DS Smith has invested £104 million to buy and modify M-Reals New Thames Paper Mill (NTPM) to take advantage of a growing market for recycled corrugated case material (CCM).
The deal is part of DS Smiths plan to produce CCM at its own mill at Kemsley, Kent, which is next to NTPM. The company has also bought the 50% balance of Grovehurst Energy, which supplies NTPM energy and services.
DS Smith chief executive Tony Thorne explained: This development will strengthen our important UK Paper and Corrugated Packaging business and give us significant capability in the growth segment of high quality lightweight CCM paper.
DS Smith said that demand for CCM is about 25 million tonnes and is estimated to have grown by about 2.5% in 2007. About 80% of the CCM used in Europe is made from recycled fibre.
Following recent economic forecasts, DS Smith estimates that annual growth in the European CCM market during 2008-2010 will be about 2.0% a year, within this, growth in western Europe is expected to be about 1.5% a year while growth in central and eastern Europe is expected to be 6-7% a year. Based on this forecast, DS Smith estimates that there will be an increase in demand for recycled CCM of 1.5 million tonnes by 2010.
To develop this opportunity, £37 million will be used over the next 12 months to modify NTPM and production of CCM is expected to start in January 2009.