Prices on European unbleached sack kraft market start to flag as players ponder Mondi Stambolijski impact

“Everyone expects an upturn in terms of demand but the market is not turning up,” one producer said.

The European sack kraft market cooled into the last quarter of the year with the majority of contacts reporting stable prices, though erosion was reported for unbleached paper in the realm of €20-40 per tonne from a limited number of contacts.

The contacts who reported price drops included instances of producers knocking Euros off previously implemented increases.

Most contacts reported stable pricing but acknowledged that producers could come under pressure before the end of the year.

One producer also said that he did not understand the strategy of lowering prices at this moment. “European producers think price drops will bring more orders but that is not the case,” he lamented.

While many in the industry had cherished high hopes for a more sustained and visible uptick by this point, multiple contacts reported that after a quiet summer, a return to the more positive market situation which earlier this year allowed a price increase to be pushed through did not materialize.

“It was much quieter in the third quarter of the year,” a producer who reported a price drop said. “I would not go so far as to say that the most recent price increase is not sticking but there is movement [downward].”

“Everyone expects an upturn in terms of demand but the market is not turning up,” another producer weighed in. Or, as one buyer put it, “The good news is that prices are not going up, the bad news is that we cannot seem to reduce them either.”

Mondi fire limits supply

The talk of the town was the recent fire at Mondi’s Stambolijski, Bulgaria, mill. The mill, which can produce some 100,000 tonnes per year of unbleached sack kraft paper according to Fastmarkets RISI’s Asset Database, will be out of commission until the middle of next year, at least.

While some contacts said that the impact on the market would be limited due to Mondi being able to supply customers from other mills, others posited that the lack of paper from Stambolijski would result in a tightening of the market.

“I think that the Stambolijski fire will make the sack kraft market tighter and whatever the impact of this temporary downturn is, it will flatten out fast,” one buyer said. “The situation is so fresh that nobody understands it,” he added.

“I am not too worried about the impact of Stambolijski,” another buyer said. “Mondi will be able to supply from its other mills,” he added.

“In better times, a fire such as this one would push up the market. Now it is just a stabilization,” another buyer said, adding that the various scheduled maintenance downtimes taken in recent weeks by producers are assisting in stabilizing the market as well.

The impact of a global market

More than one contact voiced the opinion that European price pressure is building up as a result of European producers bringing volumes back to their continental market, as producers further afield, especially Russian players banned from EU markets, have been aggressively moving into overseas markets with lower-priced offerings.

Others pushed back on this theory, commenting that from their perspective, the overseas market has not changed significantly in recent months.

Another aspect of the European market which has not changed significantly is the established perception that Germany is lagging in all economic areas and threatening to spread its weakness to the rest of the continent.

A number of contacts continued to voice concerns in this area, although now the weak market in France also entered conversations alongside Germany.

“Germany continues to be the worst performing market, and Italy appears to be the best and least vulnerable to the downturn,” a producer said.

“Germany and France are a bit weaker, but it is mainly France which is dragging behind,” another producer added.

“Germany is really suffering. It is the locomotive of Europe and whatever goes wrong in Germany goes wrong in the rest of Europe,” a buyer weighed in.

Not all contacts were exhibiting a negative mindset, however. “My perception is positive and converters in Europe have enough work,” one producer said. “European sack demand is fine and we are actually worried about a lack of paper [in part due to the Stambolijski fire],” he added.

A large part of that producer’s positive perception was linked to the new applications for sack kraft paper in recent years.

“Ten years ago, 100% of the paper we sold was converted into sacks. Now, it is less than 70%, with up to 35% being used for new applications such as filler for e-commerce,” he said, expressing optimism that the e-commerce market will continue to grow.

Bleached flat, market stable

Prices for bleached sack kraft paper stayed flat over the quarter with the market maintaining its characteristic stability.

“There is no sign of the bleached market weakening,” one buyer said. “[If] the market tightens because of Stambolijski, prices could increase opportunistically,” he added.

“Bleached paper producers would like to continue things in the same way they have been going, as things on that side of the market are fully stable,” said a trader.

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