Good afternoon, everyone. Thank you for joining us, and welcome to Metsä Board's Capital Markets Day 2020, this time fully virtually. My name is Katri Sundström, and I'm responsible for Metsä Board's investor relations and will be your moderator today. What do we have on our agenda? Five presentations, including exciting themes and topics about Metsä Board's winning strategy, our industry-leading sustainability targets, how do we create value for our customers, and our actions in innovative future packaging solutions. We will, of course, open up Metsä Board's performance during these exceptional circumstances and share our views of how we see paperboard and market pulp demand developing in the long term. The day is divided in two sections. We will take a short break after the three first presentations and then continue with the rest.
We try to be efficient and end up our day at 3:30 P.M., depending on the amount of your questions, of course. Questions can be submitted throughout the event using the question form, and you will find that below your video window. Q&A will be after each presentation, and questions are only visible to me, and I will then address them to presenters. Since we are making forward-looking statements, I want to remind you of the disclaimer and pay attention to it. But now, let's start the day, and I'd like to welcome Metsä Board CEO, Mika Joukio, here, to tell us more about Metsä Board's strategy and our high-level sustainability. Please, Mika.
Thanks, Katri, and good afternoon to everyone on my behalf too. So during these exceptional times, I want to thank you for joining us today. Before we move into the day's official agenda, I want to say a few words about past months, what impacts COVID-19 has had on us, and also then how do we see the future. Our key priority has been and will be, of course, to ensure the safety of our workers and people, and we have managed well. As far as this COVID-19 is concerned, we have had only a few cases, below 10 so far, and production and operations have run smoothly. So operations have been running nicely. And first of all, for example, in Q2, we made a new production record in paperboard production, so we have never, ever produced more paperboard than in Q2, as far as quarterly production is concerned.
Excellent thing. Our customer service has been fully operational. Of course, we have put some extra effort on reliability of deliveries and so on, but customer service has maintained a good level. How about then, how do we see the markets? This year, or the impact from COVID-19, I would like to say is neutral or slightly positive. Of course, in the beginning of this year, we had a strike at Finnish mills, and that boosted demand then after the strike in February and March, and then when this pandemic started in mid-March, then also that boosted our order inflow, and it was really high in April and May, but after this panic buying period, I would like to say, then the situation has normalized, and now the order inflow and demand is quite normal for us. How about then the future?
Of course, it's very difficult to predict at this very moment. Nobody knows what will happen and if and when this global negative global downturn will continue. Of course, that most probably will have impacts also on us, so we are not immune to global economic change. Then, a recap from our previous Capital Markets Day two years ago. We mentioned that the focus is premium paperboards made from fresh fibers, and that is still the case. We are number one in folding boxboard in Europe. We have also pole position in white kraft liners in Europe, and as far as coated white kraft liners are concerned, we are globally number one, so very good market position and position in general for us, then sustainability. We said last time, two years ago, that sustainability and its importance have increased, and that has happened.
The importance of sustainability is bigger than ever at the moment. But at the same time, I would like to say that sustainability is not a separate part of the business. It's integrated in our daily work, and that's how we see that. And I will tell you more about that in my presentation. Then two years ago, we emphasized also the importance of profitability, and especially the profitability of the paperboard business. And we said that we aim for moderate growth, and that's precisely what we have been doing. We have made small or middle-sized investments in order to increase our capacities here and there, and also then improve our efficiencies. And as far as profitability is concerned, we have been able to improve by increasing prices, for example, and improving then production efficiency at the mills. But then, ladies and gentlemen, moving to topics of the day.
So first of all, I will come back, I will go through our strategy, but hopefully, and probably all of you remember that roughly 15 years ago, we made a huge strategic decision to exit paper business and focus on paperboard business. And that is precisely what we have been doing. But I will come back to that later in this presentation. Then our aim is to be the leader in sustainability, and I will tell you more about that in this presentation. But then, in addition to sustainability, then innovations have increased their significance in our operations. We want to provide innovative packaging solutions to our customers, and in order to succeed in this, we need to invest and collaborate with our customers. And my colleagues will tell you more about that also later today.
So starting from the strategy, I dare to say that Metsä Board has a winning strategy with a clear focus on premium fresh fiber paperboards and a high level of sustainability. Our mission is packaging solutions that respect nature. Our main raw material, so wood, comes 100% from sustainably managed northern forests, and we are aiming for totally fossil-free production, as I will tell you later. Our vision is to be the first supplier of innovative and sustainable fiber-based packaging solutions, creating value for customers globally. And in this vision statement, all the words matter. So we really want to be number one, so the preferred one, and we want to supply not only paperboard, but packaging solutions which are innovative, which are sustainable, and they are fiber-based.
And then we don't only want to sell if somebody would like to buy, but we want to help customers to improve their businesses. So we want to create value for customers together with them. And we play this game globally. And our strategy is based on focus, growth, and profitability. So we are focused on the premium fresh fiber-based paperboards for consumer and retail packaging. We grow together globally, together with our old and new customers, and then profitability, two elements, of course, efficiency, efficient operations, and then we want to prioritize the businesses that benefit from the high-performance products and services of ours. And then sustainability, it goes through the whole supply chain. All our paperboards are recyclable, and the majority of them are also compostable. Then a few words about production and markets and demand.
Our strategic decision is that our production is close to our main raw material, which is wood fiber. Mills are located in Finland and Sweden, but we deliver worldwide. Europe is naturally the biggest market area for us, but also then North America is growing, and we have already a meaningful position there. And that goes for both folding boxboard and white kraft liners. About the market balance, what is the situation there as far as folding boxboard and white kraft liners are concerned? I would say that in folding boxboard, the market balance is quite stable here in Europe as well as in North America. But then in white kraft liners, there is more turbulence because old paper capacity has been and most probably will be converted to containerboard capacity.
But then it's good to remember that we are playing the game in this white kraft liner segment, and especially then the coated white kraft liners are our main liner product. And that's a very niche market, and our market position there is like 30%-35% global market share. So that's how I see it. Our paperboard capacity today is roughly 2 million tons, and roughly 1.3 million tons is folding boxboard, and then 700,000 tons white kraft liners. And then our pulp surplus is 600,000 tons based on our own production in Husum, Kaskinen and Joutseno, and then our ownership in Metsä Fibre, 24.9%. Then a few words about demand. So demand of our fresh fiber paperboard is mainly driven by consumer and retail.
Starting on the left-hand side on folding boxboard, you see that roughly 50% of our paperboard, the folding boxboard, goes to food or food packaging end uses. Another 40% goes to other end uses in consumer packaging, consumer packaging end uses like pharmaceuticals, cosmetics, electronics, and so on. Altogether, 90% goes to consumer-driven or consumer packaging, and only 10% to graphical end uses. In white kraft liners, demand is strongly driven by retail. As you can see, roughly 75% of our kraft liners are used in various shelf-ready solutions and point-of-sale displays. As you can also see, e-commerce is not that big for us, but it's growing, and we see growth opportunities also there. How our products then support sustainable consumption. First of all, our paperboards are widely known for the lightweightness.
That has been the kind of our agenda already for decades, and our intention is to continue in that path. The production of lightweight paperboard needs less water, less energy, and less raw materials, leading to a reduction of the carbon footprint throughout the whole value chain and supply chain, then in order to enhance circular economy, our main target is that our paperboards are recycled after the use, and the interesting thing is that paper and board account for almost 65% of recycled packaging material worldwide, and recycling rates for paper and board are already significantly higher than, for example, in plastics packaging, but then recycling is not always possible, as we understand and know, and then in this instance, compostability is the next alternative, and all our paperboards, except the PE coated grades, hold an industrial compostability certification, then moving on to our sustainability targets.
