July was an eventful month, with not particularly good news. Cheap imports of Newsprint from Canada are flooding into Europe placing high pressure on the production of Newsprint in Northern Europe.
In the press there have been numerous articles confirming closures of machines, paper mills and increased down time.
In the wood-free sector it has been reported that closures and downtime in the last 12 months have amounted to a reduction in production of ½ million tonnes per year in Europe alone. UPM and Hamburger group have confirmed closures of mills and paper machines in the last two weeks.
The European market is very soft with much downtime and little demand. Tissue mills and De-ink mills in particular reducing volumes and reducing pricing by £10 per tonne on most grades.
Pulp sub pricing has reduced dramatically and the box board manufacturers across Europe have dramatically reduced pricing for their grades, down between £10 to £20 per tonne
In packaging the far east buyers have maintained pricing, but it is expected that this will reduce in the coming weeks. The Europeans continue to look to reduce pricing where possible as they have seen again reductions in their finished reels pricing. Pricing for recovered paper in packaging remains stable with some reductions on certain grades.
There are also reports of high stocks of finished goods in all sectors.
Packaging
Packaging mills in Europe prices have seen a decrease in, OCC 1.04.00 & 1.05.00 and mixed papers (1.02.00) is stable, far east pricing also stable.
4.01.00, 4.02.00 & 4.03.00 (NKLS, Fruitbox and Kraft) grades pricing fell around -€5 to -€10 per tonne.
Most mill groups in Europe have reduced their intake by at 25% across all grades.
Newsprint & Graphic Papers
In July we expected price increases but with the high influx of cheap Canadian newsprint, we have seen mills reduce between £10 to £20 per tonne in this sector. Like Packaging, most mills have reduced their intake by at least 25%
Also, we would like to report that the Lets Recycle domestic N&P index is completely out of kilter with market reality. This has caused pricing issues for many that use this index to move pricing.
Folding Box Board
Low demand in this sector, machine shuts and high stocks have seen prices fall between £5 to £20 per tonne depending on the grade. The tissue sector, who also uses this grade, has also reduced demand and pricing by, on average, £10 per tonne.
Tissues
Pricing in this sector reduced by at least -£10 per tonne. However, the real problem facing this sector is the lack of mills purchasing these products. With Essity Prudhoe currently closed and all of the other mills in the UK holding high stocks, this has seen large reductions in purchasing of these grades in August.
Pulp Substitutes
Large fall in pricing in Best Whites following reductions in Pulp pricing (around €20.00 per tonne). Mechanical grades remain stronger in part as a few mills in Europe are still seeking this material.
Pricing prediction
There appears to be very little good news economically at the moment. Economies worldwide continue to struggle, and this is affecting the demand on paper and packaging.
The graphic paper industry in Northern Europe is declining at a pace. Tissues mills are investing in their pulping processes so that they can handle mechanical papers as wood-free papers are becoming more scarce. The extra capacity in the production of Testliner/container board in Europe is seeing pressure on old mills and smaller paper machines with closures machines being announced on a regular basis.
With all the above in mind, whilst we felt we may have had an uptick in September and October, the reality is that many mills have high stocks of finished goods already so the demand for recovered paper will we believe be weak, so our expectation is further reductions or stability on recovered paper. However, the flip side is, this will mean a reduced price for finished goods.