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The European magazine paper market is still seeing tough times, with low demand and operating rates, especially for lightweight coated (LWC) paper.
Given the ongoing challenging market fundamentals, producers of LWC and supercalendered (SC) paper waged a losing battle with buyers, who continued to push for lower prices over the course of the last quarter.
Both SC and LWC levels have been moving down for much of this year since hitting record highs last year on the back of soaring energy costs. The price declines continued over the summer as demand remained weak.
In mainland Europe, lower-end prices for 56-g SC offset reels fell by Euro 10-70/tonne in June, depending on the country, with higher-end levels slipping by Euro 40-70/tonne in Germany and Italy. Further declines of Euro 10-55/tonne followed in July, with higher-end levels in Germany and Italy remaining unchanged. Across the Channel, UK prices stayed stable in June as quarterly contracts held, before decreasing by £25-105/tonne the following month.
Meanwhile, for 60-g LWC offset reels, lower-end levels fell by Euro 30-40/tonne in mainland Europe in June with top-end prices also slipping Euro 20/tonne in Germany. Prices decreased by a further Euro 20-70/tonne the following month. As with SC, UK LWC pricing held steady in June before falling by £40/tonne in July.
Early indications are that prices are broadly stable in August, traditionally a quiet month due to the holiday period.
Given the continued low demand and operating rates, buyers and sellers alike have been expecting news of further permanent capacity reductions, in particular on the coated side, which is struggling more than SC paper.
News came at the end of July that UPM plans to close its Plattling mill in Bavaria, Germany, permanently by the end of the year. The plant’s PM 1 can produce 380,000 tonnes/yr of SC paper while PM 11 can make 215,000 tonnes/yr of coated mechanical (CM) paper. A 150,000 tonne/yr CM paper machine was already closed at the site in 2019. The market impact of the planned closure is expected to be greater on the uncoated side.
Heinzel is due to halt SC paper production on PM 11, a 350,000 tonne/yr machine, at its Laakirchen mill in Austria at the end of this year. Post rebuild, the machine will switch to making recycled containerboard (RCCM) next year.
This conversion, together with the closure of Plattling’s PM 1, will remove about a quarter of European SC paper capacity by the beginning of 2024, one buyer reckoned.
This would strengthen operating rates [on average] from the low 60s to the high 80s, not counting Saugbrugs. SC operating rates could be quite bullish by the first quarter next year.
PM 6 at Norske Skog’s Saugbrugs mill in Halden, Norway, has been out of action since a rockslide at the site on April 27. The 260,000 tonne/yr SC machine is likely to remain offline through the first half of next year.
A seller estimated that the UPM, Heinzel and Norske Skog SC machines together represent 35% of European capacity. “[This] will be game-changing at the end of the year,” he predicted. As a result, he anticipates some downgrading to improved newsprint and upgrading to LWC will follow on the back of higher SC capacity utilization.
Another seller reported in July that some customers were already moving back from SC to LWC or were considering doing so, after downgrading last year as “prices were sky high.” He added that some downgrading was still happening in some areas, but not as much as last year since prices were falling.
On the coated side, it is thought further permanent capacity reductions will be needed to rebalance the market, even with the Plattling PM 11 closure and the planned conversion of the Duino mill near Trieste, Italy.
Mondi aims to switch production at the 215,000 tonne/yr CM paper plant to 420,000 tonnes/yr of RCCM. In the meantime, former owner Burgo is managing CM paper operations and sales at Duino, until at least the end of the year.
A buyer estimated that Plattling’s PM 11 and the Duino mill represent about 9% of European capacity, adding that, even with these moves, operating rates would remain low. Consequently, he expects SC paper prices to stabilize or decrease at a slightly slower rate going forward but said LWC will still be “massively oversupplied.”
Another purchaser reckoned that 1-1.5 million tonnes of capacity closures are needed to bring LWC utilization rates back to more normal levels of around 85-90%. By contrast, several sources said some CM paper mills have operating rates around or below the 50% mark, with reports of some in the 60s, too.
Eyes are now looking at what is in store for September and Q4. Usually, demand improves as people come back from vacation and orders start coming in for the Christmas printing season.
There will be for sure a pick-up in demand after summer. The question is how strong it will be.
The retail sector will be an important factor. Several sources noted that printed material is a highly effective medium for advertising. As this becomes more affordable again, it is thought that some advertising which had moved away from print may return, thus helping to improve demand.
This article was first published in our PPI Europe newsletter. Find out how you can access the latest market developments in Europe directly from your inbox by speaking to our team.