The peak demand for packaging paper in 2024 looks set to pass in the summer
by: Artem Segen
According to market sources, the peak of paper demand in 2024 was passed at the end of H1 2024. An additional driver of demand growth was the Olympic Games in France, which led to an increase in demand for packaging and graphic papers. Some sources also expect a seasonal wave of demand growth before the Christmas holidays.
Since February 2024 there has been steady growth in EU paper production, which expanded by 3% y-o-y in August and 3.5% y-o-y for the first eight-months of the year. The supply of paper on the market is high as producers have excess capacity and will increase production for more efficient utilization. As a result, the high availability of paper for packaging will likely continue in the period when the key driver for prices will be production costs.
Source: Eurostat
Global steel production declines following weak demand
Global steel production in the first 8 months of 2024 declined by 1.5% y-o-y, and the main contributor to the decline was China, where steel production fell by 3.4% y-o-y. Despite the decline in production in China, the country still exports a high volume of steel, creating a surplus of supply on the world market, especially for flat steel products. The growth of steel production in the EU and Turkey is primarily the result of particularly low output volumes in 2023 when many producers stopped production to meet demand.
Global steel demand remains weak, failing to meet most market sources’ expectations. Steel consumption in China continues to decline, however, market sources report a reduction in steel inventories in September. Steelmaking has also been declining, so the market may become more balanced in October-November. Market sources did not believe the Chinese government’s stimulus would make any significant impact on consumer demand. The finance ministry of China recently pledged to provide a stimulus package to support its property market. However, after the end of the national holidays in China on October 8, optimism decreased among market players as the Chinese government did not give detailed explanations on economic stimulus. In addition, market sources do not expect the stimulus to affect the physical market until three to five months, thus, they anticipate that metal prices will remain high due to speculation.
In the US, the construction market showed a seasonal surge based on the number of building permits issued, which rose by 5% m-o-m in August a 4% y-o-y decline, indicating that the longer-term downtrend remains. The construction confidence indicator in the EU deteriorated in August to -6.6 points, compared to -4.8 points in June on the back of a seasonal downturn. The indicator declined by 0.4 percentage points y-o-y reflecting the downturn in the sector.
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