June 17, 2010

By Daniela Wortmann, Senior News Editor, PPI Europe

UWF prices on the rise again across Europe

BRUSSELS, June 17, 2010 (PPI Europe) - Prices for uncoated woodfree (UWF) paper are increasing again across Europe. After rises over the first four months of the year and more or less stable levels in May, manufacturers have been lifting prices again in June.

In general, prices have moved up by approximately £30-40/tonne in the UK and by Euro 40-50/tonne in continental Europe in June. Some suppliers reported even higher increases.

Prices for A4 B-grade copy paper, for example, are currently quoted at £690-730/tonne in the UK. Germany has seen prices rise to Euro 800-870/tonne and market contacts in France and Italy report that prices have been hiked to Euro 790-860/tonne and Euro 780-860, respectively.

A comparison of these prices with the levels at the beginning of the year shows that prices for copy paper have grown by approximately £80-90/tonne in the UK so far this year. Prices for 80 g offset reels and sheets have risen by up to £100/tonne.

Continental Europe has seen copy paper prices rise by approximately Euro 70-80/tonne since the beginning of the year. The increases for 80 g offset reels and sheets have been a little higher, amounting to about Euro 80-90/tonne.

Manufacturers obviously have not had major difficulties implementing the latest round of price increases for UWF paper. Lead times of up to three months, healthy demand and the fact that supply of UWF paper has become rather tight in Europe were a good starting point for the price move.

Manufacturers said the main reason behind the new rise in UWF prices is the cost increases they have been confronted with for quite some time now, first and foremost pulp prices. These have been rising on a monthly basis since the second half of 2009.

In late May, prices for eucalyptus pulp, for instance, stood at approximately Euro 650-690/tonne. This is almost twice the year-earlier amount of Euro 345-350/tonne. And pulp suppliers have announced further increases for June.

"The non-integrated papermakers, especially are still losing money with every tonne they produce," a market insider reported. He added that he does not see an end to this trend in the short to medium term. "If pulp prices start dropping again at some point in time, buyers will most likely demand corresponding adjustments to paper prices. Taking the still existing overcapacity in Europe into account, some producers will have to give in and consequently will keep losing money," he said.

Doubts over further increases: The future development of the European UWF market remains unclear as of mid-June. Some manufacturers said they need further price hikes. Still, there have been no official announcements so far, and buyers doubt that such a step will be possible in the near term.

Some buyers said they doubt that the paper mills are really fully booked. In the opinion of one market contact, a lot of the orders papermakers currently have on hand have been placed but not confirmed - speculative orders from merchants to make sure they get sufficient paper, which could be cancelled any time. "It is a question of what the real lead times are, not only the lead times the mills give," he said.

Others warned that the end customers' reaction to the price increases for UWF paper might rule out further hikes. "Even though merchants have been raising prices as well, the full amount of the price increases [UWF] papermakers have realized in the course of the year have not yet reached the final consumer," a market insider explained. This is expected to happen in approximately one or two months' time, i.e. at a moment when the vacation period in many countries in Europe is in full swing.

"If the price increase for the end customers is too high, they will reduce consumption," the market contact explained. This could be done by means of more duplex copying or changed ways of communication. "This is the main fear of the [paper] mills because it would not only mean less demand in the middle of summer when the market is rather weak anyway, but could also result in permanent changes to the final customers' paper requirements," he added.

Some buyers said they do not expect that papermakers will be able to use rising pulp prices as their main argument for hikes to UWF prices for much longer. "Every week there is more pulp coming from South America to Europe," a merchant said. In his opinion, pulp prices will remain stable at best once paper mills have restocked.

Another said that the European UWF market is still characterized by a very weak balance of supply and demand. "If there is just a little bit of additional volume, be it because of reduced exports, higher imports or an idle machine being put back into operation, the whole market could collapse," he warned.

All in all, manufacturers and buyers agreed that the further development of the European UWF markets depends on what happens during the summer months, which are traditionally characterized by a drop in demand. "We will see what papermakers do once their lead times are dropping. Personally, I would not rule out the possibility that one or another gets nervous and is willing to compromise on prices," a contact said.

UWF exports continue to rise: The latest statistics of woodfree paper shipments provided by the Association of European Fine Paper Manufacturers, CEPIFINE, reveal a continuing increase in UWF exports to regions outside of Europe.

Total UWF deliveries in April increased by 15.3% in comparison to the same month a year earlier, amounting to a total of 694,000 tonnes.

Shipments within Europe witnessed an increase of 11.8% to 588,000 tonnes, while deliveries to outside this region rose from 76,000 tonnes in April 2009 to 106,000 tonnes this year.

European demand was estimated at 630,000 tonnes in April, 11.3% higher than the year-earlier figure.

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