• Pulp prices down 7-9% in China, with pressure in all other regions as well: This has already seen some suppliers in China and Canada taking downtime or holding back from issuing new offers. NOREXECO pulp futures for CY 23E imply a further 5-9% decline in Europe, and a further decline of 9% in China, with significantly more pressure expected for Europe in 2024.
  • VSF prices stable to up, while cotton and polyester rebounds 1%: The VSF op. rate edged down slightly to 79% (80% last week) as some VSF units in Jiangxi were closed for maintenance. VSF inventory days improved slightly to 22.5 (from 24.0 last week). The theoretical VSF margin for Chinese producers increased to $49/t. The Lyocell market was stable with the operating rate at 70% (70% last week).
  • DP prices stable across the board despite significant pressure on paper pulp prices: Import hardwood DP is stable at $920/t. The DP/pulp spread is currently $211/t (this level generally supports preference for paper pulp production over DP production). The domestic DP price was also stable at ¥7,400/t ($1,074/t, a $154/t premium to imports). Chinese DP mills maintained operating rates with low DP stocks, with both Sun Paper and Hunan Juntai producing dissolving pulp.
  • Graphic Paper prices begin to falter: After factoring in a 30% discount to list pulp prices, the CWF/HW spread improved by 5% w/w to €404/t. The UWF/HW spread also improved to €502/t. CWF and UWF are now up 14% and 10% YTD vs. the 2022 average, while both are down 3% since the start of the year.
  • More pain for containerboard producers: Kraftliner was down 2% w-o-w and is now down 13% vs. the 2022 average. Testliner dropped 2% w-o-w and is now down 17% YTD vs. the 2022 average. The kraftliner/testliner spread decreased by 1% w-o-w to €190/t, while the testliner/OCC spread decreased by 3% to €474/t. OCC was up 3% w-o-w to €81/t. The testliner/OCC spread is down 6% vs. the 2022 average. Norske Skog started its newly converted 210Kt/y testliner PM on 1 April at its Bruck mill in Austria. First shipments are expected this quarter, with 95% utilisation expected by H2 25E. US kraftliner exports for Jan-Feb 23 were down 27% y-o-y (-45% to Europe). In Germany, the planned single-use plastic levy has received the final go-ahead, with an obligation to register for the levy from 1 January 2024.
  • Sack kraft prices in Europe come under pressure: Heading into Q2, sack kraft prices have come under pressure due to high inventories. The unbleached sack kraft price is down up to €100/t compared to €50/t for bleached grades.
  • Mondi insights: Mondi is set to close a paper machine at its Neusiedler mill in Austria. From our understanding, there are a total of four paper machines at the mill with a total capacity of 300Kt/y of UWF. The mill has a low level of pulp integration (c.17%) and accordingly low energy integration. At the same time, Mondi is investing €20mn to improve energy efficiency and upgrading machines, infrastructure, and buildings. This has been described as a “future-focused product portfolio”, with a focus on luxury packaging, professional print, and technical & converting papers. It appears that Segezha has sold its European packaging business (700mn sacks per annum) to Advanced Industries Group as the operations battled to source paper and European customers refused to buy bags from them.
  • Sappi insights: Sappi’s sale of three European mills to Aurelius will not go ahead as suspensive conditions were not met. This news comes at an unfortunate time with graphic paper markets, especially in Europe under significant pressure. The deal would have reduced Sappi’s European graphic paper exposure by 38%, mostly impacting coated mechanical (a 69% reduction). Additionally, net debt would have been reduced by €212mn – now pushing out Sappi’s net debt target of under $1bn.

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