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“The market is at rock bottom”
| | The worst case that many paper recyclers fear has not yet eventuated but the danger of insolvency and the consolidation of the market is currently hanging like a cloud over the industry. The great crisis is now four months back, but the situation is still “more than tense,” said Ralf Witte, Managing Director of Veolia Umweltservice Wertstoffmanagement.
By Andreas Schleinkofer
The machines are at a standstill. The warehouses are empty. None of the employees are tending to the preparation of freshly produced paper for dispatch. Yet another paper factory that has fallen victim to the negative market situation. There aren’t many left any more.
The worst case that many paper recyclers fear has not yet eventuated but the danger of insolvency and the consolidation of the market is currently hanging like a cloud over the industry. The great crisis is now four months back, but the situation is still “more than tense,” said Ralf Witte, Managing Director of Veolia Umweltservice Wertstoffmanagement.
Before the crisis, speculation drove prices into barely comprehensible heights. Most people in the industry were sure that the bubble was going to burst sooner or later. But everyone was surprised about the depth to which prices fell. All of a sudden, in November 2008 a ton of mixed waste paper was worth around 80 per cent less than one month earlier. “That was not foreseeable,” said Witte. The worldwide crisis is hitting the waste paper industry hard. One of the main reasons for that is declining consumption. According to Witte, the 20- to 30-per-cent decline in the industrial sector at Veolia is a further consequence of the slump in the automotive market. The fact is, less waste paper accumulates when Audi and BMW do not unpack as many vehicle parts.
Prices for waste paper have dropped
Photo: Pixelio
Prices no longer cover costs
Witte also sees a problem in the fact that export figures have fallen drastically. One light at the end of the tunnel, however, comes from the Chinese market, which, after the Chinese New Year celebrations, is starting to import more and that is causing the price to rise. The picture in Germany, however, is a completely different one. The manufacturing industry has reduced its stock levels and mostly orders waste paper purely on a just-in-time basis, making long-term planning practically impossible for recyclers.
Apart from that, German companies have already largely optimised their costs in the course of managing the crisis and Witte forecasts a great deal of restructuring and consolidation: “Small companies will not be able to endure the current situation for long. Even though large operations have their problems too, we will simply be able to hold out for longer, alone due to the amount.” This means that market leader Veolia, which turns over 2.5 million tons of waste paper in Germany and a total of five million tons within the European Union, will be able to withstand the current economically unviable market situation for longer than its smaller competitors. But Witte is still annoyed: “The price should actually stop falling as soon as supply meets demand. The current price, however, is a political one. It has been artificially corrected downwards.” The only worse thing would be if the price of the secondary raw material waste paper fell to 0.00 euros. “Then we would be making a retrograde step in the circular economy,” the expert fears.
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