This year is challenging, but we have a target of achieving at least 2% above. Certainly, when we consider projects and opportunities moving forward, we will continue to apply that. We thought it was important for shareholders to see that. With that in mind, we move to slide 11. We have a disciplined capital allocation strategy. Obviously, maintenance comes first, maintenance capital, any regulatory commitments that we have to make. We've committed to science-based targets, so there's a little bit of sustainability cost there. Some of it's legal, but overall, we've got to take those commitments into account. Moving down, as I say, our balance sheet sustainability is very, very important. You're going to see a substantial reduction from Q4 onwards and into the next few financial years. Our medium-term target is a billion, and we certainly want to get it below those levels.
Moving further down the capital allocation, we have some cost savings initiatives, efficiencies. These tend to be smaller projects but with very short paybacks. Ultimately, we move towards the dividends. Obviously, we have been paying dividends over the last few years. Only then, once we take that all into account, will we consider future growth projects. There are no major projects that we are looking at at the moment or looking to do in the next couple of years. Slide 12. Very excited to say that the project is now complete. Very exciting. We think the U.S. market is a core market for us. The packaging in the U.S., it has achieved positive growth in the last 12 months, resumed its growth. This project will double our capacity on the machine and give us 470,000 tons of SBS. Machine is looking great. The team are excited.
We are signing up customers. It's very much aligned to our strategy to reduce exposure to graphic paper and growing the packaging segment. Some nice pictures there. We have many pictures, but it's great to see the paper going through the machine. We have given you a video link where you can see some of the team that worked on the project. You can see their excitement to having this done and their enthusiasm for ramping up as we move ahead. We are very proud of this, and it's an important strategic step for Sappi's sustainable future. Moving to the segmentals and slide 14, starting with pulp. Generally, in the quarter itself, the pulp numbers were okay. We did see DP prices reduce during the quarter. If you recall, they started at $970, dropped to $900 by the end of the quarter.
There was a little bit of price downward pressure that affected us. Some of our contracts are lagged, but obviously, we do have exposure to a substantial portion of our volumes. The other factor is the shuts themselves. The fact that we had Saiccor and in Ngodwana, the lower production. Yes, the sales volume was the same, but because we produced less, as I said earlier, you have to spread the fixed costs and the maintenance costs, and that's what impacted the volumes. Obviously, there has been downward pressure, and it's in prices, and that's been linked to the geopolitical trade tensions. Normally, we see a bounce back post the Chinese New Year. By then, various industry players started to anticipate the tariffs that were about to come. We saw activity slow, and it further slowed after the quarter end.
I'll talk a little bit more about that when we get to the outlook. Page 15 is the packaging segment. Generally, okay in terms of demand. We did see positive growth in the U.S. and South Africa. However, once again, those markets or the profitability in those regions was impacted by the respective shuts that we had. The other thing I would say is that in the U.S., on our Somerset PM1 offering, there was a little bit of a product mix adjustment in anticipation of commissioning on Somerset PM2. That did impact profitability, but we regard that as one-off issues. Moving to graphics on slide 16. Overall, reasonably stable volumes. We've been gaining market share both in the U.S. and in Europe. A little bit of downward pressure on selling prices, which impacted overall margins.
Obviously, once again, you had the shut in the U.S. as well, which would have had an impact on profitability. Selling prices, although they are down, are reasonably resilient. This brings me to slide 17, which just very briefly summarizes all the regions. The quick takeaway from this one is that on the top line, the revenue is reasonably stable. You have seen that on the graph earlier. We did see higher variable costs in North America and South Africa. Once again, that is linked to the shuts and the production associated with what is left at the mill during those shuts. Graphically on page 18, Europe continues to be challenged by difficult macroeconomic conditions. It has never fully recovered in Europe since COVID. It is challenging conditions.
