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According to most market participants, the price hikes were not backed by a healthy supply and demand balance, and they were therefore implemented in a very patchy way across Europe.
Woodfree paper supply fell at the end of 2023 due to the closure of Sappi’s Stockstadt mill in Germany and its Lanaken mill in Belgium, while paper consumption improved in Q1 and continued to be higher than last year through April, before weakening towards the beginning of May.
“Paper mills are quite busy at the moment because merchants and printers have been restocking during the first two months of the year,” a market source said in April. “But, in terms of sales, coated woodfree (CWF) paper demand is down 10% compared to last year in Q1, while demand for uncoated woodfree (UWF) and cut-size [paper] is quite fine,” he added.
According to the latest statistics provided by Euro-Graph, the European association of graphic paper producers, CWF demand increased by 18% year on year to 784,000 tonnes during the first four months of 2024, while UWF paper demand improved by 15% to 1.6 million tonnes.
At the end of February, The Navigator Company announced plans to lift UWF paper prices by up to 5% in Europe for deliveries from March 25, citing “structurally higher prices of most input costs essential for paper manufacturing,” as the reason behind the price hike. “The recovery in demand visible in the global markets also contributes to this price adjustment,” the company said.
Then, at the beginning of April, Suzano said it would increase prices for all of its paper product lines by 5% as of April 1, while Burgo announced a 7% increase on UWF paper prices from April.
In the cut-size segment, some market participants mentioned increases of £10-25 per tonne in the UK and Euro 25 per tonne in continental Europe being implemented from the end of April to the beginning of May.
Prices for UWF offset paper also started to increase towards the end of April, particularly on the reel side of the business, where they grew by Euro 10-15 per tonne in continental Europe and by up to £10 per tonne in the UK.
Stockists were the first to pay higher prices, while in the indent market, major buyers managed to postpone the price increases until May.
CWF reel prices also increased in April for publishers and printers relying on three-month contracts, rising by approximately Euro 20-40 per tonne in continental Europe, thus completing the implementation of price increases initially announced in Q1.
Some other customers had prices rolled over into May. On the sheet side, prices increased by roughly Euro 10 per tonne in Germany and France and by up to Euro 25 per tonne in Spain, while staying flat in Italy. “Prices for UWF paper in both sheets and A4 format have increased, but orders are not there,” a source told PPI Europe.
Generally speaking, price increases were uneven and were applied at different times, or sometimes not applied at all, depending on the producer, the customer and the country.
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Improved paper demand during Q1, together with the strikes in the transport sector in Finland and reduced supply from Asia due to the shipping problems in the Red Sea, helped tighten the market and bolstered producers’ ability to either further raise prices in May or to actually implement already announced price increases in order to offset rising production costs.
Between the beginning of the year and May, northern bleached softwood kraft pulp prices increased by $335 per tonne on average, reaching $1,635 per tonne, while bleached eucalyptus kraft pulp increased by almost $380 per tonne to $1,440 per tonne.
In April, Sappi announced its intention to raise prices for both UWF and CWF paper to reach the 10% increase originally announced for Q1, with implementation by May 1 at the latest. “Cost levels, particularly for pulp and transport, have continued to increase heavily and are expected to escalate further in the coming months,” the firm said.
In separate moves, Lecta also said it would hike CWF paper prices by Euro 50 per tonne from May 6, while Burgo said it intended to raise woodfree paper prices by at least 5-7% for deliveries to all markets from May 1. Asia Pacific Resources International Limited also announced its intention to increase uncoated fine paper prices by $30 per tonne for global orders for April intake.
“We are very well booked at the moment. The pulp price hike will go through, it is not negotiable. It is a fact, and it is dramatic for the next month. So, either the [paper] price increase goes through, or the industry will face serious issues,” a market participant said in April.
“Paper demand is stable but soft. Still, production cost levels are rising like hell, so the chance of losses is high. Therefore, I think there will be a strong push by the industry to increase prices before May. Let’s see if we manage to,” another market player said.
Despite the announcements, price increases did not go through easily in May, and while some producers managed to lift prices somewhat, others had to postpone the hikes until June, or even later.
“Paper mills were very busy in Q1, but they have gone very quiet since the end of March. They started to see a market drop, particularly from April into May; that’s why price increases take time to be implemented,” a market participant said.
“The problem is that there is not much business so it’s difficult to implement price increases,” another source added.
One market participant even mentioned small price reductions in UWF prices in May from a producer that had increased its sales prices in April.
The situation was particularly difficult in CWF reels, where many buyers have tended to move to much less expensive mediumweight coated paper. “The May price increase is postponed or even cancelled because the market is not there,” a market source told PPI Europe.
UWF sheet prices rose by some Euro 10-15 per tonne on average in May in continental Europe, and by £10 per tonne on the lower end of the range in the UK, while reel prices increased by £15 per tonne on the lower end of the range in the UK. On the coated side, reel prices improved by Euro 10 per tonne on the higher end of the range in Germany and sheet prices by Euro 20 per tonne on the higher end of the range.
Continued overcapacity in the graphic paper market has led to further consolidation. At the end of May, UPM announced it would permanently shut UWF PM 3 at its Nordland mill in Germany, as well as its Hürth newsprint mill, also in Germany, by the end of the year. PM 3 can produce some 280,000 tonnes per yr of UWF paper.
According to one market participant, this news provoked a change in the market mood and heightened expectations that the price increases would go through.
UWF paper prices remained fairly stable between May and June in Europe, with the exception of the UK, where UWF offset sheet prices rose by £15 per tonne on average. On the coated side, CWF reel prices rose by a further Euro 40 per tonne on the higher end of the range in Germany in June, while sheet prices increased by Euro 20-25 per tonne at the high end of the range in Germany and Italy.
Despite low paper demand and with sales volumes expected to further decrease during the summer, paper producers are still hoping to increase prices in July in order to partially offset continuously rising pulp costs. The Navigator Company is the only paper producer to have publicly announced its intention to raise UWF paper prices by 4-6% as of July 1. On the other side, paper buyers mentioned special offers below normal stock prices already in June, both for offset and A4 paper.
On the coated side, a few buyers said producers are asking for at least Euro 50 per tonne more on deliveries from July, while noting that this request is not actually supported by the supply and demand balance.
“Some big printers didn’t have the price increase in June, but they should have new prices at the beginning of July. All suppliers are saying that business is bad but that production costs are increasing,” a market source said.
“Until the end of April, the supply and demand balance was good for us, but now demand is going down, another contact said. “Lead times are becoming shorter, and availability is higher. I think it will be necessary to close more CWF paper capacity,” he added. A number of market participants shared this opinion, saying such closures were necessary in order to improve prices and increase margins.
On the other hand, not all customers believe prices will increase further in the coming months given the low paper demand. “Some producers tried to lift prices and then had to retrace their steps. It’s difficult to read the market. Some suppliers offer stability; others are after price increases,” a European buyer said. “It’s true that pulp costs are quite high, but on the other hand, producers need volumes, so those who want to increase their market share are willing to offer stability,” they added.
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