FOEX: Paper packaging prices in Europe rise, supported by small rises in recovered paper prices within the region and larger increases reported from China; recovered paper prices also increase as demand from China picks up

Sandy Yang

HELSINKI , October 30, 2012 (press release) – Containerboard Europe – The US containerboard and box markets remain firm, even if a small drop was registered in shipments and in the shipment-to-capacity ratio in September. The slightly weaker shipments and a small rise in inventories did not stop the upward trending of the prices. IP announced a further expansion in their packaging business outside North America with a purchase of 75% of the shares of Orsa’s packaging assets in Brazil, including three containerboard mills and four box plants.

In Europe, the upward price movement continues as well, now also supported by small rises in recovered paper prices within the region and larger increases reported from China. While demand has not been very strong, understandably under the current economic conditions, production losses through closures (e.g. PKartons mill in Italy is down since June) and maintenance downtime (e.g. by Propapier) have improved the practical containerboard supply/demand balance. The brown kraftliner market has remained stronger than the market for recovered fibre based grades, partly because of the firmness of the North American market and the reduced need to import linerboard outside the region. Again this time, price increases in the virgin linerboard grades came out stronger than those in recycled linerboards and corrugated medium.

Last week the Euro weakened by 1.0% against the USD and by about 0.8% against the non- EMU currency basket, supporting thus upward price movement in Euro-terms. Our PIX Kraftliner benchmark went up by 4.70 euro, or by 0.82%, settling at 581.03 EUR/ton. The PIX White-top Kraftliner index gained 4.21 euro, or 0.55%, reaching 770.15 EUR/ton. The PIX Testliner 2 index increased by 78 cents, or by 0.18%, closing at 423.44 EUR/ton. The PIX Testliner 3 index gained 1.20 euro, or 0.3%, moving to 402.86 EUR/ton. Finally, our PIX RB Fluting index headed higher by 76 cents, or by 0.2%, and closed at 387.51 EUR/ton.

Recovered Paper Europe – The demand from China has picked up. This is partly due to the desire to raise purchases to obtain a sufficiently high quota for 2013 (quotas issued are largely based on previous year’s volumes), partly to the high price of RP from Chinese domestic sources and partly to the increased activity of the Chinese collection organizations in the Western markets. While the supply of recovered paper is sufficient, or even ample, in the European markets, the higher prices offered by the Chinese buyers are pulling prices up also in the European and US regional markets.

Here in Europe, the PIX benchmarks headed both a bit higher. The PIX OCC 1.04 dd went up by 81 cents, or by 0.77%, to 106.07 EUR/ton. The movements in price differentials between containerboards and OCC were small and again mixed: the gap narrowed against Testliner 2 by 3 cents to 317.37 EUR/ton but widened against Testliner 3 by 39 cents to 296.79 EUR/ton. Against RB Fluting the difference narrowed by 5 cents to 281.44 EUR/ton.

Our PIX ONP/OMG 1.11 dd index, after a fall last week, moved back upwards by 75 cents, or by 0.59%, landing at 128.53 EUR/ton. As the PIX Newsprint index declined, the price gap narrowed by 2.09 euro to 368.02 EUR/ton.

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