How an EU ban on Russian-made paper could transform the European sack kraft market

Wanted: more than 77,000 tonnes of sack kraft, as European buyers rush to replace Russian supply

After some fears and rumors of possible restrictions on paper imports from Russia to the European Union, on April 9 just such a ban became a reality. As part of its fifth package of sanctions, the EU banned the import of wood, pulp, paper and paperboard from Russia.

For most of the paper and packaging grades in Europe, the impact of the ban is rather small and for the short term, considering the high amount of capacity additions announced in the EU for products such as containerboard, which gives EU producers some flexibility to allocate new volumes in the market.

For the European sack kraft paper industry, however, the story is completely different.

EU reliant on Russian sack kraft supply

Russia accounts for 26% of the total sack kraft capacity in Europe, with some of the biggest integrated producers in the region located there. Even more important, Russian paper accounts for 60% of all sack kraft imports and 12% of all sack kraft demand in the EU. This means that with the banning of paper from Russia, the EU sack kraft market will stop receiving about 77,000 tonnes per year of sack kraft paper (based on 2021 figures).

sack kraft 2021 imports.png

This reduction in the availability of paper in a market that was already hot generates important implications for the European sack kraft market. Demand for sack kraft paper in the EU, and in the region in general, has remained very high in the first months of the year. Factors including the trend toward plastic substitution, e-commerce consumption and a strong construction sector have been boosting it.

The existent high-demand scenario and reduced availability due to the ban resulted in increased demand for paper from EU producers, generating more tightness in the market and causing operating rates to climb to even higher levels. The circumstances are even tenser in countries such as Italy where there is no domestic sack kraft production and imports from Russia have a share of almost 14% of the total sack kraft demand in the country.

Additionally, Segezha paper sacks mills in Western Europe have not been able to receive the paper for their final production from their paper mills in Russia, needing to buy sack kraft paper from other producers inside the EU. That has generated more demand pressure for producers in the region. Some independent converters have not received the quantities agreed upon with the producers because they have allocated them to supply the new demand from the Segezha converting units. That has made the problem of the lack of availability of paper more tangible and generated more stress in the market.

Sack kraft prices up 42% in past year

The first effect of this tense situation has been on prices. High inflation and energy prices, combined with low availability and high demand, generated significant increases in the prices of European sack kraft paper. During just the first quarter of the year, the semi-extensible unbleached sack kraft prices of Western Europe[1] have increased by 8% compared with the previous quarter and by 42% compared with the prices of the first quarter of 2021. Additionally, some producers already announced important price increases for the beginning of the second quarter of 2022, and others are announcing price hikes for June or July, most of them ranging between 8% and 17%.

Furthermore, Russia’s war on Ukraine, the sanctions against the country and the ban on imports of Russian paper and packaging goods all have made some big producers in the paper and packaging industry divest their assets in the country. This has been the case with Mondi and Sylvamo.

Short-term shocks could distort the sack kraft market in the long term

In these cases, even if there is no direct impact on the sack kraft paper market because these companies were producing other products at those mills, those divestitures could create notable distortions in the European sack kraft market. For example, those companies might compensate for the reduced production of those other paper grades by swinging their capacity at other mills in Western or Emerging Europe away from sack kraft. Such capacity shifts could reduce the supply of sack kraft in the European Union and take the region’s operating rates even higher.

Another effect of this situation is that these mills that are divested will be sold in Russia to other companies or investors, bringing new competitors to the European paper market. In this case, it is important to mention that the mills in Russia usually have lower production costs than the ones in Western Europe, being one of the most competitive. The emergence of new, low-cost competitors could affect prices in the European paper market – especially if the war is resolved and the ban on imports from Russia ends. The ban could also motivate some European companies with joint ventures in Russia to conclude those investments, also affecting the financial structure of the market.

In terms of capacity, the recent ban could also generate distortions. So far, all the confirmed capacity expansions in the European sack kraft market come from Russia and Belarus. The banning of EU imports from those Russia could make their producers consider stopping or delaying the investments in new capacity, extending the tight supply situation for the market into the long term. On the other hand, this situation could also show opportunities for companies in the EU to invest in capacity in order to take advantage of and respond to the new market conditions.

It is important to clarify that although there is no ban on EU imports from Belarus, some EU companies have stopped doing business in that country due to its position in the conflict between Russia and Ukraine. The effect of those decisions on Belarusian companies is also an important variable to consider.

Finally, considering the difficulties in securing paper from their production units, some integrated Russian companies with converting paper sacks mills in the EU could consider selling or transforming their assets in the region, causing additional transformations in the market.

In conclusion, the ban on imports of Russian wood, pulp, paper and paperboard is generating significant changes, challenges and opportunities in the European sack kraft paper market, and it is important that those impacts are considered by every industry stakeholder who aims to make strategic decisions in the following months.

During the next months, we will release the global kraft paper study where you could find the complete description and trends of the kraft paper market in the different regions of the world. Keep your eyes on it!

For more in-depth information and insights, check out the next European Paper Packaging Forecast. For the very first time, the sack kraft marker is included in our forecast and it will be part of it henceforth. Find out how to subscribe.

Camila Jaramillo, Associate Economist, European Paper Packaging. She works out of Fastmarkets RISI’s Brussels, Belgium, office and can be reached at

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