Roughly a year ago, we published our new sustainability targets, and I dare to say they are industry-leading targets. One of the targets is fossil-free mills and raw materials by 2030. Quite ambitious target, isn't it? Already today, 99% of raw materials measured by dry tons are already fossil-free, but we still have that 1%, so we still have PE in our products. We are using fossil oil-based materials like latexes, for example, and we are working hard together with our suppliers, with our partners, in order to then find alternatives to these fossil-based materials, and I'm convinced that during this decade, we are able to also do that, then the fossil-free target in production of energy, that covers the emissions of our own production, energy production, so that's Scope 1, and then the emissions of the purchased energy, so Scope 2.
Currently, today, 83% of the energy used by our mills is fossil-free. We have to take actions, but we have those actions already in our planning. Okay, then moving on to these actions. How we are turning the mills into fossil-free during this decade? The major action or investment naturally is the renewal of Husum Pulp Mill. In the first phase, we will get a new recovery boiler, a new turbine, and already that phase of the investment will reduce the annual use of fossil oils from roughly 13,000 tons to roughly 8,000 tons. So remarkable reduction. But then after this, in Husum, the biggest user of oil is still lime kiln. And then in the second phase, that will be converted to use renewable fuels. And after that second phase, the usage of fossil oil in Husum will be zero.
Then, the other actions in Finland are also already planned, and they concern our all mills here in Finland. And they are different ones. We are replacing, for example, peat by biomaterials, and then some natural gas by biogas as an example. But the action plan is clear, but of course, the final investment decisions have not been made, but we have a plan. How have we succeeded so far in this sustainability KPIs? And this here shows that we have succeeded well, or extremely well, I dare to say. Whether it's CO2 emission reduction, whether it's water usage per ton, or then energy efficiency improvement per ton, the old target and the current situation shows that we have done the right things. And our intention is to continue to do so. As I already mentioned, 100% fossil-free mills and products.
We have set a new target for water consumption, - 30% by 2030 compared to 2018, and then 10% energy efficiency improvement in the same period of time, 2030 versus 2018. That is the situation. Moving on to safety, I said that the key priority is the safety of our employees. Here you can see that during this year, by end of June, for example, our LTA1 figure is lowest ever. Excellent achievement, remembering that everyone has the right to have a safe workplace. That is not enough. Of course, our intention and target is zero accident at all the mills and offices, and we continue hard in this area. Moving to our public financial targets and how we have been able to maintain shareholder value through good profitability and a healthy balance sheet. Starting from comparable return of capital employed.
This year, by end of June, we are at the figure is 10.7, and remembering that we had the strike at Finnish mills and remembering that pulp business is not doing that good at the moment, I think this is good achievement. Then our financial position is strong, as you can see in the middle. At the end of June, our leverage was at 1.1. So there is a lot of headroom with our ceiling target of 2.5. Then our dividend policy, that is to distribute at least 50% of our net result to shareholders. And last year, we paid or the profit distribution was EUR 0.24 per share, which corresponds then 59% of our net result from last year. And the distribution was paid according to the Board's original proposal. Then moving to Husum. So the first phase of the Husum investment is proceeding.
In March, we started this foundation work for recovery boiler and turbine, and that is ongoing. It's an excellent platform then for future development of paperboard operations at Husum. Precisely where we are, here you can see. We started in March foundation work, and now we are still waiting for the environmental permit from Swedish authorities. Unfortunately, the permit process has taken a bit longer than we originally expected and estimated, and that prevents us from starting the installation of the new recovery boiler, but we are ready whenever we get the permit. Hopefully during the coming weeks or latest coming months. Now the estimation is that the new recovery boiler and turbine will be in operation then during the first half of 2022. Then a few words about innovation.
So we will continue to develop lightweight folding boxboards and also linerboards and barrier paperboards as alternatives to plastics. These two areas, lightweighting and then barrier development, they are the key development areas for us. But in addition to that, I see that innovation, and then the sustainability also needs to be integrated in company strategy and in our everyday work. So innovation is not only a new product, but it's new ways of thinking, new ways of working, new ways of collaborating with customers and other stakeholders. But all in all, with this close cooperation with customers in product development and packaging design and all other innovations, we are looking for and seeking for significant scale of innovations. Ari will tell you more about this in his presentation. Then to summarize, and what I want you to remember from my presentation and these messages.
First of all, we have this very clear winning strategy based on the full concentration on premium fresh fiber paperboards. Today we can state that it has been the right decision and no reason to believe something else for the future. We will continue to implement that strategy very systematically. We have an excellent track record in sustainability. We have made strong commitments for the future, but our track record backwards is also very, very good. Our main target, or one of the main targets, is that all our mills are fossil-free and all products are fossil-free by 2030. This is a very, very strong promise within the whole industry. Future growth is secured with sustainable investments. Yes, we need to invest in order to grow, but also innovations. We need to invest in innovations also.
So ladies and gentlemen, thank you very much for your attention, and I think it's now time for questions. Thank you.
Okay, thank you, Mika. And let's start with a question that goes to our ROCE. So given the positive development in ROCE and good development in the first half of this year, despite all the headwinds, why are you not more ambitious in the targeted level of 12%?
Yeah, of course. I mean, this 12% is not that old target, and I don't want to change that very easily, of course. Let's see how it goes. But also, naturally, nothing is carved in stone, so to say, so it remains to be seen in the future. But I see now it's a good target.
Okay. Then in terms of sustainability and plastics to paper substitution in particular, what kind of revenue potential do you see for your packaging business in the long term?
The whole packaging business?
In terms of sustainability and plastics to paper substitution in particular, so the sustainability you were mentioning earlier. So what kind of a potential revenue potential do you see in there?
It's quite difficult to kind of give you a clear number on this, but we see that this sustainability, because it's more and more important year after year, and then what's going on in the plastics side. So it's potentially, and it's an opportunity for us. But how much we are gaining, that's very difficult to say. We have already seen that when we launched this eco-barrier paperboard, for example, roughly a year ago, customers have taken that very, very well.
Yeah, and reminding that Ari will return in his presentation to this question in particular quite well. Okay, then when and how does Metsä Board intend to invest to grow in paperboard again?
Yeah, that's a very good question, and I expected that also. In management, in our planning board, we have different options how to continue growth. And as I said in this presentation and also in other meetings and presentations, our intention is to grow not only in pulp as we are investing now in Husum, but particularly in paperboard. But when, how much, what is the magnitude, what is the capacity increase, then we will tell you when decisions have been made. But we are planning different options.
Are you considering M&A to drive growth in the midterm?
Of course, it's an option, and we look around, but as we have seen in the past, we'd like to kind of build the additional capacity, additional revenue by ourselves. But as I said, it's also an option if and when there will be opportunities.
You mentioned packaging solutions as a focus area for you. Are you planning to invest into this, and if so, could you comment about the potential magnitude?
So if you think about packaging solutions, of course, our tactics is to help customers understand what they can do with our paperboard. And you will hear later during this afternoon what we have made, for example, in Äänekoski. We have a new Excellence Centre there. And there, the intention is to help customers to get the most out of our paperboard and helping them to understand what can be done and what is possible.
How has the lightweightness of your products developed against competition in recent years?
So we have always been a pioneer, and for example, two years ago, last year actually, a year ago, we launched a new portfolio again, which was lighter than the previous portfolio. But we have been doing this already, as I said in my presentation, for decades, two or three decades already. We have very systematically worked in this topic or for this topic.
And then replacement of PE and latex and other fossil-based materials. Are you comfortable that you can achieve this with your own measures and investments, or are you going to collaborate with a third-party acquisitions maybe to achieve this?
So as far as this barrier board development is concerned, we already today collaborate with third parties, so suppliers and universities and different kinds of stakeholders. But I'm convinced that we are able to do that. I mean, someday to have this totally plastic-free and latex-free product in the marketplace.
