IMpress June 2024

Navigating Political Unrest and Economic Shifts in Europe

Populist and dictatorial governance is back on the rise again. After the Second World War, countries were exhausted and sought unity. Social structures were rebuilt, and the public domain was once again seen as important. In the period between then and now, we often see similar fluctuating social and economic movements. Economic prosperity puts pressure on the societal foundation. Rejecting or excluding groups leads to alienation. Income disparities rise, and the emphasis on earning becomes greater. Unrest is on the lookout. 

As Europeans, we have long viewed our own system as superior, but doubts about that are increasingly surfacing. In “Western democracies,” societal unrest quickly translates into protest votes, indicating division. Currently, populist political groups are gaining support across Europe. Examples include AfD in Germany, PVV in the Netherlands, Front National in France, and so forth. Are the building blocks of European society still of sufficient quality? Or must the foundation first break before society accepts different norms and values?

As an internationally operating company, like many in our industry, we are increasingly threatened by political decisions and bureaucratic processes. The rest of the world is following a pattern similar to Europe and is increasingly governed by “populists and dictators.” Power and money are goals, and many rules are bent for them. We have to deal with it. No society is perfect. 

Remaining flexible within the framework is the challenge!
Enjoy reading.

EuroPaper: Riding the Wave of Market Momentum

EUROPE: BULK GRADES

Despite all international pressure, Europe has been experiencing a consistent upward trend in recent months.

All bulk grades have seen price increases in recent months. As reported in our previous IMpress releases, it is primarily the German factories that are positively influencing prices in this part of the continent. A slight cyclical improvement has resulted in a more robust portfolio and consequently increased demand for raw materials during a period of relative calmness.

Due to factors such as holidays, demand for other products, and scaling down of the logistical fleet, the industry’s greatest challenge has been transporting raw materials and finished products. Consequently, we believe we are walking a very thin line in terms of balancing availability and price levels. A price decline cannot be ruled out in the coming weeks/month.

Mixed paper has been a hot topic in recent weeks, resulting in a relatively wide price range for this quality. Selling prices ranging from EUR 125-170 per ton have been noted in the Northern European market. At the top end of this price range, it appears that factories cannot achieve a “healthy” business case. Measures to improve the price of the end product seem necessary, but it remains uncertain whether the market can absorb these increases. Furthermore, it remains to be seen whether a large part of these price increases will be passed on to raw material suppliers. This has been happening in recent months but has not provided a better outlook for the industry.

Demand for cardboard was strong, making it difficult to deliver the contracted quantity. Index-based prices fluctuated between EUR 155-165, while market prices ranged from EUR 165-180. A clear increase in key indices is expected again for June. Cardboard is mainly processed by liner producers. Such a high price level puts significant pressure on the results of these companies. Brown test liners are currently sold ex-factory (prime – according to customer specification) for EUR 360-420 per ton. If 50% of the selling price is already used for one raw material, it is difficult to build a positive business case. How long can buyers endure this?

In addition to strong demand for bulk grades, there was a noticeable increase in demand for deinking qualities. Both producers of graphic paper and tissue and hygiene paper were more active in purchasing raw materials. The price level of deinking (depending on purity) ranged between EUR 190–230 per ton delivered to the factory. It is expected that there will be an additional increase of approximately EUR 20 per ton in June. The price of magazines, newspapers and inserts are still slightly above this price level.

Kraft grades also found their way easily to the factories. Due to the relatively high price level of American DLK (#13, double-lined kraft cuttings – American 4.01), demand for European alternatives is relatively strong. Tobacco boxes, fruit boxes, and kraft k1 are changing hands between EUR 210-265 per ton delivered to the factory.

EUROPES: HIGHER GRADES

Overall, prices of higher grades saw a slight increase in May. A price increase of approximately EUR 20 per ton was implemented for printers waste and multidruck. Demand for these grades was good, although the total traded tonnage seemed relatively low. White top testliner continues to have weak demand, leading to a relatively balanced supply and demand for white grades. If demand for white cardboard grades picks up alongside, we anticipate further price increases in the better-quality grades.

