FOEX: In Europe, all paper packaging prices except brown kraftliner continue to rise, tight recovered paper availability pushes up linerboard costs, strengthened euro puts downward pressure on benchmark grades

Diane Keaton

HELSINKI , May 3, 2011 (FOEX) – Containerboard Europe – Fairly strong momentum continues in packaging business. Demand increased substantially in March and order books stayed satisfactory also through April. In the US, a strong reduction of stocks underlines market strength. In Europe, temporary closures for rebuilds (Varel in Germany, Powerflute in Finland) reduce supply in Q2. Recovered paper availability is tight and prices have continued to head higher, thus pushing the linerboard production costs up, too. Price increase initiatives in recovered paper based grades and in white-top kraftliner have been largely successful. With the exception of virgin brown kraftliner, all our benchmarks have been moving up over the recent weeks. Last week, the exchange rate development had a negative impact on our benchmark grades. Euro strengthened by 1.9% against the US-dollar which put downward pressure on virgin fibre kraftliner prices through imported dollar-priced linerboard. In addition, Euro strengthened by about 0.9% against the non-EMU currency basket which meant downside pressure on RP-based grades. The PIX Kraftliner index lost 78 cents, or 0.13%, and closed at 591.97 EUR/ton. The PIX White-top Kraftliner index value continued to head higher by 2.46 euro, or by 0.3%, and settled at 768.27 EUR/ton. In the RP-based grades, all the benchmark values headed again higher. The PIX Testliner 2 index value rose by 5.07 euro, or by 1.03%, to 496.49 EUR/ton. Testliner 3 index gained 2.08 euro, or 0.43%, and closed at 481.24 EUR/ton. The PIX RB Fluting index moved up by 2.98 euro, or by 0.64%, to 467.54 EUR/ton.

Recovered paper Europe – The production volumes of containerboards moved up fairly strongly in March. This raised the demand for recovered paper both in Europe and in the US. Even though there was a slightly weaker period of demand for recovered paper in China – most probably due to inventory movements - regional production and shipment gains kept the recovered paper market tight in March. The same appears to have been the case in April, even if the numbers are not our yet to give any proof on that. In Europe, the stocks of recovered paper continue to be below average. Our benchmark values continued to move up. The PIX OCC 1.04 dd price index rose by 1.51 euro, or by 0.96%, and closed at 158.97 EUR/ton. The differentials to containerboards prices grew again, although rather moderately: against Testliner 2 the gap widened by 3.56 euro to 337.52 EUR/ton. Against Testliner 3, the increase in the gap was 57 cents to 322.27 EUR/ton. Against RB Fluting, the difference widened by 1.47 euro to 308.57 EUR/ton. Our PIX ONP/OMG 1.11 dd index value rose by 1.71 euro, or by 1.03%, to 167.20 EUR/ton. As the PIX Newsprint index value retreated slightly, the differential to PIX ONP/OMG 1.11 narrowed by 1.94 euro to 332.55 EUR/ton.

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