• Pulp prices stable to slightly softer: NOREXECO pulp futures for CY 23E imply a 13-21% decline in Europe, and a decline of 9-20% in China. In December, Suzano announced a $40/t (5%) price cut for BEK pulp in China. SCA has restarted its 900ktpa Östrand pulp mill (Sweden) after suspending operations on 23 December. On 29 December, Arauco initiated the start-up process for MAPA project (1.56mtpa BEK line). Ence’s Pontevedra BEK pulp mill (515ktpa) is back to normal following five months of suspended operations. Canfor Pulp will permanently close its pulp line 280ktpa at its Prince George Pulp and Paper mill in Q1 23E. This is on the back of its analysis of residual fibre in the region. November stocks of wood pulp at European ports increased by 1.3% m/m and by 13% y/y (YTD: -5% y/y).
  • Graphic Paper prices stable, for now: After factoring in a 30% discount to list pulp prices, the CWF/HW spread was down 3% w/w to EUR 322/t, while the UWF/HW spread was stable w/w at EUR 422/t.
  • Containerboard prices all in the red this week: The kraftliner/testliner spread decreased by 4% w/w to EUR 164/t, while the testliner/OCC spread decreased by 2% to EUR 608/t. OCC declined by 1% w/w to EUR 72/t. China has temporarily reduced import duties on recycled containerboard, boxboard, fine paper to zero (from 5-6%), effective 1 January 2023. In our view, this is likely to benefit South-East Asian producers the most. In December, Ilim successfully completed the first water run of its kraft linerboard machine (KLB capacity: 600ktpa). Start-up of the KLB machine is scheduled for Q2 23E.
  • Mondi completed the Duino mill acquisition this week (12 January) for EUR 40mn: The deal will help feed Mondi’s box plants in Turkey and Central Europe as well as help shift Mondi’s net short testliner position to slightly net long. 205ktpa of coated mechanical capacity will be converted to 420ktpa of recycled containerboard at a cost of EUR 200mn. We estimate an EBITDA contribution of at c. EUR 70-80mn, implying a payback period of three years. We note there was a fire at the mill in December, however damages were not material. Burgo had already suspended operations in November on the back of market related downtime.
  • Russian Insights: On 16 December, The Mayr-Melnhof Group sold its two packaging sites in Russia for EUR 134mn. On 23 December, Amcor completed the sale of its three factories (flexible and cartons packaging) in Russia for EUR 370mn.
  • Sappi has announced a paper machine upgrade and modernisation at its Gratkorn CWF mill in Austria: The upgrade and modernisation project will focus on PM11, which will undergo extensive modernisation of automation and electrical equipment including drives, control systems, quality control and inspection systems as well as upgrades to the coating profile and other areas. During the preparatory phase in December and the main period of work in January, production on PM11 is expected to be interrupted for a few weeks. Some interruption will also occur on PM9 due to the need for a reorganisation of internal logistics. “Given current market conditions of reduced demand and high customer inventories, Sappi Europe does not expect customer’ business to be disrupted during the project period”.

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