Beyond the "Technical Fault": Why the South Pars Strike Has Reset Your Costs

This morning, the narrative shifted from a "technical incident" to a geopolitical earthquake. Reports are emerging of an Israeli targeted strike on the South Pars gas infrastructure. More critically for the markets, the suggestion of U.S. consent for this action has signalled to energy traders that the "rules of engagement" for global energy hubs have changed.

Difficult Times Ahead

CRITICAL UPDATE (13:17 GMT): The Threat of Regional Contagion

As of this afternoon, the situation has moved beyond a single strike. Iranian military officials have officially stated that the strike on South Pars "will not go unanswered," identifying five major energy facilities across Saudi Arabia, the UAE, and Qatar as targets.

This moves the "Mathematics of the Mill" from a disruption to a systemic threat. If the regional conflict expands, we are no longer discussing "high prices"—we are discussing availability.

• The Saudi/UAE/Qatar Factor: These nations represent the backbone of global LNG and oil exports. A threat to this infrastructure is a threat to the global manufacturing floor.

• The "Price of Fear": Markets hate uncertainty. The 67% surge in UK gas we reported this morning was based on the incident. The next surge will be based on the retaliation.

At Just Paper Tubes (JPT), we don't speculate on politics, but we must act on the economics. This isn't just a supply disruption; it is a permanent "Risk Premium" being baked into every therm of gas used in the UK.

The Real-Time Energy Pulse

The "spread" between European TTF Gas and UK Gas is widening, but both are moving in the same dangerous direction:

• UK Gas (NBP): Has surged to 135.15p, a 3.01% jump today and a staggering 67.33% increase over the last month.

• TTF Gas (European Benchmark): Now sits at €53.05, up 60.35% in a single month.

• Brent Crude: Has breached the psychological barrier, trading at $108.28, driving a 50.9% monthly increase in logistics and chemical feedstocks.

The "Why": Why 135p Gas Changes Everything

In papermaking, TTF and UK Gas prices aren't just numbers on a screen—they are the cost of the steam required to dry every meter of board. When gas jumps 67% in 30 days, the energy component of a paper mill’s cost base (which was already 30%) effectively doubles its impact on the final price.

Metric	The "Baseline" (Stable Market)	The "South Pars" Reality (Today)	Variance
UK Gas Price (NBP)	75p / therm	135.15p / therm	+80.2%
European Gas (TTF)	€30.00 / MWh	€53.05 / MWh	+76.8%
Energy Cost per Tonne	£140.25	£252.73	+£112.48

While a standard paper mill (making lightweight tissue or office paper) might hover around 80–110 therms, a coreboard plant is a different beast entirely for three specific reasons:

1. High Grammage Drying: Coreboard is thick, 300-600gsm. Evaporating water from a dense sheet requires significantly more residence time and thermal energy in the drying hoods compared to lightweight grades.

   
   

2. The "Wet End" Heat Demand: As you mentioned earlier, the process starts at the pulper. To break down recycled OCC (Old Corrugated Containers) efficiently, mills use large volumes of heated process water. Maintaining that "slurry" temperature before it even hits the wire is a massive, constant gas draw.

   
   

3. The CHP Factor (Combined Heat & Power): Most UK and European board mills run on-site gas-fired CHP plants. They aren't just burning gas for steam; they are burning it to generate the electricity for the massive pulper motors and refiners. When you factor in the total gas-to-energy conversion for the whole site, 180–200 therms per tonne is the industry reality for high-performance board.

Updated MD Perspective: This is Not a Drill

"The news coming out of the Gulf in the last 15 minutes has fundamentally changed the stakes. We are no longer just dealing with a 'high gas price' environment; we are looking at a potential total shutdown of global energy corridors.

While others are still reading the headlines and keeping their 'heads in the sand' hoping for a diplomatic miracle, JPT is looking at the hard reality of our customers' supply chains. You cannot run a factory on 'hope.'

With Iran now targeting the wider Gulf, the industry cost-base is entering uncharted territory. Our strategic buffer is no longer just a price shield—it is a supply lifeline. "