European coated woodfree paper prices tumble with weak summer business
We take a closer look at European CWF paper price trends and the price drivers through the second quarter of 2023
The European coated woodfree (CWF) market has continued to sail through troubled waters since the end of Q1. Continuous price increases over most of 2021 and the first half of last year and a period of stable prices in the second half of 2022 and the first quarter of 2023 have been followed by a string of price drops since March, and an end to the trend does not seem to be in sight.
Market insiders reported in Q2 that prices for reels and sheets, which started to slip in March, decreased by another Euro 50-70/tonne in continental Europe and some £70-80/tonne in the UK in April. “The market never really bounced back after the traditional summer slump last year. Demand has been weakening for far too long, and now we see the result. In fact, I’m surprised that it took so long,” a contact noted at the time.
While CWF prices stabilized somewhat during May and June, with contacts reporting drops of some Euro 10-20/tonne or around £10-20/tonne here and there, the downtrend accelerated once again at the start of the third quarter. Contacts in continental Europe said that prices dropped by another Euro 40-50/tonne or even more, while their industry peers in the UK reported decreases of around £50/tonne in July.
Capacity management had limited impact on prices
The development came despite extensive capacity management across the industry and some closure announcements, and industry insiders generally agreed that more machines had to be closed in order to bring operating rates back to acceptable levels and help stabilize prices.
In August, the market found itself in a deep slumber and contacts reported hardly any price changes. “The good thing about not selling anything is that you don’t have to lower prices,” one of them commented, and several of his industry peers shared similar views.
At the same time, the sector was eyeing the pulp market suspiciously, fearing that the downtrend in prices there was coming to an end. “Pulp prices have decreased but are still high. We really can’t afford higher input costs because I don’t think that we will be able to lift our prices any time soon,” one market insider commented.
In something of a surprise move, Sappi said in August that it would keep CWF prices steady at current levels until the end of the year. While several market players welcomed the move, others said they doubted that the plan could be realized. “Will demand bounce back sufficiently to keep prices steady or will they lose market share? We have to wait and see,” one of them noted.
Capacity-wise, Lecta said in June that it would cease CWF production on its 210,000 tonne/yr Condat PM 4 in France. In a similar move, Sappi announced in July that it entered into a consultation period regarding the future of its Stockstadt mill in Germany. The closure of the site would remove some 220,000 tonne/yr of both uncoated and coated paper capacity from the market.
A slippery slope for CWF prices in Q2 since the first price drops in March
Following a slow start to the year but relative stable prices in spite of very weak demand, CWF prices started to fall in March. Market insiders usually reported drops of around Euro 20-40/tonne or some £20-30/tonne, but considerably higher decreases were also mentioned in some cases.
“We did what we could, but in the end the pressure became way too high,” a contact noted. “Customers are not buying because they don’t need paper. Also because prices are high, but mainly because they are still well stocked.”
Will customers start buying now? No, because now they will wait and see how low prices will fall in a few months’ time.
CWF prices continued to decrease in April, with market insiders reporting drops of around Euro 40-50/tonne or some £40-50/tonne this time. Once again, considerably higher declines were also being mentioned in some cases.
To this tune, a Lecta representative confirmed rumors that the firm was eyeing options for the CWF PM 4 at its Condat mill in Le Lardin St Lazare, southwestern France. Local media reported that the machine had not been operating for almost two months and that Lecta was mulling a conversion of the line to glassine paper production.
Also in April, the planned sale of Sappi’s Maastricht, Stockstadt and Kirkniemi mills in the Netherlands, Germany and Finland, respectively, to the asset management group Aurelius fell through. While Sappi said that it would continue to be in charge of the three mills for the time being, the firm later announced that it entered into a consultation period regarding the future of the Stockstadt mill.
In May it turned out that the April decreases did nothing to improve CWF demand. Market players continued to report very weak order intake, and quite a few said that it was difficult to tell what could change the situation.
“May was an extremely slow month. There were a lot of bank holidays and people took advantage of those. But still, it was far too quiet for this time of year,” an industry insider said, and more and more market players were wondering when they would start to see the first victims of the current situation.
Price-wise, most contacts reported relatively stable levels. “There were a few smaller adjustments but no more general decreases,” a contact said. Others shared the view and added that customers were still asking for discounts. “Some people give in to these demands, others don’t. Let’s see what happens in the summer,” one of them noted.
In June, pressure remained high on CWF paper prices. According to market observers, decreases of around Euro 10-20/tonne or some £10-20/tonne, and sometimes even more, were frequently found in the market as demand was very weak and paper producers were trying to win a few orders.
Lecta revealed plans in mid-June to stop CWF paper production at its Condat mill for good. Going forward, the site will solely manufacture glassine and one-side coated specialty paper on PM 8, which was converted from CWF production in 2021. Lecta did not provide a timeline for the planned closure of PM 4, but said at the time that it soon would enter into consultations with employee representatives.
Demand decreases drastically
The latest figures provided by Euro-Graph, the European Association of Graphic Paper Producers, show how drastically CWF demand declined in the first half of the year.
According to the association, demand dropped by 40% year on year to just over one million tonnes during the period. For June alone, Euro-Graph showed a 39% year-on-year decline to 167,000 tonnes.
Summer lull in the CWF market takes its toll
In July, the CWF market went into “rigor mortis” as one market insider described it. According to him and several of his industry peers, the weakening of business activities during the main vacation period was even more pronounced than usual this year.
While several contacts on the production side said that there were hardly any incoming orders, this did not keep prices from taking another dive, slipping by around Euro 40-50/tonne or some £40-50/tonne in continental Europe and the UK, respectively.
Looking desperately for something that would cheer them up, a few market insiders said that the recently announced capacity closures were a positive signal. “It is not about the volume that might leave the market, that’s nothing. What is good is that there have been two announcements in two months. That shows that people have understood that they can’t sit and wait but need to do something,” one of them noted.
In August, the market was expected to bob along, with producers trying to defy high pressure on prices and rejecting customers’ calls for lower prices – if there even were any calls. However, estivation came to an abrupt halt when Sappi Europe announced mid-month that it would keep CWF prices steady until the end of the year.
“In an effort to address prevalent supply chain uncertainties and to maintain the commercial viability of its graphic paper business, Sappi Europe will keep prices for its woodfree coated paper grades stable at today’s level for the remainder of 2023,” the firm said in a statement. The move is meant to facilitate customers’ ability to commit to business in advance of the traditionally busier fourth quarter for the printing industry, it added.
While some market participants welcomed the move, others did not know what to think about it. “I really don’t remember anything like this. What exactly are they trying to say?” one of them wondered.
Others were equally puzzled. “In the past, summer price hike announcements usually meant that manufacturers were trying to keep prices steady. So does this mean that prices will go down?” another one said.
A third contact could not help but wonder if Sappi was ready to meet the commitment no matter how the end of the year develops. “This might be handy in case of more price decreases going forward – well, apart from losing market share. But what if demand kicks back in or costs skyrocket in the final quarter of the year? Will they still keep their promise?” he commented.
Wary eye on the pulp market
To this end, the CWF sector was keeping a close eye on developments on the pulp market where a continuous string of price decreases seemed to have come to an end in August. Following continuous declines since late 2022, levels for bleached eucalyptus kraft (BEK) pulp held steady month on month, and those for northern bleached softwood kraft (NBSK) pulp were also largely stable.
While CWF market insiders said that several price hike announcements on the BEK side were very unlikely to go through in September, they still admitted that potential cost increases were a reason for concern. “We are all under huge pressure and any additional blow to our margins could be the final straw. Let’s wait and see what happens and hope for the best,” one of them commented.