Europe’s competitiveness depends on keeping manufacturing viable

A smaller, viable sector is still within reach. Reaching it means concentrating production where assets are efficient, with sufficient capacity to serve customers and the financial headroom to maintain and improve operations.
Energy performance, rigorous supply chain tracing under the EU Deforestation Regulation and emissions compliance are costly and unavoidable parts of manufacturing in Europe, and are areas in which Sappi continues to invest. Under the European Commission’s newly proposed EU ETS review, maintaining free carbon allowances from 2031 onwards will be strictly conditional on reinvesting their full value in European decarbonisation.
Meeting these requirements takes capital and a credible business case. Fragmented, underutilised assets make both increasingly difficult.

Manufacturing in Europe should come with high standards and strong sustainability commitments. But companies also need the financial strength to meet them.

The survival of European production

This is ultimately a question about the survival of a viable European industry.
Falling demand does not mean demand disappears. If European production becomes uncompetitive and exits the market, customers will still need the product. The risk is that this demand is increasingly met by imports, including from lower-cost Asian producers that are already increasing exports to Europe and may redirect additional volumes as global trade flows shift, rather than by mills operating under European environmental, regulatory and sustainability standards.

Europe therefore has an interest in creating the conditions for established industries to adapt while they still have the strength to invest.

Competition policy is part of that picture.

The European Commission is examining the proposed Sappi-UPM graphic paper joint venture under EU merger control rules. As with any merger review, the assessment will focus on the implications for customers, including price, quality, choice and security of supply. That assessment is necessarily forward-looking. In a market undergoing sustained structural demand decline, understanding how suppliers can continue to invest, maintain production assets and serve customers reliably over time forms part of understanding the future competitive landscape in which those customers operate.

Digital substitution continues. Customers can source from other European producers and imports. Sustained low utilisation, meanwhile, affects producers’ ability to maintain assets and invest.

Current capacity therefore tells only part of the story. In industries facing structural demand decline, excess capacity and rapid change, the more relevant question is whether enough viable, investable capacity will remain to serve European customers reliably over the medium and longer term.

Building an industry for the market ahead

The proposed joint venture is our response to that challenge.

A European production network developed for demand above 40 million tonnes cannot operate indefinitely in the same form as the market moves towards eight million tonnes.
Once established, a broader asset base would allow the JV to operate its production network more efficiently, improve utilisation and provide a stronger foundation for maintenance and investment. It would also provide a more sustainable framework for aligning production with market demand while maintaining reliable supply for customers.

What matters is building a graphic paper industry that can serve the European market reliably, investing in its assets and meeting the standards expected of European manufacturing.
Customers benefit when suppliers can continue operating efficient production networks, invest in quality, maintain security of supply and respond reliably to changing demand. Preserving a viable manufacturing base is therefore not only an issue for producers but also for the many publishing, printing and distribution businesses that depend on it.

That requires an industrial structure built around the demand ahead.

A wider challenge for Europe

Graphic paper will not be the last industry to face these hard choices. Across Europe, established industries are confronting similar structural pressures. These sectors carry skilled workforces, infrastructure, supply chains and industrial expertise accumulated over generations. The challenge is not simply to preserve existing structures, but to ensure that European manufacturing remains sufficiently competitive and investable to adapt and thrive in a changing economic environment.

Europe has good reasons to want viable manufacturing to remain here. It supports regional employment and industrial supply chains. It gives customers access to domestic production. It anchors investment in facilities operating to European environmental and sustainability standards.
Keeping manufacturing in Europe sometimes requires difficult changes.

Having navigated those changes in our own industry, I know the choices are rarely straightforward. But acting while businesses remain strong creates more options than waiting until individual assets reach crisis point. Europe’s competitiveness agenda should recognise that preserving viable manufacturing may require industries to adapt before market pressures force more disruptive outcomes.

For graphic paper, the future market is already taking shape. Our task is to build a viable industry around it: one that meets Europe’s high standards and serves customers reliably for the long term.

Demand may change, but customers remain. Europe’s challenge is to ensure that competitive, sustainable manufacturing remains here to serve them.