Okay, thank you.
Thank you.
That was all.
Thanks.
Thank you, Mika. Okay, and we will move on. Next, we will hear how we have succeeded with this focused strategy, what Mika was talking about, and especially with our premium products and services. I want to welcome Ms. Sari Pajari-Sederholm, responsible for Metsä Board's sales and marketing. Please, Sari.
Thank you, Katri, and good afternoon, ladies and gentlemen, from my behalf. I would like to start by saying and confirming what Mika was saying earlier, that our strategy to focus on premium fresh fiber paperboards has been a success, also from the top line and added value development perspective. Let me now take a few moments to go through with you how we have further strengthened our position in the main markets and core products, what has been the winning formula for us in doing this, and why do I think that we are in a good position to prosper also in the future, but before we dive into that, let's take a look at what I promised two years ago.
In 2018, I said that we are a market leader in fresh fiber paperboards, that we sell globally our products, but have a regional approach, that our products are competitive and we provide value to our customers, and that our top priority is to secure healthy price levels in the markets where we operate. What have we then done? We have further expanded our foothold, particularly in Americas, which was named as our growth market at that point. We have further developed our products, Mika mentioned, the lightweight thing on the product side, and we have invested and developed world-class services to go together with the premium products. Ari will further dive into Äänekoski Excellence Centre and its product service portfolio later on. We have also acted very responsibly to keep the market healthy in both our core grades.
But in the past couple of months, of course, we've had COVID-19, and it has hit the economies and also us as individuals. COVID-19 has changed consumer behavior, and some of it will probably be permanent change. We've had segments like luxury packaging, graphical end uses that COVID-19 has had a negative impact on. But as you can see and you heard from Mika, almost half of our end uses, or almost half of our end use is food and food service, food packaging and food service. And in that segment, COVID-19 has actually increased the demand of safe paperboards. The growth rates year on year are somewhere between 10%, some say even 15% compared to last year. So our strong strategic choices have made us perform well also during this turmoil of COVID-19. And now we are even stronger in our main markets and main products than before.
Europe continues to be our home market. 70% of the volume, 1.8 million tons, is delivered to European customers. Demand is driven by environmental awareness and requirement for sustainable and safe packaging, particularly on the food and food service segment. Market is healthy. There has been only limited capacity increases in folding boxboard and also white kraft liners. But that being said, there are extensive plans of capacity increases in both testliner and brown kraft liner, which will have an impact on the market. Then to Americas. We said last time it's our growth market, but I would already call it the other main market with a running rate of 500,000 tons delivered to Americas. We've grown in Europe even during the COVID times, but we've grown double-digit numbers in Americas during this year still.
So the COVID, if anything, has accelerated the demand for safe paperboards also in Americas. There's a limited availability of lightweight carton boards in Americas, and that is the void that we are filling with our capacity there. In Asia Pacific, we aim to serve the customers to whom sustainability is a key thing, meaning that there's a lot of Chinese capacity spread all over Asia Pacific. We do not intend to compete with the Chinese, particularly not with the prices. So we have a leading market position. Mika mentioned a couple of these. We are number one in Europe in FBB. We are also number one in white kraft liners in Europe. Even globally in coated white kraft liners, we are number one. I see a lot of growth potential still in Americas with the premium lightweight carton boards that we deliver. So we've done well.
Who are then the customers that we have grown with? In the packaging market, in our market, it takes three actually to tango or to create a perfect package. So it's the brand owner, converter, and us as a board producer. 30% of our folding boxboard deliveries go via direct deals with our brand owner customers. We have long-term partnerships with some of them. We also have some newcomers from Americas where we have succeeded. That being said, the main segment still for folding boxboard customer segment are the converters. And we work intensively with converters to provide solutions that the brand owners and the consumers want. Merchants are an important sales channel for us, particularly for graphical end uses. Then on the white kraft liner side, we sell solely via corrugators in all of the continents. So our strategy is to provide value to our customers.
Based on that value, we have built these long-term relationships. But then what is this value? What provides value to our customers? It is sustainability, reliability, and innovation. These are the key competitive edges that we have as a board supplier. We have focused on those segments where the customers benefit from these competitive edges. As Mika explained, our sustainability targets are very ambitious within this industry, and we are committed also to help our customers to reach their targets. One of the examples of helping the customer is the cherry tomato box, where we were able to, in cooperation with the brand owner and service institute, create a package from our eco-barrier board, which actually has only one sixth of the carbon footprint compared to the plastic solution. It's also very good for the brand image.
As a plus, it provides extra shelf life for the tomatoes. A lot of winning arguments. Reliability. What does that then mean? We have big brand owners, big converters that are buying our board because it is consistent quality, it is delivered in an efficient way, and it provides efficiency improvement and cost efficiency also for them. That's very important. Finally, there's innovation. Again, Mika mentioned it many times. Innovation for us means a constant improvement together with our customers and other partners to provide better solutions. Innovation can also mean cooperation in creating a package. Arctic Blue Gin box created for Americas market. We worked together with a laminator, Hazen, with a converter, and designed with the brand owner a box that has actually won today another prize. That's an example of joint innovation, how to reach the targets to our customers.
So I say that we have sustainability, reliability, and innovation as key competitive edges. But what do the customers actually think? Why do they choose us? We make annual customer satisfaction survey, and the most recent survey was done in the midst of pandemic, so during this spring. And customers gave us Net Promoter Score of 40, which was an improvement from last year's 22, a significant improvement that I'm very happy about on behalf of the whole organization. Customers say that they choose us for quality and for good service. They consider us as a provider of premium products and services. And premium here means consistent products, consistent services to fulfill their needs. Third thing that came in the recent survey was innovation. So our investments in the innovation, our activity at that front has been noticed also by the customers.
Ari will talk more about that in his presentation. Then why do I think that the future will be bright also for us? There are many global trends that support the growth of fresh fiber paperboards. I picked here three. So first, increased hygiene and safety requirements. Particularly during COVID-19, safety of food has become more and more important. Before the pandemic, some of the consumers were talking about package-free solution or package-free consumption. Now I see a bit of a change there that everybody wants to keep the food that they are going to consume safe. But at the same time, they still require the package to be sustainable. So in this pure fresh fiber-based recyclable boards are a sustainable alternative. Then acceleration of e-commerce and online shopping. I bet that you are also familiar with this.
There's been a lot of delivery trucks in my door during this spring. We've tried online shopping in food, for example, and that's the general trend between consumers that we are now learning to use e-commerce. E-commerce has increased significantly, 20% per year, and it's forecast to do so also in the future. Our part comes in when the brand owner wants to provide something different, an experience for the online shoppers. One of the examples is this Billebeino package where white top kraft liner, our white top kraft liner, is used on the outer layer of the corrugated box, providing a significant brand experience for the consumer who receives the package. Thirdly, it's not only how good you are with your products and services, it's also how you act as a company, how good member you are in the global society.
Customers choose sustainable brands, and the brand owners want to work with companies that are up to today's standards, ESG standards. And we have a proven track record and awards in our performance related to this, so we are the partner also for the future. So as a summary, we are a premium supplier and will continue to create value to our customers with high-quality products and world-class services. We will focus on innovation to provide solutions to customers that fit their targets, for example, on the sustainability side. And I see that there are global trends that will support the growth of the market in fresh fiber paperboards. Thank you.
Thank you, Sari. And moving on to Q&A. So starting with the competition on premium products, given the better profitability of your premium products, and especially the coated white kraft liners, do you see more competition in this field? Is the market strong enough to absorb the new capacity from, for example, from our neighbor country?
From our neighbor country, Eastern neighbor country.
No, no, sorry, Sweden.
