Mercer International Inc.

Q1. From a CEO's vantage point, how do you see the global pulp and paper industry structurally evolving over the next decade, especially amid shifting demand patterns and sustainability pressures?

What we are witnessing is a significant rationalization of assets across the industry. Assets that are no longer competitive are being decommissioned or redeployed into something entirely different. We have seen a great deal of that with paper mills converting to packaging, or pivoting to other offerings simply to preserve the viability of those assets and deliver some return rather than shutting down entirely.

This is a direct consequence of the secular decline in paper consumption. Other market segments continue to grow, including tissue, packaging, and specialty papers, so there is still movement and opportunity. But the transition from what assets used to look like to what they can become is very real and very present.

On the pulp side, it is a question of competitiveness. New assets built today are incredibly competitive, operating at a scale and efficiency that simply cannot be compared to what was constructed 20 or 30 years ago. That puts older mills at a genuine crossroads: is there a way to produce something distinct, something niche, something that sustains competitiveness over time? Doing the same thing, just marginally better, will not be enough in the long run.

Q2. Many predict consolidation and capacity rationalization across regions. How do you assess the balance between scale, agility, and resilience in future pulp and paper enterprises?

I touched on some of this in the first question, but I would add one critical element that often receives insufficient attention: access to fiber.

If there is one thing that is foundational to any pulp venture, it is the resilience that mills derive from their fiber supply. What was once taken for granted, an abundance of accessible fiber, is no longer the case in many regions. In fact, fiber constraints are now a direct driver of closures and asset rationalization in certain markets.

So when we think about consolidation or what will determine the winners and losers in this industry, the prediction is very much tied to forests and to the relationships mills have built around fiber access.

Access to fiber is fundamentally relational. It is about proximity to the right people, about logistics infrastructure that gives you an advantage, about offering something meaningful in return so that suppliers choose to stay with you. It demands that we work much more closely with our sources and suppliers, building long-standing, loyal relationships grounded in shared values and mutual benefit. Not transactional, but genuinely additive for both sides.

Q3. Sustainability has moved from compliance to strategy. How is leadership redefining value creation in pulp and paper beyond traditional cost and volume metrics?

As the world advances, so do the technologies available to us, creating opportunities to go well beyond what our assets currently deliver from an environmental perspective. Carbon capture is a clear example. It is a reality today, not a future aspiration. It can make our assets far more sustainable than they already are.

But we cannot simply rest on the fact that we work with biogenic carbon or that our raw material comes from managed forests. The real work is in the process itself: how do we continuously improve it, reduce our impact, and extract more from less?

Water consumption is the next major frontier. After greenhouse gas emissions, I believe water will be the area where our industry will be required to invest significant attention and resources. It is a precious natural resource, and pulp manufacturing is a significant water consumer. Reducing that consumption is not just an environmental imperative; it is increasingly a social and reputational one, particularly in regions where water availability is already constrained.

Q4. What role do you see advanced fiber technologies, alternative raw materials, and bio-based innovations playing in redefining the industry's long-term competitiveness?

This is central to our strategy at Mercer. The question we are asking ourselves is: how do we convert our pulp mills into genuine biorefineries? If we remain content to be pulp mills that produce pulp, we are only scratching the surface of what these assets are capable of, and we are being too complacent about the opportunity at hand.

The real work is in what else we can extract and create. Black liquor is a strong example: what can we do with that byproduct? What can it be converted into? At Mercer, we are advancing our lignin research. Others in the industry are pursuing nanocellulose. There is also significant innovation in alternative fiber sources, including straw, bagasse, and hemp, which can potentially deliver high-quality pulp at a lower cost base.

On the finished product side, molded fiber packaging is an area of growing opportunity. As the world seeks sustainable alternatives to plastics in packaging, pulp-based solutions are well-positioned. The innovation agenda spans the entire value chain: the fibers we use, the processes we apply, and the products we ultimately bring to market. 

