VDP: demand for paper is increasing substantially - increasingly dynamic packaging paper market

Demand for paper increased again substantially in 2006. The VDP (association of German paper mills) has announced that sales rose by almost one million tonnes to 22.6 million last year. This corresponds to growth of four per cent. About half of this growth is attributable to the domestic market, which expanded by an encouraging four per cent (470 000 tonnes) to about 12.5 million tonnes. Export business went up five per cent to about 10.1 million tonnes.

These sales figures are the result of different developments. Graphic papers stagnated at 10.5 million tonnes, while packaging papers - the second-largest product segment - developed even more dynamically than before: they recorded sales growth of almost 800 000 tonnes or nine per cent to 9.2 million tonnes. The trend is towards smaller packs but larger numbers of them. Following growth of two per cent, special papers made a considerable jump to 1.6 million tonnes and sales of hygiene papers increased by 60 000 tonnes (five per cent) to 1.3 million tonnes. In spite of the substantial sales growth, the earnings situation deteriorated even more due to the dramatic increase in costs. VDP President Bernd Rettig said that the cost situation was also the reason why the sales and production record had not yet had an impact on operating results in spite of price increases.

All in all, the German paper and board industry remains the fourth-largest supplier in the world, behind the USA, China and Japan, and the biggest producer in Europe.

The growth in the German paper industry was not driven by export business alone any more in 2006. Export sales did, however, go up by five per cent (450 000 tonnes) even so, from just under 9.7 million tonnes to 10.1 million tonnes. This growth was attributable exclusively to the packaging field with an increase of 14 per cent, whereas there were slight shortfalls (- 0.6 per cent) with graphic papers. The most important export market is Western Europe, although the German companies managed to continue strengthening their positions on the markets in Central and Eastern Europe. German sales to overseas markets decreased again and the Chinese market has become distinctly less important.

VDP is expecting sales and production to continue developing positively in 2007, when it is anticipated that the domestic market will become another mainstay of the German paper industry in addition to exports. The German paper manufacturers are concerned about the drastic increases in energy and raw material prices in particular. According to Rettig, further price increases can be expected, in order to safeguard the long-term future of the German locations. What are necessary are appropriate overall political conditions at the economic level, such as affordable energy prices determined in an effectively competitive environment and a reduction in the special charges that are unique by European standards. The efforts made by the business community to reduce CO2 emissions should also be recognised and climate policy should be based on what is feasible. The industry is counting on a positive decision by the EU Commission about further approval of compensation for environmental tax. If this compensation was discontinued, it would cost the paper industry alone up to EUR 250 million per year.