Wheat exports from the country’s key deep-sea ports for exports reached 41.8 million tonnes, a year-on-year increase of just under 7% from 39.1 million tonnes in the previous marketing year, according to port line-up data seen by Fastmarkets.

Total export volumes, taking into consideration all export routes, exceeded 55.4 million tonnes, according to Russian analytical agency Rusagrotrans – an increase of around 24% from 44.7 million tonnes in the 2022/23 marketing year.

Exports were active from the very beginning of the 2023/24 season, with big harvests, high stocks and relatively competitive prices for Russia-origin wheat enticing buyers – unlike the previous season when prices were higher.

The export figure could have been even higher, Fastmarkets understands, but an unofficial governmental insistence on a minimum floor price limited Russian wheat’s competitiveness throughout the marketing year – especially with big state-backed tenders.

In addition, grain exports through the second half of the year were limited by an initial Russian agriculture ministry quota of 24 million tonnes, although this was subsequently expanded by 5 million tonnes.

Of the total 29 million tonnes available for export, ultimately, around 27 million tonnes actually left the country.

Structure of exporters

One of the main changes during the 2023/24 marketing year was the significant transformation of the structure and nature of the companies undertaking exports, with state-owned enterprises taking a bigger share.

Grain Gates, a company affiliated with major Russia-based state-backed trading house Demetra, took the lead in the first half of the marketing year, and consolidated that position in the second half of the season.

That came as private trader Rif – previously known as GTCS and Grain Flower in trading circles – came under pressure when the government withheld key phytosanitary documentation in a bid to enforce government policy, according to trade sources.

Such documents are vital for exports and sources have said that companies selling below the unofficial price floor often encountered problems getting documentation from the government.

Whatever the cause of the delayed access to documentation, the result, in data terms, shows that Rif – which was the leading Russian exporter for almost 10 consecutive years – lost 1.19 million tonnes of its export quota for the second half of the marketing year.

Quota allocations are typically based on how much agricultural product the company exports through the first half of the year, so reductions in the company’s activities led to a smaller presence when the quotas were set out.

Under this approach, Rif exported 7.3 million tonnes of wheat from the primary Black Sea ports in the 2023/24 marketing year, compared with the 12 million tonnes handled by the state-backed Grain Gates, and 5.5 million tonnes handled by trader Aston.

The last vessel shipped directly by Rif was reported in early May 2024, with the company not present in the export market since then, which potentially means that other exporters will have moved in to fill the gap.

Alongside that, a number of multinational companies such as Louis Dreyfus and Cofco significantly reduced their presence in the Russian market throughout the marketing year, with both seeing their export quotas cut to zero in the second half.

Structure of importers

While the two biggest importers of Russian wheat remained the same in 2023/24, big changes were seen in terms of other importing countries.

Egypt maintained its position as Russia’s main wheat customer, buying 8.2 million tonnes according to an analysis of Black Sea port line-up data – a drop of around 6% compared with the 8.7 million tonnes taken in during the 2022/23 marketing year.

But according to data from the Russian Grain Exporters Union, exports to Egypt totalled 8.6 million tonnes – a total that most likely factors in smaller coaster-sized parcels departing from the Azov Sea’s shallow water ports.

Turkey also held on to its place as the second biggest destination for Russian wheat, but imports dropped by almost 24% according to union data, with imports amounting to 7 million tonnes in the 2023/24 marketing year, down from 9.2 million tonnes in the previous season. Shipments through deep-water Black Sea ports declined by about 50% to 3.30 million tonnes, down from 6.75 million tonnes in the 2022/23 marketing year.

Wheat exports from Russia significantly increased into Asian destinations, however, with buyers there feeling more confident about buying Russia-origin wheat after a string of quality issues and in response to very attractive Russian wheat pricing at key stages of the marketing year.

Bangladesh overtook Iran to become the third biggest destination for Russian wheat in the latest marketing year, taking in 3.8 million tonnes, which was more than double the near-1.6 million tonnes reported in the previous season. Iranian wheat imports from Russia halved to 1.3 million tonnes as the country’s demand overall dropped.

Exports to Indonesia, meanwhile, increased almost tenfold to 1.6 million tonnes (from 168,200 tonnes in 2022/23), while Pakistan’s imports edged up slightly to 1.60 million tonnes (from 1.56 million tonnes) and Vietnam tripled its wheat bookings to 197,841 tonnes (up from 70,000 tonnes in the previous marketing year).

Exports also resumed to Sri Lanka (278,735 tonnes) and Malaysia (105,650 tonnes).

Wheat delivered into African destinations in general increased by 23% to 8.2 million tonnes, excluding Egypt, with shipments resuming into Morocco (318, 272 tonnes), Eritrea (58,000 tonnes), Ethiopia (32,700 tonnes).

