Paper Mill Closures; EUDR seminar next week
The big news of the summer – apart from the Paris Olympics – included the earlier-than-expected closure of UPM’s Rhein Papier mill in Hürth, seeing a sad end for the 330,000t recycled newsprint mill, another victim of both structural decline in newsprint consumption and higher mill costs. This paper mill was one of only very few among European graphic paper machines to see the light in the current century (2002), so only 20 years old, running on old newspapers and magazines for 100% wastepaper-content newsprint. The closure came earlier than many had anticipated, after UPM announced earlier this year that it would close the mill by the end of the year.
The other closure happened at almost exactly the same time but 10,000km away, and involved Asia Honour Paper Industries – formerly Malaysian Newsprint Industries – in Mentakab Malaysia, where Royal Golden Eagle (owners of APRIL) shut down the 250,000t machine, thus removing packaging and UWF papers, but also some Newsprint.
UPM also announced the closure of UWF PM3 at its WF paper mill in Dörpen (Nordland Papier), but the timetable for this closure hasn’t changed since the initial loose timetable of “later this year”. Similarly, the conversion out of SC by Heinzel Papier at Laakirchen is still expected in the New Year, whilst there is nothing new relating to the conversion of Stora Enso’s Langerbrugge Newsprint machine in Belgium which was indefinitely postponed earlier this year.
The latest European Industry statistics probably show better why this is happening, with 2023 & H1 2024 European demand showing the following:
W. European Graphic Paper Market Demand:
- 2023: -17%
- 2024 (H1): +1.6%
Woodfree Paper Demand
So where Woodfree paper demand is still currently statistically positive this year – on the back of catastrophic falls last year (2023), we expect these to start slowing down too for the second half of the year, as lead times have now dropped below the critical four (4) week threshold.
One mill did announce a +€50/t increase for Woodfree Paper deliveries as of September, but we have not heard yet how successful this has been; what we do know, however, is that prices were under downward pressure, still last week.
Paper Price Trends
Of course, on the upside for mills, and despite Nordic wood prices being currently high, we note that market pulp prices have started falling – and in some cases – fast, as we predicted earlier this year, both due to faltering global paper demand, as well as high pulp stocks at mills and ports around the world. This will surely be accentuated in the months ahead, both as paper demand continues weaker, but also with the help of easing logistics and thus better pulp availability to most markets. Pulp mills are taking as much downtime as possible, but with all the new projects over the past 24 months and some still to come, capacity seems to have more than caught up with demand. So whatever happens to paper price trends this autumn, mill margins should surely now improve, at least at non-integrated paper mills. As long as energy prices – and inflation – don’t skyrocket once again!
That’s more than can be said for Inapa, the Portugal-based paper merchant, including its German subsidiary, Inapa Gruppe – comprising Papyrus Deutschland which it bought in 2020 – which went into administration on 22nd July. A new restructuring plan is being developed to help the company come out of insolvency, hopefully in October. In the meantime, and as of today (6th September), it’s business as usual for suppliers and customers, as new payment terms have been worked out and agreed by mills.
Paper Industry Regulation Changes
The other big shadow lurking menacingly above the industry is of course the EU Deforestation Regulation (EUDR), and we have been inundated by calls and emails all summer, from both mills and especially buyers, asking what the consequences of this new regulation will mean for them, how to make it work or indeed what it means! The deadline for reporting is supposed to be the end of the year (31st December 2024), although with the ongoing chaos, misunderstandings and lack of full guidance, the industry via its many branches and associations is doing its very best to have the EUDR’s implementation delayed to provide more time for companies involved to understand, prepare and fully sign up to these new regulations. Our latest European Woodfree Forecast report (July 2024) provides some more thoughts and analysis on the EUDR phenomenon sweeping through industry offices. Separately, there is a FREE webinar re. EUDR for printers and publishers, on 12th September 2024 at 15.00 (CET), organised by WAN-IFRA. See their website for registration.
Global Market Pulp
But I feel that the current big story is global market pulp, which, whilst it has been seesawing in China and other parts of Asia, has remained a real thorn in the side of European – and North American – virgin fibre-based paper mills, who have justifiably been suffering from protracted high pulp costs, by far the biggest element of their production costs, in addition to bouts of inflationary pressures from other areas including energy, minerals & chemicals and of course logistics, the latter both due to post-Covid “restart” issues and Red Sea/ Middle East war problems.
As with Europe, most if not all North American Newsprint mills had also pencilled in a +US$50/t price rise for September (now), but similarly to their European UWF counterparts, it’s not a foregone conclusion that these have been successful. Demand across the Atlantic remains positive for most grades, except Newsprint, which is again falling, after a very weak 2023, and as with Europe, mill Operating Rates remain firmly stuck in the low to mid-80s, not inconsiderably helped by offshore exports, especially to India. With demand in Canadians and Europeans’ mills’ largest export market, India, stalling somewhat, following the world’s largest elections there earlier in the summer, and reports of healthy stocks at most buyers, coupled with a new drive from Russian mills offering lower spot prices on newsprint deliveries (in part thanks to a new Russian government directive removing export taxes), it’s difficult to see where or how these newsprint mills will successfully implement this latest price increase announcement. Possibly thanks to ever growing industry consolidation and another round of capacity management.
N. American Graphic Paper Demand:
- 2023: -23%
- 2024 (H1): +4%
This same principle applies to European newsprint mills, who, buoyed by last week’s closure of UPM’s Hürth mill – removing around 10% of European capacity – are hoping for another increase in Q4/October, following their only partial success in Q3/July. The main difference (with N. America) being that the removal of Hurth not only brings current European Operating Rates to around 90% (very high by recent standards), but also releases some 400,000t of wastepaper that UPM would have previously needed for this mill. The slack will surely be picked up by other mills, notably packaging mills, but presumably not at current prices, thus putting downward pressure on WP prices too, potentially another bonus for paper mills, should this occur. WP prices are certainly not as high as they have been, only as recently as mid-2022, but remain high enough to be a concern for many producers.
And so it’s easy to see that with so many variables and potential scenarios for the different mills, grades and continents, the industry really is in a state of uncertainty and flux. A little like stock markets which this week fell on the back of tech giant Nvidia shares falling strongly, following some question marks surrounding AI technology. Could paper capitalise?!!
The next few weeks will be very interesting for industry observers as mills try to keep the upper hand and regain momentum following the big UPM closure news, but will demand, both at home and abroad, be resilient enough to underpin mills’ plans for another price rise? The original article was posted on LinkedIn here.
Best get those seat belts on!
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