Supply and availability are the main constraints for demand.
NA P&W paper demand is expected to be up 5%, and CFS demand to be up 8.5%, in 2022.
Coated mechanical demand is expected to drop 13% in 2022, not due to weak paper appetites but rather sheer availability following the exit of the Pine Bluff mill at the end of last year and the strike at UPM’s Finland mills this year. The exit of ND Paper’s Biron mill at the end of 2022 will further exacerbate the situation.
Mondi is acquiring the Duino mill in Italy from Burgo and plans to convert the mill’s one machine from coated mechanical to recycled container board, removing approximately 400K tpy of CM capacity.
As expected, several mills have rolled out third-quarter price increase announcements, with the entire domestic capacity base and several major importers announcing or implementing coated paper price increases for August, September, and October of 4-8%.
The jump in paper prices seems to have so far had little to no effect on printing activity and paper demand.
European Energy Crisis Update
The month’s long energy standoff between Moscow and Europe - which has already helped send inflation surging in the region and raised the risk of rationing and recession - has taken another turn. After shutting down the Nord Stream 1 pipeline for “unscheduled maintenance” on August 31st, Gazprom announced on September 2nd that it would not resume natural gas flows to Europe through the pipeline. Gazprom blames a faulty turbine though Germany dismisses this explanation as a pretext. Indeed the Russian government now says that gas flows will resume only if the collective West lifts the sanctions that were put in place after Russia’s invasion of Ukraine. This news sent the benchmark Dutch natural-gas futures surging by 18% on Monday, September 5th. The risk of temporary paper production stops due to high natural gas prices and/or the continued stoppage of gas flowing from Russia to Europe is increasing rapidly, and this could compromise paper availability in the next three to six months.