• Pulp prices under further pressure across all regions: NOREXECO pulp futures for CY 23E imply a further 11-15% decline in Europe, and a further decline of up to 5% in China, with more pressure expected for Europe in 2024. According to UTIPULP statistics, European consumer pulp inventories declined by 1.8% m-o-m in March as consumption improved by 4.6%. This is encouraging in light of the 5.8% drop (+13% m-o-m) in global shipments reported by PPPC in March, where global producer inventories closed at 53 days-of-supply.
  • VSF prices edge up, while cotton and polyester in the red: The VSF op. rate improved to 83% (80% last week) as Alaer Zhongtai came back on stream from maintenance. VSF inventory days were broadly stable at 16.0 (from 15.5 last week) as spinners were less active in taking delivery of VSF. The theoretical VSF margin for Chinese producers improved to -$22/t as chemical and DP prices moderated. The Lyocell market was stable with the operating rate at 70% (70% last week).
  • DP prices down 2%: Import hardwood DP is now $900/t. The DP/pulp spread is currently $400/t (this level generally supports preference for DP production over paper pulp production). The domestic DP price also weakened to ¥7,150/t ($1,026/t, a $126/t premium to imports). Hunan Juntai started to shut for maintenance, and Sun Paper was still closed for turnaround. Accordingly, no DP was produced by Chinese pulp mills temporarily this past week.
  • Graphic Paper prices flat: After factoring in a 30% discount to list pulp prices, the CWF/HW spread improved by 5% w/w to €515/t. The UWF/HW spread also improved to €586/t. CWF and UWF are now up 13% and 9% YTD vs. the 2022 average, while both are down 5-6% since the start of the year. In the US, AF&PA statistics pointed to a 25% y-o-y drop in P&W shipments in April, while inventories decreased by only 1% m-o-m and CFS imports increased by only 3% y-o-y. Leipa is cutting production, and employee hours at its Schwedt coated mechanical (530ktpa) mill in Germany.
  • Green shoots of hope for containerboard producers: Kraftliner and testliner were stable potentially indicating a floor has now been reached. Compared to the 2022 average, kraftliner is down 15%, while testliner has dropped 20%. The kraftliner/testliner spread is stable at €186/t, while the testliner/OCC spread was also stable at €431/t. OCC was up 1% w-o-w to €96/t. The testliner/OCC spread is down 10% vs. the 2022 average. DS Smith set to close its testliner mill in Bulgaria (85kpta). Norske Skog Bruck (210ktpa capacity) has announced the successful commercial deliveries of containerboard grades (testliner 3 and fluting). 95% capacity utilisation is expected by H2 25E.
  • Mondi newsflow: Mondi to modernise its Dynäs kraft paper mill to improve energy and production efficiency in Sweden.
  • The Navigator Company Q1 EBITDA dropped by 29% q-o-q (+8% y-o-y): Despite this, the EBITDA margin remained healthy at 26%. UWF sale volumes dropped by 16% y-o-y, which meant pulp sale volumes were up 75% q-o-q (+19% q-o-q) as more market pulp was sold.
  • Arauco Q1 results saw profitability under pressure: EBITDA declined by 52% q-o-q, with net debt/EBITDA reaching 3.2x. Pulp volumes dropped 21% y-o-y, and were down 5% q-o-q. CMPC expects the next few month to be difficult, but noting that pulp prices are very close to the bottom as several producers could start taking market related downtime.
  • Eldorado reported Q1 results last week: EBITDA improved by 13% y-o-y but was down 22% q-o-q, with an adjusted EBITDA margin of 62%. Pulp volumes were down 2% q-o-q and down 9% y-o-y. Net debt/EBITDA reached an all-time low of 0.5x.

Download F&P Insights