BRUSSELS, April 25, 2013 (PPI Europe) -Following hikes in February/March, recycled containerboard prices remained unchanged in April across continental Europe. Producers aimed to implement the remaining Euro 20/tonne of the announced Euro 60/tonne hikes from February but failed to do so, largely due to strong resistance from buyers and softer demand for boxes, among other reasons, sources said.
Over February and March, prices rose by Euro 30-40/tonne in Germany and France, while Italian prices went up by some Euro 25-35/tonne.
In the UK, prices started rising in the second half of March. The £25-30/tonne hikes were implemented for the majority of the market by early April, sources reported.
Most market players said that paper demand in February and March across Europe was generally in line with the same period last year. Sources among corrugators reckoned that demand for boxes was somewhat lower in Q1 compared to the same period last year. Some contacts blamed the longer-than-usual winter for the drop in packaging demand, primarily in the fast-moving consumer goods (FMCG) sector.
"Demand for boxes is not booming, but it is acceptable. We had a long, cold winter, which seems to have affected the beverage segment," an independent German corrugator said.
Corrugators in Italy were more pessimistic though.
"Demand for packaging is a total disaster this year. Our economy is still in deep recession and it [negatively] affects the packaging industry," a corrugator said.
Several sources in southern Europe said that late arrival of the agricultural season after the long winter this year had also led to reduced demand for boxes.
April hikes stall:"We were asking for additional Euro 20/tonne [increases] for April, but those [hikes] simply did not go through," one large independent supplier in Germany said, adding that market dynamics are not strong enough to support the hike.
Many sources felt that strong resistance from buyers, the timing of Easter this year and rising paper stocks in early April also stymied producers' efforts to hike prices.
"Due to Easter holidays at the end of March and early April, we didn't
have much time to negotiate higher prices for implementation from April 1. And when corrugators were back from holidays, it was already mid-April and the momentum was lost," one large German supplier said.
"Although paper stocks at mills dropped in week 15, they were quite high at the end of March and early April. This created an extra obstacle in persuading buyers to accept new hikes," another producer said.
Contacts added that some suppliers decided not to ask for higher prices in April, which also hampered the hike efforts.
"One of our suppliers wanted to increase prices for April, but had to call it off because other suppliers didn't ask for any increase, a German corrugator said.
"There is a big difference [in price policy] from supplier to supplier. Some are under pressure to sell big volumes because they have a small warehouse capacity, while others prefers to keep some volumes in order to hike their prices," a large European corrugator said.
"Each supplier acted in his interests this month, but it resulted in a failure to increase paper prices," another buyer said.
Many sources reckoned that paper hikes also stalled due to increased competition among corrugators following the start-up of several new corrugators in Germany since Q3 2012(see table below).
"A few plants recently added new corrugated capacity in Germany. This increased competition among corrugators is forcing them to drop plans to increase box prices or risk losing customers. Thus, they strongly refused to pay higher paper prices," a market player said.
Cost increases not high enough:Although recycled paper (RCP) prices started rising in the second half of March, the increases were not high enough to be used as an argument in paper price negotiations, sources said.
Market players saw RCP prices rising by some Euro 5-10/tonne towards the end of March, which was the first increase since November. The levels remained generally stable in April.
Some contacts expected the levels to increase again in May, while others reckoned that RCP prices are likely to remain unchanged until June.
No pressure from new capacity yet:Although Stora Enso's 455,000 tonne/yr recycled containerboard machine PM 5 started up in February, it has not yet affected the market supply balance, sources said.
Contacts reported that at the moment the new production is mainly going to its own corrugated plants in Poland and Russia and no large volumes are being sold on the open market.
One contact said that he had got samples of Ostroleka's new paper but had not yet bought any sizable volume.
"When people talk about the effect of Ostroleka's new machine [on market supply], they mostly mean the psychological effect. I don't think we will see any considerable effect on paper supply until later in the year," a large market player said.
Sources said that closures of several recycled containerboard machines, which happened at the end of 2012 and the beginning of 2013, also helped offset the effect of the new Stora Enso capacity.
In December 2012, Mondi permanently stopped the České Budějovice mill in the Czech Republic, which housed a 100,000 tonne/yr paper machine.
In January, Stora Enso shut down its 85,000 tonne/yr BM 2 at the Ostroleka mill ahead of PM 5's start-up.
Hamburger Containerboard has also permanently discontinued recycled containerboard production at its 170,000 tonne/yrFrohnleiten mill in Austria. The producer stopped the mill's PM 1 and PM 2 in November 2012 and April 2013, respectively.
Paper hikes still on cards:Several producers said that they will continue to push for higher prices in the coming weeks.
"[Price] hikes failed in April, but we intend to ask for the Euro 20/tonne increase in May or in June," a German supplier said. "We absolutely need the increase. Nobody is profitable. We continue to inform our customers that we want higher prices," he said.
Producers admitted, however, that due to a number of bank holidays in May and a risk of rising paper stocks amid reduced production at corrugated plants, it will be difficult to implement the increase.
"May will be a hard month for paper producers. There are 18 working days in Germany in May, while in France there are only 17 working days. We should be careful not to let paper inventories rise too high," a supplier said. He added that he had not yet heard of any mills announcing market-related downtime in May.
Producers reckoned however that due to reasonably good trade in export markets, they will be able to keep the balance in the domestic market under control.
"Prices in export markets are very comparable to Italian levels, which is not bad. This is a good solution for suppliers to keep the European market balanced," a producer said.
Model to stop PM for upgrade:Model Group is set to stop its 185,000 tonne/yr recycled containerboard machine PM 3 at the Aarepapier mill in Niedergösgen, Switzerland, from May 13 till June 4 for a rebuild. The firm plans to fit the machine with a new rewinder. It will also upgrade the mill's system for transporting paper reels from the rewinder to the warehouse, a Model spokesperson said.
SKG restarts UK mill after fire:Elsewhere, Smurfit Kappa restarted operations at its recycled containerboard mill in Birmingham in the UK on Friday after a 42-hour outage. The 200,000 tonne/yr mill was hit by a fire last Wednesday around 10 PM.
The blaze hit the mill's recovered fiber yard, destroying some 9,000 tonnes of recovered paper. None of the mill's personnel were injured.
According to SKG, the incident resulted in some 1,000 tonnes of lost paper.
WTT prices unchanged in Q1:Despite (WTT) producers' efforts to hike white-top testliner prices in March and April, the levels remained generally unchanged in continental Europe. Suppliers managed to push through some Euro 15-20/tonne hikes for some customers whose prices were on the low side, according to contacts.
Sources said that generally weak demand and a high availability of paper were the main reasons for the failed hike attempts.
"There is enough [white-top testliner] on the market as more capacity by, for example, Papier- & Kartonfabrik Varel and Niederauer Mühle, was added last year," a buyer said. He added that producers of lower quality paper were offering quite competitive prices, forcing suppliers of higher quality grades to adjust their pricing policy.
"We refused to pay higher prices, explaining to our suppliers that we can switch to lower quality grades if they continue to push for increases. There is more than enough paper in the market," a German corrugator said.
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