Seeing the Field and the Forest

At a delivered price5 of ~US$345–380/ADt, our modeling finds Next Gen pulp would reach ~8% (on average across modeled assumptions) of an optimal high-performance FBB furnish by 2028. Industry reviewers consider this cost range plausible in major paper packaging-producing regions for inputs such as wheat straw residues and sugarcane bagasse. The higher end of this range reflects greater willingness to pay for Next Gen pulp when mills appreciate its ability to diversify exposure to wood price risk or when policy costs emerge; for example:

• The maximum supported Next Gen pulp price rises modestly from ~US$345 to ~355/ADt as mill risk appetite declines, when Next Gen pulp prices have half the variance of hardwood chip prices and do not move too closely with wood prices.

• A 10% upward adjustment to average wood prices further increases willingness to pay up to ~US$380/ADt as the relative savings and stability from Next Gen pulp use increase.

• An illustrative deforestation due-diligence cost, modeled on the EU Deforestation Regulation (EUDR), for virgin wood fibre in board placed on the EU market and in scope, raises the supported Next Gen pulp price to ~US$365/ADt, and up to ~US$380/ADt when the value of hedging against wood price volatility is also considered.

At the current 10% technical limit for the high-performance FBB modeled, Next Gen pulp is restricted to the middle layer and replaces relatively low-cost hardwood chips pulped at the mill. If improvements in pulp quality, consistency, or mill processes allow Next Gen pulp to be used in additional layers while maintaining product performance, it can replace higher-cost bleached hardwood kraft pulp (BHKP). This materially increases the maximum supported Next Gen pulp price from ~US$345-380 to ~US$460–595/ADt, leading to higher adoption that rises from ~10% in 2028 to ~20% by 2030.6 Some virgin wood-dependent consumer paperboards may already be able to use up to 30% Next Gen pulp because they have less demanding product specifications than the high-performance FBB modeled. These products may sell at lower prices, but lower input costs could support similar or even higher margins, with additional upside where brands value higher Next Gen fibre content, for example, due to product differentiation or sustainability goals. It is reason­ able to expect that as Next Gen receives more investment and commercial­ ization focus, there will be significant improvements in Next Gen processing and performance just as with renewables and other materials and tech­nologies as they’ve scaled.

Starting with 5–10% inclusion today builds the operating experience needed to increase Next Gen pulp use and identify where product specifications can accommodate higher levels. Put another way, it creates a strategic option to unlock higher inclusion levels of 20% by 2030 and 30+% after 2032, with greater savings and risk diversification benefits. Further scaling its use over time also aligns with the market’s broader and continued shift7 towards more regional and diversified supply chains as companies seek to reduce geo-political, trade, and supply risks.

Scaling opportunities will vary within and across regions, reflecting the type, concentration, and existing uses of locally available agricultural residues, the processing they require, nearby pulp and paper infrastructure, and the end products they can serve. India and China, for example, combine large, diverse residue streams, including cereal straws and sugarcane bagasse, with extensive experience in non-wood papermaking and large-scale paper manufacturing bases. Brazil’s highly concentrated sugarcane industry creates a particularly large bagasse opportunity alongside an established pulp and paper sector. Europe and North America offer more geographically specific combinations of cereal and other crop residues, existing mills, processing innovation and downstream demand. Southeast Asia generates large volumes of rice straw, along with bagasse and oil palm residues already collected at sugar and palm oil mills, and has a fast growing paper packaging industry. These differences will shape where Next Gen pulp capacity is most competitive, which technologies are needed, and which paper and packaging applications are best suited to each location.