• Mixed moves for pulp this week: Prices in Europe were up c.1% (but down in $). Softwood gained further ground in China, while hardwood came under pressure. NOREXECO pulp futures for CY 23E imply an 8-13% decline in Europe (2024: -15-26% decline), and a decline of 9-15% in China (2024: -10-16% decline). UTIPULP stats for December saw consumer inventories in Europe increase 5% m-o-m (+9% y-o-y, however consumption was deep in the red (-15%).
  • Graphic Paper prices hold steady, except for coated mechanical: After factoring in a 30% discount to list pulp prices, the CWF/HW spread declined by 2% w/w to €349/t, while the UWF/HW spread declined by 1% w/w to €459/t. AF&PA US P&W report for January 2023 points to further weakness in demand (only uncoated mechanical was in the green), with total shipments down 9% y-o-y.
  • Containerboard prices under further pressure with kraftliner and testliner both down 1% w-o-w: The kraftliner/testliner spread was flat w-o-w at €176/t, while the testliner/OCC spread decreased by 1% to €569/t. OCC is stable at €70/t. ICE Dutch TTF Natural Gas Futures are down 6% w-o-w to €50/MWH.
  • Finnish logistic strikes began this week: On Wednesday, industrial action kicked off across the Finnish logistics sector. So far this has impacted the Finnish ports, terminal operators, workers in the trucking, tanker and oil products industries. If the strike continues, factories in the paper, assembly and steel industries face the threat of shutdowns. Approximately 90% of Finland’s foreign trade is carried out via its ports. Mondi has 11% of its containerboard capacity located in Finland, while Sappi’s graphic paper exposure is limited following the planned disposal of Kirkniemi (750Kt/year of CM) in CY Q2 23E.
  • The Navigator Company reported Q4 22A results yesterday (UWF, Pulp and Tissue Insights): Top line improved by 6% q-o-q and +35% y-o-y, while EBITDA came under pressure q-o-q (down 11%) as UWF sales volumes declined by 8% q-o-q (-7% y-o-y). Despite this, the EBITDA margin was still robust at 28.7% and net debt/EBITDA of only 0.5x. The company expects destocking to remain an issue in Q1, with potential industry downtime and closures in light of weaker demand and higher costs. The conference call is next week.
  • VSF prices stable this week: The VSF op. rate jumped to 65% (from 59%) as VSF plants in Hebei and Sichuan raised run rates. VSF inventory days decreased to 31.5 (from 32.0) as spinners were seeing mixed feedback from end-ser orders. The theoretical VSF margin for Chinese producers weakened slightly to $29/t. The Lyocell market was stable to slightly stronger, with the operating rate improving slightly to 56% (from 55%).
  • Import hardwood DP stable, with some further gains for domestic producers in China: The spot hardwood price is now $900/t. The DP/pulp spread is currently $136/t (this level generally supports preference for paper pulp production over DP production). The domestic DP price increased by 1% w/w to ¥7,160/t ($1,050/t, a $150/t premium to imports).

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