• Pulp prices stable, for now: NOREXECO pulp futures for CY 23E imply a 13-18% decline in Europe, and a decline of 11-20% in China.
  • UWF up 1% w/w leading Graphic Paper gains: After factoring in a 30% discount to list pulp prices, the CWF/HW spread dropped by 9% w/w to EUR 183/t, while the UWF/HW spread decreased by 2% w/w to EUR 319/t. Sappi Europe and Lecta are set to increase prices to CWF and UWF grades by 8-10% from 12 September and 1 September, respectively. Sappi North America (#1 by capacity: 50% share) is set to increase CFS prices by up to 8% from 19 September. Billerud North America, formerly Verso (#2 by capacity: 3% share), ND Paper, UPM North America and Lecta have all announced price increases.
  • Containerboard prices stable: The kraftliner/testliner spread was stable at EUR 165/t, while the testliner/OCC spread was down 3% w/w. European PFR dropped 9% m/m in August. This was driven by a combination of relatively high stocks on both the selling and buying sides of the market, coupled with reduced demand due to production stoppages (due to high energy prices) from several paper mills across Europe and low export activity. At least 200-250kt (10-15kt from Mondi) of containerboard was removed from the market during July-August, predominantly testliner grades. Further downtime is expected in September. According to the latest CEPI Containerboard statistics, paper stocks at European mills rose 54% y/y to 1.035mt in week 30 this year (931kt in week one). At the same time, total RCCM production increased by 2.8% to 15.6mt year YTD. Stock levels for August have yet to be published; however, traditionally, stocks increase during this month, but are not expected to rise nearly as much as they usually do due to the massive downtime taken at mills in August. Leipa has set its sights on a EUR 60/t price increase for all grades from its Schwedt mill from 1 September. Smurfit Kappa also announced a EUR 130/t price increase as of 19 September on the back of energy prices.
  • Positive read-through for Sappi’s Packaging & Specialties: Sappi North America set to increase SBS grades by up to 8% from 19 September. WestRock, Graphic Packaging and Clearwater Paper are also all out with increases.
  • RISI estimate that up to 8.3mt (692kt p.m.) of containerboard production is at risk if Russian gas flows to Europe stop completely (ICC Dutch TTF Gas Futures currently EUR 243/MWH, from a high of EUR 346/MWH on 26 August): Despite softer European containerboard fundamentals, energy prices remain an underpin for stable to higher containerboard prices. The European Commission adopted a regulation on a voluntary reduction in natural gas consumption for this winter to manage a potential gas shortage. Member states agreed to reduce their gas intake by 15% compared to their average consumption in the past five years, between August 2022 and March 2023, via measures of their own choice. Those measures are likely to affect and possibly stop containerboard production if European countries cannot ensure sufficient natural gas supply to paper mills. German and Austrian testliner mills have a higher dependency on Russian natural gas imports. Italy is also very dependent on natural gas (40% of the country’s energy mix); however, Italy recently secured 11.5bcm of natural gas, mostly from Algeria and an additional 1.5bcm from Azerbaijan through the TAP pipeline. Germany’s incoming gas price levy has been set at EUR 24.19/MWh by Trading Hub Europe, Germany’s gas market operator. RISI estimates that a EUR 10/MWH increase in natural gas prices would raise average testliner manufacturing costs by EUR10-20/t and for kraftliner by EUR 5-10/t.

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