Cellulose Prices and Demand Have Recently Seen a Downturn in the European Union

Cellulose and starch prices in Europe have recently been rolling down the price trend. The cellulose and starch production sector in Europe has experienced a noticeable downturn, with production significantly reduced to around a quarter of its potential capacity. This decline has been influenced by a combination of decreasing demand and low market prices, particularly impacting the paper and cardboard manufacturing sector. The situation has been exacerbated by an influx of affordable imports from Asia, where there is excess capacity, further dampening the price outlook for cellulose in the European market.

The paper and cardboard industry, which consumes approximately 30-35% of the cellulose produced, has seen a marked decrease in output across the European Union. This reduction is attributed to a combination of factors, including economic downturns, rising costs, and a process of inventory destocking.

Since the end of the pandemic, the cellulose and starch industry in Europe has faced greater challenges compared to its counterparts in the United States, largely due to higher energy costs and a slower economic recovery.

This decline in starch production has consequently led to a reduced demand for grains, affecting the agricultural sector significantly. The challenge has been further compounded by a significant increase in imports from Asia, with Chinese exports of dextrose and sorbitol to the EU showing a dramatic increase, alongside a notable rise in Vietnamese tapioca imports. This trend has raised concerns within the European industry, especially as these imports benefit from favorable trade agreements.

In light of these challenges, some production facilities have had to halt operations, either due to market conditions or unforeseen incidents such as factory fires. While the decline in grain prices could potentially offer a sigh of relief by improving margins for starch makers, the benefits may not be immediate due to the practice of securing raw materials months in advance. Industry experts remain cautiously optimistic, suggesting that there might be an improvement in the situation, though significant recovery is not expected until the end of the year.

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According to the article by Procurement Resource, the European cellulose and starch market has been declining, with production dropping to roughly 25% of its capacity due to decreased demand and competition from low-priced Asian imports. This downturn, particularly felt in the paper and cardboard sector, is exacerbated by higher energy costs and slower economic recovery post-pandemic, contrasting with the situation in the U.S. Reduced starch production has led to lower grain demand, impacting agriculture. Despite challenges, including increased Asian imports and operational halts, there's cautious optimism for future recovery, though immediate improvement is unlikely due to pre-purchased raw materials.