Oh, Sweden. Sweden. We have other operators on the premium segment also. There seems to be a rather high hurdle to enter, particularly the premium segment. That's why I'm confident that we will be competitive also in the future. There is competition. There are products coming on stream. I still think that we've had the winning formula and we've been able to maintain our position and market share despite of the new capacit y.
With regard to the U.S. markets and folding box board, how big is the core market that you are targeting? How big of a share do you think you can capture in the long term?
Our market share in Americas is still very small. The market is dominated by SBS and white lined chipboard, recycled board. That's exactly what we are hitting or targeting with our lightweight and safe boards. There's still a lot of room to grow. Depending on what you count in, it's millions of tons. So a lot of room still.
Okay. And then about pricing, are you planning to increase the paperboard prices for next year?
We have, like always, annual negotiations during the autumn time. Situation has been rather peaceful so far, but it remains to be seen. I want to emphasize here that we don't change the prices. Our products are not priced based on raw material prices. It's a demand-supply balance that affects the pri ce.
Okay. Thank you, Sari.
Thank you. Thank you.
And next, we're going to have a look to the future. Ari Kiviranta, responsible for development in Metsä Board, will tell us about Metsä Board's R&D, innovation, and customer collaboration. He will also reveal some exciting new projects in the pipeline. Please, Ari.
All right. Thank you, Katri. Ladies and gentlemen, welcome to the wonderful and exciting world of fresh fiber packaging materials and paperboards. Innovation was mentioned a few times already in Mika's and also in Sari's presentation. I have a lot of pressure here to explain to you about that and what we are doing in that field. Let's see what we can do. I will tell you how we develop future packaging together with our partners. Before I go into the details, so let's take a look at the picture we have on the screen. What do we have there? There is our new Excellence Centre in Äänekoski.
Äänekoski in central Finland is a unique concentration of various Metsä Group's industries. And in the heart of all this is our new Excellence Centre . Why do I call this place unique? Well, first of all, we have a lot of technical competence in the Excellence Centre . But what makes it unique is that it is in the middle of a very big industrial site. There's a brand new bioproduct mill in the site. There's a paperboard mill there. And there are some other production units there, as well as something else. So it's a very big concentration of know-how in paper and pulp industry. And as said, our Excellence Centre is in the middle of it. So very good location. Right. Well, what else will I tell you more than just the Excellence Centre ? I will talk about the innovative packaging solutions.
I will also say a few words about this significant scale of innovations. And then finally, talk about the cooperation with our partners. But before doing that, let's go back to the Excellence Centre and see if there's a video of it. Let's see if it works.
The market, it's in turbulence, and everyone is looking for better and more sustainable packaging solutions. Speed is very important, and collaboration is the key to speed up. I'm very excited about the new Excellence Centre and the innovation collaboration that makes it possible. Well, at the moment, the replacing of the plastic, that's the biggest thing that will have an effect to every kind of packaging. I would say that one of the main themes of sustainability is to reduce the amount of material used.
We want to suggest lightweight materials, and we want to suggest solutions that are fit to purpose so that we avoid overpacking. We are supporting the sustainability targets. Together with our customers and partners, we can co-create packaging solutions that address the whole product lifecycle from material development to the production and design for recyclability. The new Excellence Centre . It helps us to accelerate innovation. We have very strong competence in design and R&D, as well as the wide partner network. Together, we can create the perfect package. In Metsä Board, we do the innovation together with our customers, together with partners like research organizations, universities. We are not working alone. It's a collaboration, and we want to do it faster than others. I think this space is great because it collects all the talented people, the professionals under the same roof. We can create something amazing for the future.
So there we go, Excellence Centre . Now, if I can change the slide, let's see. Yeah. What do we have in the Excellence Centre? First of all, well, we have some space. That's not very exciting, but there's 1,500 sq m of space. It includes R&D laboratory where we have state-of-the-art measuring equipment, more than 100 different things that we can do in the lab, different measurements, different analytics. In addition to that, we have the packaging design studio, as you could see in the video. We can make different packages, try different designs, try different layouts, all that stuff. Very exciting. Third point, we have also a very good possibility to use computer simulations for packaging design and packaging performance. What does this mean in practice?
For instance, if a customer comes into us and says, "Hey, I'm using this paperboard right now in my packages, why don't we try something of your products?" and we don't even have to make the package. As we just make a few measurements on the paperboards, we can simulate which one of our products would fit well there, how much lightweighting we can do, and so on. Very useful tool. In addition to that, we have a customer feedback center there, which is also very good because every now and then we might get also some, well, not so nice feedback from the customers, and we have to analyze that. Was it our fault? Was it our paperboard? Was it something else? and this is also very good.
We can go directly from the customer feedback center to the lab, talk with the guys, analyze it, and we have the answers quickly there. And of course, in the center, we can also utilize our global network of experts. So we do have a lot of technical staff in the market, and we can make a very good network with them too. So a lot of things available. Right. So that's Excellence Centre. And then I move on. And you heard already lightweighting many times in Mika's presentation, and you heard it also in Sari's presentation. And as you heard, this is an old story, old stuff, but it is still very important. And just want to give you an example why it is so important. Just a concrete thing.
Every day, when we talk about our folding box boards, about 160 million packages are made out of Metsä Board paperboards. If we can decrease the weight of paperboard by just 1%, it of course means that there are kind of 1.6 million packages made kind of free. What does it mean yearly? It means that more than 500 million packages are made for free from the same amount of raw material. That's a huge amount. Therefore, it's easy to understand why this lightweighting is still important. Even a small change makes a big difference. The lightweight paperboards, of course, they create less waste and prevent overpackaging. As you heard, we just made a step about a year ago with lightweighting with very good results. That was an important project for us, and the customer feedback of it has been also very positive.
Lightweighting does matter, but so does also the recyclability. It is very clear that the consumers, they prefer, we all prefer more sustainable materials. Well, for instance, about 80% of the European consumers would rather choose cardboard packaging over plastics if that's possible. I mean, there are certain end uses, especially in the area of food, where you need the so-called barrier properties. And therefore, it's not that easy to change from one material to the other. But you have to have also some properties there that you can do it. And if and when we can make the barrier properties without plastics, that would be great. And it's also because the plastic-free products are recyclable. So it all fits in the picture very well. There was already a question about this, what we have on this slide. And it's about the size of the market.
But let me explain this figure a little bit more in detail. First, on the X-axis, we have different barrier properties like grease resistance, moisture resistance, and water resistance. The reason why they are in this order is very simple. It is that the grease resistance is actually quite easy to produce. And when you move more to the right, it becomes more difficult. So they are in that order, therefore. And then when you look at these, what kind of products need different barrier properties? The simple things are like packing fruits or vegetables, biscuits, soaps. Quite often, grease resistance is what you need, and also some moisture barriers. And that's what we already have done. We have the one product that Mika mentioned, this eco-barrier board, so MetsäBoard Prime FBB EB, that gives already pretty good barrier properties against those. The market size, and this is very optimistic.
I mean that when you read two million tons there per year, it means that then we would take all of it, not only the things that are packed now in paperboard, but also everything that's packed in plastics. And you can see that when you go to more demanding barrier properties, the market size becomes even bigger. The thing here is that these difficult barrier properties, of course, as I say, they are difficult to produce. With certain materials like plastic, they are naturally there for paperboards. We need the barrier coatings to make that. And we are working on this. As you can understand, we have started with the simple ones, with the grease barrier, with moisture barrier. And we are working our way towards the more demanding end uses, more technically demanding products. And this is what we have in the pipeline.
I will not say exact numbers about the timescale and so, but you can believe we are working on this. And this is, as you heard already earlier, one of our two top R&D projects. Right. Well, what else do we do in R&D? Some of you might think that, "Hey, I have heard this story before. Lightweighting and barrier, yeah, everybody's doing that. So aren't they doing anything else?" And the answer is that actually we are doing something else too. And if I start the different types of projects that we are doing together with our partners, are they then customers or are they suppliers? I'll start from the left-hand side with these joint ventures and just show you one example, this nice, I don't know what you want to call it, glass or cup for champagne.