Grains and oilseeds export data

Russia stopped publishing customs data in March 2022, shortly after undertaking its full-scale invasion of neighboring Ukraine, which means the latest publicly available official statistics are from January 2022 – just over halfway through the 2021/22 marketing year.

Fastmarkets has, therefore, used alternative data sources and its own analysis to track exports of grains and oilseeds from Russia.

Port loading and ship data – known as line-up data – was one source of information, collecting information about the destination of ships, along with mirror data from key trading partners, to track imports.

View our wheat prices

The post Russia posts record wheat exports for 2023-24, plus structural changes for importers and exporters appeared first on Fastmarkets.

MB-STE-0558 Steel billet index export, fob Black Sea, CIS, $/tonne
MB-STE-0016 Steel slab export, fob Black Sea, CIS, $/tonne
MB-STE-0017 Steel wire rod (mesh quality) export, fob Black Sea, CIS, $/ tonne
MB-STE-0014 Steel hot-rolled coil export, fob Black Sea, CIS, $/tonne
MB-STE-0012 Steel cold-rolled coil export, fob Black Sea, CIS, $/tonne

The payments term for all five prices will be changed to “15-30% advance payment possible, rest or 100% against shipping documents or upon delivery” instead of “30% prepayment, 70% L/C”.

Billet sizes have also been changed to “130x130mm and 150x150mm” from “130×130 mm” previously and wire rod sizes have been changed to “6.5 mm” from “5.5mm” previously.

The timing of the slab assessments have been changed to “6-10 weeks” from “8-10 weeks” and the timing of wire rod assessments have been changed to “3-6 weeks” from “6-8 weeks” to better reflect the market.

The changes to MB-STE-0016 Steel slab export, fob Black Sea, CIS, $/tonne are effective from Wednesday May 22.

All the other changes will take effect from Monday May 27.

The full changes to the specifications will be as follows:

MB-STE-0558 Steel billet index export, fob Black Sea, CIS, $/tonne
Quality: Base 3SP (grades Q275 Q235, 5SP and equivalent normalized). Base sectional dimension 130x130mm and 150x150mm, 6-12 m length (100x100mm, 125x125mm, 120x120mm normalized)
Quantity: Min 2,500 tonnes
Location: fob Novorossiysk
Timing: Up to 6 weeks
Unit: USD/tonne
Payment terms:15-30% advance payment possible, rest or 100% against shipping documents or upon delivery
Publication: Daily, 4pm London time

MB-STE-0016 Steel slab export, fob Black Sea, CIS, $/tonne
Quality: Width 1,250-2,100mm, thickness 220-270mm, length 6,000-12,000mm
Quantity: 20,000-50,000 tonnes
Location: fob Black Sea
Timing: 6-10 weeks
Unit: USD/tonne
Payment terms:15-30% advance payment possible, rest or 100% against shipping documents or upon delivery
Publication: Weekly. Monday, 2-3pm London time

MB-STE-0017 Steel wire rod (mesh quality) export, fob Black Sea, CIS, $/tonne
Quality: Standard diameter 6.5mm
Quantity: 1,000-5,000 tonnes
Location: fob Black Sea
Timing: 3-6 weeks
Unit: USD/tonne
Payment terms:15-30% advance payment possible, rest or 100% against shipping documents or upon delivery
Publication: Weekly. Monday, 2-3pm London time

MB-STE-0014 Steel hot-rolled coil export, fob Black Sea, CIS, $/tonne
Quality: Width 1,000-1,500mm, thickness 2-8mm
Quantity: 1,000-3,000 tonnes
Location: fob Black Sea
Timing: 6-8 weeks lead time
Unit: USD/tonne
Payment terms:15-30% advance payment and against shipping documents or upon delivery
Publication: Weekly. Monday, 2-3pm London time

MB-STE-0012 Steel cold-rolled coil export, fob Black Sea, CIS, $/tonne
Quality: Width 1000-1,250mm, thickness 0.5-2mm
Quantity: 1,000-3,000 tonnes
Location: fob Black Sea
Timing: 6-8 weeks
Unit: USD/tonne
Payment terms: 15-30% advance payment and against shipping documents or upon delivery
Publication: Weekly. Monday 2-3pm London time

These prices are a part of the Fastmarkets steel metals package.

To provide feedback on these prices, or if you would like to provide price information by becoming a data submitter to these prices, please contact Vlada Novokreshchenova or Marina Shulga by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Vlada Novokreschenova or Marina Shulga, re: Black Sea steel products assessments, billet index.”

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets’ pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.

The post Amendment to export steel assessments, billet index from Black Sea appeared first on Fastmarkets.