Q5. Digitalization is transforming asset-intensive industries. How can pulp and paper companies effectively leverage Industry 4.0, AI, and advanced analytics without compromising operational reliability?

We are just beginning to understand what is possible here, and the honest answer is that we are still at the early stages.

When I think about artificial intelligence and where it offers the greatest potential for our industry, predictive maintenance and predictive reliability come to mind immediately. Equipment failures in pulp mills rarely happen without warning. There are signals, early indicators embedded in vibration patterns, temperature readings, and other operational data. The challenge is capturing all that data, synthesizing it, and using it meaningfully so we can intervene before a failure occurs rather than after.

The infrastructure required is substantial: instrumentation, sensors, and data integration systems. But the return on that investment in terms of uptime, production efficiency, and reduced maintenance costs is very real.

Beyond reliability, there is also significant potential in simulation. If you can model operating conditions and anticipate problems before they occur, such as web breaks in paper machines, you begin to unlock a fundamentally different kind of operational performance. Systems integration is key to all of this. You need a common architecture where data from every part of the operation speaks the same language and informs the full picture. 

Q6. Energy efficiency and decarbonization are now boardroom priorities. How should industry leaders approach the trade-offs between capital investment, operational risk, and climate commitments?

The framing of this as a trade-off is part of the challenge. When you look at it correctly, investments in environmental performance are not simply costs. They are strategic investments because the world is changing, and customer requirements are changing with it. We will live in a future where customers, and their customers, will simply not purchase from suppliers who cannot demonstrate environmental credibility. It becomes a necessity for continued market participation.

A concrete example from our own operations is the lime kiln project at Mercer Stendal. This project yields benefits on multiple dimensions simultaneously. It responds to what our customers want to see. It is also economically advantageous because using biomass and wood residuals as a fuel source is, in our case, more viable than continuing with natural gas. We are uniquely positioned to capture that value because we have access to lower-value wood residual streams that others may not.

So the message I would offer to other leaders is this: look past the capital expenditure line and examine the full value equation. When decarbonization investments align with operational economics and customer requirements, the case for action becomes much clearer. 

Q7. Packaging demand continues to rise while graphic paper declines. How should leadership teams rethink portfolio strategy to remain future-ready without overexposure to cyclical markets?

It goes back to what I said earlier: mills must transform themselves. Some will, and some will not, but those that do not adapt will ultimately face closure as demand for graphic paper continues to decline. That trajectory is not going to reverse. Digitalization has eliminated any realistic path back for that segment.

I would put tissue in the same transformation conversation. These are the areas of growth, and mills with existing infrastructure need to honestly assess whether and how they can participate in those growth segments.

The question is not whether change is needed. It is whether leadership has the courage and the strategic clarity to pursue it decisively before the window closes.

Q8. In an era of increasing regulatory scrutiny and ESG expectations, how do you see the role of CEOs evolving in shaping transparent, credible sustainability narratives?

Transparency is the foundation, and it is more critical than ever. We have publicly made long-term sustainability commitments. We affiliate with credible, respected bodies that can independently verify what we do and how we do it. That verification is not incidental; it is the mechanism by which transparency becomes meaningful.

The risk of greenwashing in our industry is real. When organizations simply say what they believe will sound favorable, without concrete actions and independently verified data to support those claims, they undermine trust across the entire sector. Third-party verification is the cornerstone of credibility. It is not just what we say, but what others, rigorous external parties, confirm about our performance.

For CEOs, the role has evolved from spokesperson to steward. We are accountable, in a very public and verifiable way, for whether our commitments translate into outcomes. 

Q9. Supply chain volatility, from raw materials to logistics, has become a strategic concern. What lessons should the pulp and paper industry take from recent disruptions?

The most important lesson is simple but often undervalued: always have a Plan B.

You need to develop alternative logistics options before you need them, not in response to a crisis. In Germany, for example, fiber availability has declined and we are having to source from further distances. In that context, investing in rail terminals located farther afield but providing economically viable access to those fiber sources becomes a strategic priority.

