DS Smith Plc, the largest UK producer of cardboard, today (31 October) issued a trading update which confirmed that prices for new cardboard have risen meaning that the company has managed to pass on increases in the price of waste or ‘recovered’ paper.
And, also today, Europe’s largest forest owner SCA, which produces paper grades such as newsprint and cardboard, published results and noted that market conditions are good “in all segments”.
The positive outlook from both companies comes as the UK paper sector wrestles with challenges of markets for mixed paper and potential quality restrictions on cardboard from China.
DS Smith’s cardboard mill at Kemsley, Kent; the company is positive about the markets for its products
However, the signals from DS Smith and SCA are likely to be welcomed, particularly as they mean that there is a strong market for paper and paper products on the European Continent where DS Smith also has a number of operations.
Volume growth
DS Smith said that in respect of the half year ending 31 October 2017, “Volume growth has been consistently very strong throughout the period, and across all our regions, driven by our pan-European and e-commerce customers. As expected, we are continuing to recover the increase in paper prices with our packaging customers. Trading is in line with our expectations in the half year with return on sales for the period broadly consistent with that reported for the full year to 30 April 2017, and ROACE in the upper end of the target range.”
The company also noted that its American acquisition, made this summer, of Interstate Resources Inc was performing strongly. It said: “The integration process is proceeding very well with excellent levels of enthusiasm and commitment from Interstate. We therefore remain confident and excited about the prospects for this business.”
Miles Roberts, DS Smith group chief executive, said: “We are pleased with the consistently strong organic progress of the business. Customers continue to demand high-quality, innovative packaging on a multi-national basis and we have the scale and expertise to serve them. We have also strengthened our business model further through selective acquisitions, in Europe and US, driven by customer demand. As such, we view the future with confidence.”
SCA of Sweden
The third quarter of 2017 was Swedish firm SCA’s first full quarter, since it separated from its hygiene and tissue division now known as Essity and operating as an independently listed company. SCA said that “The market trend was favourable in all of SCA’s segments and earnings improved compared with the preceding quarter as well as the same quarter last year.”
SCA is the largest forest owner in Europe: pulp prices are rising, it said
It continued: “Demand for wood products is high, with stable demand and balanced markets in Europe, China and the US. Due to these strong market conditions, prices were increased during the year and price increases continued in the third quarter.”
On the paper front, SCA was very positive, highlighting the growth in e-commerce as a driver for increased demand for cardboard (kraftliner).
In a statement, SCA said: “Demand for kraftliner has shown a strong growth trend for several years. The key drivers of this trend are e-commerce and demand for high-quality packaging, which has thereby strengthened demand for virgin fiber-based packaging material (kraftliner). In 2017, three price increases were announced for unbleached kraftliner, totaling EUR 150 per tonne, and these are being successively implemented. The price level of white kraftliner has also increased. Demand for publication paper, continued to show a negative trend.”
SCA also noted that the pulp market has continued to be strong. This impacts on the price for some grades of waste or recovered paper. And, it noted that there had been good demand from China. The company is to invest heavily in its Ostand mill which it expects to be “one of the most cost-efficient production facilities in the world for softwood kraft pulp”.
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Source: letsrecycle.com Packaging
