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Klabin, Brazil’s largest producer of packaging paper, has captured significant attention in the highly competitive global forest products industry for its innovative approach after launching a kraftliner made of 100% eucalyptus, known as Eukaliner.
It achieved this while also bolstering its portfolio of softwood-based products, including the production of fluff in a country where all new projects focus on bleached eucalyptus kraft (BEK) pulp.
Under the leadership of chief executive officer Cristiano Teixeira since 2017, the company has offered a compelling narrative of strategic growth and diversification of its portfolio, reporting 20 billion Reais ($3.6 billion) in net revenues in 2024, up by 9% compared with 2023.
After being named Fastmarkets Forest Products’ Latin American CEO of the Year for a second year, Teixeira now has the company in deleveraging mode after starting up two PMs and a new large corrugated board plant in recent years.
He is also maturing Klabin’s next growth cycle that considers softwood as a key element, while looking to opportunities in the recycled paper market.
“The core strategy for Klabin continues to be differentiation through softwood,” Teixeira said in an exclusive interview with Fastmarkets. “This characteristic allows the company to create niche products, a broader portfolio, with higher added value, enabling the company to make products that are currently produced [only] in the Northern Hemisphere.”
Klabin’s stronger presence in the southern states of Brazil, including Paraná and Santa Catarina, is both a strategy in the softwood market and a protection against climate change, because these are colder areas that allow high productivity in pine tree plantations.
“If we were playing the eucalyptus ‘game’ alone, we’d obviously be in other states [in Brazil, such as Mato Grosso do Sul], working with more commoditized products,” Teixeira said.
Klabin’s long-term vision with softwood, he explained, is also connected with the fact that the company still has family members as important shareholders, now into the fourth generation, and they see paper products aligned with major trends of consumption, and consider softwood a low-risk investment.
“We can’t lose sight of the fact that the pulp and paper sector has largely migrated to corporations, which primarily aim [to give a] return to invested capital,” Teixeira said. “We also have that, but it’s not just about that. There’s a legacy that cannot disregard the long-term vision.”
In his view, products made of eucalyptus remain very important in the company portfolio, but a smaller percentage of consumption will come from softwood products, serving high-end products in the sector and commanding a higher premium. “That’s where we want to be,” Teixeira said.
Because of that, Klabin has been telling the market since late 2022 that it has plans to add new large capacity for softwood fluff pulp in Santa Catarina state, increasing the company’s capacity to around 1.2 million tonnes per year. The project was expected to be subject to board approval after the current deleveraging process is concluded, expected by late 2026.
“From a trend perspective, we still see an ageing population and increased income among older people,” Teixeira said. “People are taking more care of themselves. For us, fluff is a winning product for the long term.”
On another front, Teixeira also has been consistent in saying that Klabin’s next paper expansion should be focused on recycled paper, with a new 450,000 tpy unit to be installed close to its Piracicaba packaging unit in the next few years.
According to Teixeira, the radical shift from virgin paper to recycled is a natural move for the company, with Klabin firing-up two PMs focused on virgin paper in recent years. The idea is to boost capital return while diverting more volumes ftoor export markets that need virgin fiber, replacing products made at higher cost and older mills. This move, he said, is already taking place with the rising number of capacity closures in the northern hemisphere.
But he also recognized that it is clearly difficult for virgin pulp and paper producers to get a return on invested capital.
“There is a difficulty in the market in recognizing the value of forests and forest assets within the company’s own market capitalization,” Teixeira said. “As well as Klabin, this applies to several other companies in the sector. The market cap doesn’t manage to take account of the forests Klabin has, leaving aside state-of-the-art equipment, technology, human resources, and all the attributes of a company such as this.”
Teixeira said that, besides the valuation issue, the paper sector also faces strong and “unfair” competition from plastics, an industry that only recycles 10% of its output capacity and is a byproduct of petrochemicals in general.
“In this context, we need to remove the forest from the cost base,” Teixeira said. “Use of virgin fiber must stay with those [products] that need its technical aspects, such as for moisture resistance and food contact. For the rest of the market, the company must remove the forest base cost by making more recycled products.”
Unlike its peers in the region that focus on BEK pulp, Klabin operates in various sectors of the paper market and is quite diversified, while still operating in pulp. According to Teixeira, managing a wide portfolio demands commercial expertise and an ability to operate in various markets, combined with dynamic operational planning.
But BEK is also important for the business, he said, as a quick generator of cash when needed, while in the packaging sector less-commoditized products protect the company’s investments, including carrier board and liquid packaging board.
“In the kraft market, we want to convert as much as possible in corrugated boxes,” Teixeira said, adding that the goal was to have the lowest production cash cost among the various sectors.
After the breakthrough launch of Eukaliner, Teixeira said that there was much more to come in terms of technology.
“We invest a lot in increasing the recyclability of some of our products, in the creation of barrier coatings that are biodegradable, and in products that can [substitute for] single-use plastics,” he said.
Klabin must pick its battles, however, Teixeira said. “I don’t believe paper needs to be competitive on all fronts,” he said. “Paper has to be where it makes sense, and every industry must have a commitment to recycling. Recycling is essential in the global vision over the next 20 years.”
He believes that the development of technology with a low production cash cost is what makes Klabin a successful example in the industry.
“We always keep operational efficiency in sight, and it’s the combination of this [with development of new technologies] that allows us to maintain the company’s central vision,” he said. “I do not want us to become a company too focused on innovation and to loses the essentials of competitiveness and cash cost. Also, there is no use focusing on efficiency and losing sight of the differentiation of products for our clients.”
Klabin currently manages 911,000 hectares of forests in Brazil, of which 41% are intended for conservation. Because the industry is dependent on climate, rain and soil quality, Teixeira is aware that climate change has already started to have an effect on the highly productivity regions of the world, including Brazil.
Maintaining the productivity curve measured by MAI (Mean Annual Increment, cubic meters per hectare per year) will be a challenge in the coming decades, because a reduction in precipitation, combined with an increase in average temperatures, is creating risks of stagnation or even decline.
The productivity of Klabin’s eucalyptus forests is 54 m³ per ha per year, and 39 m³ per ha per year for pine trees, but at recent planting Teixeira said that in some cases productivity of eucalyptus was more than 60 m³ per ha per year.
All forestry development is achieved by the traditional method of cloning trees, due to limitations imposed by certification agencies such as the Forest Stewardship Council (FSC), but Teixeira believes that discussion should move to protecting the future.
“We believe that genetically modified individual trees may become a reality in areas most affected by drought, and this is perhaps the biggest challenge for the sector now,” he said. Due to climate change and the need for a giant site to produce millions of tonnes of pulp, producers may need more land and to source material from much more distant locations.
“The cash cost tends to increase if there isn’t significant evolution in productivity, which we don’t see in natural selection,” Teixeira said. “The need for a lot of land for the sector – at a time when the world demands higher capital costs and interest rates, in a sector that is already very capital-intensive – is a threat. [Forest productivity] may reach a point where only genetic enhancement will bring improvement.”
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