The Spanish pulp and paper industry once again finds itself in a delicate position. Coface’s latest risk update has downgraded the sector’s rating from “high” risk to “very high,” making it, along with automotive, one of the two sectors in Spain’s economy with the highest level of business risk.
The figure contrasts with Coface’s generally favorable assessment of Spain. The country retains an A2 rating, considered low risk, supported by the resilience of private consumption and investment. Yet behind that relatively favorable picture lie industries especially exposed to the new international environment. Paper is one of them.
To understand the downgrade you must start with the very nature of this industry. Manufacturing paper and pulp requires large amounts of energy, especially electricity and heat for processes such as drying. This makes factories particularly sensitive to any rise in gas and electricity costs. ASPAPEL acknowledges that energy constitutes an essential part of the production process and one of the main factors that condition competitiveness.
Precisely, the latest analysis arrives in a scenario marked by tensions in the Middle East, energy supply difficulties, and international logistical problems. The crisis related to the Strait of Hormuz has again put pressure on energy and transport prices, deteriorating the outlook for many industrial sectors. The June 2026 Risk Review records no fewer than 41 sector rating downgrades, versus only four upgrades on an international scale.
Lower Output and Intensifying Competition
But energy is only part of the problem. The latest industry data also show a decline in activity. In 2025, national production of paper and cardboard fell 3.9%, while pulp production declined 4.5%. Revenue fell 2.7%, down to €5.092 billion.
The deterioration comes after the sharp rebound recorded in 2024, when paper and cardboard production had grown by 8.5%. Yet even then there was a warning sign: despite higher activity, revenue hardly advanced due to foreign competition and high structural costs.
Competitive pressure has intensified also as a result of international trade tensions. Tariffs imposed by the United States are disrupting global flows and diverting product toward Europe. Spanish manufacturers thus must compete with producers from Asian countries with lower energy, labor, or regulatory costs, which puts pressure on prices and tightens margins.
It is not a Spanish-only problem. The European association Cepi notes that European paper and cardboard production fell by 1.5% in 2025 and warns of a combination of weak demand, high costs, greater international competition, trade tension, and a growing regulatory burden. Particularly pronounced is the deterioration of graphic paper, whose European production fell 7.2% last year.
Demand is also changing
Added to these cyclical factors is a structural transformation. Digitalization continues to reduce demand for graphic paper, while other segments, such as packaging, depend closely on the evolution of commerce, industry, and consumption. Coface already identifies that structural decline of graphic paper and the packaging sector’s sensitivity to the economic cycle as two of the industry’s major vulnerabilities.
All of this explains why risk is rising even in a Spanish industry that remains relevant in Europe. Spain has become the fifth-largest producer of paper and cardboard in Europe, employs around 17,600 people directly, and maintains a significant investment effort: in 2025 it allocated €318 million to investments.
Therefore the rating does not mean the Spanish paper sector is doomed to decline. It measures the risk of corporate default by taking into account payment behavior, financial condition, and economic factors. But it does serve as a warning: the combination of expensive energy, weaker demand, international competition, and margin pressure is increasing the financial vulnerability of companies.
The challenge now will be to turn the sector’s commitment to energy efficiency, the circular economy, and decarbonization into a competitive advantage sufficient to offset international conditions that, at least in the short term, continue to work against it.
