Year of the Dragons

China is now in the Year of the Dragon, symbolic of power and authority, associated with lightening (it spits flames) and fertility (it brings rain). It is however, like all symbols, ambivalent by nature it can be destructive and in the Bible, saints slayed the dragon.

Europe is also not free of dragons as Draghi means “dragons” in Italian and thus the ECB is headed by Mario Dragons. With him the ECB is opening the valves to ease the supply of money for the banks and ensure they have the liquidity of which they were short. The volume of cash issued by the European Central Bank boosted the supply by around 50%, helping ease the markets and leading to a depreciation in the euro (the good side of the dragon) but the cost of imported energy and raw materials is going to be higher and it is likely that inflation will also pickup over the next few months (the not so good side of the dragon).

As for the small paper dragons that are the companies, they need to constantly restructure themselves in order to ensure their survival in the storm we are living through. In the most serious cases the companies were wiped out. The amount of capacity lost in France during last year was 600,000 t and this could increase to 1 million tonnes this year with a number of small papermakers still facing problems and with the doubts surrounding the future of the M-real Alizay mill. This is equivalent to the loss of over 10% of paper industry capacity.