Trends, strategies and forecasts

The European paper industry

We are going through a period of delicate adjustments in the global markets and economies. And, moreover, the cost of raw materials and energy is greatly weighing on the manufacturing industry. How and where is the European market moving in the paper industry? And what are the strategies to focus on?

Teresa Presas, director general at Cepi

Teresa Presas (Director General at Cepi), Klaus Windhagen (VDP-Director General), and Massimo Medugno (general manager Assocarta) agreed to answer our questions to provide their point of view.

The European paper industry is very diverse, explains Teresa Presas, manager at Cepi: «The European pulp and paper industry is very diverse and ranges from large international companies to SMEs. They also produce a variety of products from pulp to paper, packaging, tissue, chemicals and other. They may or may not own forests and can be integrated or not. They use virgin fibre or recycled fibre as main raw material and are often based in rural areas in Europe». This is why a fundamental role is played by national associations in Europe which «are themselves members of CEPI to liaise with the European institutions for pan-European issues». A group so well-stocked, says Massimo Medugno, general manager at Assocarta, with many production specialties: “a world that we cannot define as uniform given the large difference in forestry issues among the countries, characterized by integrated non-forest firms, unlike Italy, where the only form of integration is that of waste paper.”

A differentiated scenario with common goals

Very different countries, but all of them look with apprehension and attention to two essential issues, energy and raw materials.

«As the pulp and paper industry is in transformation in Europe there will be more cost cutting and streamlining. Investments will be made in energy efficiency», says Teresa Presas.»With more people on the planet and increased per capita wealth, consumers will be aware of resource pressures and the need for efficiency. They will also expect better functionality from goods with a smaller carbon footprint. ICT will play an ever-increasing role, while nanotechnology, biotechnology and artificial intelligence will reshape society in ways we cannot imagine today».

A necessary «change in values»

«There will be more emphasis on efficiency, in households, construction and industry», says Presas. »At the top end will be zero waste – ‘cradle-to-cradle’ – systems, in which all by-products are reused or returned cleanly to the soil. Elsewhere, there is likely to be extensive retrofitting of systems to improve efficiency. There will be a greater drive to reduce food waste. The emerging trend for urban food production and urban energy efficiency solutions will continue and will change our experience of cities. The nature of social cycles suggests that the next cycle will be more driven around the wider needs of the community and less market-driven than at present. There appears to be a value shift going on in wealthier markets from materialist to postmaterialist values, e.g. a desire for experience over material possession. The way that people judge success – and companies’ performance – may change. Bio-based products will become the talk in town. Able to produce the highest possible value added from initial raw materials, renewable and recyclable products will meet the demands and expectations of the 2050 consumer. If our sector is able to develop its knowledge of consumer demands, one day people might be lining up in front of stores to get the newest forest fibre-based gadget.»

Efficiency is not enough

Klaus Windhagen, VDP-director general

It is a delicate phase of settlement, with ups and downs which are sometimes predictable, sometimes unexpected: «Especially the sales of graphic paper are turning down. The digital revolution takes its toll», says Klaus Windhagen (VDP-Director General). «On the other hand the other paper grades, packaging, hygiene and coarse papers are staging a satisfactory growth In this scenario, companies’ strategies were to increase efficiency, but it may not always be enough: “If companies are not given opportunity to look at new areas and if certain burdens as energy costs are not removed, the way towards energy is not enough” says Massimo Medugno. “I believe that integration should be pursued at the national level: as well as some Nordic companies use wood to make paper, but also other substances, in the very same way, one should experience other forms of integration. In Italy, for instance, a well-known paper industry has developed a thermal power plant capable of serving the entire territory: solutions that often are not facilitated neither by the regulatory environment nor by the availability of local institutions. Similarly, in non-forest countries, companies could go towards a better management of their waste, integrating upstream and having a more active role in the collection of the paper which for now is just a cost issue. This would help them become competitive and develop some potential.”

Raw materials, energy, environment: European political strategies

Cepi is active in many areas in Brussels, says Teresa Presas: «Our main focus lays on raw material access and availability as well as climate change, energy and waste/recycling legislation».

Carbon Leakage list. «In 2013 and 2014 the European Commission will review the so-called carbon leakage list in the framework of the EU ETS legislation. The decision to give free allocation and develop the carbon leakage approach was to level up the playing field in the absence of an international climate change agreement that would have all countries to compete on the same or equivalent level. This is an important dossier for our industry.»

Energy. «The industrial policy communication by the European Commission shows that the energy prices for industry in Europe are not only high, but increasing even further, while prices in the US and Canada are stable or declining. Paper production becomes much more cost competitive in the US, which makes the energy policy dossier an important part of CEPI’s work.»

Trade. «In the last two years, CEPI has been faced with an increasing amount of trade barriers and protectionist measures from other parts of the world. While we understand the key principle of free market, we believe that the situation needs to be adjusted.»

Raw Materials. «Even though the European paper recycling level has reached 70% in Europe, there is still potential to increase availability of paper for recycling from today’s levels and offsetting considerable costs for the industry, while achieving society’s aspiration for recycling. Quantity is not the only important parameter. Quality of paper for recycling is a critical factor for competitiveness as well. CEPI is investing time and effort to improve both areas. To bring solutions to the availability of wood, the policy framework for forests and use of its resources should ensure a supply of carbon neutral biomass from sustainably managed forests to the economy, where it should be used in a cascading use, e.g. where most value and jobs can be created from it.»

