The Knock-on Effect of Ongoing Record High Energy Prices to Paper Supply

We have written before about the impact of the global energy crisis on the paper industry, but ongoing record high energy costs, particularly wholesale gas prices, continue to put pressure on the sector.

The per-tonne costs of publication and fine paper has risen dramatically in Europe in January 2022, almost doubling year-on-year, driven by the rising cost of energy and the pandemic-induced supply chain squeeze.

Some paper mills have stated that their costs have increased by several hundred Euros per tonne which, coupled with changes in demand for publication and woodfree grades, has hit the newsprint and coated woodfree paper sectors, particularly hard.

Shrinking output pressures supply chains

Adding to an already complicated situation is the European paper mills' response to the crisis: an unprecedented shutdown of capacity, with around three million tonnes per year of woodfree coated and uncoated output removed from supply chains in the past three years, a trend set to continue in 2022.

Analysts have said the publication paper market will also see roughly four million tonnes per year of machine capacity for newsprint, lightweight and supercalendered paper in total removed from supply chains.

The obvious result is tighter supply, making straitened markets more challenging.

Intergraf, the European printing industry's unbrella organisation, has warned about "serious consequences" for the paper sector, one of the world's energy intensive industries.

Decarbonising energy intensive industries

According to the International Energy Agency, paper and paperboard production is set to grow 1.5% annually to 2030, and the sector's energy use should be limited to 0.5% per year, aligning with the Net Zero Emissions by 2050 scenario.

A tough challenge in the face of exorbitant energy prices.

Intergraf has demanded urgent action, calling for national and international authorities and institutions to recognise the seriousness of the situation faced by the paper industry, prompted by the energy crisis, and urging them to ensure the supply of raw materials for paper production.

Allocations and delivery times

As the majority of paper deliveries are put on allocation and delivery times become increasingly long, the pressure to supply enough paper to ensure the publication of newspapers, magazines, books and advertising, is set to increase.

The direct mail and magazine industries, which enjoyed a boom during the pandemic as lockdown prompted a surge in interest in hobby publications and home shopping, could be particularly impacted if supply of newsprint and magazine papers tightens.

Potential paper and board shortages could also impact the food and medical supply sectors.

Government support for paper industries

UK Business Secretary Kwasi Kwarteng warned the coming months would be a "very difficult time" and said the price cap, alongside other government measures, would go some way toward easing the situation.

While the EU also moves to put contingency plans in place and find alternative energy sources should the extreme situation between Ukraine and Russia continue, the paper and packaging industries, alongside many others, are steeling themselves for more challenges.

At Denmaur, we're committed to finding sustainable and cost-effective solutions for our customers. We will use our strong network of connections and relationships to secure supply, delivered by our own fleet of delivery vehicles.

We are always available to talk through your paper supply options, provide free paper dummies and samples, and help you achieve your carbon balancing goals.

Contact us at info@denmaur.com or phone 01727 738750