Obviously, now we have the kind of latest trade tensions, which is not allowing for a meaningful improvement. The U.S. was affected by the shut on PM2 and lower selling prices for SBS. In South Africa, as I said, once again, the two big shuts. Slide 19 has our thrive strategy. It is something that we continue to focus on. It guides us as we look forward. Once again, you have seen it before, and I am not going to talk about it too much other than to say, firstly, on operational excellence. Obviously, when you move into times of difficult market conditions, a focus on costs, focus on efficiencies is ever more important. That is what we are working on. I do think that with the current market conditions, and albeit the uncertainty around tariffs, there could be raw material cost opportunities. It is important that we take advantage of those.
On enhancing trust, obviously, sustainability is very important, particularly, well, it is across all our segments. The fact that our wood is certified, I always say, gives us a strong strategic positioning against our competitors. In terms of growing our business, we have made those investments now, and it is important that we ramp up, realize the profitability, and obviously, we continue to reduce exposure to graphics. On financial health, you have heard me say many times, bringing the debt down is our number one priority. You see the one and a half times here. Obviously, based on roughly where debt/dollar levels are, that roughly equates to the $1 billion. That is why we are strongly committed and a strong balance sheet and optimizing our capital. Turning to tariffs on slide 20. Firstly, the direct impact of tariffs is not that material.
We do have about 7% of our sales volumes across border U.S. trade. It is not that material. When we look at the individual categories, we do not think it is going to have a significant impact on our business. We do have some raw materials, but we would look to source those. The tariff situation is evolving, and it is important that we are flexible in terms of our suppliers. On the graphic side, the U.S. is a net importer of graphic paper, roughly 500,000 tons. The fact that we are a domestic producer could create opportunities for us. Our European business imports about 50,000 tons of graphic paper, so we have a little bit of exposure there. Similarly, on the packaging and the SBS side, overall, the U.S. is a net importer. Once again, this could create opportunities.
I think, which is nice, as you start up on the PM2 at Somerset, this could create additional opportunities. We've obviously been signing up customers for a period of time, and this could be additional on top of that. We do have a little bit of exposure from Europe, being 25,000 tons of various spread across a number of products on the packaging and specialty front. Turning to Dissolving Pulp, we export about 30,000 tons of DWP to the U.S.. It is a relatively small portion of the total. Our Cloquet mill in the U.S. exports 200,000 to other countries, which I guess potentially could have, there could be reciprocal tariffs. It is important to say that's not China. This is other countries. Clearly, at Cloquet, we have the ability to swing. That gives us some potential mitigating factors that we could take into account.
Overall, you can see the direct is not material. If anything, there are potentially more opportunities. The bigger worry is the indirect impact and its impact on global trade flows and ultimately inflation and consumer demand. Most specifically, it is on the tariffs imposed by the U.S. on textile. It is not just textiles, but for us, it is obviously textile and apparel manufacturers in China. That is impacting on demand for clothing. We export a significant amount of our volumes to Asia and more specifically China. What we are seeing at the moment is that various industry players are adopting a wait-and-see attitude. The trade flows between China and the U.S. have slowed considerably. The vessels are not flowing. Everybody is waiting to see what happens. For us, it is not so much that we sell huge volumes into China, but we are exposed to Chinese selling prices.
Because the conditions have deteriorated rapidly, it has meant that the DWP price has dropped. I talked about it earlier. After the quarter end, today it's $830 a ton. It is for that reason we had to be cautious about our outlook statement. We believe this is a short-term impact. You saw it obviously during COVID. Ultimately, the U.S. will need clothing, and ultimately, volumes will flow once again overall. At the moment, on a very short-term basis, there is not a lot of activity, and that is having an indirect impact on DWP selling prices. I'm not concerned about the volumes because most of our volumes either go contractually to our long-serving or our long-standing contractual customers, or they go to other markets outside of China. We are exposed to the Chinese price, the selling price of DWP.
