- Pulp prices mostly stable, except for further softness in Europe: NOREXECO pulp futures for CY 23E imply a further 4-10% decline in Europe. Meanwhile, prices in China are expected to improve by 1-4%. According to UTIPULP statistics, European consumer pulp inventories declined by 2.9% m-o-m in April, while consumption dropped by 8.7%. PPPC statistics for May reveal that shipments dropped further by -3% y-o-y (+11% m-o-m), while global producer inventories increased by 1 day to reach 57 days-of-supply. The shipment-to-capacity ratio improved to 85% (April: 80%) but remains lower than 88% last year. After 7 consecutive m-o-m increases, EURO-PULP stats show that stocks of woodpulp eased by 1% in May; however, remain a staggering 50% higher y-o-y. Meanwhile, Arauco has announced a price increase of $20-30/t for USK, BHK imports into China, but keeping BSK stable.
- VSF prices stable, while cotton and polyester are in the red: The VSF op. rate eased slightly to 84% (86% last week) as Xinjiang-based plants reduced run rates in part due to the Dragon Boat Festival. VSF inventory days ticked up to 14.5 (from 13.5 last week) as delivery of goods was slower, with sentiment of a slack season in the downstream sector with tighter funds. The theoretical VSF margin for Chinese producers softened further to -$40/t (from -$33 last week). The Lyocell market was stable with prices flat and the operating rate still 70%.
- DP prices stable: Import hardwood DP is still trading at $870/t. The DP/pulp spread moderated to $364/t from $372 last week (this level generally supports preference for DP production over paper pulp production). The domestic DP price is also stable at ¥7,100/t ($986/t, a $116/t premium to imports).
- Graphic paper prices mostly stable, except for UWF down 1%: After factoring in a 30% discount to list pulp prices, the CWF/HW spread improved by 2% w/w to €538/t. Conversely, the UWF/HW spread softened to €595/t. In the US, AF&PA statistics point to a 22% y-o-y drop in P&W shipments in May (April: -25%), while inventories were flat m-o-m. UPM has now closed 485Kt/y of graphic paper capacity in Europe this year.
- Containerboard prices point to further stability as seen in recent weeks: Compared to the 2022 average, kraftliner is down 17%, while testliner has dropped 22%. VPK started up the production of recycled containerboard (500Kt/yr) following the €200mn conversion at the Alizay mill in France. Burgo has restarted PM2 at its recycled containerboard Avezzano mill in Italy (200Kt/y), following various upgrades. Hamburger Containerboard has paused the construction of its 480Kt/yr board mill in Kütahya, Turkey for at least 24 months due to the current state of overcapacity on the Turkish and broader European markets. This follows PKV’s decision against the construction of a new 600Kt/y recycled containerboard mill in Germany, originally planned for start-up in 2026.
- Mondi news flow: A €16mn investment will more than double Mondi’s MailerBAG production capacity in Poland and will include a new production line to meet growing eCommerce demand. Meanwhile, Mondi’s recently acquired Duino mill in Italy (215Kt/y CM), was not operating in June due to market conditions. Mondi intends to convert the mill to a 420Kt/y recycled containerboard mill with ramp-up expected in 2025.
- Russia insights for the period January-April 23: Wood pulp production dropped 3.7% y-o-y, P&B production -7.5% y-o-y, while corrugated box production was only down 1.2%.
- H&M Q2 results: Revenue was flat y-o-y (LC: WE +3%; SE +5%, Americas: +2%, and Asia -1%), impacted by their exit from Russia. Margins under pressure due to high costs and FX. The outlook is upbeat, with the Q3 revenue run rate for sales up 10% y-o-y and expecting the operating margin to bounce back next year to 10% (H1: 4.9%).
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