SCA's Trough and the Turning Winds: Containerboard and Energy Offset a Soft Pulp Market

Svenska Cellulosa Aktiebolaget (SCA) reported its Q2 2026 results against a mixed global backdrop. The company's own trajectory shows fuel prices as the dominant theme, driven by the Middle East conflict, which simultaneously punished its Forest and Industry segments and rewarded Renewable Energy. Yet this quarter also brought signs of a cyclical bottoming—management reiterated its belief that the trough is behind, and a fresh supply response in softwood pulp via the Canfor closure could tighten the market.

Reaching the Bottom

CEO Ulf Larsson opened the call with a clear message: “we have reached the bottom now” — Ulf Larsson, President and Chief Executive Officer (CEO) · 2026-07-22. In the prior quarter, he had already declared the cycle bottom, and Q2 EBITDA of SEK 1.3 billion (25% margin) marked an improvement. The statement is buttressed by the fact that the industry is seeing curtailments in CTMP production and incremental supply rationalization. The curtailments taken in softwood pulp, along with the Canfor closure, were cited as evidence that the market is closer to balance.

"I'm cautiously positive for this autumn."— Ulf Larsson

Pulp prices remain under pressure—China demand is normal but port inventories are high, and the conflict in Iran continues to complicate logistics. However, the company remains confident in its cost position in the new Östrand mill, which it says is unlikely to face curtailments. The CTMP business at Ortviken is a different story: “we have taken curtailments during the spring. We will continue to take curtailments if that's needed.” — Ulf Larsson, President and Chief Executive Officer (CEO) · 2026-07-22

The Renewable Energy Hedge

Renewable Energy delivered a record quarter, with EBITDA reaching SEK 217 million (42% margin). The key driver is the jointly owned biorefinery in Gothenburg, which benefits from the elevated fossil fuel prices. CFO Andreas Ewertz noted the group's net oil exposure of roughly 130,000 tonnes of bunker oil and diesel, partially offset by tall oil and the Renewable Energy segment. This creates a natural hedge—while higher fuel costs hit forestry and distribution, the renewable side captures the margin expansion. As CEO Larsson put it: “If they stay on a high level, of course, that will benefit our Renewable Energy business.” — Andreas Ewertz, Chief Financial Officer (CFO) · 2026-07-22

Containerboard: A Turning Point

The most encouraging narrative is in Containerboard. Two price increases for kraftliner were announced during the quarter, totaling EUR 60 per tonne for brown and EUR 40 for white, with the second increase scheduled for mid-June. The Containerboard market is tightening as demand improves and US capacity closures (3–4 million tonnes) reduce global supply. Management is confident that the price hikes will flow through in H2, but they caution about possible pre-buying. The premium of kraftliner over testliner is at a historical high of around EUR 280, suggesting strong preference for virgin fibre. CFO Andreas Ewertz remarked: “The price increases will gradually be reflected in the earnings during the second half of the year.” — Ulf Larsson, President and Chief Executive Officer (CEO) · 2026-07-22

From the prior quarter's call, the tone was more tentative: “we are at the bottom of the business cycle just now” — Ulf Larsson, President and CEO · 2026-04-24. That sentiment now feels more tangible. The company is also guiding wood costs lower—pulpwood and sawlog prices expected to fall 3–5% in Q3—which should expand margins in Wood and Pulp. Andreas Ewertz had earlier commented: “pulpwood will continue to go down slightly in Q2” — Andreas Ewertz, CFO · 2026-04-24, and that trend continues.

Cash flow is the current management focus. With strategic investments nearly complete, the company expects stronger free cash flow as the market recovers. Capital allocation questions around buybacks were deferred to the board, but the balance sheet remains solid with net debt to equity at 10.7%.

In summary, SCA stands at a cyclical inflection point. The Renewable Energy segment provides a buffer against geopolitical energy shocks, while Containerboard and softwood pulp are responding to supply rationalization. The key risks remain the trajectory of demand in Europe and China, and whether the current price increases hold. The global keyword list for this quarter includes "conflict in Iran" and "Middle East" — themes that directly touch SCA's operations.