Impress March 2024

The Paper Industry’s Future: Survival of the Fittest?

The international stock markets are at an all-time high, bitcoin is soaring again, and the job market is tighter than ever before. This may all seem like signs of a robust and growing economy, but nothing could be further from the truth.

We, ‘paper people’, know better than anyone that things are not as good as they seem. Volumes in our industry are low, and there will be many changes in our environment in the coming years. Paper mills will close, or will be merged to ensure survival. More and more printing houses will shut down, and packaging – and its waste – will also come under fire. Exciting times lie ahead – “survival of the fittest”.

The number of mills will decrease in the coming years. Distances to be traveled to recycle recovered paper will increase. This also means that the market will be more subject to fluctuations. The logistic component will take up a larger part of the price, and we have seen enough movement in this area recently (read: red sea). The paper industry will have to become increasingly professional and efficient in managing its logistics.

Europe: Bulk grades

From Pulp Fiction to Paper Profits: European Market Update

‘’Peace and calmness will save you’’, but this is a bit too calm. Europe seems to have dozed off on both the supply and demand sides. There’s not much being offered, and the demand is adjusting accordingly.

We did notice a slight uptick in demand for certain grades in the western part of Europe in mid-February. Smurfit increased its ‘free’ market price by a few EUR per ton, leading some of the free tons to find their way to Renkum, Roermond, Hoya or Zülpich. Cardboard was traded factory-delivered in northern and western Germany and the Netherlands for EUR 107-115 per ton, while prices were slightly lower in the southern part of Germany.

The demand for mixed paper also seemed to improve in February. Grey board factories (including MM, RdM, Smurfit) saw significant improvements in their order positions and were therefore more active in securing enough raw material. This will likely lead to a price increase for mixed paper in the coming month.

Demand for deinkable grades clearly saw an upward trend last month. Finding balance in this market will become increasingly challenging. Quantities are decreasing, but collection and production won’t always align, leading to gaps in supply and demand. This is what creates a volatile market.

The situation was relatively calm in the rest of Europe as well, partly due to low demand from Asia.

For March, we expect a correction in prices upwards. German factories will try to minimalize their price improvements, to use the price increases in new paper (EUR 30-80 per ton), including testliner and greyboard, for margin improvement.

The expected price level for mixed paper will be between EUR 105-110 per ton, and for cardboard, a price of EUR 115-125 per ton delivered to the factory is expected.

The delicate balance we’re walking on will lead to fluctuations this year. The European industry will need to secure tons quickly, as demand from Asia is expected to increase significantly in the coming weeks. Further increases in recovered paper can be expected.

External news about our industry

The paper market in Germany faces challenges as February begins. Suppliers of packaging papers and boards are pushing for price hikes, while the publication paper market remains under pressure. Demand for publication paper remains low, with intense competition and a wide range of prices. Some buyers anticipate further price drops after the recent downward trend. Despite a slight softening in quotes for recycled corrugated case material, prices have remained stable. Producers cite heavy cost burdens as limiting their ability to offer further price concessions. Market participants predict that containerboard producers may soon announce price increases due to poor financial results. Several paper mills have already announced price hikes of EUR 30-80  for recycled cartonboard. (Source: EUWID)

Production of pulp, paper, and board are having a hard time due the economic challenges and prolonged destocking. Production in 2023 decreased by 13%, surpassing even the declines seen during the Covid-19 pandemic. Consumption of paper and board fell by 15%, because of a poor economic environment, ongoing destocking, and high energy costs. Declines were observed across all paper and board grades, with graphic paper experiencing the largest drop at nearly 28%. Packaging paper and board production slowed due to decreased retail and e-commerce activity. However, sanitary and household paper consumption remained relatively stable with a modest 4% decline. Total pulp production in Europe declined by almost 8%, primarily due to closures of graphic paper mills. Market pulp production, however, grew by 5% in response to strong demand from China. (Source: EUWID)

DS Smith has acknowledged receiving a preliminary expression of interest from Mondi regarding a potential merger. The British recycling, paper, and packaging manufacturer confirmed Mondi’s interest but stated that no offer had been received yet, and there was no certainty if any proposal would be made. Mondi also confirmed considering a possible merger but emphasized that no definitive decision had been reached. Both companies acknowledged the ongoing evaluation of options to accelerate growth in the packaging sectors. (Source: EUWID)

Higher grades

The past few months haven’t been great for higher-quality recovered paper types. Office paper, Multidruck, and unprinted qualities were all in low demand, leading to a gradual decrease in prices.

