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The energy gap between Italian paper mills and their European competitors is a critical factor for the sector’s competitiveness, a spokesperson for Burgo Group told Fastmarkets on Monday December 1.
And while all paper manufacturers face persistent pressure from volatile energy prices and changing regulations, Italy’s struggles are unique in the European Union because it has to factor in higher costs than all its European counterparts due to having a less robust energy infrastructure and a heavy reliance on imports.
Assocarta said lowering energy costs and ensuring regulatory stability were essential conditions for safeguarding production and maintaining the competitiveness of one of Italy’s “key industrial chains.”
And although Italy remains a leading manufacturing nation, ranking eighth globally, a new report published by Confindustria on November 26 shines a light on just how uncompetitive Italian manufacturing can be.
The Confindustria report highlights that volatile energy prices and uncertainty over supplies are critical risks to long-term industrial growth in Italy, citing persistent price gaps in terms of both natural gas and electricity that “put Italian paper mills at a disadvantage.”
In response to the report, Assocarta said it had called for an Italian energy decree to provide breathing space for companies, with measures that include eliminating the gas price spread between the Italian PSV gas hub and the Amsterdam TTF benchmark.
The Burgo Group spokesperson said the situation in Italy is far more complex than elsewhere in continental Europe.
“Gas prices remain tied to the PSV, which in recent months has consistently been €4-5 ($5-6) per megawatt hour (MWh) higher than the Dutch TTF, creating a spread that is immediately reflected in electricity costs. Because gas sets the marginal price of electricity, this differential results in significantly higher energy costs [in Italy] compared with its European competitors,” the Burgo spokesperson said.
Some countries have rolled out subsidies to help their nations, the Burgo spokesperson added, giving them a clear competitive advantage. And, in November, the UK and Germany announced they would be offsetting high energy costs to make heavy industries more attractive for investment.
Assocarta told Fastmarkets on October 28 that high energy prices remained a threat to the competitiveness of the Italian paper industry and confirmed that Italy was “still the EU country most severely hit by the energy shock.”
Russia’s invasion of Ukraine in 2022 drove a global energy crisis that inflated manufacturer production costs, worsening what Confindustria said was already a high energy burden. This led to natural gas supplies to Europe being front and center of the crisis, according to the International Energy Agency (IEA), with Italy more reliant than any other country on imports, which account for 40% of its domestic demand.
According to Assocarta, for the first half of 2025, Italian electricity was significantly more expensive than in Germany and France, for example.
The share of energy costs in Italian industrial production also remains more than one percentage point above its 2018/2019 average, a burden that, the association said, has been largely absorbed in France and only partially felt in Germany.
“For an energy-intensive sector such as paper manufacturing, this gap directly erodes margins and constrains investment capacity. Higher upstream costs inevitably fell through the supply chain, affecting converting, printing, and graphics, and weakening the international competitiveness of the entire system,” Assocarta general director Massimo Medugno said.
According to Fastmarkets’ Asset Database, most of Italy’s energy mix is dominated by natural gas, which provides up 95.8% of the heat requirement, with 140 out of 150 Italian pulp and paper mills benchmarked.
Together, these mills represent around 11.1 million tonnes of capacity and Fastmarkets’ director of mill intelligence Ville Henttonen said that, while many Italian mills have some electricity generation capacity, the benefit remains limited in the current pricing environment.
“Eighty-two of the 140 mills have some form of electricity [generating] capacity, typically heat-electricity cogeneration using combustion or steam turbines,” Henttonen said. “This gives them flexibility in how they manage their energy supply, but when both natural gas and electricity remain expensive, the advantage is modest and only relative to even more costly alternatives.”
In October 2025, Confindustria figures continued to demonstrate an Italian lag in electricity prices when compared with Europe’s other main pulp and paper producing countries. The average wholesale price for electricity in Italy in October 2025 averaged €111 per MWh, while Germany averaged €84 per MWh, Spain €76 per MWh and France €57 per MWh.
This is partially down to some European nations having distinct energy infrastructure. French pulp and paper mills, for instance, benefit from significantly lower electricity prices than their Italian counterparts, mostly due to the region’s extensive nuclear network, which supplies 70% of the country’s electricity.
A key reason for Italy’s energy weaknesses lies in the country’s dependence on energy imports, making the region vulnerable to price hikes and escalations that are completely outside its control.
Figures from Italy’s Higher Institute for Environmental Protection and Research (ISPRA) show that Italy’s dependence on foreign energy imports amounted to three quarters of its total domestic demand in 2023 – although it also pointed out this was an improvement on a peak of 85.5% dependency in 2006.
Italy was also previously heavily dependent on Russian LNG and, after having reduced those imports from around 40% of total LNG imports in 2021 to less than 2% in 2024, Italy has said it is in full support of EU caps from the region.
In October 2025, the EU Council announced it had agreed its position on rules to phase out imports of Russian gas, with a full ban set to apply from January 1 2028.
Because of the unique pressures on the Italian manufacturers and higher costs when compared with other European nations, the Confindustria report set out key constraints and investment barriers that are limiting manufacturing in the country, including high energy prices and a lack of infrastructure.
When comparing Italy’s manufacturing rates with its Southern European counterpart Spain, a clear gap emerged in the first nine months of 2025, when Spain grew by around 1%, while Italy contracted by roughly the same amount, a divergence largely attributed to Spain’s lower energy costs, according to Confindustria.
In response to the “unfavorable scenario” across Italy, a Burgo spokesperson told Fastmarkets the group is implementing a strategy to reduce its energy costs that includes increasing its use of biomethane and the renewal of cogeneration systems to be compatible with hydrogen use.
“Ensuring fair competitive conditions in the long term will require aligning national energy policies with the best European practices: only in this way can the Italian paper industry continue to compete on equal footing with the largest European countries,” the Burgo spokesperson said.
While Italy may still be battling with long-term energy security issues for a while, the region has set tough targets in terms of reaching carbon neutrality and reducing its reliance on natural gas.
The pulp and paper industry has called for structural policy measures to enhance the use of forest-based biomass in mills, a material which, according to Fastmarkets analysis, has not yet been extensively utilized.
According to Fastmarkets data, only five mills rely on fuel oil and Ville Henttonen said that just “five out of the 140 mills incinerate biomass, accounting for just 1.6% of total heat generation across the industry.”
Demand from the pulp and paper industry is divided, with large shares pointing towards industrial natural gas consumption and electricity use, but the price gaps for both have been looked at with concern by the paper associations.
As the Confindustria report warned, Italy must “rapidly reduce the energy-cost gap with its main European competitors,” if it wants to preserve its industrial competitiveness.
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