The European Energy Crisis and the Paper Industry

The UK paper industry has been hit with vast increases in energy bills after Ofgem raised the price cap in April, and another looms in the autumn.

Of course the challenges businesses and consumers face aren't limited to the UK. The EU recently introduced the European Gas Demand Reduction Plan, which aims to cut gas consumption on the continent by 15% until next spring.

Will it have a positive effect, and are there other ways the paper industry could be supported during this challenging time? Let's take a closer look.

Russian gas prices and Ukraine retaliation

Europe relies on Russian gas for around 40% of its supply, with some member states more dependent on those fuel supplies than others.

Europe's opposition to Vladimir Putin's invasion of Ukraine earlier this year prompted wholesale gas prices to skyrocket, with households in the Netherlands seeing hikes of 167%, 122% in Austria and 118% in Italy, according to the BBC.

The Russian leader then cut off gas supplies to Poland, Bulgaria, Finland, Denmark and Netherlands after they failed to pay for the fuel in rubles.

Then, concerns mounted that 10 days of scheduled maintenance to the Nord Stream 1 pipeline, Russia's biggest, would lead to a reduced supply or, even worse, would not be restarted.

Nord Stream 1 fears eased - for now

To the relief of many, gas flow did begin again on 21 July, but was cut to 40% capacity, prompting Germany's network regulator to warn of continued uncertainty to the country's energy supply - something the business community never handles well.

Germany in particular is well aware of its dependence on Russian natural gas, but its concerns are echoed across the European continent, with analysts warning of potential energy rationing and industrial shut-ins amid a "winter of discontent".

Press manufacturers take action

The situation has forced German press manufacturers Heidelberg, and Koenig & Bauer to lay out their plans to deal with the energy crisis.

Koenig & Bauer said they will commission their own liquefied gas tanks that will be filled with North Sea crude oil, propane or butane that has been refined in Europe and guaranteed by the supplier.

However, the firm warned: "the extent to which the gas supply stop affects our suppliers is beyond our control".

Heidelberg also said it was developing "contingency plans" in the event of restrictions or an embargo on gas supplies.

It will remain to be seen not necessarily if other companies in the industry follow suit, but when.

Cepi urges government support for the paper and pulp industry

Cepi, the European association representing the paper industry, has also waded into the situation.

It called on governments to prioritise the paper and pulp sectors when procuring gas supplies and developing policy to enhance energy resilience.

Cepi warned that disruption to energy supplies would naturally have a knock-on effect on paper packaging supply for the food, pharmaceuticals and essential hygiene industries (to name but three) and the effects would be felt EU-wide.

Risks to EU recycling

As well as the economic and supply-side issues, the non-profit reiterated the paper recycling industry's dependence on gas.

It said interruptions to supply could also disrupt waste management operations as well as the continent's transport packaging value chain, which relies heavily on recycled material.

Cepi also urged governments to make sure that critical industries, including pulp and paper, were able to secure gas contracts at an affordable price when renewals come up towards the end of the year.

Bolstering the future EU economy

Jori Ringman, director general of Cepi, said: "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."

Accelerating the shift to packing

There are a couple of small silver linings among the gloom, according to Moody's.

It said the energy crisis could see more paper mills switch to packaging grades, a move that was already underway before the Russian invasion of Ukraine, as the sector offers more resilient growth.

The ratings agency also hinted that the essential nature of the paper packaging industry, as underscored by Cepi's demand, could enable companies to pass on their rising costs more easily than in other sectors.

The European Gas Demand Reduction Plan

The European Commission's white paper calls on all consumers, public administrations, households, owners of public buildings, power suppliers and industry to implement ways to save gas.

The European Gas Demand Reduction Plan also aims to reduce demand by 15% between 1 August this year and 31 March 2023.

The regulation also means the Commission could - after consulting Member States - declare a 'union alert' on security of supply, allowing it to impose a mandatory gas demand reduction.

Speeding up renewable energy adoption

The plan also seeks to accelerate work on supply diversification, including joint purchasing of gas supplies, as well as prioritising the switch to renewables or cleaner, less carbon-intensive or polluting energy sources.

Our commitment to you

While the European Gas Demand Reduction Plan is one of several measures being hastily put in place to ease the current energy crisis, the paper and packaging industries, alongside many others, continue to brace themselves for further challenges.

But they're not insurmountable. At Denmaur, we're committed to finding sustainable and cost-effective solutions for our customers.

We will use our strong network of connections and long-standing relationships to secure supply of quality materials, all of which can be delivered to the printer of your choice by our own fleet of delivery vehicles.

We are always available to talk through your paper options, provide free dummies and samples, as well as our paper management service, all while helping you achieve your carbon balancing goals.

Contact us at info@denmaur.com or phone 01795 426775.