And of course, you think that, "Hey, this is not a big-" you are talking about the significant scale of innovation, but this is not significant. So champagne glasses, so you don't need them too many in the world. But this is something that we need to do, and it's also very important for us. Experiment different things, experiment also smaller things, and show that what can be done with the paperboard. Then we are, if I take the other end of the spectrum and say that we are in a project called ExpandFibre, we are there together with Fortum and Metsä Group. And that's a big project. Metsä Group is investing a lot of money into new innovations and using a tool called Metsä Spring there. Metsä Spring is the innovation company of Metsä Group.
Metsä Spring is, for instance, building a new pilot plant for textile fibers based on wood in Äänekoski. That's part of the program. We are there too. Our part of that is partly barrier development, plus then something that you see in the middle, which is called 3D fiber packaging solutions. This is a brand new project. We announced it, or Metsä Spring announced it only, was it two weeks ago. The idea is to produce 3D fiber packaging directly from pulp. We are aiming there for high-volume market segments. You know these kind of solutions already. When you go to the grocery store and you buy eggs, they are in these kind of things. But there's something very new in here. First of all, it will be high-quality products. And secondly, the target is that we can produce these efficiently.
That's a very important thing. That's why we have also a machine supplier partner in the project. Without that, it would not work. It shows also the way we work, another way of working for us. We work a lot with the customers, but we work also a lot with suppliers. Somebody asked, I guess, about these latexes. How do we get rid of latex? Are we confident that we can do it? Alone, no possibility. But we are working with our suppliers there too. This project, coming back to this 3D fiber packaging solution, it was started some months ago. It was published two weeks ago. It will be a EUR 20 million project. The target is that there's a pilot plant running in Äänekoski again within about a year.
So next year, there will be a pilot plant in Äänekoski testing this. Good. Now I come to my summary. First of all, well, I have talked a lot about innovation and partner collaboration. I don't have to say too much about that, but that's the way how we want to do innovation in cooperation with various partners. Our R&D work is driven by sustainability. Barrier boards, for instance, are a very good example about that. And then finally, we aim for significant scale in innovations. Of course, we want to try smaller things, but we always keep in our heads that when we do something, it has to have a certain relatively big scale. So thank you very much for your attention. That was my part.
Thank you, Ari. Very interesting topics. Now the questions. So, presumably, fiber-based packaging remains a more expensive alternative to plastics in typical end uses. Could you comment on this? What is the typical price ratio from the customer's point of view that makes paperboard a more viable alternative?
What should I say there? I would like to leave this question to somebody else. So, if, for instance, Sari could answer that, but yeah, I'm not sure about that. So, better not comment.
Okay. Then, has the coronavirus pandemic impacted customers' interest in sustainability and innovative produ cts?
Well, I would say so that the simple answer is no. On the other hand, what we can see now, well, I forgot to say one thing, which is very important. It is that during the pandemic, so we have been able to run our R&D project, I would say, very normally.
And for instance, the Excellence Centre and all the labs and so, they have been working very normally there. Of course, this pandemic situation means that the cooperation with the customers becomes a little bit more difficult because you cannot make customer visits. They don't allow you to go to their plants, and it's more difficult to work with new products with customers. So that's, of course. But sustainability agenda as such, I guess it has not vanished anywhere. So it is still there.
Okay. And now presumably this refers to this 3D fiber product that are replacing the plastics. Do you think this will have an impact on group earnings in the coming years, or is it too early to say? So how are these products priced?
It's too early to say because now what we are doing, or what Metsä Spring is doing here, it's first of all, it's a technical study to see that is it possible to produce good quality products at a reasonably good productivity, and then all these things come after that, so now in this first phase, it's a question of developing the technology, seeing that it works, and those things come then later.
Okay, and then still the same subject. How big is the current market you are targeting, and what kind of a revenue potential do you see in the longer term?
Good. That's a very good question. I mean, it depends on how widely you define where do we want to target, and by the way, who is going to target, so this is done by Metsä Group now, this study.
Of course, it's very important for us because we are working with the packaging customers and so. But it can be real big. It can be relatively big. I don't give any exact numbers about that, but we are not talking about Mickey Mouse money.
Okay. Which are the most difficult end uses for paperboards to replace plastic-based products?
Okay. That's also a good question. Those are the products where you need many various different barrier properties. So easy ones are those where you say that, "Okay, I need also only a grease barrier." That's kind of the easy. Or if I just need water barrier. But when you say that, "Okay, in addition to that, I want to have high aroma barrier. I want to have high oxygen barrier," and so, those are the most difficult ones. And when you think about products, so for instance, fresh food is one of those, of course. Yes.
Okay. And if customers already prefer non-plastic products and producers know how to do it, have the technology, so why commercializing taking so long?
Yeah. Again, a very good question. I think there are many reasons. One of the basic things is that although there's a lot of interest for these products in the market, but on the other hand, how many tons are sold, there's a very big conflict between them. There's a lot of interest, but on the other hand, the market still is quite small. Secondly, the technology, how to produce these things, it exists, but it's not easy. And it's for anybody in the industry. It will be very difficult for anybody to come and say that, "Okay, good.
I will put this online on my paperboard machine, and that's it so we can produce the properties." It's not that easy. And the third point, of course, is that, well, there was a question about the price and cost difference between paper-based packaging or fiber-based packaging and plastic, for instance. The new barrier materials can be relatively expensive. That's also one part in the game.
Okay. And which industry needs more than other to have fiber-based packaging? Which industry is your priority to serve first?
No, I didn't understand. Yeah.
I think it's more about the end uses of our products. So if we think, Mika went through earlier about how much folding box board goes to food and food service packaging, consumer goods, and retail. So I think that's the answer in there.
Yes. Exactly. Yes.
And how much is the spend on R&D? How much is R&D to sales ratio?
Well, of course, there's a standard definition. How do you define it? And at us, it's about 0.2%. Now you think that, "Okay, good. This number is real low." It's a relatively standard number in the forest industry. In some other industries, of course, they are spending 5% or something of their turnover on R&D. At us, it is around 0.2%.
Okay. And then still about the barriers. Who do you consult to evaluate that these new barriers are better? Do we have any external consultants who you would mention?
No, not like that. We do a lot of work ourselves. And of course, we also work with our customers. That's the way how we do it. And as I said, we do cooperate a lot with our suppliers. Is it then machine suppliers, or is it then also the raw material suppliers? So that's the network where we get it.
Okay. Thank you, Ari.
Okay. Thank you. Thank you.
And now it's time for a short break. We'll take a five-minute break. So we'll be back at 1:41 PM . See you then. Welcome back. Joining Metsä Board's Capital Markets Day 2020. Before we move on to presentations, I want to remind you about Q&A. So you may submit your questions throughout the presentations by using the question form. You will find that below your video window. Questions will be visible only to me, and I will then address them to the presenters. And I want to remind you of our disclaimer because next two presentations will include a lot of forward-looking statements.
Next, we will hear more about hard figures and facts on Metsä Board's performance during these exceptional times. We're going to hear an interesting view for the future after the pandemic. I want to welcome our CFO, Jussi Noponen here.
Good afternoon, ladies and gentlemen. I think we can all agree that the times we are living in now are truly exceptional. I'm going to talk about our financial performance through the pandemic so far, as well as give some forward-looking views on how the pandemic might change our businesses going forward. Let's start with what I said in our 2018 Capital Markets Day and where we are with those points today. Back in 2018, when this statement was made, the global pulp market was performing strong. Due to our net long position, we gained from that situation.
