In focus: the German paper industry The German economy is living in turbulent times: The Corona crisis was seamlessly followed by the Ukraine war and its economic impact on price levels. This has not left the German paper industry unscathed. High raw material prices are just as big an issue in Germany. In addition, the industry has to cope with challenges such as the digital transformation and the shift towards greater sustainability.

But how does the German paper industry stand up to international competition and how is it positioned to meet future challenges? We offer you an overview of the most important figures and developments.

Not just packaging and books: What areas does the paper industry cover?

The paper industry in Germany is very diverse. At Palamo, we stand for sustainable packaging and focus our attention on it. Innovations are particularly interesting for us here. These enable us to present even more innovative packaging solutions overall. Overall, however, the business activities of the paper industry can be divided into four major subject areas:

1. Packaging papers (54.8 percent)
   

   Packaging papers represent the largest business area, accounting for a total share of production of 54.8 percent in 2020, according to an industry study by IG BCE.

   This includes cartons and papers for product packaging in almost all industries. In mail order and e-commerce, shipping packaging also plays a very important role.

2. Graphic papers (32.2 percent)

   Graphic papers include everything that is written on or printed. This mainly includes books, magazines, newspapers, stationery and brochures. At 32.2 percent, this business area also accounts for a large share of total production.

3. Sanitary paper (6.8 percent)

   Sanitary papers include all papers used for personal hygiene or food hygiene. These include toilet paper, handkerchiefs and also kitchen towels.

   With a share of 6.8 percent of total production, this market segment is rather small.

4. Technical and specialty papers (6.2 percent)

   The smallest market segment comprises technical and specialty papers with a share of 6.2 percent of total production. This segment includes, for example, roofing paper, photographic paper, filter paper and special paperboard for the automotive industry.

   The product portfolio of the German paper industry comprises around 3,000 different paper grades.

What is the current position of the paper industry in Germany?

 

The paper industry is an important branch of the manufacturing industry in Germany. For a first insight, here are some industry figures:

	2022	2021
Sales	12.64 billion euros	15.53 billion euros
Employees	40.000	39.400
Number of companies	92	93
Number of location	152	149

 

The sales growth in 2021 shows the recovery after the corona crisis, which also affected the paper industry. Remarkably, for the first time in many years, the number of companies in the industry has increased minimally. However, this does not change the fundamental development, because in 2010 there were still 100 paper-producing companies.

Fewer small businesses

The size of the companies is also changing: In 2021, one company each disappeared from the statistics in the size category of 0 - 10,000 t production volume and in the 50,000 to 100,000 t range. Instead, there are three new large companies with a volume of between 100,000 and 250,000 t.

These shifts reflect the general changes in the paper market: for example, demand for graphic papers has been falling continuously for years because fewer newspapers are read in paper format. However, this segment in particular is mainly served by smaller companies. In the growing segment of sanitary papers and packaging, on the other hand, larger suppliers tend to be on the move.

Growth markets Asia, Eastern Europe and Latin America

In the future, the hygiene and packaging papers business areas will see major growth, particularly outside Germany. The IG BCE industry study specifically mentions Asia, Eastern Europe and the Latin American region. This will also result in interesting export opportunities for German suppliers.

Trends and challenges for the German paper industry

The German paper industry ranks fourth in the world after China, the USA and Japan, and is definitely number one in Europe. This size gives rise to many opportunities for further developments. Nevertheless, the industry faces national and global challenges.

These include:

1. Globalization: Greater competitive pressure on world markets
   

   The paper sector is clearly one of the industries that depend on global trade. The import and export of cell fibers for paper production and recovered paper for recycling is a factor for the domestic industry that should not be underestimated. Even though the focus of German paper manufacturers remains in Europe, other markets such as India, Japan and Indonesia are also very interesting.

   For example, demand for sanitary papers and cardboard for packaging is growing rapidly in India. Since the country is poorly self-sufficient in this regard and only has a recycling rate of just over 30 percent, this presents exciting export opportunities for the German paper industry.

   But it is precisely here that strong competition has developed from Asia: The Chinese paper industry is by far the largest in the world. Not for nothing did the EU impose anti-dumping duties on fine paper from China in 2017 to protect the domestic paper industry. In the meantime, the EU has again decided to phase out the measures.

   The reason is that paper is currently in short supply, which in turn is driving up prices. Imports from China can alleviate this problem. This again shows how strongly the paper industry is integrated into international value chains.

