Earlier this year Printweek published an analysis piece on ‘Navigating the paper supply crisis’, which detailed the new capacity landscape after nearly 6m tonnes of paper production had been taken out of the market through mill closures and conversions.
At the time the long-running strike action at UPM’s Finnish operations was also affecting European supplies.
The article went to press just before Russia’s invasion of Ukraine, which, beyond the obvious horrendous human cost of war, has resulted in further seismic impacts for European paper supply chains.
A number of paper groups, including Mondi, Sylvamo and Stora Enso are exiting Russia as a result, at vast cost.
Meanwhile Russian gas supplier Gazprom’s decision to dramatically restrict gas supplies to continental Europe via the Nord Stream 1 pipeline has left many countries scrambling to reduce gas usage.
Some, including Germany, are contemplating extreme measures that could result in swathes of industry including chemicals, aluminium and paper, being forced to shut down.
Germany entered phase two of its three-tier emergency gas plan in June. The country is the largest producer of paper and board in Europe, so what happens there really matters. It previously imported 55% of its gas supplies from Russia.
Russia supplied around 40% of the EU’s natural gas and 27% of its imported oil last year.
German papermaker Feldmuehle is switching fuel from gas to light heating oil at short notice due to the gas supply crisis, which requires a €2.6m (£2.17m) spend. But that is just one, 250,000tpa mill.
Over the summer Norske Skog – which had already taken drastic action at its Bruck mill in Austria back in March with a temporary shutdown – said that raw materials and energy prices were expected to remain “high and volatile” in the second half of 2022, and may cause further short-term stoppages in production.
“The turbulent operating environment, especially on the energy side, may result in further temporary or permanent closures in the industry,” the group noted.
Corrugated packaging giant Smurfit Kappa opted to cut production by some 30,000-50,000 tonnes in August because “with the current price of energy there’s absolutely no sense whatsoever to make stock”.
European paper industry federation Cepi has warned that possible disruptions in the industry’s gas supply “would affect the entire logistics of the EU, availability of paper packaging for food and pharmaceuticals, as well as essential hygiene products”.
Flexible Packaging Europe has also flagged concerns over potential disruption to flexible packaging materials which are also made using continuous processes.
Cepi director general Jori Ringman believes pulp and paper should have some form of priority status due to the intrinsic role of paper-based materials in everyday life.
Recycling operations in the paper industry are also almost entirely based on natural gas, so restricted gas supply would potentially disrupt related waste management operations and supplies to the transport packaging value chain.
“We call on the national governments to swiftly implement measures ensuring that our industry can keep delivering essential goods in times of crisis,” he stated.
“By prioritising the pulp and paper industry, member states can not only secure the wellbeing of EU citizens now, but also strengthen the role of green and more energy efficient industries in the future EU economy.
“The paper industry is a perfect example that this is not about a choice between protecting citizens and safeguarding industrial production.”
It’s not just the continent that is affected. Energy intensive industries in the UK are also struggling with the spiralling cost of energy here.
Papermaker Portals cited energy prices as one of the reasons behind the recent shock announcement that it planned to close its historic Overton banknote paper mill in Hampshire.
Andrew Large, director general of the Confederation of Paper Industries in the UK, has welcomed the recent government consultation on the British Energy Security Strategy, while calling for concrete action as a matter of urgency.
He said: “CPI urges the government to implement the proposed 100% exemption level as quickly as possible, to reassert UK competitiveness and prevent the further leakage of investment to countries with lower climate ambitions and lower energy costs.”
Energy prices are of course a major factor in the seemingly never-ending surcharges on paper prices.
But as Sappi CEO Steve Binnie has noted: “It gets more and more difficult to pass on all these higher costs all the time,” and the very obvious danger is that the ever-increasing price of print on paper will hasten the shift to digital media for some products.”
What can print bosses do? Keep a watchful eye on world events. Control the controllables. And, to repeat some advice from that earlier article, plan ahead and stay close to your suppliers.