While the decision has raised concerns about a flood of metal onto warrant, it was probably a better option than banning Russian metal from the exchanges regardless of when it was produced. A more extreme move would have significantly increased the probability of delivery failures and market instability.

That was because of the increased chance that short-position holders would have found themselves scrambling to find units eligible for delivery. It could also have resulted in some market participants using the ban as an excuse for not fulfilling delivery obligations.

Instead, the new rules divide Russian metal into two categories – anything produced and warranted before April 13 is now Type 1, and anything produced before April 13 and warranted on or after that date is Type 2.

But basing the sanctions on production rather than bringing in a wholesale ban does raise the risk that more metal goes on warrant. This inevitably would increase the amount of metal that would be less useable for people in the UK, a topic that has been hotly debated in the recent past.

It is important to remember that nobody actually knows how much Russian metal is off-warrant and could begin to move to an exchange.

There are more than 1.2 million tonnes of metal in LME warehouses at the moment, of which 927,477 tonnes is open-tonnage and the remainder is cancelled.

According to the latest data released by the exchange, 39.6% of the total open-tonnage stocks in LME warehouses on March 28 were of Russan origin.

So what will happen now to companies with contracts to take Russian metal?

It is likely that these contracts have a clause which states that the metal must be warrantable on a specific exchange, such as the LME. Buyers could now work to renegotiate the clause to take the metal at a discount. They could also opt to warrant Type 1 metal and use Type 2 metal for physical delivery.

Similarly, Russian companies may push to sell type 1 metal in the physical market and avoid accepting a discount. The option to sell to physical market customers in China, India and the EU remains wide open, because similar sanctions do not exist in those jurisdictions.

The LME has added a series of fairly onerous steps to the procedure for putting metal on-warrant. The extra level of bureaucracy could act as a deterrent, and mean that market participants will opt to trade physical material instead of warranting metal after all.

This report was had been updated to correct the first paragraph, which said that Russian brands produced before Saturday April 13 could not be delivered to the LME.

In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Sign up today to receive Andrea’s content as it is published.

The post Authorities opt for market stability over ban on Russian metal | Hotter Commodities appeared first on Fastmarkets.

Imports climbed to 4.42 million cubic meters through March, up from 4.06 million cubic meters in the first quarter last year, according to figures from Trade Data Monitor. Shipments from foreign suppliers fell 10% in 2022 and plunged 23% in 2021 compared to 2020.

Traders remain hopeful about Chinese real estate

The rate of decline in Chinese imports slowed throughout 2022. Shipments reached 4.7 million cubic meters in the fourth quarter last year, marking the fourth consecutive quarterly hike and the highest three-month total since 2021. Seasonal factors, including Chinese New Year observances, contributed to the decline in first-quarter shipments compared to the fourth quarter of 2022.

Many traders remain hopeful that China’s real estate sector will regain its stride as the year progresses. Government measures designed to stimulate real estate investment are expected to be fully implemented in the second half.

Despite the signs of recovery in the Chinese import market, North American suppliers continued to lose ground. Shipments from Canada plunged to 311,402 cubic meters, down 25% from a year ago. Deliveries from the US fell 13% to 29,172 cubic meters.

North America’s share of the Chinese import market faded to 8% compared to 11% in the first quarter of 2022. US and Canadian species have lost market share at a steady rate in recent years, with Europe and Russia becoming the dominant suppliers.

Chinese imports from Europe surged to 1.23 million cubic meters in the first quarter, up 41% compared to a year ago. European producers have relied heavily on export markets to compensate for weak domestic demand in 2023.

Russian exports to China reached 2.59 million cubic meters through March. Russia supplies accounted for 59% of total Chinese imports in the first quarter. However, shipment volumes posted a relatively modest 2% gain compared to the first three months of 2022. Russia’s share of the Chinese import market was 63% in the first quarter last year.

China is an export target for Russia

China is expected to remain a primary target for Russian exporters because many other countries have imposed economic sanctions against Russia in response to the Ukraine war.

Further, North American suppliers are likely to face rising competition from other producers worldwide if overall Chinese demand continues to recover. Imports from Chile jumped 88% in the first quarter to 101,670 cubic meters. Shipments from New Zealand more than doubled. Pine from those two countries will compete directly with US Southern Pine.

An influx of softwood logs from Australia added to the supply mix in recent weeks. A resolution to a longstanding trade war between China and Australia allowed Australian log shipments to resume in China. Historically, Australia is among the world’s largest log suppliers to China.