With that in mind, then moving to page 23, our outlook statement. As I said, this disruption of trade flows, and in particular on the clothing sector, that is why we've been very cautious. On the cost front, yes, there's a risk of inflationary pressures. As I said earlier, some of our raw material costs are starting to come down now. That could create opportunities. We do have some shuts in the quarter. Those are normal. We wanted to be transparent and just call those out to you. On the Somerset, as I said, completed. Now we're focused on ramping up, and Q3 will be progressively ramping up. Turning to page 24, firstly on capital allocation. Obviously, I've indicated that the CapEx for the year is $550 million. The final payments for the PM2 conversion occur in Q3.
You will see the peak at the end of the quarter. In Q4, that reverses. We start to come down fairly fast thereafter. Taking all that into account and giving this uncertainty, and primarily given the DWP price at $830 a ton, we have adopted a cautious outlook. Based on that, we have estimated that adjusted EBITDA for the quarter will be at a similar level to Q2. Operator, I have gone through the presentation. I am now going to hand it back to you for questions.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile a Q&A roster. Our first question comes from the line of James Twyman of Prescient. Please go ahead. Your line is open.
Yeah. Thank you very much. Yeah. The question's from me. Firstly, in terms of the U.S. market, what reaction have you seen from the import competitors in terms of any movements in pricing that they've done? I suppose you would be an example of that. Have you adjusted your prices for imports into the U.S., for example? Secondly, how exposed are the Chinese viscose producers to the U.S.. market? I mean, roughly what % do you think of their sales ends up in the U.S.? The third question is, in terms of the timing of the startup of the new machine at Somerset, do you think we can assume that in Q4 it'll be ramping up and breaking even, or do you think that's been delayed a little bit further? Thank you.
Yeah. Okay. A number of questions. Firstly, on the imports into the U.S., and I'll let Marco elaborate if I have not fully answered your question. We did see some announcements from different players, both in the graphics and in the packaging side. You remember there was the initial announcement of 20%, and then it dropped to 10%. Some players jumped the gun and then reversed it. We have seen various behavior from different players. There is so much uncertainty, James. From our perspective, we have not increased those prices as of yet. Marco, anything you want to add there?
No. No, Steve, you're right. The uncertainty has led to a very diverse approach, which all has been rolled back and basically waiting for the negotiations between the European Union and the U.S. You might see then more direction. For the moment, there's not. You're right. We have not increased our prices.
Yeah. James, I think everybody's pulled back and adopted a wait-and-see strategy. Your second question about Chinese viscose producers' exposure, I know that, and Mohamed can correct me, about 35% of clothing to the U.S. comes from China. What we don't know is that same ratio for viscose producers because it tends to, a lot of it gets blended, and we don't have the full visibility downstream. So I would say about a third of the overall U.S. clothing. Mohamed?
Yes, Steve. I should just add, I think it's important to distinguish between the finished garments, as you pointed out, and the raw material fiber like Viscose. From our understanding, looking at the export stats out of China, there's very little of Viscose staple fiber exported to the United States. Yes, finished garments in volume terms makes up about 35% of the clothing that the U.S. imports.
Yeah. Indeed. On the last question, I'll let Mike talk more broadly. Obviously, Q3 has the initial startup, the initial ramp-up, the initial teething. That's normal. That's obviously part of the outlook statement that we've given in terms of our guidance. By the time we get into Q4, you start to see further improvement. I think I said it on the call last time is that each quarter thereafter, as you move through 2026, you're going to see a progressive improvement each quarter. Yes, you will see an improvement in Q4. Mike, maybe just broadly, just talk about how you see the ramp-up occurring.
James, the ramp-up starts right now. As it ramps up, it's kind of exponential in the early phase. You asked about the volume. I would suggest that the machine by the end of Q4 is back equal to a production level that we were at when we shut down, but now on purely board versus graphics. From that point forward, we'll be continuing to increase production throughout the following year.
Okay. James?
Yep. Thank you very much. I've got some follow-ups, which I'll do later on if there is time. Thank you.
Thanks.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Brian Morgan of RMB Morgan Stanley. Please go ahead. Your line is open.
Yeah. Thanks very much, Steve. If I could just ask, could you chat to us about the calculus around swinging Cloquet maybe from DWP back to paper pulp, given the way the prices are falling? I'd have thought some aggressive action would be needed to address this price fall.
