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Germany papermaking sector on verge of crisis.

Pulp and Paper Raw materials market

Germany will face with an acute shortage of paper this year, that will be mainly due to ever rising energy prices in the country this year and the existing threat of bankruptcies of many leading local pulp and paper enterprises, according to recent statements, made by some leading German paper producers and local media reports.

As some German media write, currently the most complex situation is observed in the segment of toilet paper, the volume of which production in the country has sharply declined in recent weeks.

So far, in order to stay afloat many of German toilet paper manufacturers have already used some unpopular measures, being forced to raise prices and cut production, explaining this by the ever rising production costs, particular for energy.

As gas prices in the EU are steadily growing, many German companies – paper producers – are considering switch to other energy sources and increase prices for their flagship products. According to German media, as of now prices for most of paper types in Germany have been increased by 10%-18%, while the growth of prices is ongoing.

At the same time, despite the increase of prices for most of their range, many of leading German paper producers are still unable to continue their operations in the current conditions, being forced to suspend their work and leave the market.

For example, the Düsseldorf-based Hakle, one of Germany's best-known toilet paper brands, has already filed for bankruptcy, citing high energy, material and transport costs. Representatives of the company were not available for comments.

Many of industry’s representatives and paper manufacturers believe that it will not be easy for them to stay afloat and continue their work in the domestic paper market even if the state provides support.

There is also concern that companies will be affected by energy rationing, which means the supply of energy on a rotational basis and within specially created schedules.

Still, according to a spokesman for the German pulp and paper industry association Die Papierindustrie, paper will probably remain in the list of goods, which production will be in the list of priority for Germany and its national economy.

In general, Germany has become one of the few countries in the EU, which has mostly suffered from the interruptions and suspensions of gas supplies from Russia, due to its traditional heavy dependence on the Russian gas and other energy sources.

Local analysts expect the current energy crisis in Germany will be much tougher for the country's paper sector than the coronavirus pandemic. In 2020 Germany also experienced a shortage of paper although this time the crisis will be probably deeper. There is also currently also unclear in which prices the supplies of raw materials for the needs of German paper manufacturers will be conducted, as many of German leading chemical concerns have also been forced to revise prices for their range amid the ever growing energy prices.

In the meantime, the German federal government is taking measures to deal with the current situation. As part of this the government has recently announced a €65 billion program to help individuals and businesses. It includes a one-time payment of a subsidy to households to pay their energy bills, as well as an extension of a €5 billion package introduced in July for companies specializing in energy-intensive production, including paper sector. In August, the Chancellor Olaf Scholz also announced a reduction in the value-added tax on gas sales from 19% to 7%. The government hopes that should help to stabilize the current situation in the papermaking sector of Germany and to restrict a further growth of production costs of local paper manufacturers.

Some companies are also actively switching to renewable energy sources, such as liquefied gas and hydrogen. While this allows them to diversify energy sources, such transition does little to reduce costs, as most of renewables remains still very expensive.

Annika Silver
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