BIR Autumn 2022: Energy markets fuel paper mill turmoil

Reduced energy supplies in Europe have caused once profitable paper mills to face entirely 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, which took place in Dubai, United Arab Emirates (UAE), in mid-October, Francisco Donoso, of Spain-based Dolaf Servicios Verdes S.L. presented a European industry sector that has scaled back production in response to Russia’s curtailment of natural gas and oil exports to the European Union.

Donoso said prices for old corrugated containers (OCC) had fallen by from 80 to 90 percent in recent months, amid extremely low demand around the world and high inventories of the material 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 production cost for mills,” said Donoso. “They cannot pass on this cost in their sales prices because demand for their products is also low, [and] neither can they reduce their energy costs. Therefore, the only cost they can manage is what they pay for their raw material.”

Regarding conditions in the United States, Donoso said, prices for mixed paper had reached zero dollars in some locations. However, prices had fallen fastest in Europe, and Donoso said he anticipated further downtime, suggesting, “It is difficult to know where the bottom is” in the European market.

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