However, it seems that this trend has now been broken. With the improvement in demand for certain paper grades, we expect demand to pick up again in the coming months.

Metsa Tissue Germany lowered prices again in March, we don’t believe this was a wise decision. Other markets are waiting, and these quantities won’t be sold twice. Therefore, we might see a rise in office paper prices again from mid-March.

Multidruck was somewhat easier to sell in February, as mentioned in our previous newsletter (Impress February 2024 – IMtrade), and it seems to remain so. Stable to slightly increasing prices have been recorded for March.

Wood-free white grades 3.16 and 3.18 were out of favor, but with the rise in pulp prices, demand seems to be picking up again. Although the waste paper processing industry in Europe can’t easily switch to cellulose, they do feel the stronger demand, resulting in rising (USA) import prices. However, a significant price explosion is unlikely due to the limited number of buyers.

We expect a clear increase in demand for office paper and multidruck in March, and other higher qualities are also gaining momentum. This trend isn’t favorable for paper mills, but it’s not easy to break.

ASIA: Bulk grades

The Folding of the House of Cards: Can India’s Paper Industry Rebuild?

There hasn’t been much news from China in recent weeks. It’s the Year of the Dragon, a year that according to the Chinese horoscope promises many good things. Let’s hope for the best then.

February was quiet due to the Chinese New Year. Vietnam, Malaysia, and Indonesia partly produce for China, so there was relatively little demand from these countries. Due to the increase in container prices, it was practically impossible to match supply and demand.

The coming weeks will reveal what the Asians are willing to pay and whether other variables such as shipping costs and exchange rates will affect prices. American cardboard seems to remain expensive, leading to an expected rapid increase in demand for cardboard from Europe. If they can’t buy, they will pay the requested prices.

The downside is that Europeans will sit on their volumes. They sense stronger demand from Europe and also notice increased interest from the Far East. At some point, purchases must be made, and we expect prices of 122-127 FAS Antwerp/Rotterdam for 95/5 cardboard, resulting in a price of USD 165-170 per ton in Malaysia/Vietnam.

India faced the same fate as other Asian countries. Since container rates increased, only a limited number of orders have been finalized for India. The price level of cardboard in January, USD 170-175, could not be maintained. Factories simply didn’t make money at this price level, so Indian buyers withdrew to try again in February at a different level.

Currently, cardboard is being sought from Europe for approximately USD 165 per ton delivered to Mundra. This results in an FAS price of 92-95 EUR per ton in Rotterdam and Antwerp. There simply aren’t enough tons available for this price.

Overall, prices need to rise to attract tons. We expect prices to reach around this level for purchases: BBC USD 175-180 and OCC 95/5 USD 185-190.

Sentiment in India is still not positive. As mentioned in our newsletters before, substantial adjustments need to be made in the Indian industry to compete with other markets. Closures, acquisitions, and restructuring are part of this change.

 Higher grader

The increasing demand for white grades is clearly noticeable. With the rise in cellulose costs, other grades are becoming more attractive.

Demand for SOP and Multigrade showed some improvement in February (but we can’t say it’s a strong market yet). However, we expect this improvement to continue, leading to a slight price increase in the coming months.

Turkey also seems to be awakening again. In addition to cardboard, there is renewed interest in office paper grades. This could increase pressure both locally and internationally.

Other news

This month we have two of our fellow co-worker’s birthdays coming up: with Ron Smalbil at the 14th of March and Brenda Kuiper at the 26th. Looking forward to some nice pie and networking in March as we also head to the BVSE Juniorenkreistreffen.

The “BVSE Juniorenkreistreffen Peute” denotes a meeting or event organized by BVSE (Bundesverband Sekundärrohstoffe und Entsorgung), a German federation specializing in secondary raw materials and waste management. Held at the premises of Peute, this specific event is for the purpose of networking, knowledge exchange, and exploring potential collaborations within the sector of secondary raw materials and waste management. IMtrade is set to attend this event, fostering professional engagement and industry connections.