Both PIX and TTO pulp indices are used in the service. Based on what Metsä Fibre’s customer chooses, the prices for pulp batches could be based on the previous month’s PIX price index or could follow the index’s monthly development.
On the other hand, the parties could agree that their transactions will follow market-based pricing, based on the TTO index for spot prices.
GPP allows faster reaction to changes
"Based on their own appraisal of the situation and risk appetite, the customer can choose how much price weighting they want to put on PIX indices, which follow market prices more slowly, or faster-reacting TTO indices,” states Metsä Fibre’s VP, Sales Europe Mikael Lagerblom.
A further objective of the GPP price mechanism service is that the relationship between supplier and buyer continues at fair market price across cycles.
“The level of volatility has grown in the pulp market, making it harder to monitor price indices that are sometimes slower to react. GPP allows faster reaction to changes if necessary.”
The new system was adopted in autumn 2020 and is now used actively.
“We are happy to see that the new service has been received well and adopted quickly. When it comes to trends in the pulp market and prices, the new service has taken our discussions with clients to a deeper level.”
This article was originally published in Fibre Magazine issue 2021-2022.