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Energy prices continue to rise and affect the global paper industry

CEPI announced at the end of April that due to the sharp rise in energy prices affected by the dispute between Russia and Ukraine, most European steelworks were also affected and it was decided to stop production temporarily. Although they suggest a possible alternative to maintain operations in the event of a power outage: a temporary transition from natural gas to less environmentally friendly energy sources, such as oil or coal.

Will oil or coal be a viable and viable alternative to natural gas in European plants?

First of all, Russia is the third largest oil producer in the world after the United States and Saudi Arabia, and the largest exporter of oil in the world, as well as the second largest exporter of crude oil after Saudi Arabia.

With 49% of Russia’s oil exports to Europe according to 2021 data released by the OECD, and although it is uncertain when or whether Europe will impose extensive restrictions on Russian oil imports, Brent has reached a 10-year record. The level has reached almost the same level as in 2012 and has increased 6 times compared to 2020.

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Poland is the OECD’s largest coal producer in Europe, accounting for 96% of total coal production of 57.2 tonnes in 2021 – a 50% reduction in European capacity since 2010. While coal is not a favorable energy source in Europe, prices have also quadrupled since earlier this year.

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According to Fisher Solve, there are more than 2,000 gas boilers in Europe, with only around 200 oil-fired boilers and more than 100 coal-fired boilers. Disregarding rising oil and coal prices and supplies, it also takes a lot of time to change boiler fuel, which seems like a long-term solution to a short-term need.

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Are rising fuel prices only affecting Europe?

If we look at this side of Asia, we see my country and India: the two largest coal producers have similar price trends. The level of coal prices in my country reached a peak of 10 years at the end of 2021 and is at a historically high level, forcing many paper companies to stop production.

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In India, we have not only seen price increases, but there has been some shortage. It is reported that since the end of last year, 70% of the stock of India’s coal power plant has been maintained for less than 7 days and 30% has been maintained for less than 4 days, resulting in continuous power outages.

Demand for electricity and fuel has expanded as India’s economy has grown, although the devaluation of the rupee has also pushed up coal prices as 20-30% of coal is imported. #PE Coated Paper Roll Manufacturer    # Raw Material Paper Cup Ran Supplier

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Energy costs are an important factor

Although switching fuels is not a viable short-term solution for the paper industry, energy costs have become an important factor in production costs. If we take the costs of producing container plates as an example, the average energy cost in China, India and Germany in 2020 is less than 75 USD / FMT, while the energy cost in 2022 is already as high as 230 USD + / FMT.

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Considering all these factors, for the brick and mortar industry, some important questions should be considered:

When fuel prices rise, which companies will retain their cost advantage and which companies will make a profit?

Will different production costs transform world trade?

Companies with stable raw material channels that can compensate for price increases can seize this opportunity to build brands and expand their markets, but will there be more mergers and acquisitions?


Post time: Jun-14-2022