The price of SOP increased by EUR 15-20 per ton in recent months on the European continent. Under pressure from increasing export orders and improved demand for deinking, prices needed adjustment in this part of the world. With a mixed paper price, partially exceeding EUR 160, and a price of SOP ranging from EUR 195-235 per ton in May, the gap between lower and higher grades is not significant. Consequently, the sorting of certain SOP qualities may become less relevant. For June, the industry is expected to raise the prices of these grades once again. We anticipate another increase of EUR 20 per ton. The price level is then expected to range between EUR 210 and 250 per ton delivered to the factory.

Woodfree coated and uncoated white papers (3.16.00 and 3.18.00, respectively) saw slightly increased demand. The supply of these grades is gradually declining. Due to digitalization reducing demand for printing paper, there has been a decrease in sales of uncoated paper. The largest producer of uncoated office paper, UPM Nordland, announced this week a further reduction in paper production at its Dörpen, Germany plant due to overcapacity. 200 employees will lose their jobs as a result (UPM to reduce graphic paper capacity in Germany – euwid-paper.com). Disappointingly for the industry, a further price increase for these grades is expected in the coming months. Cellulose prices are rising, and woodfree grades will experience some increase under pressure from this development and rising American prices. Woodfree uncoated white paper (3.18.00 / HWS) was traded at EUR 520-580 per ton delivered, while woodfree coated found a new buyer in May between EUR 460–530 per ton delivered to the factory.

Price Pushback: Asia’s Resistance to Rising European Paper Prices

ASIA – BULK GRADES

Asian buyers witnessed the recent price increases implemented in both the US and Europe in recent months with discontent. Many questions have been raised from Asia regarding these increases. Demand for finished products remains relatively modest in Asia, preventing paper price hikes from being passed on.

The price level for 90/10 cardboard in May ranged from USD 195-200 per ton CNF (Cost and Freight) to Vietnam, Thailand, and Indonesia. In India, the price was slightly higher (USD 205-215 per ton CNF), but sales at the top end of this range are genuinely limited. There are a few factories willing to pay an “extra” price, although they can be counted on two hands. Overall, an attitude of waiting is still the main appearance of Asia. It’s preferred to produce less rather than operate at a negative margin. This consensus appears to have been reached, especially in India.

With cardboard prices rising again in Europe, it will be a struggle to get enough tons to Asia. Therefore, a price increase in the Far East is actually quite possible. With the current price level in Northern Europe, prices of USD 210-215 USD per ton CNF to Thailand/Vietnam/Indonesia and USD 230-235 per ton CNF to India should be sought. Alternative procurement markets include the Middle East, Africa, and Oceania. Increasing demand in these areas will also lead to more traction, and it remains to be seen if the “hunger” for volumes from these regions can be satisfied.

Kraft qualities continued to find eager buyers in India in May, although a sort of price ceiling has been reached. Fruit boxes were sold between USD 270-290 CNF, with tobacco boxes slightly higher. The price of kraft paper (e.g., sack kraft without PE) was above USD 325 per ton, and SMK (steel mill kraft) was clearly sold above USD 400 per ton. The demand for these “pulp substitutes” appears to remain strong.

ASIA: HIGHER GRADES

Superior grades of waste paper are still making their way to Asia, but with the steep price tags in America and Europe, the quantities are somewhat restricted.

Interestingly, there’s a growing interest in cellulose in Asian markets. This might signal a forthcoming surge in demand for superior grades, especially in India.

OTHER NEWS

UPM Nordland, announced this week a further reduction in paper production at its Dörpen, Germany plant due to overcapacity. 200 employees will lose their jobs as a result (UPM to reduce graphic paper capacity in Germany – euwid-paper.com).

And ofcourse it’s almost party time! We marked our calendars because we have two special birthdays coming up:

Marieke Jansen – June 12th

Peter Paul Pastoor – June 15th

Ofcourse we make these days extra special and spoil our colleagues with a healthy dose of celebration! 

See you next month with another edition of our IMPress. Thanks for reading.