Yeah. As always, Brian, the differential is about $250 a ton. Clearly, with DWP prices now at $830, the gap becomes much closer. The one thing I would say is that now hardwood pulp prices have dropped. Obviously, China tends to lead the world in terms of pricing here. We have seen hardwood pulp prices in China now below $500 a ton or just below $500 a ton. In the U.S., it is not at those levels. All Europe, they are not at those levels. At the moment, Mike, it is roughly the prices have only dropped in the last couple of days. You clearly need time to react. As things stood last week, it was still very close to the break-even levels, Mike.
I think that's accurate, Steve. We evaluate that on an ongoing basis and make the right business decision.
Yeah. I mean, it's important, Brian. As you know, with these things, you have contractual commitments. You've already made your orders for the paper pulp. You can't move in and out on a daily basis. Clearly, if it were to stay at less than $250 for a period of time, you would make the decision to make more paper pulp.
Okay. Cool. Thanks, Steve. Can I just ask on could you just update us on the timing3 delays of CCF prices and how they feature into your top line?
Yeah. It's a good question. As you know, in the past, 80% of our volume used to be a quarterly leg. We've since restructured that. And roughly about 15% now is on a quarterly leg. The vast majority of the rest is either one month in arrears or on spot. Brian, I'm glad you asked it because obviously, that was why you had a bit of an impact in Q1 and also why we're so cautious about—sorry, I didn't mean to say Q1. I meant Q2. A little bit of an impact on Q2 towards the end of the quarter and why we were so cautious about our outlook for our Q3 earnings.
That's great. Thank you, Steve. Can I just ask a third question on maintenance shuts in South Africa? You've spoken in the past about a shortage of skills. Is that the reason for the $30 million overrun, or is it something else?
No, I wouldn't say so. I'll let Graeme expand further. It is a challenge. When we took the shuts, we did identify some additional issues. When we restarted up afterwards, that didn't go as smoothly. We can't put it all down to human resources. Some of it relates to what was identified during the shut. Graeme, maybe just if you want to speak about—
Yeah. Maybe just to check whether it's the shut overrun cost-wise at Somerset or whether it's— Somerset overrun in this quarter?
No, no. It's South Africa.
You're talking about South Africa?
Yeah. It was South Africa.
Yeah
Just from a personnel perspective, there's always a shortage, but it's not had a material impact.
Yeah. Typically, the area of concern was on the recovery boiler side. Typically, there we bring in expertise from the equipment manufacturers and highly skilled, typically. It is not a skills issue. It is predominantly a weakness in materials outside of the normal risk work that we did. That led to problems in startup once pressure was back in the recovery boiler. Of course, when you have those issues with the recovery boiler, it needs to cool down and then heat back up. Each time you have one of these issues, it adds sometimes four or five days' worth of delay, which has both a production impact, but more materially—well, equally as materially—is a cost impact because we are unable to generate power from our own processes during that period. You need to typically bunker fuel to get the recovery boiler going again. Not a skills problem in this case. It's more about where on materials outside of the normal areas we would address in the shop.
Thanks, Graeme.
That's fine. Thank you.
Thanks, Brian.
Thank you. We'll now take your next question. Please stand by. Our next question comes from the line of Sean Ungerer of Chronux Research. Please go ahead. Your line is open.
Good afternoon, Steve. Just going back to the outlook statement, you've obviously flagged the DP price as a key concern. Just can you maybe talk about order books on the DP front? Is that also a concern, or is it just mainly the price element at this point?
It's interesting, Sean. Even across all the segments, it's not a volume issue at the moment. Volumes are reasonably stable. And as you know, on Dissolving Pulp specifically, we have a high proportion contracted. And those volumes are fine. This is purely price. When you're selling over 300,000 tons a quarter and the DP price drops by $100 a ton, that has a material impact on quarterly earnings. That is our main issue at the moment. Obviously, Q3, for those who've followed Sappi for a long time, Q3 is normally the lowest quarter. You bring in this impact of the lower DWP price, and then you've got the ramp-up on PM2. At Somerset, you bring all that into account, and it tells a large part of the story of why we're guiding the way we are.
