Europe’s paper surplus

The Paper Stock Industries (PSI) chapter of the Washington-based Recycled Materials Association (ReMA) has been tracking a decline in recovered paper exports from the U.S. that shaped the 2023 market and has sustained throughout this year.

Although China’s door is again slightly open to imports that meet specific standards, a combination of its withdrawal from the market and adjustments by U.S. mills to accept more grades of recovered paper has caused at least a temporary change in the import-export balance.

In Europe, the shrinking Chinese market has been a factor, but in the past two years, that trend has been offset by different geopolitical and recycling market circumstances that have created a surplus of recovered paper on a continent that now has a higher volume moving offshore.

Attentive collection, restrained end market

A European paper and board industry that suffered from production cuts in 2023 consumed less recovered paper that year than in 2022, leaving the door open for a 33 percent increase in recovered paper exported from Europe in 2023 compared with the prior year.

That was among the notable findings in a 2023 report prepared by the Brussels-based Confederation of European Paper Industries (CEPI).

CEPI presented information pertaining to European and global demand as well as Europe’s supply situation when painting an overall portrait of how Europe’s paper industry and recycling sector fared last year.

The report indicates nations in the CEPI region shipped out more than 9.4 million metric tons of recovered paper last year, a 33 percent jump compared with less than 7.1 million metric tons exported in 2022.

On the supply side, CEPI data show Europe attained a 79.3 percent recycling rate for discarded paper and board in 2023, with 82 percent of that material consumed in Europe and 18 percent exported beyond the CEPI region. Comparatively, Europe exported 14 percent of its collected recovered paper in 2022.

Several nations in Europe are world leaders in the collection of paper for recycling, in some cases because landfill and other disposal options are prohibitively expensive and in others because officials are striving to meet European Union packaging recycling targets.

CEPI itself has organized recycling initiatives designed to ensure its member companies have access to adequate recovered paper feedstock. Those programs include the 4evergreen initiative, which is designed to raise Europe’s paper and board rate to 90 percent.

“We have been doubling our recycling [activity] since the 1990s,” CEPI Director General Jori Ringman said at a July news briefing designed to provide additional detail about its 2023 report. He also noted that the 2023 CEPI region recycling rate was another record for Europe.

The vigorous collection activity helped create a surplus of 9.4 million metric tons of recovered paper exported from the CEPI region last year. The CEPI region, which includes more than 850 mills, does not align perfectly with the EU, though most EU nations are included, as well as Norway and the United Kingdom.

More than 88 percent of CEPI-region recovered paper exports went to Asia, with non-CEPI European countries receiving most of the rest. The roster of non-CEPI European nations includes Turkey, which received about half that export fraction, or 11 percent.

Also contributing to the surplus of recovered fiber in Europe last year was a mill sector that operated well below capacity, which CEPI attributed to more than one factor at the July briefing.

A negative charge from the energy sector

At the July briefing, Ringman and Trade and Industrial Policy Director Bernard Lombard portrayed a European paper industry beset with high operating costs and an overhang of inventory in 2023.

The CEPI region’s paper and board output was down across all sectors in 2023, with year-on-year output reductions of 9.5 percent in packaging grades, 4 percent in tissue grades and 24.2 percent in graphic paper grades.

Mills in Europe encountered an energy price spike in 2022 in the aftermath of COVID-19, Russia’s invasion of Ukraine and the subsequent curtailment of once-abundant Russian energy sources.

“Energy prices remain nearly two times higher than before the COVID crisis and have significantly eroded European industry’s competitiveness,” CEPI says.

The lofty energy prices were not the only factor cited for the sector’s woes but also an overhang of inventory that was built up earlier in the decade and subsequently spent down throughout last year.

At a February briefing, CEPI noted German box makers, in particular, were working through accumulated inventory they had rebuilt in 2022 after COVID-19-related supply chain disruptions followed by more fears of disruption after Russia invaded Ukraine in February 2022.

“Destocking along the supply chain lasted most of 2023,” CEPI says, referring to the inventory situation, adding that the situation seems largely to have come to an end as of the beginning of this year.

One bright spot for Europe has been China’s demand for market pulp from the region. Chinese mills, less able to import old corrugated containers and other recovered paper grades because of environmental policy, instead contributed to the global demand for more than 7.8 million metric tons of market pulp that left Europe.

Market pulp exports from the CEPI region increased by 47.8 percent in 2023, mainly driven by China’s growing demand, Lombard said. CEPI’s definition of market pulp does not include any references to recycled content, and the two biggest producers of the material are heavily forested Sweden and Finland.

Regarding Europe’s ability to consume more of its own recovered paper, CEPI expresses some optimism that its mills can be more productive this year than last year.

Sparking activity closer to home

At the news briefing, Ringman and Lombard indicated conditions for CEPI paper and board producers could be shaping up differently this year, despite Europe’s high energy costs.

On the energy front, while prices remain higher than those in North America or other parts of the world, CEPI’s tracking indicates they have fallen steadily since the initial spike experienced in 2022.

CEPI says the improved energy cost outlook and inventory wearing down seem to have led to a 2024 that has started on a much more positive note.

Output among European paper and board producers is up 6.6 percent in the first quarter compared with last year’s first three months.

The improvement might be appreciated, but it hasn’t stopped CEPI from joining trade groups in Europe lobbying for what Lombard called an “Industrial Deal” to go along with the EU’s Green Deal.

The effort goes back to February, when 73 business leaders representing 17 sectors presented the Antwerp Declaration for a European Industrial Deal to EU Commission President Ursula von der Leyen and the Belgium prime minister.

More than 1,000 organizations spanning 25 sectors now support the declaration, calling for a European Industrial Deal to complement the EU Green Deal and safeguard jobs in Europe, according to https://antwerp-declaration.eu.

“Europe’s industries are facing the worst economic downturn in a decade at a period when investments are needed to achieve Europe’s transition to climate neutrality,” the coalition says. “Urgent action is needed to restore the business case for investments in Europe.”

“We expect legislation that is more investment-friendly,” Ringman said, adding that ideally legislation can scale back on regulatory requirements and help the investment cycle catch up with what he described as a faster-paced legislative cycle. “We know Europe loves red tape, but nobody needs that much.”

The author is senior editor with the Recycling Today Media Group and can be reached at btaylor@gie.net.