«Hot» topics in Germany and in Italy and the necessary cooperation among companies

Massimo Medugno, Assocarta general manager

«On top of the agenda, besides resources issues», says Klaus Windhagen, «there is the energy U-turn in Germany, the government’s highly ambitious concept for an expanded use of renewable energy sources and an accelerated phase-out of nuclear energy. If energy intensive branches like the paper industry fail to remind politics of the need for a sense of proportion in this process, they might end up as losers in an energy shift context». In Italy, Massimo Medugno says, “the issue of waste is perhaps one of the major impediments which, on the contrary, might lighten a heavy situation in other ways.” Instead, under the aspect of collaboration and cooperation between enterprises, Italian companies have shown to be very competitive, but also to be able to come together for ‘a system’: “examples of this are the Consorzio Gas intensive, which includes the companies in the paper industry but also in other sectors, and must be understood as a desire to work together and try to deal with common problems. Or, the presence of a Consortium as Comieco  is reflecting the comprehensive will of the industry to address certain problems peculiar to the sector. Also, the fact that for twelve years an “Environmental Report” has given a description of the industry from the environmental viewpoint, or  collecting data on workplace safety while companies are fostered to join the Progetto Sicurezza Obiettivo Zero’ project (an award organized by Fondazione Lazzareschi for companies that reach “zero accidents”): it is another way for businesses to be represented as a community to understand what the paper industry is for Italy, for the world , for the environment and safety.”

The growth of the Chinese paper industry

A particular source of concern on the European front is also China and its incredible growth. But is it a threat or a stimulus to competitiveness? Klaus Windhagen answers and reassures: «The Chinese paper industry as the Chinese industry as such is growing with enormous rates, albeit the speed of growth has slowed down. So far Chinese paper exports do not affect the European markets in a substantial manner and the Chinese paper producers predominantly meet the domestic demand. Nevertheless the Chinese import huge volumes of recovered paper from Europe and have a noticeable effect on this market».

We will analyze the issue in further details, in an interview by Francesco Zago, Gruppo Pro-Gest, that follows.

Innovation, technology, research: areas where it is important to intervene

All three areas – innovation, technology and research – are equally important and tightly knit, according to Presas: the investment must be made in terms of innovation and research for the development of new technologies that allow a bright future for the paper industry. «For developments beyond 2030, the pulp and paper sector will depend on breakthrough technologies and techniques (BTT) that are yet to be explored, and that would need to be focused on the EU market. Systems need to be put in place that support and enhance innovation for the EU. The EU will need to keep its technological edge. One approach will be to work together with the value chain. Innovation requires the financial capacity to invest in R&D, piloting and deployment. The sector has to break out of a cycle of low rates of return to get the investments needed to make transformation happen». In Germany, says Klaus Windhagen, «Again energy is the issue. All decisions in this field have to take the industry’s competitiveness on world markets into account. Industry in Germany is burdened with energy costs, competitors in other countries do not have to bear. Despite all exonerations the industry pays additional costs of 5,6 billions Euro. So government must secure, that no additional burden is put on the shoulders of industry, especially the energy intensive branches like the paper industry.» As for research in Italy, Massimo Medugno adds: “there are good tools for innovation, such as Innovhub  which is leading the EcopaperLoop European project (article on page 36). Research is lively, but what one may need is the minimal resources to pursue research opportunities: companies should be able to implement such stimuli. ”

The «TwoTeam» project

A very practical way to speed up innovation is to invest time and ideas into the TwoTeam project by Cepi: «It consists of two competing teams that include experts, scientists, manufacturers, suppliers and representatives of the pulp and paper industry and other sectors. Applying a unique method of open innovation, both teams are set to identify breakthrough concepts that make the current pulp and paper manufacturing process more efficient and create more value. Breakthrough technologies are at the heart of Cepi’s 2050 Roadmap to a low-carbon bio-economy report. A successful delivery on the two objectives of the roadmap – namely 80% decarbonisation of the industry and 50% value creation in 2050 – is only possible when breakthrough technologies are available by 2030. The teams are urged to think out of the box, outside their comfort zone. The final concepts will need to be creative, innovative and imaginative». It is an interesting strategic project, adds Massimo Medugno, “which could enhance some innovation areas in which to invest and work as European paper industry: thus it help identify the areas of greater interest.”  The Companies are invited to gather one’s ideas for the most efficient pulp and paper mill and submit them today at

What to do in the short term

The scenario we are facing is properly described by Klaus Windhagen: «The European Market will face a significant structural change. So at its best we will have a stagnation of the paper market as a whole. The industry has to struggle to earn an acceptable return. Paper companies have to face a lot of challenges on the markets, within political regulations e.g. Each company has to find its individual way, also depending on its product. Where the companies have issues in common with others, bundling the interest by associations is a well proven way to deal with.»

In general, says Teresa Presas, «investments in R&D are needed to continue our position as the industry in Europe that manages to have competitiveness and sustainability go hand-in-hand. We are very well positioned in the bio-economy and need to invest in low carbon technology and new bio-based products, making use of our knowledge on wood fibres.» More practically, «mill managers and employees can become fans of our TwoTeam Project and submit their ideas for the most efficient pulp and paper mill. Inviting member of national parliaments and members of the European Parliament for mill visits are also very practical ways to back our call for support from governments in all areas. Additionally, each national association employee and pulp and paper company employee are welcome to subscribe to our quarterly CEPI Focus newsletter to keep up-to-date on policy issues in our industry».