Perfect, Steve. Just going on to PM2 with obviously the higher CapEx for 2025 now, does that mean it's gone from $450 million to close to $485 million, or is it—was it?
Yeah. We're estimating close to the $500 million mark, Sean. Roughly, the difference overall from the initial guidance we gave obviously last year, roughly, it was higher labor costs, which we talked about last time. The fact that it took us a little bit longer in April to complete the project. Roughly half-half those two issues make up the difference to get us to the $550 million. Moving forward, we're estimating below $350 million CapEx for the next two years. We do not normally give you two years ahead, but we felt it was very important to emphasize our commitment to debt reduction. The CapEx is primarily going to be focused on maintenance CapEx.
Thanks. Just on that slide where you have the CapEx for the following years, it looks like it's closer to, like I said, $320 million, $325 million. And if I look at maintenance CapEx for the past three years, it's hovered around the $200 million mark based on what's been disclosed at least. Are there any levers to shave off from the $320 million, or yeah, just want to get your thoughts around that?
Yeah. Look, included in those numbers is the sustainability commitments that we've got. Some of it is legal in Europe. It is still early days, and we're still working through the final numbers. You have our commitment that we are going to be at maximum of those levels. Clearly, we would like to bring it down further.
Okay. Perfect. Steve, just on cash flows heading into H2 now, you're obviously calling peak gearing in the third quarter. I'm assuming CapEx is heavily weighted to Q3 with maybe a third lift or, sorry, the balance there for Q4. Are there any other notable cash flows that we should be aware of? I mean, what's happening with working capital for the next couple of quarters just so we can get a better feel around that?
Yeah. Indeed. I'll let Glen elaborate further. If you look at the year-to-date CapEx, it's about $280 million. You've obviously got the balance of the CapEx to get to the $550 million for the full year. A high proportion of that occurs in Q3. That's why we said Q3 will be higher. I'll let Glen talk about working capital and then the reversal.
Yeah. Sean, just taking up the bulk of that, CapEx will come through in Q3. CapEx will taper off in Q4. We're expecting a further outflow on working capital in Q3, but then that reversing and more than reversing in Q4 and coming out above where we were last year. Overall, Q4 will be a good cash inflow, and we'll reverse whatever happens in Q2, I mean.
Perfect. Thanks very much.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of James Perry from Citi. Please go ahead. Your line is open.
Hi. Thanks for the presentation. I think most of the questions have been asked now, but just a quick one again on the CapEx. You said that the higher guidance is mostly due to the longer maintenance and the Somerset overrun. Just to be clear, is that to say that the extra $25 million is mostly incorporated into the Q2 figure already, or should we model higher figures at all for Q3 and Q4?
No. I would say maybe it comes back to the point that I made earlier. The year-to-date CapEx is $280 million, right?
Forward the jump.
Yeah. So that means that the balance of the 550 will occur in Q3 and Q4. A significant proportion of that is in Q3. Specifically to the 25 you refer to, that technically, yes, would be in Q3.
Okay. Thank you.
Thank you. We'll now take our next question. Please stand by. Our next question comes from the line of Andrew Jones of UBS. Please go ahead. Your line is open.
Hey. Thanks for the chance to ask questions. Just had a couple. I mean, first of all, on the U.S. volumes or volume shipped into the U.S. from outside, can you quantify those? I mean, you said you gave a sort of percentage of revenue, roughly. But in terms of volumes of coated woodfree or any other products, could you give us some volumes around that? And then I'll ask my next question.
Yeah. Are you talking about the industry or Sappi?
No, for Sappi specifically.
Yeah. On the one slide that we have for the tariffs, coated woodfree or, sorry, graphic paper is about 50,000 tons. And packaging and some of the other smaller specialty grades combined, all of that is about 25,000 tons. You can see, yeah, those are not small volumes, but it is not material volumes. Overall, there is something like 500,000 tons of coated woodfree imported into the U.S.. We are not the largest importer.