Now the pulp price levels are clearly lower, which obviously has had a negative impact on our profitability. However, in the current market environment, our paperboard business has really shown its strength. With our current business portfolio, we can deliver solid performance through difficult times while benefiting from the peaks of the economic cycles. In terms of capital allocation, we have delivered according to our views from 2018. We have continued to pay dividend according to our policy. Our balance sheet has remained strong while we have started to modernize our pulp assets in Husum, and already at the end of 2018, we were able to conclude that the profitability improvement and the ramp-up of the new folding boxboard machine had been completed. For many industries, this year has been a tough one.
For us, despite the weak pulp market and the fairly long strike that we had early in the year, this has actually been a reasonably successful year so far, thanks to our strong paperboard business. Let's have a look at that and then see what we think about the life after the pandemic. Here you see how our operating result has developed in the past five years and in the last 12 months. And the line in the graph is the market price of softwood pulp in Europe on an annual level. Our EBIT sensitivity for market pulp price is about EUR 30 million for each 10% change in the price. As you can see, our last 12 months' profitability is roughly in line with the full year 2019, despite the exceptional market conditions in 2020.
First, there was a strike in the finished paper and pulp industry early in the year, impacting our result by about EUR 20 million. And then came the pandemic, which has kept pulp market prices on a low level. As our profitability has not declined accordingly, we can say that the performance of our core business, paperboard, has improved. The strong performance of paperboard is translated into profitability through increased delivery volumes and through lower costs. In this low pulp price environment, our profit sensitivity to paperboard delivery volumes is higher than in normal market conditions. Market prices of energy and some raw materials have declined, but equally importantly, a number of new production records have been made at our mills this year.
Good operational performance is the key in achieving lowest possible unit costs in this industry, while maintaining the superior quality of the products that Sari was talking about earlier, and while our business is performing well, we are prepared to face stormy waters should the macroeconomy suffer more than forecasted. Our core liquidity, including cash and committed bank facilities, is EUR 350 million, and on top of that, we have access to Metsä Group's cash, and we have a possibility to borrow back pension contributions that we have made in the prior years, so using the widest definition of liquidity, we are at about EUR 700 million, and on top of that, there is the project financing for Husum's recovery boiler investment. A total of EUR 225 million of facilities have been signed before the pandemic, with up to 10 years' maturities and at a very low cost.
The remaining EUR 95 million of the investment will be financed through cash flow. And actually, about EUR 60 million out of that 95 million portion has already been paid. The Husum investment will be mainly paid this year and next. As you heard earlier, the startup of the new boiler has been pushed forward to year 2022, which may shift also some CapEx forward accordingly. We will update the estimates when we have the environmental permit secured and the final investment decision made. Our current CapEx guidance is roughly EUR 200 million per year for 2020 and 2021. And on the fossil-free roadmap, as explained in more detail by Mika earlier, by far the biggest investment will be phase two of Husum pulp mill renewal. And that will be implemented later in this decade. The rest of the projects are small or medium-sized investments for us.
Now I would like to highlight that the fact-based part of my presentation ends, and I'm moving on to talk about our views on how the pandemic could change our business in medium and long term. It goes without saying that there are a lot of uncertainties related to what the world will look like after the pandemic. In the short term, we see downside risks related to macroeconomy. These concerns are not specific to our business, but relate to the level of economic activity overall. A key demand driver in many businesses, including ours, is consumer purchasing power. After the pandemic, it's likely that we will start from a higher level of unemployment, which will reduce purchasing power. A lot of stimulus has been used, and the levels of sovereign debt have substantially increased.
And if there will be political will to repay that debt, then it probably will mean higher taxes, which again leads to reduced purchasing power. And then there is the psychological element. If the consumers will start building financial buffers, it could again be negative for consumer spending. So with those macro elements, we see a risk that the short-term market growth for us could be below the 2-3% trend line that we have seen historically. But then there are structural impacts from the pandemic on different levels: consumer behavior, corporate behavior, and regulation. And from that, we see substantial upside potential for our business, possibly accelerating our medium to long-term growth even above the trend line. The growth of e-commerce has accelerated during the pandemic, and we estimate that this step change that has been achieved will be sustainable also after the pandemic.
A very interesting segment in e-commerce for us is food retail. There is an extra leg of logistics from the retail shop or from a distribution center to the home. And the consumers want to have their packaging looking good when they unpack the groceries at home. So we see that it will increase the demand for packaging strength and create opportunities for strong packaging materials, such as folding boxboard. We also see higher requirements for safety and hygiene. This was already covered in Sari's presentation earlier, so I'm not going deeper into that. Then, due to the sharp decline in printing and writing paper demand, which we believe may not fully recover to the pre-pandemic levels, the availability of recycled fibers will be lower and may accelerate the shift from recycled packaging to fresh fiber-based packaging.
Mr. Ismo Nousiainen, CEO of Metsä Fibre , will say a few words about the balancing between recycled and fresh fiber in his presentation. The fourth point is that the shortage of goods and raw material caused by the pandemic and experienced by both consumers and manufacturers may cause corporations to reevaluate their global raw material and manufacturing strategies. As automation will level out at least part of the traditional labor cost arbitrage, we see possibilities that production of consumer goods will be at least partly resort to our main markets, Europe and North America. For the most critical supplies, there is a possibility that there can be even governmental guidance for reshoring. With these four elements, we see a good possibility to compensate for the potentially weak macroeconomy and to achieve healthy growth also as going forward.
And then, to summarize the key takeaways, Metsä Board is well positioned to succeed during the pandemic. We have the right product portfolio, and our financial position is strong. The company is now in the middle of a more CapEx-intensive period. Through those investments, we maintain and further enhance our leadership in sustainability. And looking beyond the pandemic, we see that the changes in consumer and corporate behavior open up new business opportunities for us. Thank you.
Thank you, Jussi, and to the questions. In terms of the second half of the year, how do you see your key product prices, volumes, and cost trending compared to the first half?
If we start from costs, during the second quarter, we saw cost deflation as well as exceptional performance from our own mills, and now going forward for the third quarter, we see flat costs quarter on quarter. In terms of product pricing, it's fairly stable, as was discussed earlier in the presentation, so especially for folding boxboard, the price negotiations for next year are just about to start. In terms of volumes, there are seasonal differences, but the big picture is that we continue at basically full utilization going forward.
Okay. Then what is the expected CapEx for the second part of the Husum pulp mill renewal?
The first phase of the renewal is estimated at EUR 320 million, and we have said that phase two will be roughly in that same scale.
Then what is the share of e-commerce in your business? Has it grown, and how do you track this?
I think it was covered in Mika's presentation already, and especially from the line r board side. And as you saw in my presentation, we see now new opportunities that are not directly e-commerce, but perhaps changes in packaging requirements that are driven by e-commerce. But those are longer-term things.
Could you comment about the expected earnings impact from FX changes in the second half and also in 2021?
Our hedging norm is six months forward, and with the U.S. dollar, we are at that norm level. So we will start seeing the negative impacts of the current FX rates from the first quarter onwards. And with the Swedish krona, we have a slightly longer hedging duration. So impacts there will be seen from the second quarter onwards next year.
Okay. And still coming back on the last pictures, what you had, do you expect the market growth to be higher in the future than the historical 2%-3% growth rate?
That is, of course, difficult to say exactly, but as said, we see potential that it can be higher even despite the not-so-good starting point after the pandemic with the weak macro.
Okay. Then bridge to the next presentation. How will Metsä Fibre 's Kemi investment be financed? Might equity injections from the owners, including Metsä Board, be needed?
So far, the plan is that the company will self-finance through cash flows and external debt. But I leave it for Ismo Nousiainen to comment further if he likes.
Okay. And then could you remind us of the expected earnings impact of the current investments in Husum and when these gains will be visible?
