FOEX: Paper packaging prices in Europe down, as containerboard prices remain under downside pressure with overcapacity; recovered paper sees weak demand with lowered production of paperboard

Kendall Sinclair

HELSINKI , December 27, 2011 (press release) – Containerboard Europe – In the US, November box shipments by the Fibre Box Association showed a 1% increase over November 2010, better than the cumulative average change over the preceding 10 months. Stocks were up, though, both at the box plants and, especially, at the linerboard producing mills. Good operating rates helped the US prices to remain flat. In Europe, the past couple of months have been difficult and statistics showed growing declines against last year in September-October. November statistics are not out yet but with the economy stagnating, the regional demand is likely to have been weak in November and the weakness is likely to persist through December as well as in early 2012. Prices have remained under downside pressure as over-capacity in linerboards persists and as fibre prices keep shifting lower.

The currency movements reduced again those downside pressures on our packaging indices, although only moderately. Euro weakened by 0.1% against the USD and by about 0.7% against the weighted basket of the non-EMU currencies. In spite of the help from the exchange rate movements, most of our packaging benchmarks continued to trend further down. The PIX Kraftliner index retreated by 4.25 euro, or by 0.79%, to 535.14 EUR/ton. The PIX White-top Kraftliner index moved down by 5.13 euro, or by 0.66%, and closed at 773.47 EUR/ton. Our PIX Testliner 2 index declined by 6.17 euro, or by 1.38%, settling at 440.85 EUR/ton. PIX Testliner 3 index fell this time less, i.e. by 3.11 euro, or by 0.76%, landing at 407.74 EUR/ton. Our PIX RB Fluting index declined by 4.47 euro, or by 1.12%, to 394.08 EUR/ton.

Recovered paper Europe – With European demand and production of paper and board down, the needs for recovered paper have also been weak. Lacklustre outlook for the coming months and good availability of recovered paper have allowed reductions in the recovered paper stocks held at consuming mills. Somewhat improved demand from China has not compensated for the fall in the European demand. European regional prices of all types of recovered paper moved down first through November and then also through all of December, including last week.

The PIX OCC 1.04 dd benchmark lost 31 cents, or 0.28%, and closed at 109.79 EUR/ton. As the liner and fluting prices fell clearly more, the price gaps narrowed. Against Testliner 2, the gap was reduced by 5.86 euro to 331.06 EUR/ton and against Testliner 3 the differential narrowed by 2.80 Euro to 297.95 EUR/ton. Against RB Fluting, the gap tightened by 4.16 euro to 284.29 EUR/ton.

Our PIX ONP/OMG 1.11 dd index retreated by 1.34 euro, or by 1.02%, landing at 129.67 EUR/ton. As the PIX Newsprint benchmark inched up, the differential to PIX ONP/OMG 1.11 widened by 2.27 euro to 383.60 EUR/ton.

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