March 17th, 2022

How the Conflict Between Russia and Ukraine is Affecting the Paper and Pulp Industry

For the past month, Ukraine has suffered the terrible consequences of Russia’s invasion, with many forced to leave their homes, evacuate their country and suffer casualties at the hands of their northern neighbour.

Without undermining the gravity and horror of this reality for the Ukrainian people, we want to convey the facts that affect those in the paper and pulp industry globally, as a lack of information could cause problems for millions of businesses and workers alike, if they fail to prepare.

As the war commenced on February 24th, the vast majority of paper and board producers in Ukraine stopped operations, according to the director of Ukrpapir: the Ukrainian Association of Pulp and Paper Industry.

This means that 1.2 million tonnes of capacity will be lost in terms of paper and board – however, most of this used domestically, so shouldn’t significantly affect the supply available in Europe.

Russia, on the other hand, provides a significant volume of newsprint and kraftliner to Europe – each year, Russia exports up to 200,000 tonnes of Kraftliner, which could lead to possible shortages.

22% of pulpwood logs and softwood lumber is supplied by Russia

Likewise, it’s possible that supply of pulp may be affected by trade restrictions with Russia as the country is responsible for supplying 22% of pulpwood logs and softwood lumber globally.

In protest to the conflict, paper and packaging companies such as Stora Enso are boycotting Russia, halting sales and production at their corrugated packaging plants and sawmills, with paper company Sylvamo contemplating following suit.

Likewise, the ever expanding sanctions against Russia may provoke the country to stop exports of paper and pulp.

However, corporations such as Stora Enso are working hard to increase their capacity at their paper mill in Finland, while the increasing capacity of the U.S. and Brazil paper industry should help to offset the disruption caused by these potential shortages of paper and pulp to the European market.

While there is a possibility for shortages of certain paper and pulp products, the factor most likely to affect the paper and pulp industry is the potential shortage – and the rising cost – of energy.

Gas prices have soared in Europe since the conflict began

At the moment, up to 40% of natural gas and oil used by Europe is supplied by Russia. As such, gas prices have soared in Europe since the conflict began.

The countries that most reliant on Russia for energy – including Germany, Italy and the Scandinavian countries, among more – are the most at risk if Russia chooses to withhold their resources, which may affect businesses depending on paper and board supplied from them.

Lastly, delays should be expected by paper and pulp corporations when receiving raw materials, and also by businesses who require paper and board as part of their operations, as thousands of Ukrainian drivers have discontinued work.

Likewise, cost of delivery is likely to be higher as both the increase of natural gas and oil, and the scarcity of drivers, contributes to rising prices.

The German branch of the paper manufacturer Leipa has already been affected by the conflict, as they announced to customers that they should expect “postponements, delays and cost increases in the coming weeks” as a result of Russia’s invasion of Ukraine.

With so much uncertainty, it is vital that those in the paper and pulp industry and paper-reliant businesses alike, take steps to prepare themselves for possible paper and pulp shortages and probable delays, so that they can continue to serve their customers successfully irrespective of the conflict.

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