• Paper pulp prices under pressure in all regions, while DP continues to gain ground: Hardwood DP increased by 1% w/w, while most paper pulp grades were down 1%. Pulp purchases in China have paused ahead of the upcoming Shanghai Pulp Week. NOREXECO pulp futures for CY 23E imply an 6-9% decline in Europe, and a decline of 7-10% in China, with more pressure expected in both regions in 2024. Arauco expects to produce around 800-850Kt of BEK pulp in 2023 from its MAPA project – this implies an average operating rate of c.52%.
  • VSF prices stable, while cotton prices come under pressure: The VSF op. rate is stable at 81% (81% last week). VSF inventory days ticked up slightly to 22.5 (from 22.0 last week). The theoretical VSF margin for Chinese producers weakened slightly to $52/t with higher DP prices, although chemical prices moderated somewhat. The Lyocell market is also stable with the operating rate at 70% (70% last week).
  • DP prices continue to gain traction: Import hardwood DP is now $920/t, with some further gains for domestic producers in China. The DP/pulp spread is currently $183/t (this level generally supports preference for paper pulp production over DP production). The domestic DP price increased by 1% w/w to ¥7,350/t ($1,053/t, a $138/t premium to imports). Sun Paper maintained stable DP production with offers maintaining ¥7,300-7,500/t, and Hunan Juntai was evaluating the resumption of DP production.
  • Graphic Paper prices stable except for UWF: After factoring in a 30% discount to list pulp prices, the CWF/HW spread was up 2% w/w to €372/t – the highest in 2023 to date. The UWF/HW spread was up 1% w/w to €472/t, reaching a high in 2023. CWF are now up 14% and 10% YTD vs. the 2022 average. In the US, AF&PA released February 2023 P&W stats. Total P&W shipments dropped 15% y/y (CFS: -8.5% YTD).
  • Containerboard prices weaken further, while some producers announced price increases: Kraftliner was down 2% w/w and is now down 11% vs. the 2022 average. Testliner dropped 2% w/w and is now down 14% YTD vs. the 2022 average. The kraftliner/testliner spread decreased by 2% w/w to €189/t, while the testliner/OCC spread decreased by 3% to €516/t. OCC was up 4%% w/w to €75/t. Despite testliner pressure, the testliner/OCC spread is only down 2% vs. the 2022 average. Mondi has announced an €50/t increase on testliner as of 1 April – if successfully implemented, this equates to an 8% increase from current levels. Mondi currently has approximately 0.5mtpa of testliner capacity but consumes around 0.8mtpa.
  • ICE Dutch TTF Natural Gas Futures stable: YTD, the prices is down a staggering 44%, now trading at €44/MWH. This is beneficial for F&P producers, but especially for testliner and non-integrated graphic paper producers.
  • MM Group reported Q4 22A results this week: EBIT dropped 37% y/y, despite sales growth of 28%. There was a strong decline in demand in the MM Board & Paper division due to high customer inventories.  In the Board & Paper division, market-related machine downtime is necessary in Q1 23E. In the Packaging segment, demand has weakened slightly in the first two months.
  • Negative read-though for specialty packaging as UPM confirms temporary layoffs in Finland: This will impact specialty paper production at its Jämsänkoski mill in Finland (300Kt/yr of label and packaging paper on two machines).
  • Paper Excellence Group (PE) becomes North America’s largest market pulp producer: PE has closed the acquisition of Resolute Forest Products. PE’s total market pulp capacity is now 3.88Mt/yr, followed by IP (3.49Mt/yr) and GP (2.58Mt/yr).

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