- Pulp prices extend gains, up 2% in Europe but stable in China: Following damaged caused from a rockslide in 2023, Norske Skog plans to initiate a study of aiming to enter the bleached chemi-thermomechanical pulp (BCTMP) market with production at its Saugbrugs mill in Halden of up to 300Kt/yr by 2027 with an investment of around €140-180mn. In terms of supply disruptions, Metsä Fibre’s Kemi mill (1.32Mt/yr of bleached softwood and bleached hardwood kraft pulp) is slated to restart at the end of June at reduced capacity. In other news, Suzano is working on essential final tests to start up production at its new greenfield pulp mill (2.5Mt/yr) in Ribas do Rio Pardo, Mato Grosso do Sul state, which is expected to begin operations this month.
- Mixed fortunes for textile prices this week: ICE cotton contract softened by 3%, while the ZCE cotton contract increased by 1%. The VSF price increased slightly by 1% with an improvement in sales and a positive trading sentiment. The VSF operating rate increased w-o-w to 81% from 78% with some Xinjiang-based units back from maintenance. VSF inventory days decreased slightly w-o-w to 10 from 11, and the theoretical VSF margin for Chinese producers improved to -$78/t (from -$90/t last week).
- There were no new offers in the dissolving pulp market as the focus remains on fulfilling previous offers: The spot price for imported hardwood dissolving pulp stayed constant at $940/t, with a DP/pulp spread of $201/t. The domestic DP price too was stable at ¥7,660/t ($1,055/t), reflecting a $115/t premium over imports. In the Chinese market, Hunan Juntai came back from maintenance and Sun Paper continued to sell down stock. In other news, Suzano is set to enter the dissolving woodpulp market with a 15% stake in Lenzing. Subject to the closing of the transaction, B&C will hold a 37.25% stake in Lenzing and keep its role as controlling member of the new syndicate, with Suzano holding the minority stake of 15%. Suzano has the option to acquire an additional 15% stake in the company from B&C until the end of 2028. The price per share will be €39.70, with a total acquisition purchase price of €230mn to be fully paid at closing. Following the transaction, Lenzing’s free float will be around 48%.
- Graphic paper margins continue to come under pressure for non-integrated producers as pulp prices rise further: Potentially more good news for uncoated woodfree (UWF) producers in Europe as The Navigator Company (NVG) plans to increase UWF prices by 4-6% in Europe, effective July 1. NVG continues to cite structurally higher prices for most input costs as they key driver supporting further price increases (the current FOEX UWF price is 20% higher than its ten-year average). On the supply side, European UWF paper capacity will fall by 280Kt//yr with the shut of PM 3 at UPM’s Nordland mill in Germany. Meanwhile, coated woodfree paper (CWF) prices were stable in May and June, despite efforts from the likes of Sappi, Burgo and Lecta to raise prices. In other news, a strike has been authorized by Sappi Cloquet mill workers as the most recent three-year contract offer has been rejected by 150 members of the NCF&O Union. Sappi believes the negotiations are expected to resolve the issues.
- Further momentum for paper packaging grades in Europe: Kraftliner was stable (+6% y-t-d), while testliner increased by 1% (+7% y-t-d). Meanwhile, waste paper (OCC) jumped 6% to reach €160/t and has now increased by 60% since the start of the year. On the supply side, the Model Group is expected to delay the commissioning of its 650Kt/yr recycled containerboard machine (converted from newsprint) in Germany to July. In other news, both Smurfit Kappa and WestRock shareholders have now approved the combination.
- Week ahead: We are meeting with Sappi next week Tuesday ahead of the closed period and DS Smith to report next week Thursday.
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