Mondi bolts back into the North American market with €400 million virgin unbleached kraft paper machine

Mar 27, 2024

In a unique move, Europe’s Mondi said that it is considering spending €400 million to build a new 200,000 tonnes/yr unbleached kraft paper machine in Hinton, AB, at an unbleached softwood kraft pulp mill that it reached an agreement to buy this week for $5 million from West Fraser.

In a release this week, Mondi said the machine would make virgin unbleached kraft paper and start up in four years in the second half of 2027.

The acquisition is expected to close by the end of this year, Mondi said. The kraft paper project also requires pre-engineering work and permitting, and a final decision from Mondi before the project would be done. The €400 million is for the paper machine and installation, and for other related mill improvements.

Mondi, a global player in the unbleached kraft paper business including extensible high-strength paper, operates kraft paper converting plants in the US and Mexico. If the 200,000 tonnes/yr machine project is completed, Mondi would jet into the No. 3 position among kraft paper producers in North America, based on today’s capacity total, according to Fastmarkets PPI Pulp & Paper Week research. WestRock and Georgia-Pacific are the two largest kraft paper producers in North America.

Mondi also did a long-term fiber agreement for the Hinton pulp and paper mill. West Fraser would sell Alberta sawmill fiber to Mondi.

One contact was surprised by the $5 million cost for the mill and suggested that “maybe a zero was missing” from the amount reported. This said, the press releases about the deal did not identify the value or length of Mondi’s “long-term” fiber agreement with West Fraser.

Further, Mondi said that the “acquisition of the mill, and investment in the paper machine, will fully integrate operations in the Americas and enable Mondi to secure the long-term supply of high quality, cost competitive kraft paper into its network of 10 paper bags plants in the region, better positioning Mondi to support the growing market demand for industrial and mailer bags.”

Two companies now make kraft paper in Canada: Canfor in British Columbia and Canadian Kraft Paper (CKP) at The Pas, MB, mill site. The total capacity of Canfor and CKP is about 325,000 tons/yr, based on a Fastmarkets P&PW capacity estimate.

“I believe (Mondi at Hinton) will make similar grades to the CKP mill: extensible and high porous sack kraft paper. It’s not great news for the other two kraft paper producers in Canada,” one market contact said.

Mondi CEO Andrew King noted that kraft paper for mailers could potentially be made on a machine at Hinton. US e-commerce demand has been on the rise the last three years for paper mailers as at least a partial replacement for polyethylene bag mailers.

“The acquisition of Hinton is an excellent opportunity for us to secure locally produced kraft paper for our bags customers, helping to meet the current and anticipated future growth in demand for industrial and mailer bags in the Americas,” King said in a release.

Mondi would start up virgin kraft paper capacity while at least four unbleached kraft paper capacity adds the last five years in the US have been of machines that produce recycled unbleached paper.

Since about 2018, new capacity in recycled unbleached kraft paper capacity was started up by Norpac, Bio-Pappel, Midwest, and ND Paper.

As of this month, North American unbleached paper packaging capacity was at about 2.29 million tons. The startup at ND Biron and if Mondi went ahead at Hinton would increase North American kraft paper capacity, barring any shutdowns, by 15% four years from now at about 2.63 million tons/yr, according to a P&PW estimate.

With its global presence in kraft paper, Mondi has kept close contact and a business position in unbleached kraft packaging paper in the US market over the years.

In 2018, Mondi sold its Pine Bluff, AK, kraft paper mill to Twin Rivers Paper, which operates that mill today, making both natural unbleached kraft bag and sack paper, and lightweight recycled grocery bag paper, according to contacts.

Watch our European sack kraft paper outlook webinar, which also includes an analysis of the US sack kraft paper industry.

US unbleached packaging paper and specialty packaging shipments of 163,500 tons dropped 3.7% compared with May 2022 shipments, and were down 3% year-to-date, the AF&PA reported.

The operating rate for unbleached packaging papers and specialty packaging paper mills were down to 84.2%, down from 95.7% in May 2022. Year-to-date unbleached packaging paper shipments totaled 822,300 tons in the US, down by 2.5% on a year-over-year basis.

In the two largest volume categories, unbleached bag and sack shipments totaled 453,800 tons, and were down by 4% year-over-year, and unbleached converting and other shipments increased 12.7% to 192,500 tons. Unbleached paper imports remained up, by 11% and 9,000 tons year-to-date.

This article was first published in PPI Pulp & Paper Week, the industry’s most trusted pulp and paper market news and prices for North America. Speak to our team to find out more about our news and market analysis services.