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A threat on energy supply

It is widely believed that a key part of the Kremlin’s strategy in the attack on Ukraine was to use Europe’s heavy and long-standing dependency on Russian energy (oil, natural gas, electric power) to prevent European countries from intervening beyond the typical “deeply condemn” statements expressed about any violation of international order. Under an unstated threat that any sanctions or support from the EU would prompt countermeasures from Russia on energy supplies — which would cause a severe crisis in the EU, something politicians would avoid at almost any cost — the Kremlin assumed it could constrain Europe’s response.

A historical precedent for this approach was set 50 years ago. The 1973 oil crisis originated in exactly the same way: to prevent countries from supporting Israel in the Yom Kippur War, Arab nations embargoed oil shipments to countries doing so, a strategy that had been defined in the planning stages of the war. The Kremlin’s assumption was most likely bolstered by Europe’s response to its violations of the sovereign territory of Georgia in 2008 and Ukraine in 2014; sanctions had been applied, but they were limited and had little impact.

So, what ultimately happened?

Russia began to restrict liquid natural gas (LNG) supplies to Europe in the beginning of 2021 and particularly after July, after which EU inventory levels had dropped (Figure 1). Russia’s share of total EU natural gas imports started to decline in mid-2021 (Figure 2). The share of Russian LNG in EU natural gas imports was about 40% for the majority of 2021, but it fell through 2022 to only 8% during the first weeks of 2023, according to data provided by Bruegel Datasets.

However, although Russian gas imports declined, total EU gas imports remained the same and even increased after Russian attack. European countries found other suppliers, set up new networks and accelerated their plans to shift away from fossil fuels, all of which prevented Russia from holding Europe hostage by restricting energy supplies.

Additionally, thanks to energy conservation and a mild winter, inventories of LNG in the EU are at fairly normal levels and the price of natural gas has plummeted from the peaks seen in 2022 – even below the levels seen after June 2021. Because natural gas has been the key driver for the extraordinarily high prices for exchange-traded electrical power in the EU — the highest price production sets the price for the spot market — the substantial decrease in natural gas prices now seen at the peak of the European winter are also pushing electricity prices down toward more normal levels.

However, it is important to remember that gas and electric power are only one segment of the industrial and domestic energy supply chain. Another important segment is fuels used in goods transport, which in Europe is heavily dependent on diesel trucks. At present, although prices of exchange-traded diesel fuel in Germany remain elevated compared with the levels seen in 2015-21, current prices are much closer to those posted in 2014 than the peaks in 2022.

So, the energy price crisis never materialized.

Lastly, the lower prices of energy within the EU, illustrated in Figure 3 by the German exchange prices of natural gas and diesel fuel, also indicate that energy-driven inflation is likely to be rather minimal during 2023 — possibly even negative. It will, however, take a while for this impact to make its way through the industrial and domestic supply chains, due to forward contracts and hedging. One should also not forget that energy hasn’t been the only driver for inflation; there are pressures coming from the labor market as well.

A leap forward in reducing reliance on Russian fossil fuels

In the end, the threat of cutting energy supplies did not prevent the EU, EU member states, the UK or the US from supporting Ukraine, and the European economy did not collapse under the pressure of higher energy prices.

There was an immediate crisis, a price that had to be paid, and a severe impact, but the move away from being so heavily dependent on Russian fossil fuels took a leap forward, which with new import infrastructure coming on line lessens the reliance on Russian energy.

It is also clear that European industrial, domestic and transport energy sectors are taking a giant step away from the use of fossil fuels altogether — a development that could be compared with the emergence of the North Sea oil industry that got a boost from the 1970’s oil crisis. For example, the vast amount of wind and available and accessible land in Northern Europe could give that region and its various energy-intensive businesses an edge in the access to green energy.

Even though the energy market is likely to normalize in Europe as spring approaches, one should not forget the ongoing everyday struggle and suffering of the Ukrainian people in their nearly year-long effort to expel an invader from their country. Their bravery and courage have pushed Europe to sever its dependency on an energy provider that tried to use that reliance as a weapon in its unlawful invasion of a sovereign nation.

Lasse Sinikallas, Director, Macroeconomics, is the author of the Monthly Economic Commentary and the ‘Macroeconomic outlook’ chapters in Fastmarkets Forest Products’ five-year and 15-year forecasts. Speak to our team about our short- and long-term forecasts to see how they can help your business plan ahead.

The post How reliant is Europe on Russian energy? appeared first on Fastmarkets.

Recycled containerboard (RCCM) prices went down by an average of Rouble 12,000/tonne, sliding below Rouble 30,000/tonne, while unbleached kraftliner prices decreased by some Rouble 10,000/tonne and reached the level of approximately Rouble 40,000/tonne. White-top kraftliner prices remained stable at about Rouble 75,000/tonne, though this segment, too, was hit by lower demand, as some packaging producers considered switching to cheaper boxes.

