottneros mill as there are no prospects for long-term sustainable profitability, the company announced. This is due to both the dramatically changed situation on the electricity market with very high and highly volatile energy prices, and the structurally decreasing demand for the end products where groundwood pulp is used, mainly printing and writing paper, which makes it difficult to reach sufficiently high price levels.
The decision will affect 40 employees and is associated with cost of approximately SEK60m. Production is expected to cease at the end of 2022, following the conclusion of trade union negotiations which are now beginning, according to Rottneros.
In 2021, Rottneros produced 64,000 t of groundwood pulp, corresponding to 16 per cent of Rottneros' total production of 395,300 t. During the same year, the groundwood line's share of the group's net sales amounted to just over 10 per cent, while the contribution, including electricity hedges, to the group's net profit was marginal.
Rottneros' electricity needs will be affected by a closure of the groundwood line, but also by increased CTMP production. As a result, the group's portfolio of electricity futures will be adjusted, and surpluses will be realised at current market prices. The value of the group's electricity futures is high, meaning that the profit impact from the closure is estimated to be substantially lower than the cost of the closure.
CTMP production to be increased to 150,000 tpy
Rottneros is conducting a pre-study for further development of the CTMP line. The goal is to increase production capacity from currently 120,000 tpy to 150,000 tpy, with an expected investment cost of SEK160m to SEK200m. The pre-study also addresses the issues of raw material supply and long-term stable and competitive electricity prices. The pre-study is expected to be completed in the fourth quarter of 2022.
During the last five years, Rottneros invested more than SEK600m in fossil-free production and an increase in capacity from 80,000 to 120,000 tpy of CTMP.
"The decision to close the groundwood line is of course associated with great sadness for us, given the employees affected (...). Unfortunately, the financial prospects are insufficient for continued operations of the groundwood line in the long term, mainly due to the sharply changed situation in the electricity market (...). At the same time, it is important to emphasise our significant investment plans within CTMP, the most important product segment of the Rottneros Mill. The continued positive long-term profitability outlook for CTMP implies that we plan for a significant production increase during the coming three-year period. Our investments in packaging within Rottneros Packaging and in the raw materials company Nykvist Skogs are further evidence that our position in Värmland has grown in a significant way during recent years," says Lennart Eberleh, Rottneros' President and CEO.