The discipline here is to look ahead, anticipate the challenges that are likely to materialize, and put contingency structures in place while conditions still allow for thoughtful planning. Resilience is not built in a crisis; it is built in advance of one. 

Q10. Talent attraction and capability building are emerging challenges in traditional industries. How can pulp and paper leaders future-proof their workforce for a more digital and innovation-driven era?

There are two distinct dimensions to this challenge.

The first is skills. As we move deeper into an AI-enabled operating environment, we need people who can bridge the knowledge gap, who understand the technology, and can apply it in a pulp and paper context. The traditional mill operator profile, while essential and deeply valued, is not sufficient on its own to make the step change we are describing. Additional capabilities are required, and we need to be deliberate about building or recruiting them.

The second dimension is attraction, and here I think we have an underutilized story to tell. The opportunity to develop novel biomaterials, to sequester carbon, to produce products that genuinely contribute to a more sustainable world: these are compelling reasons to build a career. For younger generations, particularly Gen Z, the environmental dimension carries real weight in employment decisions. Our industry's environmental commitment, when it is genuine, visible, and ambitious, can be a meaningful recruitment asset.

Q11. Capital allocation decisions are becoming more complex amid uncertainty. What strategic principles should guide investments in new mills, upgrades, and emerging markets?

The first and most fundamental question is: what business do you want to be a part of? Do you want to participate in a declining market or a growing one? The obvious answer is growth, but it requires an honest assessment of what that means and the changes necessary to get there.

Those strategic discussions need to happen much more frequently than they have in the past. The pace of change in market conditions, customer preferences, and technology is such that annual planning cycles are no longer adequate. We live in a world where artificial intelligence, data centres, and energy consumption are reshaping industrial landscapes in real time. What does that mean for an industry that generates substantial quantities of energy? What does it mean for carbon capture at scale? These are not abstract questions for future consideration; they are live strategic questions with near-term capital implications.

The frame I would encourage is this: rather than asking how you can improve what you have always done, ask how you can adapt what you have to serve where the world is going. 

Q12. How can pulp and paper companies balance short-term financial performance with long-term transformation, especially when shareholders expect measurable returns?

It starts with operational excellence in the short term. Running your assets like a true manufacturing powerhouse, extracting maximum efficiency and productivity from what you have today, is what generates the liquidity needed to fund transformative investments. There is no shortcut to that.

The complicating factor is that the future is arriving faster than many anticipated. Some of what was considered long-range thinking even five years ago is now an immediate competitive reality. The window for comfortable sequencing, first optimize, then transform, is narrowing.

Being a pioneer carries real costs. When you are opening new ground, whether in lignin commercialization, biogenic carbon capture, or other novel applications, you face greater risk and expense than those who wait and follow. We are navigating that with our lignin pilot at Rosenthal and with our carbon capture work. Others are on similar paths. The field is moving, but no one has fully cracked it yet.

The balance, ultimately, is using what you have and what you can do today as the fuel to build what tomorrow requires. Operational strength and transformation ambition are not in opposition. One enables the other. 

Q13. Finally, what leadership mindset will be most critical for navigating the next phase of the pulp and paper industry: incremental optimization or bold reinvention?

Bold reinvention, without question.

Incremental improvement will simply not be sufficient. The markets are transforming. Customer preferences are shifting in fundamental ways. Environmental pressures will continue to intensify. Technology is changing what is possible, what is expected, and who is equipped to deliver it.

Assuming that we can navigate this period by doing what we have always done, just a bit more efficiently, would be naive. We need to take bold decisions. We need to innovate. We need to take calculated risks, accept that some of those risks will not pay off immediately, and commit to the path regardless.

The leaders and organizations that will be successful on the other side of this transformation are those who start making those bets now, while they still have the operational strength to absorb the cost of getting it right.