• Pulp prices stable to slightly down, with more relief for European pulp buyers: Hardwood DP was stable this week, while softwood DP decreased by 2% w/w. NOREXECO pulp futures for CY 23E imply an 5-9% decline in Europe, and a decline of 7-9% in China, with significantly more pressure expected in both regions in 2024.
  • VSF prices stable, cotton under further pressure, while polyester rebounds 2%: The VSF op. rate is stable at 78% (78% last week) as a large-scale VSF plant in South China continued to shut lines for maintenance. VSF inventory days ticked up slightly to 24.0 (from 23.0 last week). The theoretical VSF margin for Chinese producers improved slightly to $49/t. The Lyocell market is also stable with the operating rate at 70% (70% last week). Lyocell output remains strong currently and downstream demand is relatively good in the short run but is expected to decrease in mid-April amid concerns around the end of spring and summer orders.
  • Hardwood DP stable, while softwood comes under pressure: Import hardwood DP is stable at $920/t (Brazilian hardwood DP offers this week were consistent at $920/t). The DP/pulp spread is currently $196/t (this level generally supports preference for paper pulp production over DP production). The domestic DP price increased was also stable at ¥7,400/t ($1,074/t, a $154/t premium to imports). Chinese DP mills maintained higher operating rates, with both Sun Paper (Zoucheng) and Hunan Juntai producing dissolving pulp.
  • 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 improved by 3% w/w to €384/t. The UWF/HW spread also improved to €477/t. CWF and UWF are now up 14% and 10% YTD vs. the 2022 average, while both are down 2% since the start of the year. EURO-GRAPH statistics confirm continued deterioration in the European P&W markets in January. CWF shipments were hit the hardest, dropping 39% y-o-y (+10% m-o-m), while CM shipments declined by 27% y-o-y (-7% m-o-m). UWF shipments were also down, -20% y-o-y (+2% m-o-m).
  • More pain for testliner producers: Kraftliner was stable and is now down 12% vs. the 2022 average. Testliner dropped 1% w/w and is now down 16% YTD vs. the 2022 average. The kraftliner/testliner spread improved by 1% w/w to €201/t, while the testliner/OCC spread decreased by 1% to €489/t. OCC was up 3% w/w to €78/t. Despite testliner pressure, the testliner/OCC spread is only down 4% vs. the 2022 average. Despite resistance from kraftliner producers due to wood prices, further price erosion is likely given testliner softness. Voith and Toscotec have completed the rebuild of PM 2 at Papierfabrik Niederauer Mühle’s 350Kt/yr WT testliner based paper mill in Kreuzau, Germany. Extension of downtime (350Kt) by Nine Dragons in China confirms continued weakness in the Chinese packaging market.
  • H&M reported Q1 23A results: Reported sales up only 3%, but core revenue (excluding Russia, Belarus, and Ukraine) improved by 7%. Gross margin dropped 210bps. Q2 has started off better with sales up 4% in local currency. Management noted that “spring collections have been well received”.
  • Mondi insights: Mondi has partnered with Swiss converter ATS-Tanner to create new kraft paper bundle packaging. The innovative solution is strong enough to replace plastic on single or bundle packages and ideal for drink, fruit and vegetable and eCommerce end-uses. The band is recyclable in existing paper recycling streams.

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