Meanwhile, paper for recycling (PfR) seemed to reach a bottom when it hit some Rouble 6,500/tonne in mid-December but then rebounded somewhat, rising to as much as Rouble 10,000/tonne at the end of the month.

The latest round of EU sanctions, which effectively banned exports and trading of virgin containerboard, created a surplus, forcing manufacturers to lower prices. The situation put additional pressure on RCCM producers as well, contacts said. Containerboard trading volumes worsened from November to December, and the traditional pre-holiday demand did not materialize.

Consumer activity was quite slow in the run-up to the end of the year, and packaging producers had already bought enough containerboard during the fall months, limiting their winter purchases. Lower e-commerce sales, the exit of large foreign employers from the country and a significant swath of the population holding post-Covid-19 consumer loans also contributed to a negative impact on the consumer market and demand for containerboard.

Virgin containerboard surplus

Prices for unbleached kraftliner in Russian roubles fell by some 37% over the course of 2022, and by more than 19% alone month on month in December. Exports were decreasing from the end of summer, and with the introduction of the latest EU sanctions in October, more and more board remained in the country, driving prices down, sellers said.

Under the latest sanctions, as of January 8, no new business can be conducted with EU parties, and existing business had to be completed by that date. New emerging export markets such as Africa are being explored, but the logistics situation remains difficult, according to market contacts.

White-top krafliner prices remained stable in December, but containerboard producers may choose to focus on new products, as some of their customers might change to brown boxes, sources noted. It is not difficult to diversify production and switch to manufacturing of, for example, sack kraft paper, contacts said.

Recycled containerboard prices fall

RCCM price levels tumbled by some 47% in rouble terms over the course of 2022 and by over 28% month on month in December.

The last month of the year started with individual discounts of Rouble 2,000/tonne, leading to further decreases in the range of Rouble 8,700-12,000/tonne.

“The price depended on what individual deal you could agree on. Once producers saw that the volumes were low, they started negotiating with customers on a case-by-case basis,” a contact in the packaging sector said. The demand for corrugated packaging is also not exactly at a high level now, he added.

PfR prices continued their downward cycle in December, touching Rouble 6,500/tonne, a level where collection is no longer profitable, before bouncing back up to Rouble 10,000/tonne at the end of the month. However, only 10% of Russian PfR is collected “from the ground,” and the rest is sold by supermarkets, a market source pointed out.

With the lower demand for this raw material, the large supermarket chains have enough to sell, unless they decide to hold on to their PfR to drive prices up, as they have done before, he commented.

Future expectations

Traditionally, producers of corrugated packaging take downtime at the beginning of January, during the week-long Russian public holiday period, and trading volumes are normally some 15% lower in January than in December.

While January price decreases are generally expected for all grades of containerboard, RCCM levels remained stable at the beginning of the month, while all of the virgin grades were down by at least Rouble 6,000/tonne, according to contacts. In certain cases, unbleached kraftliner was down by Rouble 10,000/tonne, some market sources said.

Though it is too early to say how the month will end, it is generally expected that even though the pace of RCCM price decreases is slowing compared to December, drops of at least 5% are likely. RCCM producers cannot afford to lower prices much further, unless PfR prices drop, a packaging contact suggested.

Market players envision a difficult Q1, as export logistics will remain expensive and complicated, and the output of Russian producers remains high, adding to the surplus. Nevertheless, they remain more optimistic about Q2, due to an expected increase in local demand as well as improved opportunities for exports and, possibly, a somewhat weaker rouble.

The post Why did Russian recycled containerboard and unbleached kraftliner prices slide in December? appeared first on Fastmarkets.

Difficulties in substituting missing Russian fiber 

First off, we’ve examined historical trends in Russian pulpwood and woodchip exports, which are most relevant as pulp fiber, as opposed to larger logs (over 15cm in diameter) that find uses as saw logs or veneer logs, especially birch.

In 2018-21, European Union member states (excluding the UK) accounted for about 70% of Russian pulpwood and woodchip exports, with Finland alone claiming a 64% share over the same period. With the import ban preventing further trade in Europe, only China has remained a significant importer of Russian pulpwood and woodchips in recent months. On a year-to-date basis through July, Russian exports of pulpwood and woodchips are down about 60% or 1.98 million cubic meters.

Focusing on Finland, where the lack of Russian wood fiber is being felt most acutely, we see a similar pattern in pulpwood and woodchip imports in the wake of the invasion of Ukraine. Total Finnish import volumes through May were down 69% or 2.02 million cubic meters, with the lack of Russian imports (down 1.58 million cubic meters) also paired with lower year-to-date imports from Estonia, Latvia and Lithuania (down a combined 44% or 433,000 cubic meters). This poor performance in Baltic imports so far this year has discounted our earlier prediction that more wood arriving from this region would help back-fill the loss of a Russian wood.

