This year we have seen a dramatic decline in demand for recovered paper as the global economy suffers with the ongoing effects of the war in Ukraine and other macroeconomic factors. Demand for goods in general has reduced and as paper production is an energy intensive industry, the increased cost of energy has had a dramatic impact on the total cost of production. Most commentators say that production in Europe is down by around 20% for the year.
Genus has established a consistent supply base and because of this lower demand for recovered paper some of the pipelines to our customers have been disrupted. Many mills have taken commercial downtime, and the issue is particularly acute in Germany which is our biggest geographic market. In 2022 and the start of 2023, our customer base was split 75% to Germany and 25% to the Netherlands so this downtime has presented us with a challenge to quickly find alternative markets for the UK based supply.
Since Brexit, our logistics team have been working with operators who specialise in deliveries to the EU. We adapted to the change in customs and VAT requirements and created a structure that enabled us to remain ‘easy to work with’, a core part of our offering. We worked with our hauliers to develop the relevant systems to manage customs requirements, provide the simplest delivery terms possible and thereby minimise disruption to our suppliers and customers.
Consequently, we are now registered for VAT in four EU countries: Germany, Netherlands, Belgium, and France. This means we can offer VAT support to customers in all these countries, and it also makes transit through these countries more streamlined, much to the delight of our logistics partners who continue to provide us with vital support. With these advantages in place our commercial team could focus on opening up new customers in a wider geographic spread, targeting France, Spain and Belgium. Additionally, we have engaged with agents who specialise in sales to Asia which had not been a focus for development until these market changes.
Germany and the Netherlands are still very important markets for us but today represent just over half of our sales profile. We have been successful in opening new customer accounts in Belgium and Spain and just over 10% of our sales are now to India.
Our continued market growth
Whilst 2023 has been a challenging year for us, we are proud of our market growth. This year will see two new papermills start production in France and we are already in advanced talks with them to become their UK supplier of choice, having sold ourselves on the benefits of our structure. In addition, we have maintained supply to our more established customers in Germany, albeit at a lower volume but with margins maintained.
We believe that when the market demand returns to more normal levels, we will be in the perfect position to leverage significant growth opportunities. Serving our old customers and new customers including those we are developing in France. As a brokerage, the increase in potential outlets for recovered paper also leads us ever closer to our goal of being the UK’s largest independent recovered paper broker for export tonnes.