FOEX: Paper packaging prices in Europe down except White-top kraftliner; weak economic activity affecting containerboard demand that has slowed over past weeks, months
September 13, 2011
– Containerboard Europe – A major acquisition was seen in the US when IP acquired Temple-Inland at 32 USD per share. This deal is still conditional, requiring the acceptance of the TIN shareholders and the anti-trust officials. If concluded as proposed, the share of IP of the North American containerboard capacity will rise by more than 10 percentage points to about 37%. There have been no announcements as to the possible changes in capacity. New capacity will be added by Cascades but that will be starting up only in early 2013. A significant drop in the recovered paper costs in late August/early September will improve the economics of the RP-based grades, at least temporarily.
In Europe, the weakness of the economic activity impacts the containerboard demand which has continued to slow down over the past weeks and months. After a clear increase still in Q1, shipment volumes have fallen to, or below, 2010 level over the summer. Also in Europe, the prices of recovered paper have been slipping lower with sluggish demand but the drop has been less significant than in the US market. Combined with the weakness of the linerboard and fluting demand, the prices have become under downside pressure.
The currency development had a basically positive impact on the benchmark prices, at least from the producers’ point-of-view. The Euro weakened by 3.1% against the USD and by 0.5% against the weighted basket of the non-EMU currencies. These changes had, theoretically, a clearly positive impact on the Euro-prices. But, in practice, most of our benchmark prices in packaging grades headed back downwards after a small rise last week. Our PIX Kraftliner index fell by 2.79 euro, or by 0.48%, and closed at 574.82 EUR/ton. The PIX White-top Kraftliner index value gained 3.03 euro, or 0.39%, and settled at 788.08 EUR/ton. Our PIX Testliner 2 index value retreated by 2.54 euro, or by 0.50%, and closed at 501.72 EUR/ton. PIX Testliner 3 index slumped by 6.40 euro, or by 1.33%, and closed at 475.12 EUR/ton. The PIX RB Fluting index value fell even more, i.e. by 7.43 euro, or by 1.58%, to 463.72 EUR/ton.
Recovered paper Europe – The prices of recovered paper have remained well above the long-term average in real terms through this year, in spite of the strength of the Euro. The simultaneous weakness of the demand for recovered paper in the North American and European markets, coupled with the return of the collectors from holidays and with again a slower intake by the Chinese/other Asian buyers have increased the downside pressure on recovered paper prices in most of the grades. The fall of the pulp price puts extra pressure on the pulp substitute grades and the indirect impact is felt through the portfolio of different RP-qualities, including the brown grades. Data over last week’s RP business in Europe shows that our OCC 1.04 index lost 1.65 euro, or 1.09%, and settled at 149.81 EUR/ton. With a bigger drop in liner prices, the price differentials to containerboards narrowed: against Testliner 2 the gap shrank by 89 cents to 351.91 EUR/ton; against Testliner 3 the differential narrowed by 4.75 euro to 325.31 EUR/ton and against RB Fluting by 5.78 euro to 313.91 EUR/ton.
Our PIX ONP/OMG 1.11 dd index lost 54 cents, or 0.31%, and closed at 172.06 EUR/ton. As the PIX Newsprint index moved up, the differential to PIX ONP/OMG 1.11 widened by 2.67 euro to 337.01 EUR/ton.