I mean, as the mill ramps up at Somerset, how do you see the market playing out? I mean, I guess maybe you get potentially some lower imports because of the tariffs. It is such a large mill in that market. Do you expect to see peers shutting? Obviously, I guess demand might potentially be under pressure if consumer confidence is lower. How do you see your ability to actually place volumes in that market? Do we need to see your peers shutting down to be able to really allow you to ramp that mill up properly, or do you think, I mean, what is your take on how that shakes out?
Okay. I'll start, and then I'll pass to Mike to talk a little bit further. Firstly, I would say we have seen an increase in demand over the last year or two. That is partially going to help. Specifically, Sappi's business case around this project was focused on non-integrated converters. We have been working closely with them and signing them up. We are pretty confident that we can—we have already signed a whole bunch up, and we will continue to sign. We are confident that we can fill the machine. There was a little bit of capacity that came out a couple of years ago, which will help us further. Obviously, this latest noise around tariffs, there are converters in the U.S. who are wanting to have domestic capacity and suppliers. That will further create opportunities. We continue to believe that the market will grow at a couple of percent per annum. All of those factors will contribute positively. Maybe, Mike, you want to elaborate further?
Steve, I think you captured most of it. The one thing that I'd offer is we have about two-thirds of the volume for our startup already lined up. We also have the ability, if pressured, to swing our PM1 because that machine was designed to be able to make graphics or packaging. Now, that's not our intention initially, but if there was pressure and the graphics market continued to be strong, that's an option for us. We feel great about the project. In all honesty, we included a link, and the link's a few weeks old now from the video. We have a brand new state-of-the-art paper machine or board machine in our Somerset mill. It is absolutely well built, and the commissioning has been going very, very well. We feel great about our product. It has state-of-the-art controls, and it's truly world-class. We are convinced our customers are going to realize that as they have realized that from our PM1 machine. With all that, yeah, our confidence is high.
No, that's clear. Just in terms of the competition, have you observed much of a change in terms of imports into the U.S. because of the tariffs or maybe with this new Ulu mill on the FPV side from Storer? They were obviously looking at the U.S. market as a target market. Have you seen them aggressively trying to price into some of those converters to take share? Anything you can share on the competitive landscape of that?
No. Look, as you know, we can't talk about competitors specifically. All we can say broadly is that the direct impact of tariffs hasn't taken place. You haven't seen meaningful volumes move one way or another. What I would say is that naturally, there is a nervousness associated with the threat of tariffs. Customers are looking at their supply chains. They're looking at their suppliers. The fact that we are a domestic producer puts us in a good position against those imports that are coming in from Europe.
Okay. No, that's all clear. Just one slight clarification on something that you said earlier. I think one of my colleagues was asking the question about the percentage of Chinese made viscose that goes into the U.S. I think you quoted the proportion of U.S. imports that came from China. If we take the overall Chinese viscose market, do we know what percentage of that is being shipped out specifically to the U.S.? I think that was what one of your panelists was asking.
Yeah. Andrew, you would not know that. I'll tell you why. Because what happens is you have the various fibers that go downstream, and ultimately, a lot of that product gets blended. It is very difficult to differentiate how much specifically goes from China to the U.S.. We always use as a proxy because we know overall clothing is about a third, as I said. We use that as a guide. We do not know the answer to that in short.
Yeah. Okay. Fair enough. Thanks.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Cole Hathorn of Jefferies. Please go ahead. Your line is open.
Good afternoon. Thanks for taking my question. Two from my side. The first is on Dissolving Pulp markets. I know you mentioned that the real issue is the price rather than the volume and the production side. I'd just like to understand how you're managing inventory levels whilst there's the debate around tariffs and concern around kind of clothing demand. If clothing demand does come back and there's a drop on tariffs there, do you think that the Dissolving Pulp prices come back faster than the commodity grades? Just how you're managing inventory levels and what could happen to prices if we see a kind of recovery there.
