Shrinking energy supplies in Europe have forced once-profitable paper mills to face whole new profit-and-loss calculations, according to the president of the paper division of the Brussels-based Bureau of International Recycling (BIR).
Speaking at the paper division meeting at the BIR Autumn Round-Tables event, held in Dubai, United Arab Emirates (UAE), in mid-October, Francisco Donoso, of Dolaf Servicios Verdes SL, based in Spain, presented a European industrial sector that has cut production in response to Russia’s reduction in natural gas and oil exports to the European Union.
Donoso said prices for old corrugated containers (OCCs) had fallen by 80% to 90% in recent months, amid extremely weak global demand and high inventories of materials at paper mills in Europe.
“The high cost of energy – and specifically gas – is one of the reasons for this, as it has become by far the largest cost of production for factories,” Donoso said. “They cannot pass on this cost in their selling prices because the demand for their products is also low, [and] nor can they reduce their energy costs. Therefore, the only cost they can manage is the one they pay for their raw material. »
As for conditions in the United States, Donoso said, mixed paper prices had hit zero dollars in some places. However, prices had fallen fastest in Europe, and Donoso said he expected further downtime, suggesting, “It’s hard to know where the bottom is” in the European market.
Nishant Sahney, of Gaurav Vipa Papers Pvt. Ltd., whose company sells material in India, said high prices for recovered paper in the Middle East for more than six months had fallen dramatically.
“We no longer have exports to China because the Chinese no longer buy pulp,” Sahney said. “On top of that, due to lower demand in the US and Europe, we are now competing with manufacturers in the Middle East and other Asian countries. Factories in India are now operating at 70% capacity, which is why they cannot afford the prices of six months ago.
Ranjit Baxi, chairman of the BIR-affiliated Global Recycling Foundation, sounded more optimistic, saying the paper sector had always shown resilience. “Ours is a very strong industry, and we always come out stronger, even through COVID,” he said.
Baxi continued, “It’s the expertise and commitment of our employees that makes it work. The demand for paper is not decreasing, it will always be there. It is time for us to support new countries elsewhere, in the [Middle East] or countries in Africa, which could be the next manufacturing hub. Let’s not be upset by fluctuating prices; market demand will be strong, so let’s be positive.
While conditions in India may have suffered a setback recently, Sahney’s presentation described the Indian market as having imported seven million tons of scrap paper in 2021, of which 40% came from the United States, 25% from Europe and 22% from the Middle East. , with Sri Lanka, Australia and Africa making up the rest.
In India, consumption was on the rise, Sahney said, and with 65% of Indians under the age of 35, it was a big opportunity for the paper industry. Another benefit is the Swachh Bharat Abhiyan program in India, designed to increase scrap paper collection.
However, Sahney added, China has invested heavily in Vietnam and Malaysia in recent years to cater to its domestic market, which has reduced demand for Indian products and created a gap between supply and demand. “Here is the question: did China invest because it could or because it had to? We will soon know the answer,” he said. “Add to that the energy crisis in Europe and the lack of real container demand in the United States due to fears of recession, and we see the reason for the plummeting prices for recovered paper in all areas. ”
Atul Kaul, of Saudi Arabia-based paper and board producer Waraq, said production in the kingdom in 1996 required 85% virgin fiber but had now moved to 85% recovered paper.
Similarly, in 1995, 80% of the recovered fiber produced by Saudi Arabia was exported, with the rest going to landfill. This year, 90% of the recovered paper generated will be consumed by local mills, Kaul said.
The BIR Fall Roundtables took place at the Intercontinental Festival City in Dubai.