• Hardwood pulp prices show signs of stabilization in China: However, NOREXECO pulp futures for CY 23E imply a further 11-15% decline in Europe, and a further decline for softwood of up to 5% in China, with more pressure expected for Europe in 2024. In the US, spot markets have continued to slide with weak demand and elevated stocks. In contrast, BHK suppliers (APP, Suzano) are pushing for a $30-40/t hike in China. Arauco expects pulp prices to stabilize around $500/t if China starts to restock inventories.
  • Cotton prices climb and more deals were concluded in the VSF market this week: The VSF op. rate edged up to 84% (83% last week), while VSF inventory days dropped to 13.5 (from 16.0 last week) as spinners increased VSF orders. With low VSF inventories and continued momentum in cotton and polyester prices, there is upside risk for VSF prices in the ST. The theoretical VSF margin for Chinese producers reduced to -$30/t and the Lyocell market was stable with the operating rate at 70% (70% last week).
  • DP market stable but new offers expected next week: Import hardwood DP is stable at $900/t, while the DP/pulp spread is up 6% w-o-w to $425/t (this level generally supports preference for DP production over paper pulp production). The domestic DP price was also stable at ¥7,150/t ($1,026/t, a $116/t premium to imports). Sun Paper is ready to restart following maintenance, while Hunan Juntai is planning to switch back to DP production from June.
  • Slight pressure on graphic paper prices: After factoring in a 30% discount to list pulp prices, the CWF/HW spread dropped by 3% w/w to €500/t. The UWF/HW spread also declined by 2% to €574/t. CWF and UWF prices are now up 13% and 8% YTD vs. the 2022 average, while both are down 5-6% since the start of the year.
  • Containerboard prices continue to hold their ground: Kraftliner and testliner prices showed further signs of stability. Compared to the 2022 average, kraftliner is down 15%, while testliner has dropped 20%. Accordingly, the kraftliner/testliner spread (€185/t) and testliner/OCC spread (€431/t) were flat w-o-w. OCC continues its upward trend (+1% w-o-w) to €98/t (testliner/OCC spread is down 11% vs. the 2022 average). In North America, containerboard prices have dropped a further $20-30/t with May box volumes similar to April (Q1 23A: -5.5% y-o-y).
  • Mondi news flow: Silbo is replacing plastic stretch film on all its pallets with Mondi’s Advantage StretchWrap kraft paper, using a new fully automated wrapping machine. The 100% paper pallet wrap is fully recyclable, more efficient and provides higher pallet stability than industry standard plastic film. Additionally, Holz-Bauer and Mondi launched new paper packaging, PelletBags (kraft paper) for wooden pellets.
  • Altri reported Q1 23A results this week (market pulp and DP insights): Revenue decreased by 10% y-o-y (-14% q-o-q), while EBITDA dropped 18% y-o-y (-36% q-o-q) and net debt/EBITDA reached 1.1x. Hardwood pulp sales were down 13% y-o-y (flat q-o-q), while DP sales were down 34% y-o-y but up 39% y-o-y. Variable costs started to decreased during the quarter, a trend expected to accelerate in the coming quarters for chemicals, natural gas and wood (in the local markets). In terms of end use, tissue continues to maintain solid demand levels, increasing its weight to 56% (53% in 2022 and 50% in 2021). The P&W segment remains the second most important, with 16% of the volume sold, but losing importance given the destocking effect occurring in this segment.

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