The Finnish import statistics have also yet to reveal any influx of hardwood eucalyptus fiber arriving from Uruguay, Brazil or South Africa, despite earlier speculation that perhaps eucalyptus fiber would be imported from the southern hemisphere to help displace the lack of birch fiber.

Prohibitive transportation costs appear to have also stifled this solution, leaving Finnish pulp and paper producers with a narrowing field of substitutes for Russian wood fiber.

Finnish producers expected to trigger BHK capacity swing into BSK

In Figure 3, we home in on the trade of pulpwood and woodchips between Russia and Finland to quantify the potential impact on pulp production (integrated and/or market pulp production) as this trade has ground to halt in 2022.

Woodfiber imports have been converted to thousand air-dried metric ton equivalents to assist in this comparison, with total Russian pulpwood and woodchip imports in 2021 providing enough fiber for the equivalent of 720,000 tonnes of air-dried pulp.

On average over the past five years, Finnish softwood chip imports from Russia have fibered the equivalent of 380,000 tonnes of pulp, while softwood pulpwood have accounted for 25,000 tonnes of pulp. On the hardwood side, chips have provided fiber for the equivalent of 115,000 tonnes of pulp, while hardwood pulpwood for 120,000 tonnes.

It is again worth noting that we have excluded from this calculation the importation of larger logs (with a diameter greater than 15cm), which we do not believe were imported primarily for the purpose of pulp production. The volume of this trade was significant in 2021, especially for birch logs (4.4 million cubic meters) likely destined for plywood mills, and less so for softwood logs (460,000 cubic meters) which likely landed at sawmills.

One of the largest remaining unknowns is the extent to which veneer and sawmill residuals from imported Russian wood were utilized to fiber pulp lines. Another factor contributing to the opacity of this issue is the unknown proportion of residuals and/or imported chips that are utilized as biomass chips as opposed to pulping chips.

All said, we see sufficient evidence for an impact from the Russian wood fiber import ban in Finland equivalent to 500,000-750,000 tonnes of pulp. As a result, we expect to see more Finnish BHK capacity swinging into BSK, where technically possible, and an increased appetite for imported BHK (especially eucalyptus) developing in Europe.

Russian pulp exports down further than expected 

The trade of finished Russian market pulp has also been negatively affected by the war in Ukraine, with total Russian pulp exports down 10% or 114,000 tonnes on a year-to-date basis through June.

Leading this development has unsurprisingly been trade with European Union member states, which saw pulp imports from Russia decline 38% or 41,000 tonnes in the first six months of the year. Some countries have seen an increase in pulp imports from Russia this year, with Turkey seeing the largest increase of 315% or 26,000 tonnes over the same period.

Perhaps most surprisingly, however, has been a decline in Chinese imports (down 8% or 64,000 tonnes) and imports from other Asian countries (down 11% or 19,000 tonnes).

Parsing out the consequences of Russia’s invasion of Ukraine from other market factors, such as the weakness in Chinese pulp demand that developed in the first half of 2022 or the reported lack of bleaching chemicals in the early months of the war, remains difficult, but we can examine the statistics by grade for further insights.

While Russian BSK exports were down 7% (50,000 tonnes) and BHK exports were down 32% (53,000 tonnes) through July, UKP exports were up just 7% (16,000 tonnes), which suggests that the bleaching chemical shortage alone is not enough to explain lackluster Russian pulp exports. Therefore, the weakness in East and Southeast Asian pulp demand has further clouded how we can measure the direct impacts of the Russian invasion of Ukraine.

Regardless, the export statistics have also disproven another of our initial predictions: that Russian pulp producers would swing productions toward more BHK and UKP. This has so far only materialized slightly for UKP, but Russian producers are also contending with increased competition in the Chinese market from Canadian UKP producers this year, following two recent conversions from NBSK to UKP in British Columbia.

Lack of Russian imports brings further consequences for global pulp producers

Reduced access to the domestic Russian market has been a further consequence for foreign pulp producers in 2022.

Total Russian pulp imports were down by more than half (57,000 tonnes) on a year-to-date basis through July. BSK grades saw the largest impact, with BSK from United States down 57% (21,000 tonnes, mostly fluff pulp) and BSK from other nations down 51% (27,000 tonnes, mostly NBSK from Finland and Sweden).

BHK imports were also down about 47% or 9,000 tonnes over the same period, highlighting that lower Russian pulp exports are also likely a result of Russian pulp producers focusing on fulfilling domestic demand for pulp wherever possible.

