A strong year with extensive demand and favourable prices
Following the financial crisis, consumption came under way with rising demand for pulp. Healthy volumes and elevated prices combined with revenues from energy sales resulted in a strong year.
Södra Cell is one of the world’s largest producers of market pulp. Pulp is produced at five mills: Mörrum, Mönsterås and Värö in Sweden and Tofte and Folla in Norway. Customers are primarily European producers of fine paper, printing paper, tissue, speciality products and board. Södra Cell also engages in considerable production and sales of green energy in the form of electricity, district heating and biofuel.
Södra Cell creates added value through a broad range of products, considerable technical expertise, environmental responsibility and a stable supply of raw materials from the members’ forests.
Positive market trend
A stronger economy during the year had a positive impact on the demand for paper and pulp. The paper market developed well in terms of volume, but the producers of graphic paper had difficulty in raising their prices to match rising costs.
Early in the year, global pulp inventories were low after previous production cutbacks. After the financial crisis, pulp consumption made strong progress and prices rose. Reduced supply, after the earthquake in Chile resulted in shutdowns of some of the country’s pulp mills for a protracted period, contributed to the strong market conditions. Other causes for the lower supply were labour market conflicts and shortages of wood raw materials in Finland and the United States. No significant new capacity was added during the year, either.
Production under favourable conditions
Good production conditions prevailed at the company’s mills during the year. Production amounted to 2.0 million tonnes, of which the main product, bleached softwood sulphate pulp, accounted for 1.5 million tonnes. The focus is on pulp for use in tissue paper and special products. These product segments are expected to continue to be in greatest demand.
Certification of forestry is being demanded by the customers. Södra Cell can offer both FSC and PEFC certified softwood pulp, thus making the company the first-choice supplier of many customers.
Research and development is conducted in several areas, often in cooperation with research institutes and universities. The research division and its laboratories at the Värö mill are at the core of these efforts. One goal is to develop new pulp grades, such as for use in packaging and clothing. At year end, it was decided to invest in the mill in Mörrum for the annual production of 170,000 tonnes of dissolving pulp that can be used for applications such as textiles. Production is expected to begin in late 2011.
Through the Södra Pulp Labs website, some of the work on the future use of the pulp can be followed.
During the year, Värö became the world’s first fossil-free pulp mill since no fuel oil is used in normal operations. This means that emissions of carbon dioxide decrease and biofuel is freed up for external sale.
Södra Cell reinforced its position as a supplier of green energy in the form of electricity, district heating and biofuel. Conditions exist to increase district heating deliveries.
Value adding service an extra plus
PulpServices is the collective name of a number of value adding services Södra Cell offers with the long-term aim of growing together with customers to meet increasing demands for quality, productivity and efficiency.
The concept includes key areas such as logistics, IT, environment, fixed price agreements, technical cooperation in customer product development and market information.
Productivity developed well
Productivity work focusing on increases in efficiency and competitiveness continued during the year. Many employees contributed to this work, which resulted in 2,065 ideas. Each week, 17 improvement proposals were implemented.
A bright future
The future is bright for cellulose fibres in both traditional and new areas of application. Södra Cell’s foremost product, bleached softwood pulp, is an important and highly valued product on today’s market. No significant expansion in the global production of softwood pulp is anticipated in the next few years, which provides latitude in the development of products and markets. Energy efficiency enhancements and larger energy deliveries are highly prioritised.
Net revenue increased to SEK 11,310 million (9,601). Operating profit improved to SEK 2,224 million (406) as a result of higher pulp prices and favourable energy deliveries.