Strong competition and declining demand on the German market put a strain on LWC producers


The paper industry is suffering more than expected from the declining demand for LWC. Printing and publishing companies have recently reported that their order intake is weak or have even complained of declining volumes – even though order books of paper factories are growing again.

The majority of EUWID contacts in the LWC market are not satisfied with the way the year has developed or their annual figures – even a strong finish would no longer be enough to save 2012, many said.

While the declines in the magazine paper segment in Germany were painful, but not too extreme, there was a considerable drop in demand in the rest of Europe. According to Euro-Graph statistics, demand for LWC in Europe up to and including July fell by nearly 300,000 t compared to the same period of the previous year. In this context, EUWID respondents also pointed out that the annual figures were also impacted by the Ikea catalogue’s switch from SC paper to LWC. “Otherwise, the lost volumes would have been even higher”, they said.

The decrease in demand has made competition among suppliers on the market much more intense. As a result, manufacturers have been unable to achieve any successes on the price front. There is now little hope that even a strong fourth quarter will allow mark-ups to be realised. In fact, the most recent price reductions nearly always apply until the end of the year.

The industry is having trouble fighting the overcapacity plaguing the market. A “sink or swim” mentality had taken root, contacts said. “Generous temporary capacity management that was common in the summer makes no difference: the only possible response to the prices dictated by some buyers is closing mills”, say observers, calling for continued consolidation in the industry.

Some market players warn: “The demand that is being lost in the magazine paper segment now will not return”. The declines in consumption would be lasting, they said. Given these factors, capacity reduction could not be avoided.

⇒ This article is an excerpt from EUWID's monthly report on the German paper market. The EUWID Price Watch Germany for August will be published in EUWID Pulp and Paper no. 36 on 5 September.

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