Germany's 130-year-old Paper Mill Had No Choice But To Go Bankrupt!

The energy crisis is superimposed on the shrinking demand, and the 130-year-old paper mill in Germany has no choice but to go bankrupt!

The German economy is facing serious challenges, with more and more companies in danger of going bankrupt. Even if the new government led by Friedrich Merz intends to invest huge sums of money to stimulate the economy, for many companies in the mire of money, this aid may be a long way off. The German economy has been reaffirmed by the fact that the well-known Hagen-based paper manufacturer Kabel Pulp & Paper Mill (KPPP) has filed for bankruptcy.

KPPP filed for bankruptcy on March 6, 2025. The long-established mill has been producing paper since 1896, but recently due to a severe shortage of orders, production has almost completely stopped, and a system of shortened working hours has been introduced. At present, the future direction of the company and the fate of its 420 employees are unclear. For the city of Hagen, the KPPP paper mill is as much an integral part of the city as the Hungestey Lake or the Osterhaus Museum. In its nearly 130 years of development, the company has changed its name several times, but it has remained an important pillar of Hagen's economy.

In an interview with the Westphalian Post, Hagen Mayor Eric Schultz lamented the bankruptcy of KPPP. "The collapse of such a long-established employer is a tragedy for the city of Hagen," he said. The mayor admits that he has long been aware of the company's "continuous production cuts", and now "the decline in production is unstoppable".

The municipality is said to have done everything it could to help, and was actively pushing for the sale of KPPP's 9.2-hectare plot of land to an investor. Although the multi-million euro deal was close at one point, a sudden bankruptcy filing cast a shadow over the deal, and its final completion became unattainable.

In fact, the signs of KPPP's bankruptcy have already appeared, and as the mayor said, it is not an emergency. Local media reports indicate that the factory's production line has actually come to a standstill due to a chronic lack of orders. Employees have also been forced to accept short-term work arrangements. KPPP's 420 employees are generally concerned that their jobs will be seriously threatened in the ensuing bankruptcy proceedings.

The Westphalian Post also quoted a senior employee who did not want to be named, further revealing the company's internal predicament: "We saw the bankruptcy information from the commercial register. No one took the initiative to communicate with us, neither the management nor the union representatives were silent on the matter, and the whole company was silent. The District Court of Hagen (Case No. 103 IN 44/25) has formally ordered the preliminary receivership of the assets of Cabel Pulp & Paper Mill and appointed Dr. Eberhard Schmidt of Ennepetar as provisional receiver.

Like many companies, the continued high energy prices are one of KPPP's dilemmas. More lethal, however, demand for KPPP's main products is shrinking. KPPP mainly focuses on the production of lightweight coated printing paper and pulp. The company has two advanced papermaking production lines with a total annual production capacity of up to 450,000 tons, and its products are mainly high-quality coated paper for offset printing and gravure printing. Among them, the No. 4 production line has a width of 7.2 meters and an annual output of 190,000 tons and is dedicated to the production of gravure printing paper, while the No. 5 production line is also 7.2 meters wide and has an annual production capacity of 260,000 tons, which is used to produce offset printing paper.

In addition, KPPP has one of Europe's largest cutting paper divisions, with an annual production capacity of 120,000 tons. However, it is regrettable that the market demand for printed products has continued to decline in recent years, which has undoubtedly brought a huge impact to KPPP's operation.

KPPP's annual report also confirms this market decline. In the 2023 environmental report, the company still has 600 employees. Today, the number of employees at the plant has shrunk to just over 400. Originally, the sale of the land was expected to bring new liquidity to the company, but the bankruptcy made this plan go to naught. Against this backdrop, the first priority for the insolvency administrator at the moment is to find potential buyers for the KPPP. However, industry observers generally agree that this will be an extremely difficult task given the current market environment.

KPPP is a long-established and traditional company, and its predecessor, the Kabel paper mill, was founded in 1896 in the district of Kabel in the city of Hagen. In 1959, the factory was acquired by the famous German company Feldmyer AG and in 1990 it was integrated into the Swedish Stora Group. In 1998, the Stora Group merged with the Finnish Enso Group to form the Stora Enso Group.

On 1 October 2001, KPPP was reorganized into Stora Enso Cabel. On 1 September 2016, KPPP was spun off from the Stora Enso Group through a divestiture. Currently, KPPP is controlled by two family offices in Hannover and aims to promote the long-term development of the company.

KPPP's main sales market is concentrated in Europe. Thanks to its geographical location in the European sales center area, the company is able to deliver products to customers quickly and reliably. More than 60% of its sales come from the German-speaking regions (Germany, Switzerland, Austria) and neighbouring countries, as well as Italy and the United Kingdom. The remainder of sales was sold to the rest of Europe, North America, and EMEA (Europe, Middle East, and Africa).

According to a new report released by the German Paper Association, despite the challenges, the performance of the German paper and pulp industry in 2024 is only slightly lower than the previous year's output and sales. However, the report also highlights that energy and increasing bureaucratic costs remain the main risk factors for the industry to remain competitive.

The report notes that the German paper and pulp industry has seen an initial recovery in key market sectors in 2024 after a sharp decline in production in 2023. Among them, the packaging paper field performed well, with an increase of 5% to 12.3 million tons; Specialty paper production also increased by 1.2% to 1.4 million tonnes. Among all types of paper products, only the output of cultural paper showed a slight decline of 1.1% to 4.1 million tons. The output of toilet paper was basically unchanged from the previous year, at about 1.4 million tons (a slight decrease of 0.6%). Overall, the total output of the German paper and pulp industry in 2024 increased by 3% from the previous year to 19.2 million tons.

From the perspective of sales, all kinds of paper products produced by German paper and pulp enterprises can meet market demand, with a total sales volume of 19 million tons, a year-on-year increase of 1.8%. It is worth noting that due to the impact of the overall economic situation, the growth of overseas sales has compensated for the decline in domestic sales in Germany, which has become a bright spot in the development of the industry.

However, despite the recovery in production and volume, profitability remains a serious challenge for the industry. In 2024, annual sales in the German paper and pulp industry are expected to be 15 billion euros, down 2.7% year-on-year. The main reason for the continued tight profitability is the continued high cost of energy, logistics and raw materials. The report notes that while energy prices have eased after peaking in 2022, they remain two to three times higher than they were before the crisis. In addition, the increasing regulatory burden is further exacerbating the operating costs of companies, making it increasingly difficult to maintain cost-effective production in Germany.

All in all, the German paper and pulp industry has experienced a modest recovery in 2024, but the future remains challenging due to the double squeeze of high costs and regulatory pressures.