Secondly, it's a more difficult question, but on your European asset base, we are seeing a number of your competitors, in my view, kind of reevaluating what they think about medium-term demand, reevaluating how costs might impact their assets. We're seeing more M&A. We're seeing increased discussion around closures, but no material closures as yet. How do you think about some of your mill assets in Europe? Could you be thinking about further kind of structural actions, be it closure, disposal? Just any thoughts would be helpful. Thank you.
Yeah. Firstly, on Dissolving Pulp, a high proportion of our volumes is committed already, whether it is through long-term contracts or relationships with long-standing customers. It is for that reason we do not anticipate a significant risk on volumes. In terms of inventory levels, obviously, generally, if markets slow, there is a risk that inventory levels could build up. It is interesting. We obviously have the precedent of what happened during COVID. We are not saying this is COVID times. Certainly, you will all recall that there was a sharp drop during the height of COVID, and then you had this huge recovery thereafter. Clearly, I am pessimistic about the very, very short-term impacts of these tariff threats. Subsequent to that, ultimately, the Americans need to buy clothes. You are going to see a massive recovery. I speculate that will match what happened in 2022 after COVID.
It is a headache, but I do think you are going to have a massive bounce back because ultimately, people need clothes. On prices, when you have these dynamics underway and there is not a lot of activity out there in China, there are a number of clothing factories that have temporarily closed. The retailers in the U.S. have paused ordering from China. That is going on whilst everybody waits to see what happens. At some stage, things have to be resolved one way or another. Maybe the manufacturing of clothing moves to other countries. Ultimately, there will be the underlying demand for viscose, and it will just be a shifting of where our raw material goes. I am confident that it will bounce back. Unfortunately, in the very, very short term, it is having an impact on Dissolving Pulp selling prices. The European asset base, you are right, it continues to be challenged.
There is excess capacity. We did a tremendous amount of work. We closed two mills last year. At the moment, and you've heard me say it a few times on this call, I don't want to say volume is not a risk because it clearly is a risk. At the moment, you're seeing a pricing risk rather than a volume risk. I don't want to underplay the volume risk. To your specific question, I don't think we need to close any capacity at the moment. We continue to evaluate. We project forward, and we are proactive. We've always been proactive. At the moment, we don't think we need to close any capacity.
Maybe I'll just follow up with the Dissolving Pulp side of things. Prior to Liberation Day, we saw a number of the swing producers shifting their production as much as they could into Dissolving Pulp just because of the price differentials. How do you see that dynamic now? Are most of those swing producers starting to shift the other way? I imagine you probably commit to that production level for at least a quarter. There probably hasn't been much, but I just wanted to understand.
Yeah. We haven't seen a significant shift reversing that. What I would say to you, I think I said it on the call earlier, hardwood pulp prices are also under significant pressure out of China as well. A lot of the reasons for that are similar to what's happening in Dissolving Pulp. What happened is you started to see hardwood pulp prices rise, and then the whole tariff thing happened, and they've come back. In fact, they've reached, Mohamed, lower than they have been for some time again, once again.
Sorry, just one final clarification. On the capacity that you closed last year, just trying to understand, when you do close capacity, you do get the benefits of the fixed cost savings for those assets, savings on future CapEx and maintenance CapEx. We should think about, in general, yes, a one-off impact on a closure, but positive EBITDA contribution, and importantly, also continuous fixed cost savings when there is upcoming capital calls on any assets.
Very much so. Yeah. We have seen that in the past. Obviously, subsequent to the closures that we made—it is nearly two years ago now—we did get those savings. There were other factors like selling prices and market conditions that offset some of that. Specifically on the fixed costs, yes, we did realize that. If there was ever to be shuts in the future, we would save those fixed costs.
Thank you.
Thank you. There are no further questions. Speakers, please continue.
If there's no further questions, I just want to thank everybody for joining us today, and I look forward to discussing the results at the end of our Q3. Thank you very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.