And now over to paper industries. The future of European packaging
The world’s paper market is growing, but the growth is not about Europe: countries of Eastern Asia and South America are now accelerating; there is also a slight increase in Eastern Europe. Francesco Zago, Pro-Gest, describes a wrapping paper market that goes toward specialization and that compares with the dynamic evolution of supply and demand.
«The packaging market is transversal to different sectors and is an indicator of the general economy.» So begins Francesco Zago, Pro-Gest, the Italian group that in recent years has experienced an important development. «The European package,» he continues, «cannot but be in trouble, given the general decline in consumption, and the market should therefore move towards specialization rather than mere expansion.» In other words, companies that are able to give more in terms of service, quality, punctuality, are competitive: «At the moment Gruppo Pro-Gest is trying to consolidate its leadership in Italy which remains the second most important European market, and the customer service has always been one of our strengths on which we work hard to improve from year to year and our investments put us in a leader position in Italy for the quality of our products. At the same time we also follow the main emerging markets to assess the possibility of future internationalization».
China: growing demand and domestic production
The growth of Chinese paper industry is unquestionable, says Zago, «and the demand is also increasing domestic production. It is evident that the significant presence of China on this market puts Europe and Italy in a disadvantaged position in particular on several fronts: first of all, energy, which is the major cost after raw material for an energy-consuming industry like the paper industry; secondly, environment, since China is not subject to compliance with strict emission standards, not to mention the issue of security and labor costs. This allows China to produce paper with better margins, but strong domestic demand and complications related to ship transport at least for the moment, make the impact of Chinese paper on sales in Europe limited.»
The demand of waste paper and its impact on prices
The arrive of coil semifinished products from China has a relative impact on the European market: «Chinese paper is available in Europe but there are many difficulties in transport, mainly due to moisture that makes the product not always suitable for processing. In addition, the supply and order times are long, and in a just-in-time market like the European one, customers cannot always afford to risk too much. A problem, however, which is to be added to another, since «the cost to transport goods from Europe to China is very low, so we have to face competition on the waste paper market which is our raw material. Given that in China there is no advanced waste collection as in Europe, for their part there is a huge demand for raw materials, which influence world prices causing a very variable trend. «That is why our market strategies have to be updated very frequently, just on the basis of the fluctuating prices».
Energy, waste and environment: three penalizing reasons
«There are three considerations to think about to understand how much Italy is penalized» says Zago. First energy: «In the first place, one has to consider that in Italy we pay 30% higher energy costs than the European average (Eurostat) and the situation has been so, for many years.» The Italian paper factories, which make extensive use of energy, must therefore compete with those in Europe and in recent years they have inevitably impoverished. «In the rest of Europe, they have made major investments, greatly increasing the quality of recycled paper. It is sufficient to say that the average weight of corrugated cardboard in Italy is 573 against 532 g/m2 of France, or Germany, or 524 against 490 of Austria (Fefco Source 2011). In Italy, however, we have kept obsolete plants and we often have troubles in competing in the same market with much lower margins than our competitors abroad.»
The second point concerns the waste market. «The Italian paper factories have been for years the Italian bins of old paper ensuring the disposal and recycling of waste paper. When Pro-Gest began making recycled paper in 1989, we had to buy waste paper in Germany, as in Italy the collection was not so widespread.
Then, thanks to the great efforts by Comieco, the Italian paper factories contributed to the development of separate collection, reaching rates up to 80% (source Comieco), bringing Italy to the first places in the world, and – even more importantly – they have helped to prevent the construction of 248 dumps from 1999 to 2011, developing a virtuous system of which we can be proud, envied in the world. Today, however, we are at a historical crossroad for our industry: after long years of impoverishment caused by energy costs, the free market has allowed the outstanding collection system that we created to go entirely towards China which nowadays buys at any price, with serious repercussions throughout the Italian paper system.»
Finally, environment. «In Europe we are at the forefront of compliance with environmental restrictions on emissions: plants have very low environmental impact with regard to waste water and emissions into the atmosphere, and are subject to pressing controls. It is not the same in China, where laws on emissions are much more permissive.»