With no fluff pulp production in Russia, this approximately 75,000-tonne-per-year market will be difficult to displace, although the Svetlogorsk mill in Belarus has recently announced that it has started to produce an absorbent grade of BSK to help fulfill domestic demand from Russia and Belarussian absorbent hygiene product producers.

Further risks to pulp supply ahead

As the war in Ukraine grinds on, further risks to pulp supply have emerged with the potential for both long- and short-term consequences.

In the longer term, sanctions preventing the leading equipment suppliers in the pulp and paper industry, Andritz and Valmet, from doing business in Russia will likely be a significant hurdle for future market pulp capacity expansion projects.

Last month, the Kraslesinvest greenfield project in Siberia reported that it would need to pivot away from its original plan to work with Western European suppliers and instead it would look to work with a Chinese engineering firm with significantly less experience. Meanwhile, with more Finnish capacity focusing on BSK production, the domestic wood supply for future market pulp expansion projects is also in question.

As a result, we believe the prospects for future BSK capacity expansion have significantly diminished in the wake of the Russian invasion of Ukraine, which will likely work to support a higher global average price premium for BSK over BHK and will motivate paper and board producers to utilize more hardwood fiber in the long run.

A more immediate and less defined risk to supply also looms on the horizon as Russian producers face an upcoming maintenance season devoid of the expertise and essential spare parts that the leading Western European equipment suppliers would normally provide. Undoubtedly, Russian producers will look to procure alternatives domestically and from their remaining allies; however, we see the risk for incidences of unexpected downtime emerging from the Russian pulp market ratcheting higher for as long as sanctions remain in place.

Interested in finding out more about pulp prices? Take a look at the key price drivers for pulp in the market from Patrick Cavanagh here. Explore and learn more about our short- and long-term forecasts and how this could help your business plan ahead.

The post What are the impacts of Russia’s war in Ukraine on global pulp markets? appeared first on Fastmarkets.

Despite western sanctions and Russian citizens’ worries about the future, demand for packaging improved slightly in both August and September compared to the first two summer months. This demand, together with expensive paper for recycling (PfR), provided support for price levels of all containerboard grades, contacts said.

In September, RCCM manufacturers who were on the brink of unprofitability the previous month, announced price increases of Rouble 11,000/tonne on average. The price gap between RCCM and the virgin grades became extremely narrow as bleached kraftliner and semi-chemical fluting prices stood in the Rouble 38,100/tonne-42,650/tonne range. White-top kraftliner prices remained stable at around Rouble 74,000/tonne.

It looks like the market has slightly recovered. There is also traditionally an increase in demand for corrugated packaging once the vegetable season begins, and this will be followed by the grain harvest and winter holiday shopping,” a contact on the production side said.

Several contacts agreed that the policy of import substitution was also influencing consumer activity and containerboard demand. Locally produced goods require packaging, which drives demand even during an economic downturn, they noted.

RCCM prices bounce with high PfR costs

The pressure from high PfR costs has been pushing prices for RCCM up, and in September, price increases for RCCM ranged from Rouble 8,000/tonne to over Rouble 14,000/tonne, with an average of around Rouble 11,000/tonne. Meanwhile, old corrugated containers (OCC) traded at around the Rouble 18,000/tonne level, the same as the last week of August. However, prices sometimes reached Rouble 20,000/tonne at the auctions of supermarket chains, according to market contacts.

While high PfR prices were still one of the main reasons behind the RCCM price increases, a lack of stock was also said to be a contributing factor to the rebound in demand and the price rise of over 35%.

“Packaging manufacturers have a very small supply [of paper on hand]. While prices were falling, nobody wanted to buy extra volumes in the hope that they could buy it at even cheaper levels later. Their stocks are low now, which also contributes to demand,” a packaging source explained.

The situation was quite difficult at the beginning of September, as producers were struggling to source enough containerboard, a converter said.

Prices for virgin grades remain flat

Prices for the virgin grades remained stable in August, however, producers had already announced to their clients in September plans to increase prices beginning in October, and sources expect the upward trend to continue through November. With a narrow price gap of less than 10% between the recycled grades and unbleached kraftliner, it is possible that some packaging producers may consider making a switch between grades.

“The switch may be particularly beneficial for producers of packaging for products that require moisture-resistant packaging, for example, for meat,” a corrugated packaging producer said.

However, producers said that they were not aiming to take away market share from RCCM manufacturers, and that their current strategy was simply to increase prices and secure profitability.

The demand for white-top kraftliner was also reportedly good in September, with demand coming from locally manufactured beverage packaging as well as domestically produced disposable cups.

In September, producers of the virgin grades continued to face logistical difficulties with exports. Because of the Russian-Ukrainian war, some trains have been rerouted, which can lengthen delivery times.

