• Pulp prices stable to slightly down: Hardwood DP was stable this week, while softwood DP decreased by 1% w/w. US spot pulp prices drop $20-50/t with demand softening as paper mills increase downtime. NOREXECO pulp futures for CY 23E imply an 5-9% decline in Europe, and a decline of 7-10% in China, with significantly more pressure expected in both regions in 2024. January stocks of wood pulp in Europe continue to rise. January marked the fourth consecutive monthly increase since October last year, with total stocks now c1.7Mt (+36% y/y). PPPC statistics reported a surge to 51 days-of-supply in February (+2 days m-o-m), with shipments down 4% y-o-y (-1% m-o-m) to 4.01Mt. Accordingly, the shipment-to-capacity ratio reached 87% (Feb 22: 90%), an improvement from 79% in January.   
  • VSF prices stable, while cotton prices under further pressure: The VSF op. rate is down to 78% (81% last week) as a large-scale VSF plant located in South China shut for maintenance. VSF inventory days ticked up slightly to 23.0 (from 22.5 last week). The theoretical VSF margin for Chinese producers weakened slightly to $56/t. The Lyocell market is also stable with the operating rate at 70% (70% last week).
  • Mixed moves for DP: Import hardwood DP is stable at $920/t, with some further gains for domestic producers in China. The DP/pulp spread is currently $192/t (this level generally supports preference for paper pulp production over DP production). The domestic DP price increased by 1% w/w to ¥7,400/t ($1,072/t, a $152/t premium to imports). Sun Paper maintained stable DP production while Hunan Juntai resumed DP production.
  • Graphic Paper prices holding steady but are down YTD, except for newsprint: After factoring in a 30% discount to list pulp prices, the CWF/HW spread was flat at €371/t. The UWF/HW spread was also stable at €472/t. CWF are now up 14% and 10% YTD vs. the 2022 average, while both are down 3% and 6%, respectively since the January. UPM set to close PM6 (165Kt/yr uncoated publication paper) at is Schongau mill in Germany by the end of Q2 23E.
  • Containerboard prices remain under pressure: Kraftliner was down 1% w/w and is now down 11% vs. the 2022 average. Testliner dropped 3% w/w and is now down 15% YTD vs. the 2022 average. The kraftliner/testliner spread jumped 6% w/w to €199/t, while the testliner/OCC spread decreased by 4% to €496/t. OCC was up 1% w/w to €76/t. Despite testliner pressure, the testliner/OCC spread is only down 3% vs. the 2022 average. SCA’s kraftliner machine upgrade at its Obbola mill in Sweden has entered service. This is now the largest kraftliner machine globally (725Kt/year). With a total investment of SEK 7.5bn, the project was completed ahead of schedule and within budget. Full ramp-up is expected in 2026.
  • European cartonboard market is also suffering from an inventory overhang: Demand has slowed in Q1, with ample supply available. Some folding boxboard (FBB) producers managed to increase prices by €80-100/t on contracts that renewed in January, while other producers more exposed to energy prices lowered prices,
  • ICE Dutch TTF Natural Gas Futures stable: YTD, the price is down a staggering 45%, now trading at €43/MWH. Euro inflation was marginally down to 8.5% in February (Jan 23: 8.6%), this compares to 5.9% last year February.
  • Russian insights: Smurfit Kappa has taken almost one year to conclude the sale of its Russian operations to local management. Nokian Tyres received only €285mn in March (30% less than expected) for its operations in Russia.

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