• September average price changes: NBSK pulp +1% m/m; +12% y/y; BHKP pulp 0% m/m; +21% y/y; China BHKP net pulp 0% m/m; +39% y/y; China NBSK net pulp -3% m/m; +14% y/y; LWC +1% m/m; +74% y/y; CWF +2% m/m; +75% y/y; UWF +3% m/m; +54% y/y; Newsprint 0% m/m; +76% y/y; Kraftliner -1% m/m; +22% y/y; Testliner -1% m/m; +27% y/y; OCC -26% m/m; -19% y/y.
  • Q3 22A average price changes: NBSK pulp +7% q/q; +11% y/y; BHKP pulp 10% q/q; +20% y/y; China BHKP net pulp 7% q/q; +32% y/y; China NBSK net pulp -1% q/q; +14% y/y; LWC +5% q/q; +75% y/y; CWF +8% q/q; +75% y/y; UWF +8% q/q; +52% y/y; Newsprint 4% q/q; +80% y/y; Kraftliner +1% q/q; +26% y/y; Testliner +1% q/q; +31% y/y; OCC -7% q/q; +8% y/y.
  • September saw all shares in the red, except Suzano (+1%m/m): Top losers included Segezha (-34%); IP (-24%); Lenzing (-24%) and Mercer International (-24%). Sappi & Mondi -4% m/m.
  • All peers trading at a discount to their 5-yr average EV/EBITDA: Sappi and BillerudKorsnäs are trading at the deepest discount (39%) of 2.9x and 5.1x, respectively. Mondi is trading at 5.0x (30% discount). UPM has held up best at 8.3x, a 7% discount.
  • Pulp price stable but weak EUR drives pulp prices up: NOREXECO pulp futures for CY 23E imply a 14-19% decline in Europe, and a decline of 7-17% in China. Arauco partially restarts Valdivia flexible pulp mill in Chile, allowing DP production. Arauco will continue to work on the complete repair of the drying machine, works that should be concluded in April 2023, when the full authorized capacity of the mill should be re-established. The temporary fix will allow the mill to operate c.80% of its capacity (500ktpa). Factors weighing on pulp supply currently include the extended downtime of Suzano’s Aracruz mill (will stop for 45 days in Q4); Arauco shut down a line in Jan. in preparation for the MAPA start-up; and the shutdown of Spanish Ence Pontevedra mill due to water shortage.
  • CWF and UWF edge up 1% w/w leading Graphic Paper gains: After factoring in a 30% discount to list pulp prices, the CWF/HW spread was down 15% w/w to EUR 180/t, while the UWF/HW spread decreased by 7% w/w to EUR 327/t. Lecta to take temporary downtime at several mills on the back of high production costs, and weaker demand primarily due to destocking on the value chain.
  • Containerboard prices stable, while OCC under the pump further: The kraftliner/testliner spread decreased by 1% w/w to EUR 166/t, while the testliner/OCC spread increased to EUR 654/t. Stora Enso takes maintenance downtime at Varkaus kraftliner mill in Finland and moves ahead with investment plan (EUR 23mn) to increase capacity by 10% (405kpta currently). To improve ROIC, WestRock to permanently close corrugated medium (200ktpa) manufacturing operations at its recycled paper mill in St. Paul, MN.
  • ICE Dutch TTF Gas Futures now trading at EUR 176/MWH: German government scraps gas levy (EUR 24.19/MWH) supposed to be enforced from 1 October in favour of EUR 200bn protective package. This will save F&P producers EUR 40-50/t dependent on their production process.
  • M&A: Mayr-Melnhof Group completes acquisition of Essentra Packaging, allowing MM to become a global player in secondary Healthcare & Pharma packaging (FY 21A sales: EUR 410mn).
  • Russian insights: RCCM prices rise >33% in September, virgin grades steady. Demand for packaging +10% during August and September vs. June and July. Sylvamo completes sale of Russian operations to Pulp Invest for USD 420mn (USD 390mn in cash received after FX and transaction fees). Sylvamo announced its decision to sell its Russian operations in May.
  • Mondi news flow: Mondi strengthens position in Turkish corrugated market by merging Mondi Tire Kutsan and Mondi Olmuksan. Mondi confirmed that all conditions were satisfied, with the merger effective from 30 September 2022. Mondi currently holds 84.65% of the shares of Mondi Turkey Oluklu Mukavva Kağıt ve Ambalaj Sanayi A.Ş (the new entity), comprised of a network of nine corrugated solution plants and a containerboard mill (Tire) and a wastepaper collection facility (Adana).

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