• Paper pulp prices increase further: Pulp prices improved by 4-5% in Europe, +2% in the US and hardwood pulp edged up a further 1% in China. NOREXECO pulp futures for 24E infer the pulp rally is largely complete in China with some further improvement for hardwood (+4%) and softwood (+1%) pulp prices in Europe. Arauco is considering building two new BEK pulp lines in Brazil, each with a capacity of 2.5Mt/yr. The first line would start up in 2025, with no timeline provided yet for the second line.
  • Cotton rebounded by 2%, while VSF softened further by 1%: The VSF op. rate was broadly stable at 89% (90% last week) and VSF inventory days continue to edge up, now 11.0 (from 5 last week) as orders from spinners slowed. Meanwhile, the theoretical VSF margin for Chinese producers deteriorated to -$83/t (from -$45/t last week). The Lyocell market too weakened significantly with the operating rate dropping to less than 70% (82% last week).
  • Domestic DP prices show signs of weakness: The spot imported hardwood DP remained stable at $900/t, and the DP/pulp spread is $265/t (from $266/t last week). Meanwhile, the domestic DP price fell by 3% to ¥7,450/t ($1,038/t, a $138/t premium to imports). In the Chinese market, Sun Paper and Hunan Juntai were still producing DP, with Sun Paper mulling over a two-week planned maintenance in December.
  • Graphic paper prices remain stable: Graphic paper fibre margins continue to come under pressure, with the UWF/BHKP spread dropping 6%, while the CWF/BHKP spread dropped 8%. In other news, Lecta successfully implemented its refinancing transaction with support of shareholders and creditors.
  • Containerboard prices come under further pressure: Kraftliner softened 1%, while testliner fell 2% and OCC was flat. In other news, Stora Enso announced a Q4 23A impairment of €514mn due to a weaker outlook compared to previous estimates. 74% of the impairment relates to its containerboard business. Following Stora’s announced containerboard closures, we estimate the company’s containerboard capacity at around 1.815Mt/yr (53% testliner and 47% kraftliner: was 63%/37% previously). In Italy, Prinzhorn Group’s Hamburger Recycling acquired Eurocart, increasing its recovered paper capacity to 2.1Mt/yr (+239Kt/yr). Meanwhile, in the US, IP has confirmed a 14% box price increase ad 16% sheet price increase from January 2024.
  • Sonoco to raise uncoated recycled paperboard by $50/t due to increased cost pressures: This will be effective from 1 February in the US and Canada and could be supportive of Sappi’s board operations in the US. Meanwhile, Solidus plans to close its solid board mill (150Kt/yr) in the Netherlands in Q1 24E due to high costs.
  • Sappi Q1 24E pre-close feedback: Q1 EBITDA guidance remains unchanged (lower q-o-q due to $40mn maintenance impact at Saiccor, Ngodwana and Cloquet. Starting point is $168mn less $40mn and some upside from volume growth). Encouragingly, Packaging & Specialties volumes in North America are rebounding ahead of expectations, while board & containerboard remains a drag on European volumes.
  • Mondi Q4 23E pre-close feedback: Overall, the macro has not been as negative as previously expected. Further containerboard closures are needed to balance the market with around 20% of capacity under water currently. The circular for the proposed special dividends and share consolidation should be published in the next week or so. The general meeting will take place in January and assuming shareholders vote in favour, the proceeds from the Russian exit should be settled before the 2023 results on 22 February.

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