The Chinese market, which has been very attractive for exports in the past, remained slow, and some producers reportedly had to take downtime. In theory, containerboard under the Russian customs code 4805, which includes kraftliner made from semi-chemical sulfate pulp, may be exported to Europe, but in addition to the complicated logistics, the lack of Forest Stewardship Council certification makes it unattractive for European buyers, a contact said.

“Should energy prices drive European containerboard prices up further, the situation may change,” he suggested.

Future expectations

Limited foreign travel possibilities continued to result in more people remaining inside the country, a development which was cited as another reason helping to maintain consumer activity and containerboard demand. However, the Russian government announced the first partial military draft since World War II on September 21, and many male residents were leaving the country.

Contacts in the pulp and paper industry said it was too early to predict how the situation will unfold and how containerboard markets will be affected. According to local press reports, industries may request government permission to exempt employees from the military mobilization.

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In the week of May 22, wheat volumes from Russian ports came to just over 244,000 tonnes, including 137,300 tonnes heading to Iran, 53,000 tonnes to Libya, 40,100 tonnes to Israel, and 13,700 tonnes to Egypt.

Furthermore, port data showed around 279,250 tonnes of Russian wheat under loading currently and listed in the line-up to depart during the following week.

Egypt was marked as the destination for 69,250 tonnes, with 40,000 tonnes expected to move to Nigeria, and 40,000 tonnes to Turkey, while the data did not yet show the destination for the remaining balance of just over 130,000 tonnes.

Domestic forecasters have raised their Russian wheat export outlook in May from 900,000 tonnes to 1 million tonnes but warned that in June, against the backdrop of high global prices, it may rise to 1.3 million tonnes.

That would be half the volume exported at the same point of last year when exports increased sharply due to the transition from a fixed duty of €50 per tonne to a floating duty mechanism.

During the reporting week, export prices continued to rise, while prices of the future crop grew more actively, along with global price rises due to the imposition of restrictions on the export of Indian wheat and a significant reduction in its export potential.

Indicative export prices for Russian wheat with 12.5% protein for May-June delivery continued to rise, reaching $410-415 per tonne FOB, up $25 per tonne versus the previous week, according to Fastmarkets Agricensus data.

The decline in exports is also associated with the exhaustion of quotas allocated to many exporters at the beginning of the season.

Over two thirds of the eight million tonnes wheat export quota was already thought to have been exhausted, with a number of large exporters either already exhausting their allocation or are close to it.

All the above brings the total wheat exports from Russia to around 30.3 million tonnes, while the USDA estimates exports from Russia in the 2021/22 marketing year could reach 33 million tonnes.

To find out more about the evolving dynamics in the global wheat market, join our webinar on June 1 at 2pm and hear all the latest updates from Tim Worledge and Marc Ostwald.

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Softwood lumber traders are scrambling to ascertain the extent to which Russia’s invasion of Ukraine will impact markets, especially throughout Europe.

Many U.S.-based exporters noted in March that their customers in Europe were astonished at how quickly and severely the situation escalated. “It makes me sick to watch this unfold,” one Southern Pine exporter lamented, echoing widespread sentiments throughout the industry.

Uncertainty regarding how long the conflict will linger and what geopolitical changes may result clouds projections about how the invasion might alter worldwide softwood lumber trading in the weeks and months ahead.

North American lumber traders were already noticing impacts a few days after the invasion began. Surging fuel costs have prompted trucking companies to raise rates that were already historically high.

The war has piled additional uncertainty on an already strained ocean freight system. Disruptions at ports have delayed and altered shipping schedules, often leaving U.S. importers guessing when previous orders might arrive, if at all, amid the chaos.

Many NATO countries have cut economic ties with Russia in response to the invasion. Severe economic sanctions imposed by the U.S. and NATO members, including measures that target Russian banks, are already hitting the Russian economy.

The ruble has plunged 30% since mid-February. Cash has grown scarce in Russia. Multiple media reports indicate long lines at ATM machines in Russian cities.

Funding new transactions between Russia and NATO countries will be difficult, if not impossible. Widespread opposition to the invasion has discouraged companies from trading with Russia and many have already cut ties with Russian trading partners.

A recent Fastmarkets analysis estimates Russia’s share of the global softwood lumber trade at roughly 22%. Statistics from Global Trade Atlas show Russian softwood lumber exports reached 27.8 million cubic meters last year, down 6% from 29.5 million cubic meters in 2020.

Russian exports to Europe increased 16% last year to 5.2 million cubic meters. Many observers anticipate Russian exports to shift away from Europe and other NATO countries toward alternative markets that remain open to trade with Russia such as China, India, and North Africa.

Read lumber economist, Dustin Jalbert’s latest viewpoint to understand the impact of the Russia-Ukraine conflict on the lumber market.

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