Unfortunately for the region, the volatility continues and there is no clear light at the end of the tunnel. As of this writing, Russia has cut off gas supplies to Poland and Bulgaria. Even after prices experience some relief, there is a strong possibility that a quick reversal and price spike could return.
In a worst-case scenario for the pulp and paper industry, when looking at possible outcomes, the closure of the Nordstream pipeline would likely create a gas scarcity that would significantly impact companies in locations more exposed to gas supply constraints. To get ahead of the situation, some Southern European countries have announced financial support to energy-intensive industries. However, as stated by Spanish Prime Minister Pedro Sanchez, there is unfortunately a limit on what the country´s treasury can support. The support provided will most likely be short-termed, and even then will not be enough to offset the price pressure paper manufacturers are facing.
While this is a tough situation to navigate, the pulp & paper industry needs to be prepared—now more than ever—to “brace for impact,” though it’s important to keep in mind that these changes will not affect all players in the same way. There are different factors that will have different results on the viability of each industry player, such as:
- Mix of energy sources
- Technical age of assets
- Geography and energy source exposure
Being able to quickly analyze the different possible scenarios that could arise due to current energy challenges helps provide a clear picture of which mills or lines are more likely to close or curtail production going forward. This kind of analysis also provides insights into where the next merger and/or acquisition opportunities will emerge.
Some questions to think about during this unpredictable time include:
- Which grades are more exposed to gas and electricity price increases? Through FisherSolve’s ability to provide detailed data on virtually every mill the world, we can get a clear overview of which grades use more energy to produce – and are therefore more at risk for greater price increases.
As illustrated above, the gas price increase of earlier record levels doesn’t affect many countries who have already made the transition to alternative fuel options. However, countries like Italy and Spain will be much more sensitive to such price changes as their technological options still heavily rely on gas-based solutions - and with FisherSolve, you can drill this type of information down all the way to the mill line level.
If there’s anything we’ve learned since the beginning of 2022, it’s that we should be prepared for a BANI (brittle, anxious, non-linear, incomprehensible) world and economy. Fisher International can help businesses prepare for ongoing volatility through the use of our business intelligence platform FisherSolve. In combination with our consulting services, we can help provide the answers to important questions by explaining these market movements in verifiable, fact-based terms that industry professionals find useful. To learn more about our capabilities and how the Fisher consulting team can help you prepare for the coming challenges and opportunities, contact us today.
Source: Fisher International