FOEX: Paper packaging prices in Europe down except white-top kraftliner; containerboard market weak with depressed demand, surplus inventories; recovered paper prices down with lessened demand pull from China, Asia

Kendall Sinclair

HELSINKI , November 15, 2011 (press release) – Containerboard Europe – The weakness of the European economy and the even weaker near-term future outlook depress the demand for packaging products. After a good start for the year, supported by the export boom in Germany, containerboard demand has gradually weakened and is already at/slightly below the 2010 volumes. The threat of a double-dip during Q4 2011 – early 2012 dims the outlook further. The drop of the demand and prices of recovered paper is reflected also in the pricing of containerboards, especially over the recycled grades. With limited amounts of downtime taken, at least for the time being, inventories have not come down. Relative to the recent shipment volumes, they have probably risen. With a further decline of the order books and with the over-supply environment, prices have been declining for all the brown grades, including virgin fibre kraftliner. White-top grades have been more firm, both volume as well as price-wise. The currency movements meant, theoretically, a small upward push on our packaging indices, as the Euro weakened against both the USD (by 0.9%) and the weighted basket of the non-EMU currencies (by about 0.3%). Our PIX Kraftliner index retreated by 4.44 euro, or by 0.8%, to 555.00 EUR/ton. The PIX White-top Kraftliner index moved up by 30 cents, or by 0.04%, closing at 783.63 EUR/ton. Our PIX Testliner 2 index declined by 7.31 euro, or by 1.55%, settling at 465.44 EUR/ton. PIX Testliner 3 index came down even more, i.e. by 10.10 Euro, or by 2.3%, landing at 430.04 EUR/ton. Our PIX RB Fluting index declined by 9.55 euro, or by 2.2%, to 422.68 EUR/ton.

Recovered paper Europe – Demand pull from China and other Asia has been lacklustre and export prices have been on their way down. Reduced regional demand and lower, at least temporarily, export volumes have created an over-supply situation. Consequently, the erosion of the recovered paper prices has continued, covering virtually all grades and all European markets. The same applies to the US market where the price erosion has been even bigger than in Europe. Most analysts expect the export volumes to move back up, possibly even soon, when the Chinese RP inventories have melted and the buyers return. Our two indices continued their recent downward trend. The PIX OCC 1.04 dd benchmark lost 4.20 euro, or 3.23%, and closed at 125.85 EUR/ton. As the testliners and RB-fluting prices fell even more, the price differentials narrowed. Against Testliner 2, the gap narrowed by 3.11 euro to 339.59 EUR/ton, against Testliner 3 by 5.90 euro to 304.19 EUR/ton, and against RB Fluting by 5.35 euro to 296.83 EUR/ton. Our PIX ONP/OMG 1.11 dd index went down by precisely 3.00 euro, or by 1.93%, landing at 152.41 EUR/ton. As the PIX Newsprint benchmark inched slightly higher, the differential to PIX ONP/OMG 1.11 widened by 3.52 euro to 358.75 EUR/ton.

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