Paper straws, protective masks and an online store’s mailing label are examples of specialty paper products, and demand for them is growing.
While there is no single correct way to examine the specialty paper market, Alexander Watson Associates (AWA), a consulting firm monitoring the industry, identifies 11 market segments and over 100 paper grade categories within it.
In 2019, the size of the specialty paper market monitored by AWA was roughly 29 million tonnes, equivalent to approximately six per cent of the world’s paper and paperboard production. In terms of value, though, the significance of specialty papers is greater.
“The figures we follow in some market segments include some non-specialty paper products as well,” says Corey M. Reardon, President and CEO of AWA.
Specialty papers are produced according to each customer’s requirements. Nor is it unprecedented for a product that entered the markets as a specialty paper to gradually become a basic paper. This is what happened to copy paper, for example.
Packaging and labelling the largest segment
Whereas demand for printing papers has declined slightly over the past decade, the market for specialty papers has grown steadily. According to AWA’s report, the growth in recent years has been approximately 2.3 per cent a year.
“COVID-19 has really disrupted the entire paper industry, and its impact may last for several years. In the long-term, however, it will not affect the trends shaping the specialty paper industry. Once the pandemic has receded, and the global economy has recovered, I believe the specialty paper market will also get back on track,” says Reardon.
Packaging and labelling form the largest segment of the specialty paper markets, covering 40 per cent of them. Specialty papers related to building and construction account for 18 per cent, and those related to food services for 10 per cent of the market.
Covid-19 changed the growth forecasts
Before the COVID-19 pandemic, AWA forecast the fastest growth to be in packaging and labelling materials. The food services segment was also expected to grow more quickly than average.
Of the major specialty paper segments, the one hit hardest by the impact of the COVID-19 is the papers used by the construction industry, given how closely that industry follows general economic growth.
What the COVID-19 has positively impacted is the specialty papers of the healthcare sector, such as the filter papers used in protective masks. On the other hand, this is a peak that Reardon does not expect to be long-lived.
The restaurant takeaway food boom resulting from the pandemic may instead have a longer lasting effect on food service industry packaging. The food packaging segment is also doing well due to environmental reasons, as the search for more environmentally friendly solutions than disposable plastic continues.
Specialty paper producers consolidating
According to AWA, specialty papers are produced by some 300 manufacturers around the world. This group includes global forest industry companies with a wide product portfolio, but the specialty paper market has traditionally been dominated by small, local companies.
More than half of specialty paper companies make products for one to four market segments, and very few operate in more than one or two geographical areas. Exporting is profitable only in respect of products with high added value.
The situation is nevertheless about to change, says AWA’s report. As the market for basic papers contracts, an increasing number of major operators are becoming interested in specialty papers. This means that big players are buying out smaller ones or converting their machines for the production of specialty papers.
“European companies operate more globally than their North American competitors,” says Reardon.
Relatively steady price development
The price level of specialty papers is often higher than that of high-volume papers, and there is a wide price range. Reardon says that the price is largely influenced by three factors – the price of pulp, production capacity and the product’s technological demands.
“Their combined effect translates into a relatively steady price development in specialty papers,” Reardon says.
According to Reardon, Asia was and will continue to be the growth engine for specialty papers. This applies to the time both before and after the COVID-19.
“The markets in Asia are still growing faster than the mature markets of Europe and North America, but the growth rate is slowing. New technologies are also being adopted in Asian markets. Environmental awareness might still be slightly stronger in Europe and North America,” says Reardon.
Specialty pulps offer possibilities to the replacement of plastic
What are the significant trends in the specialty paper market, then, which will remain unchanged despite the CODID-19 crisis? Reardon says that they are the growth in environmental awareness and technological development.
“E-commerce, takeaway food and fast food are growing trends that are increasing demand for packaging and wrappers. For environmental reasons, these are increasingly made from paper-based materials instead of plastic. Technological developments facilitate the replacement of plastic, films and plastic coating in these products,” adds Reardon.
For the producers of raw materials such as pulp, specialty papers offer a promising outlook. Reardon highlights especially specialty pulps such as micro fibrillated cellulose, which is needed when specialty papers need to be given a barrier for liquids that does not include plastic.