According to Fastmarkets price analysts, US coated freesheet (CFS) and coated mechanical (CM) papers prices were unchanged in October, after several increases implemented by North American suppliers during the third quarter. But major domestic producers including Verso and Sappi as well as overseas suppliers have already announced new price increases for November.
Verso on Wednesday October 20 announced that it will increase transaction prices of all its coated web rolls, sheets and sheeter rolls, as well as CM web rolls and specialty grades by 8%, effective with all new and existing orders with confirmed delivery dates of Saturday November 20 or later.
While Verso’s announcement includes existing orders with delivery dates of November 20 or later, Sappi said its new price increase applies only to new and unconfirmed orders with delivery dates on or after November 15. As industry sources mentioned, Sappi’s price increase is more likely to occur in January of 2022, as new orders are not likely to have confirmed delivery dates this year due to backlogs and machine allocation.
Energy costs are impacting price
A few days after the price hike announcement in North America, Sappi Europe declared energy surcharges of up to $120 per tonne ($108.86 per ton) across all products manufactured by Sappi Europe from October 25 and sold into the North American market due to "unprecedented increases in energy prices."
Sappi said the surcharges will help avoid production stops and ensure that the various supply chains will continue to function. The company said the surcharge "will apply until further notice and is in addition to any current and future price increases."
Lecta on October 11 announced an 8% price increase on CFS sold in the US and Canada, "effective immediately for new or unconfirmed orders." Lecta noted that "confirmed orders with a delivery date on and after January 1, 2022, will also be subject to the 8% increase." The company attributed the price hike to "fast increasing energy, chemical and logistics costs."
Asia Pulp & Paper (APP) Canada sent a letter to customers on October 12, informing of a 6-13% price increase for all paper products sold in Canada, effective November 15 "due to significant increases in raw materials, extreme increases in shipping costs as well as increases in logistics costs and other factors beyond our control."
Hansol America on October 15 announced an 8% price increase "effective immediately with all orders" due to "the unprecedented cost increase in logistics, energy, and chemical."
Moorim also set an 8% increase for its coated paper sold in the US, effective for orders placed in November.
However, there were no price changes in October. Prices for CFS 80-lb premium sheets remained at $1,540-1,640 per ton and CFS 80-lb economy sheets stayed at $1,320-1,385 per ton, according to our pricing survey. Pricing for CFS No. 3, 50-lb rolls in October were stable when compared with September levels at $1,225-1,270 per ton, and the No. 3, 60-lb rolls, at $1,165-1,195 per ton.
As for CM paper, our survey found prices for CM No. 4, 50-lb rolls in October unchanged at $1,080-1,140 per ton and CM No. 5, 40-lb offset rolls at $975-1,045 per ton.
Mills sold out and selling into 2022
Sources continued to report that the CFS and CM markets on a supply and demand basis are tight, mills are running at full, and customers are not receiving all the paper they need.
"I’m shocked that (customers) are not cancelling orders even if there are delays. This shows me how tight things continue," a paper producer said. "We’re fully booked for the year. … No extra paper in 2021 for us … and we have customers that want to order for next fall."
"We cannot get enough paper in either CM or CFS," a paper buyer said. "(Both grades) are oversold for the year and into next. (Mills are) putting us on monthly allocation for 2022 as well. Orders late...orders rejected…terrible situation."
North American CFS mills operated at 106% of their capacity in September and held 10% less inventory than in August and significantly lower inventories, down by 66%, than a year ago, according to the latest Pulp & Paper Products Council (PPPC) statistics report.
The CM mill operating rate in September was also high, at 100%, while inventories declined 58% year-over-year.
While demand for CFS through September increased 4.4% when compared with demand in September 2020, CM demand fell 5.9%.
"Printing and writing (paper demand) is dropping in terms of capacity and consumption. As prices move higher, the drop in demand will accelerate. For now, shortages are a main part of the market and driving prices higher. … But (paper) sellers and their commercial printers should be worried about what happens going forward," a market analyst noted.
"Prices are rising and orders are there, but actual demand is not that high. End-users are moving away from the segment in droves. Fewer catalogs or fewer pages, and lower basis weight and lower-cost papers are being used," the contact added.
Pactiv Evergreen mill ends CM paper production, tightens supply
Contacts reported that Pactiv Evergreen has already stopped making CM at its Pine Bluff, AR, mill. The company announced at the end of July that it would permanently cease CM production at that mill by October 31 due to "the decline in the coated groundwood market," and to be able "to re-invest resources into our strategic core competency of liquid packaging board as well as other more profitable segments."
"(Evergreen): They’re done. We’re not able to get anything from the Pine Bluff mill. … it is out of commission," a buyer said.
"I think (Evergreen) stopped, given the way customers are acting (looking for paper)," a CM paper supplier said.
Supercalendered demand rises, Covid-19 ripple effect felt through supply chain
Sources said the Pine Bluff mill closure adds even more pressure on CM supply and is making CM users look for paper alternatives, such as supercalendered (SC).
North American producers implemented a $60 per ton price increase on SC paper in October, according to our survey.
"We are not clear on Evergreen’s status. However, we are seeing a flood of heavy weight SCA++ demand inquiries coming from new clients to us. More and more traditional coated buyers are looking to SCA to secure the needed supply going into 2022," a producer stated.
"SC is sold out for the balance of this year (at most suppliers)," a printer said. "We are hearing that the mills have full order books for next year as well, unless demand wanes. We are not getting all of the paper we need for SC."
Earlier this week, a European producer, Heinzel, announced the conversion of a 330,000 tonnes per year machine at its Laakirchen mill in Austria from SC to recycled containerboard by mid-2023.
"That sent a ripple as well, even though it will be late next year before changing over. Availability is now more important than price," a domestic producer said. "Customers are frustrated with lack of supply to do what they want to do."
"Heinzel was exporting (SC) paper to the US," another contact with a domestic producer said. "Stora Enso will also stop making SC and high-brights (at a mill in Sweden) … impacting supply to North America."
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