   Ultimately, German manufacturers will have to invest in new technologies in order to be able to expand and maintain their own position in international competition.

2. Digitization: Paper has had its day in certain areas

   Whether it's news or scientific articles - you will almost certainly turn to the Internet first when doing research. This is also reflected in the circulation figures for national daily newspapers:
   
   - First quarter 2012: 4 .1 million copies
   - First quarter 2022: just under 2 million copies

   Initiatives such as the paperless office have also ensured that demand for graphic paper has fallen sharply in this country over the last 20 years. And this development is far from over:

   - Authorities are planning to document more and more administrative processes digitally.
   - Many companies are still in the process of implementing their digitization processes.

   However, the paper industry has already taken this into account and reduced many overcapacities. In turn, the demand for packaging materials continues to rise due to increased online trade. While demand for packaging papers was still at 90 kg per capita in 2000, it has risen to 115 kg in 2019.

   Graphic papers will probably continue to lose demand in the future, while the trend for packaging and hygiene papers is likely to be the opposite. The paper industry must take this into account and retool production facilities at an early stage.

Book retailing is also becoming increasingly digital. Nevertheless, printed books on paper are here to stay and are likely to continue to play an important role in the future.

Digitization of production: Another construction site

It is not only demand that has changed as a result of the digitization process. The digitization of production also holds great potential for manufacturing companies. These areas in particular are interesting:

• Transparent data acquisitionToday, operating times, maintenance intervals, and estimates of the service life of individual components of production plants can be digitally can be digitally recorded. Through better planning of maintenance increases the service life of the equipment.
• Robotics and AI optimize the production processBy using robotics and AI, the production process can be made much more efficient. make the production process much more efficient. As a result, a lower use of resources is matched by a better output. Often this can lead to reduce scrapThis minimizes costs and also conserves resources.
• Special paper-based products: Digitization is helping develop more high-tech products. This also applies to the paper industry.

 

Example of high-tech products: Carrier material for Covid 19 antibody tests Covid-19 tests based on paper represent a real innovation. They are the result of a collaboration between the TU Darmstadt and the pharmaceutical company Merck. The advantages of these tests are, on the one hand, the costs, since the nitrocellulose originally used is significantly more expensive. On the other hand, disposal iseasier because the biodegradable carrier material decomposes itself.

 

Sustainability: an important issue in the resource-intensive paper industry

Current situation

Today, the manufacturing industry can hardly ignore the topic of sustainability. This applies all the more to the paper industry, which is generally very resource-intensive. Before the energy crisis, energy costs accounted for around 10 percent of sales - putting paper manufacturers clearly in the top group.

Nevertheless, the paper industry is continuously working on improvements. For example, specific energy consumption today is around 67 percent lower than 50 years ago. Energy consumption per t of production was also reduced from 2,796 kWh/t to 2,645 kWh/t between 2017 and 2019.

Recycling

Waste paper is a valuable commodity in this country. No wonder: the energy required to produce recycled paper is only half that required to produce paper from virgin fibers. With a recycling rate of 79 percent, Germany therefore has a functioning circular economy.

However, as demand for newspapers is falling rapidly, the volume of recovered paper is also declining. Moreover, packaging papers often do not offer the desired quality: they lack the bright white needed for the production of sanitary paper or graphic paper. As a result, recovered paper could become more expensive in the future. In addition, the circular economy is being undermined.

New ideas in this area start with the use of residual materials from waste paper recycling for other industries. For example, the lignin produced during recycling could be used as a base material for chemical products.

New production processes: The "Model Paper Factory" project

The "Model Paper Factory" project was launched by 17 companies from the paper manufacturing industry and their suppliers. In cooperation with various scientific institutes and universities, new disruptive ideas are to be developed there. The goal is to decarbonize the paper industry by 2045.

Sustainability in particular will be a major concern for the German paper industry in the coming years. Both political requirements and environmental necessities are forcing the industry to act. This is an important topic - we will stay on the ball for you and inform you about news in our blog!

Conclusion: The German paper industry is on a good but rocky path!

The German paper industry ranks fourth after China, the USA and Japan. The technical equipment is at a high level compared to the competition from Asia and the standing in Europe is quite strong. Nevertheless, the competition from China should not be underestimated, especially on the world market.

In addition, the industry must also embrace digitization and leverage the potential it offers. This is the only way to maintain its good position on the global market. Finally, the energy-intensive sector faces the challenge of decarbonization. Even if initial steps can be seen here, it will probably take longer to find solutions that are sustainable in the long term.