‘Recession will decrease packaging needs; waste paper will start to go to landfill due to Shutdown’

‘Recession will decrease packaging needs; waste paper will start to go to landfill due to Shutdown’

- EU’s future ban on waste paper will give a clear competitive advantage to European paper mills
- Warehouses that were overstocked in anticipation of a strong demand remained … overstocked.

Regarding the ongoing energy crisis in Europe, which has affected how effectively paper mills operate? Waste paper prices have decreased due to a sluggish market for finished paper. The Pulp and Paper Times assessed the situation and spoke with Mr. Marc Ehrlich, CEO, VIPA Group, on the status of the European paper business at the moment. Here's what he thinks:

1 November 2022 | The Pulp and Paper Times:

Q: What is the present state of European Paper Mills, are they operating or taking a shutdown due to insufficient energy supply?
 
European paper mills are hit by the prices of gas. But the main problem at the moment is the lack of orders for finished products. This is a result of the slowdown of the economy and expectations that a severe economical crisis will decrease sharply the need for packaging. Warehouses that were overstocked in anticipation of a strong demand remained … overstocked.

The situation in Europe is also darkened by the first war in more than 70 years. At the same time, we need also to watch the economic situation in China, where the economic situation has deteriorated since the beginning of the pandemic. All this on top of increased interest rates leaves little room for a quick recovery.
 
Q: The price of imported recovered paper has dropped down drastically; It is now coming to around $ 145 to 160-ton at an Indian port, What reasons do you see behind this drastic drop?
 
The collection of waste paper was still strong in September, whereas paper mills started to shut down. This happened in combination with better logistics in both EU and US markets.
 
Q: Is the shutdown of European mills decreasing the price of imported OCC due to the better availability of recovered paper in the market?
 
Absolutely, this is certainly one of the main reasons.

Q: How do you predict the next six months for Indian Paper Mills, do you think that price would go down?
 
I believed we have reached a dangerous bottom. Below this point, a lot of waste paper will not be collected and will start to go to landfill. We should not expect prices to go much below this point.
 
Q: Is the logistic cost drop down also?

The logistic has improved a lot. This is especially the case from Europe and from the US.

Q: Will this energy crisis spike the finished paper price in the European market? 
 
No, because of the very low demand. Warehouse and distributors are now full, and I doubt this will lead to higher prices.
 
Q: The drop in paper production in Europe may invite the import of finished paper to meet the local demand.
 
Again, the demand is very low. Paper mills are shutting down mainly because of the lack of demand. This is true in all sectors, but especially in packaging.

Q: Any other comment you want to mention

I am surprised to see the lack of reaction in India on the future ban of exports of recycled materials from Europe. This will give a clear competitive advantage to European paper mills and European metal buyers but nobody seems to react on that. Indian industries account for many thousands of employees and should use this weight to talk to the government about this issue before it is too late.

Web Title: ‘Recession will decrease packaging needs; waste paper will start to go to landfill due to Shutdown’