The Econmist - USA (2021-11-06)

F

oreightconsecutiveyearsver.di,

Germany’ssecond­biggesttradeun­

ion,hascalleda strikeduringthepre­

holidayseasonatAmazon’sfulfilment

centres,thevastwarehouseswhere

packagesarepreparedfordelivery.This

yearthetraditioncontinued.Around

2,500Amazonemployeesatsevencen­

treswalkedoutonNovember2nd.The

unionwarnedthatthestrikescould

continueuptoChristmas.

Ver.didemandsan “immediate”

salaryincreaseof3%thisyear,followed

by1.7%nextyear,inlinewitha collective

labouragreementfortheretailsector.

Amazonismakingheapsofmoneyin

Germanyandcannotcontinueto“refuse

wageincreasesthatothercompaniesin

thesectorpay”,saysOrhanAkmanof

ver.di.MrAkmanvowsnottogiveupas

strikesinpreviousyearsyieldedresults.

UnionpressureforcedAmazontoin­

creasewagesseveraltimes,hestates.

Thewidergoalofthestrikeisthe

preservationoftheTarifvertrag,a per­

iodicagreementbetweenunionsand

bossesthatsetswagelevelsforeach

industry.Itiscreditedwithplayinga big

partinGermany’sharmoniouslabour

relations.Such“tariff”agreementshave

beenerodedoverthepastcoupleof

decades,especiallyineasternGermany.

Manyfirmsinserviceindustriesinpar­

ticularnolongeradheretothem.

“Amazonisanexcellentemployer

withoutthetariffagreement,”insists

MichaelSchneider,a companyspokes­

man.InthesummerAmazonraisedpay

forallemployeestoatleast€12($14)an

hour—theminimumwageis€9.60.After

twoyearsworkersearnonaverage€2,750

a month.Halfofits19,000employees

haveworkedatAmazonforoverfive

yearsandseemunwillingtowalkout.

Amazonishiringanadditional

10,000temporaryemployeesforthebusy

Christmasseasoninitssecond­biggest

market.Thecompanysaysit canfulfilall

ordersinspiteofthestrikes.Inlikeli­

hoodthisyear’sindustrialactionwill

endliketheotherseveryyearsince 2013

withAmazonmakingsomeconcession.

ButbynotadheringtotheTarifvertrag,

thecompanyisfurtherchippingawayat

wageagreementsbothfortheretail

industryandGermanyasa whole.n

AmazoninGermany

Strike season

B ERLIN

Abigunion’sfighttopreservenationalpaystandards

Cycleofindustrialunrest

The Economist November 6th 2021 Business 59

Newspapers

Paperchase

“I

t’slike taseringanelderlyperson

who’s already on a pacemaker,” says a

British  newspaper  boss  of  the  newsprint

market,  where  prices  have  risen  by  over

50% in a matter of months. The cost of pa­

per  that  feeds  into  presses  around  the

world is rising to record highs, pushing up

expenses for newspapers from Mumbai to

Sydney. When times were good, before ads

shifted  online,  newspapers  had  a  suppor­

tive  partnership  with  paper  mills.  As  ads

departed  and  circulations  fell,  relations

became more transactional. They are now

at the shouting stage. 

Paper mills had the worst of it for years

as  newspapers  reduced  pagination,  went

wholly digital or shut for good. The papers

were  able  to  hammer  down  the  cost  of

newsprint from firms fighting for business

as  demand  declined.  Price­taking  paper

mills suffered in silence. Many hesitated to

shut  massive  machines  costing  hundreds

of millions of dollars. 

That  hesitance  has  disappeared;  mills

are  taking  out  newsprint  capacity  and  di­

versifying. Norske Skog, a Norwegian pulp

and paper firm, said in June it would close

its  66­year­old  Tasman  Mill  in  New  Zea­

land, for example. Many mills are convert­

ing  machines  to  make  packaging  for  e­

commerce.  upm,  a  Finnish  firm,  an­

nounced  this  year  the  sale  of  its  Shotton

newsprint mill in Wales to a Turkish maker

of  containerboard  and  packaging.  For  jcs

Volga,  a  Russian  mill,  newsprint  used  to

account for 70% of production; now half of

what  it  makes  is  packaging.  The  mills

“moved  from  being  price  takers  to  being

capable co­participants in a declining mar­

ket,” says Tim Woods of IndustryEdge, a re­

search  firm  for  Australia  and  New  Zea­

land’s forestry and paper industries. 

The  pandemic,  with  people  working

from  home,  meant  even  fewer  newspaper

purchases,  which  depressed  demand  for

newsprint again and increased the pain for

paper  suppliers.  In  the  past  24  months

European  mills  have  responded  by  shut­

ting  almost  a  fifth  of  their  newsprint  ca­

pacity, says a buyer for a large British news­

paper group. 

Then  economies  reopened.  Newsprint

demand  shot  up.  That,  combined  with

much  reduced  capacity  and  coupled  with

soaring  energy  prices,  has  resulted  in  a

price  shock.  Particularly  controversial  are

energy surcharges that some paper suppli­

ers  are  seeking  to  pass  on.  Newspaper

firms  reckon  this  amounts  to  breaking

contracts. European newspapers will have

to  pay  newsprint  prices  that  are  50­70%

higher  in  the  first  quarter  of  2022  com­

pared  with  the  year  before.  As  for  their

counterparts in Asia and Oceania, they are

facing  prices  around  25%  to  45%  above

their  usual  level.  Kenya’s  Nation  Media

Group  is  paying  around  $840  per  tonne,

compared  with  $600  at  most  in  the  past,

says Dorine Ogolo, a procurement manag­

er at the firm.  North American prices went

up  earlier,  and  more  gradually;  contracts

are  fixed  monthly  rather  than  half­yearly.

But there, too, newsprint prices are 20­30%

higher in 2021 than in 2020. 

Germany’s print and media industry as­

sociation  has  warned  that  mills  are  going

to  force  newspapers  to  dump  paper  edi­

tions,  hurting  each  other  in  the  process.

“It’s about the famous branch that both of

them  are  sitting  on,”  it  said  recently.  But

mills  can  sell  packaging  instead.  “We’re

not  going  to  save  the  publishing  industry

by  being  unprofitable  ourselves,”  says  a

mill executive in North America. 

For  some  publishers,  price  rises  will

wipe out profits. They will need to do fur­

ther  restructuring  involving  axing  titles

and layoffs. Iwan Le Moine of emge, a Brit­

ish  paper­industry  consultancy,  expects  a

big  increase  in  2022  of  the  number  of  pa­

pers  that  shut  compared  with  a  typical

year.  That  will  lower  demand  and  nudge

the market back towards equilibrium. But

newspapers will have more hard conversa­

tions  about  paper,  full  stop,  says  Douglas

McCabe  of  Enders  Analysis,  a research

firm. More digital adrenaline is onepossi­

ble riposte to the paper mills’ tasers.n

Soaring newsprint costs make life

even harder