The startup of the new boiler has been pushed forward to year 2022, so we will gradually start seeing the improvements from late 2022 and then the following years. It takes some time to fully materialize the benefits, and we are talking about EUR 30 million-EUR 35 million cash flow improvements from the first phase of the investment, and what comes to the second phase, we will then comment more specifically when the time is to make the investment decision for that.
With Kemi pulp mill increasing your net sales position in pulp to about one million tons, do you see it as a factor encouraging you to increase your paperboard capacity? And what do you see as a likely timeline for considering potential paperboard investment?
The timing, I guess, was covered by Mika already, and how we see the net long position in pulp is so that it's a good basis and platform for adding paperboard capacity as going forward, but at the same time, it's fair to say that the current and the future net long position that we have, it's more than enough for any foreseeable growth in paperboard.
Okay. Thank you. That was all.
Thank you.
Okay, and let's move on to our last presentation. Our colleague from our sister company, Metsä Fibre , of which Metsä Board owns 24.9%, CEO Ismo Nousiainen, will open up Metsä Fibre' s performance and future plans and give his view on the global pulp market. Please, Ismo.
Thank you, Katri. Good afternoon, ladies and gentlemen. In my presentation, actually, I have two main messages. Global pulp market, and especially the softwood pulp market, in our perspective, remains attractive in the longer term. And the second message is that we are continuously improving our cost competitiveness, and now we have also a growth plan through our investment plans. But let's start from the Metsä Fibre as a company briefly, what we are today. Our pulp capacity is 3.2 million tons, and the share of market softwood pulp is 2.4 million tons. Actually, we are the biggest market softwood supplier globally. Then we have also sawn timber production. Our production capacity in sawn timber is 1.9 million cubic meters. We are the biggest sawn timber producer here in Finland, but globally, we can say that we are in the middle class in sawn timber. Then we have also other bioproducts.
Traditionally, we are producing tall oil, turpentine, in conjunction with pulp production, and also bioenergy. We have put a lot of efforts during the last years so that we can increase the share of these bioproducts. For example, nowadays, we represent about 10% of renewable electricity production here in Finland and totally 14% when we are looking also at our wind park, which we are delivering to the outside use, for example, in municipalities' power plants. We want to increase the share of these other bioproducts also in the future. We have our own bioproduct concept, which we are utilizing when we are renewing our pulp mills. Then when we are looking at our pulp deliveries, in 2019, internal use in the group was 0.8 million tons, and the rest is divided equally to the EMEA market area and the Asia market area.
When we are looking at the end uses, tissue paper, printing and writing paper, and board, they have the same weight in our product portfolio. Of course, these shares differ when we are looking at the different market areas. When we go to our key financials, we had a very strong year in 2018. Of course, it was then we had a good demand for the softwood pulp. Also, the prices were very high here in Europe. The price level was average $1,160 per ton. When we go to 2019, the prices went down here in Europe and also in the Asia market. Now when we are looking at the first half of this year, we have the negative operating results, and this is because of three things, actually.
The strike, what we had in the first quarter, and then we have lower deliveries comparing to the last year, and price level is low, then if we look at our cost competitiveness and what position we have nowadays in the softwood, here in the right picture, there are the companies who are in the market softwood pulp, their mills' technical age, and average mill capacities, and we can see that we are in the strong corner so that our mills are averagely they have low technical age and also high capacity average. We can see that a lot of capacity is there in the area where the technical age is quite high and the average capacity low, then when we look at the cost competitiveness in the Shanghai port, there is the curve where is the total capacity in market softwood.
Our Äänekoski bioproduct mill is in very good position in this curve, but also the other mills, Rauma and Joutseno mill, they are positioned well, and the Kemi mill, but Kemi is actually the thickest when we look at our pulp fleet, and therefore, we have now the pre-engineering study ongoing in the Kemi so that we are planning to invest in new bioproduct mill there so that we can replace the existing pulp mill and increase the capacity to 1.5 million. There will be increased the capacity to 0.9 million when we compare to the existing pulp mill. The investment will be EUR 1.5 billion, and we are putting a lot of efforts here to the energy efficiency, to resource efficiency, and environmental permit. Now we are expecting that we are getting the readiness to make the final decision by the end of this year.
With this schedule, the startup of this mill will be 2023. We have also investment in the sawn timber side. Actually, we made the decision to invest the world's most modern sawmill in Rauma in March. The capacity of this sawmill will be 750,000 cu m , and it is tightly integrated to our existing pulp mill in Rauma so that we are utilizing the excess heat from the pulp mill to the sawn timber production, and the sawmill chips we are utilizing as raw material in the pulp mill. We have also planned to utilize the sawdust as a fuel in the pulp mill side so that we can replace the oil there in the process, and in this way, we can reach the total fossil-free integration also in the Rauma. There are our investment plans. Then I want to move to the pulp.
Of course, first, it is interesting what is the situation today. Here we can see what has happened in the demand totally in the market pulp during the first seven months, six to seven months, yes, six months. The increase has been 6%. It's about 1.7 million tons when we compare to 2019. And this is due to the good demand from the tissue side, good demand from the carton board side. And of course, we have to remember that in 2019, at this same time frame, there was the stocking in the customers, so the deliveries were restricted. But the demand has been quite good if we look at what is the situation totally in the world. Of course, we have waste in the printing and writing paper sector. The demand declined a lot during the last months.
Then when we look at the rest of the year, the one issue is that the supply is restricted because many, many companies who had planned the maintenance shutdowns during the first half have moved and postponed them to the second half, like we did also in Äänekoski and Rauma mill. This will restrict the production. And also there have been quite big restrictions, especially in Canada during the summer months. Actually, in July, there were totally 170,000 tons restrictions. And they will affect the market balance in the second half of this year. Then if we look more precisely at the market situation in Europe, in Europe, when we look at the overall market pulp demand, it has been slightly below the average long-term levels during the first half of the year.
We know that tissue and hygiene paper demand has, and they picked up in March in the beginning of the coronavirus pandemic, but they have now normalized. Good demand in packaging papers has remained, and like I mentioned, the printing and writing paper sector is struggling now, but we believe that there will happen some rebound now in the second half. In China, the paper production has increased significantly, and it's due to the fact that the domestic demand has improved there, and there were also a lot of paper production curtailments earlier this year, and it has helped to keep now the full production in the paper and board sector. Tissue has also normalized there. Packaging materials have been good, and inventory levels have decreased. Nowadays, the total estimate is 1.8 million tons. When we are looking at the normal level, it is about 1.2 million tons nowadays.
But what we have done also in the China market, we have implemented the price increases, and we have announced the price increases also in September. So there is the situation what is today in the pulp market. Then if we look at the longer term, what is happening in the pulp market, and especially in the softwood pulp market, I want to start from the history. What has happened in the end uses when we look at the softwood pulp and hardwood pulp, and when we compare 2010 to 2017, we can notice that the share of printing and writing paper has decreased quite much from 37% to 27%. And at the same time, the tissue has risen to 37% to 44%. Paperboard specialties have been more stable in this share in their shares. In the hardwood pulp, there is the same trend.
What we expect in the future is that this trend will continue so that the share of printing and writing paper will decline by 2027 to 18%, but at the same time, the tissue will increase the share to 47%. So when we are looking at the demand development in the future, t he printing and writing paper demand is declining, but because this segment's weight is not anymore so high what it was in 2010, the growth in the tissue, the packaging, and specialties are compensating very well this decline, and actually, we have the growth in softwood pulp demand. So when we are looking at the growth, we can see here that the growth will continue. The pace is not so high what it has been earlier, but there is clear growth. The same trend is in the hardwood side.
