Cartonboard has experienced significant growth over the last couple of years. It currently makes up about 17 percent of the global paper and board market—the second leading grade behind containerboard. The consistent growth within this sector is due to a combined result from many factors such as the economy, urbanization, population, sustainability concerns, and government policies and regulations. As we can see in Fig. 1, cartonboard capacity experienced a substantial increase in 2021 (+5 percent YoY) and 2022 (+3 percent YoY), with an even more impressive increase expected to occur in 2023 (+8 percent YoY).
There are many different types of grades that cartonboard producers can make, depending on the finished product, including folding box board (FBB), coated recycled paperboard (CRB), solid unbleached kraft (SUK), solid bleached sulphate (SBS), coated unbleached kraft (CUK), and uncoated recycled paperboard (URB).
FACTORS IMPACTING CARTONBOARD GROWTH
There are several combined factors at play contributing to the annual growth of cartonboard. One major factor is the growth and popularity of frozen food. Frozen food has been a pandemic powerhouse and growth already outpaced total food and beverages in the three years preceding the pandemic. In 2Q of this year, the frozen food category experienced another surge amid increasing inflation—outgrowing the fresh food category by 230 percent at that time.
This trend has created a great opportunity for companies that produce the paperboard used in frozen foods packaging as demand has significantly increased. SBS and SUK, both virgin fiber-based grades, are the preferred paperboard grades for frozen food packaging due to their wetting resistance and superior stiffness.
However, CRB has also been gaining wider acceptance among consumers due to the growing preference for recycled-based packaging. Production capacity for SBS, coated SUK, and CRB has increased as more consumers continue to purchase frozen meals.
Another major factor impacting the growth of cartonboard is increased consumer awareness about exc essive plastic pollution and its hazardous effects to the environment. We are beginning to see more countries impose bans in an attempt to significantly reduce plastic pollution. For example:
- The European Union implemented a EUR.80/kg tax on non-recycled plastic packaging waste.
- India’s ban on single-use plastic items went into effect on July 1, 2022.
- Several states in the US have some form of plastic bag legislation enacted.
- On June 20, 2022, Canada’s government announced its plan to ban the manufacture and importation of single-use plastics by the end of the year.
- Earlier this year, heads of state, environment ministers, and other representatives from 175 nations endorsed a historic resolution at the UN Environment Assembly in Nairobi to end plastic pollution—and forge an international legally binding agreement—by the end of 2024.
- On January 19, 2020, China announced a five-year plan to rid the nation of single-use plastics.
This means that we will see a significant increase in cartonboard demand as paper food-grade containers and paper cups replace plastic over the next several years. This column will focus on FBB and SBS and discuss the differences between the two as well as its potential future.
WHAT IS THE DIFFERENCE BETWEEN FBB AND SBS?
The main difference between folding box board (FBB) and solid bleached sulfate (SBS) is that FBB is always multi-ply and uses a combination of chemical and some form of mechanical pulp (MP) or thermomechanical pulp (TMP). SBS can be either single or multi-ply board but is always comprised of 100 percent chemical pulp.
FBB is layered with mechanical pulp that is sandwiched between outer layers of chemical pulp with an optional coating. Being virgin fiber paperboard with consistent purity for product safety, the combination of inner layers of mechanical pulp and outer layers of chemical pulp creates a low-density, bulky board with excellent folding and printing characteristics. Major end uses of FBB include:
- Frozen and chilled packaged foods
- Liquid packaging board
- Take-out boxes
- Health and beauty products
- Electronic packaging
The leading regions of FBB include Europe, South America, and Asia. It is also India’s primary packaging substrate used by businesses.
SBS is purely constructed of bleached chemical pulp with a coated top side that creates excellent printing characteristics with moderate strength. These boxes are popular with most industries and are used to package:
- Pharmaceutical products
- Frozen food
North America is the leading region for SBS production. Over half of the world’s supply of SBS comes from North America and is used for packaging retail products.
WHAT DOES THE FUTURE OF FBB AND SBS LOOK LIKE?
As we can see in Fig. 2, China is the dominant market for coated cartonboard and is expected to remain the leader for the foreseeable future. This makes sense considering that the majority of coated cartonboard capacity is targeted to the Asia Pacific region. In fact, Asia’s cartonboard capacity will continue to boom as eight million metric tons of new capacity has been announced through 2025.
In Fig. 3, we can see that FBB is the fastest growing global cartonboard grade with a 24 percent increase YoY in 2023 to kick things off. This is a big and recent shift, considering it was only the third leading cartonboard grade this year.
FBB is experiencing such significant growth due to many of the factors previously identified, i.e., increased frozen food demand and plastic substitution. However, it’s also important to note that US$1.5 billion of investment is flowing into North American cartonboard production—with some of that going towards FBB production.
North American bleached paperboard capacity has been flat to declining for the last decade. As noted earlier, the US is one of the few markets that heavily focuses on producing SBS. However, in December 2021, Swedish pulp and paper manufacturer BillerudKorsnäs AB (now referred to as Billerud) announced its acquisition of North American coated papers producer Verso Corporation. Demand is decreasing for SBS, because many of the assets used to produce the grade are older and have higher costs, so Billerud is planning to convert its Escanaba mill into a scale-size FBB mill, with the first machine expected to be converted by 2025 (see Fig. 4) and another by 2029.
However, in November 2022, Sappi North America announced the approval of a US$418 million capital project to convert PM2 (a coated freesheet machine) at its Somerset mill in Skowhegan, ME, to increase its capacity and produce SBS products. The planned project at the Somerset mill is slated to come online early in 2025. As we discussed earlier, with the increased awareness about excessive plastic pollution, Sappi’s goal is to pursue the growing area that is plastic replacements, and SBS is a more environmentally sustainable alternative to plastic packaging.
After looking into the cartonboard market and some of the different announced investments, a number of questions arise. Questions include:
- Is there long-term demand to support 2.5 million metric tpy in North America and 6.4 million metric tpy in new capacity without significant machine shutdowns?
- Will some of the folding carton business, i.e. SBS and FBB, switch to recycled or brown fiber in the name of environmental sustainability?
- With the entry of FBB production in the North American market, will it turn out that imports have paved the way for rapid growth in this efficient substrate? If so, in which products?