Then, when we look at the capacity situation, what is the capacity situation now in the next few years? We can notice that we have three confirmed hardwood pulp mill capacity investments, but we don't have any softwood pulp capacity increase investments. There is only de bottlenecking investments. And if you look further, what is happening in the softwood capacity side inside, the fluff and fluff demand is increasing, and it is leading to a situation that from the paper grade pulp mills are moving more to the fluff pulp. There is a 1 million tons capacity in the paper grade side, which can also produce the fluff, and in the future, because the fluff pulp is increasing and demand is increasing, they are shifting more to the fluff pulp. Same has happened in the dissolving pulp.
There have been many projects where companies have changed from paper grade to the dissolving pulp, and also many pulp mills have changed their production to the unbleached side. So actually, in the paper grade softwood side, the capacity is decreasing. And this means that when we are looking at the demand capacity ratio, it will rise in the future without the new investments. And we see that there is room for new investment, and therefore, we are planning to do the Kemi bioproduct mill investment. So, like I said about my main message, we are keeping us in good position in cost competitiveness. We have the excellent cost and production efficiency. We are improving all the time our sustainability. We are putting a lot of effort into the environmental performance, to resource efficiency, and also energy efficiency. And the pulp is a growing business. Thank you.
Thank you, Ismo. Very encouraging news in the perspective of softwood pulp. And now to the questions. So according to recent data, pulp producers' inventories globally are still somewhat high. What is your view of pulp buyers' inventories in Asia? Are they low or high?
We don't have the exact numbers there, but from the hardwood side, I believe that they are higher than normal. But in softwood, I think that they are close to the normal levels.
Okay. And then continuing, do you see potential for higher prices this autumn in China?
Yes, what I said that we have implemented now the price increases, and I believe that if this kind of trend, what is happening now there, that this domestic demand is rebounded, really, I believe that there are possibilities to make the price increases.
And then where would Kemi mill stand in cost curve after the potential investment? How would it compare with Äänekoski mill?
Sorry, I didn't mention in my presentation that in this slide, but we are going to the same or even lower level what we have in the Äänekoski.
Okay. How do you see the Chinese waste directive regarding the recycled fiber to affect the global balance and flows between virgin fiber and OCC, and does it have any impacts on Metsä Fibre ?
Of course, when this recycled paper situation is coming, so when we are looking at what is happening in the printing and writing paper side, it means that we will not have so much recycled paper in the future. And of course, it gives room for the virgin fiber.
In China also, what we have witnessed, of course, they have moved their production outside of China a lot nowadays where they are using the recycled fibers, but there is also some they can replace some amount with the unbleached pulp. There is also a reason why some companies are changing their production more to the unbleached pulp side.
Okay. Current price spreads between softwood and hardwood are relatively high. Do you see room for even higher spreads going forward?
Yes, that's right. When we look at the history, there is even higher spread in the softwood and hardwood has been, but of course, there is the fact that it can't be very, very high that there has and has to be happened also in something in the hardwood side in the pricing.
Yes. And how do you see NBSK prices developing in Europe for the rest of the year?
Europe is more a question mark. Now, when we are looking now, what we have seen in China, when we compare that to Europe, and I believe that now we are in the bottom in the prices in Europe, and we looked at how the European market is rebounding in economic growth and so on.
And in terms of market pulp demand, you pointed to 1.7 million tons growth up until July. What do you expect for the full year and in 2021?
It depends what happens in Europe, especially how the European market is rebounding. We see that in Asia it's going quite well, and I believe that it will be going in the rest of the year. So it's a little difficult to say.
Now, when we look for the analysts, what they are saying, they said in April, in May that there will be a very big drop in the pulp demand, but they have revised now their announcement that it is more a little this drop in the pulp demand, but it's a little difficult to say and too early to say.
At this stage, yes. So with the environmental trends in mind and potential change in consumer preferences, what is the outlook for bleached pulp? Totally the bleached pulp, what is that? Just only bleached pulp.
Only bleached pulp. It's good. Actually, I want to mention here that this northern softwood pulp especially, when we look at the softwood totally, there is the southern softwood, there is the radiata, and there is the northern softwood.
Especially in the northern softwood, we see, like I mentioned, a good future because the capacity is decreasing, but the demand is increasing. And I see that the future is good.
And you don't see any? I think there was a little question of the environmental side, so no.
No, I don't see any because, like I said, that we have put a lot of efforts to the environmental performance in our mills. For example, now when I compare to the existing pulp mill in Kemi and what we have planned now, the bioproduct mill, we can decrease the absolute level, the emissions to the water. Even we are increasing the capacity 2.5 x higher. So there has happened a lot.
Yes. And do you expect to see integrated pulp capacity moving into the market pulp segment due to the graphic paper capacity closures?
Yes, and there has happened some amount of these kind of changes, but I believe that they are not very long. In the longer perspective, they don't have a very big effect to the supply.
Okay. And then a similar kind of question. So do you see integrated capacity and/or dissolving pulp capacity in the softwood markets in Europe or Asia?
The question is that what kind of effect there can have to the market balance or.
Yes, yes.
If you look at the situation today, the dissolving market and dissolving market situation is very weak, even weaker than what has been in the pulp market. And of course, it has led to the situation that there is some producer which has moved back to the paper grade.
But I believe that when the situation is more normalized, the dissolving pulp market is going back to the normal, and they are producing the dissolving because they have invested to make the dissolving pulp, especially.
And in terms of total market pulp inventories in the value chain across the world, how much higher are we than historical averages?
Our company or totally in the world?
I think this refers to a big picture. It doesn't mention Metsä Board.
In big picture, now the latest inventory levels are 46 days in the softwood and 41 days in the hardwood, and hardwood is in the average level. But in softwood, we are higher than average because the average level is somewhere in the 30-34.
Fair enough. Okay. That was all. Thank you.
Thank you.
Thank you, Ismo. Okay. And now it's time to wrap up the day. Before we move into that, I want to thank you on my behalf for joining us today. Hopefully, the day has been helpful, and you have now a better understanding of Metsä Board, Metsä Board's business and its key drivers. But now I'll let Mika do our closing words. Please, Mika.
Thank you, Katri. Okay, to close this session. So first of all, I would like to say that the recent development has been good. Our strategy, I dare to say, has proven to be the winning strategy. We have solid performance, good demand, as we heard earlier today. Customer kind of satisfaction is good at good level, as we heard from Sari. Operational efficiency, that's very good at the moment. We had a record high production in second quarter. We have never ever produced more paperboard than in April, June.
That shows that efficiency is in place. Then there is good profitability and strong cash flow in the paperboard business. This is naturally not possible without skilled people. As I mentioned in the beginning, our key priority is the safety of our employees. That will be the case also in the future. We need to be prepared. The world around us is in turbulence. There is turbulence, and we are not immune to that, as we heard in my presentation and also in Jussi's presentation. We will continue to create shareholder value through our clear and focused strategy. Our ambitious target is to be a real leader in sustainability. We want to be, as we heard from Sari then, the number one choice for our customers, and we need to provide premium products and services in order to be there.
Ari went through our plans and our status as far as the innovation and collaboration with the customers are concerned. Very, very good initiatives there. And then, of course, we are looking forward to physically be able to utilize the Äänekoski Excellence Centre , ASAP. Then in Jussi's presentation, I think, of course, he went through our numbers and our financing and so on. But then what was interesting was that potential new business opportunities after this COVID-19 pandemic is over. So it remains to be seen what will happen. And then Ismo told us, and I fully agree, and it's an excellent thing that pulp remains a growing business. Also in the future, even though writing and printing papers are in consumption decline, but then there are other areas, other end uses that will then grow. So I hope that the day has been useful for you.
Thank you very much for your participation. And also I would like to thank Katri for facilitating us, and then also Sari, Ari, Jussi, and Ismo for the good presentations. I wish that everybody could have a nice start to autumn, and most importantly, I hope that everybody can stay safe. Thank you very much.