FOEX Pulp & Paper Indices - Dec. 7, 2011

Sandy Yang

Sandy Yang

Dec 7, 2011 – FOEX

HELSINKI , December 7, 2011 (press release) – US NBSK – The shipments of market pulp to the North American market are reported to have continued weak through November. Producer inventories are above average. The knowledge of difficulties of taking downtime during winter months at the northern mills adds to the downside price pressures. Some producers have announced lower prices for December, typically down by 30 USD/ton at 890 USD/ton. Our PIX US NBSK index fell by 23.08 dollars, or by 2.5%, and closed at 896.92 USD/ton.

US Newsprint – The market in North America remains weak and has grown gradually weaker over the year. Exports have supported production volumes but the demand on the export markets has also started to fade away. US newsprint production was down almost 9% in October whilst the cumulative drop is still moderate at 3.5%. The PIX US Newsprint 30lb index still remained unchanged at 623.80 USD/ton, and the 27.7lb index at 664.58 USD/ton.

Pellet Continental Europe - We have today launched the PIX Pellet Continental price index for wood pellets for medium scale use. This index is based on net prices without tax delivered at end client’s warehouse for 26 ton lots in Germany and 17 ton lots in Austria, within the delivery distance of 50 km. This new index will come out every first Tuesday of the following month. The first index value launched today, based on November prices, is 214.79 EUR/ton.

General economy: US –The global recovery picked up speed after having slowed down continuously during the summer and early fall. US economy played a fair role in turning the pace of growth moderately upwards. A week ago positive news came both from the industrial production and from consumer spending. With conflicting drivers, the efforts of resolving the troubles of the Euro-zone could be the decisive element in the near-term US economy. Success would support also the US growth whilst a failure could still defuse the recovery.

Europe – Euro-zone economy appears to have contracted for the third month in a row in November. The fears of the Euro-zone breaking up increased last week. That scare appears to have brought with it positive reactions. Standard and Poor’s added fuel to the fire by announcing that they were planning to mass downgrade Euro-zone countries if the leaders’ summit next Friday could not find a convincing way to solve the crisis. As a first positive step, Italy and Greece have approved austerity plans and interest rates immediately fell, in Italy by almost a full percentage point.

Japan – Continuing rebuilding programs support economic growth but obviously not enough. Enterprises are facing difficulties with costs still moving up, even if more and more moderately, but selling prices, on average, heading lower. Manufacturing moved back into recession-territory. Order backlogs shortened in the service sector. This was, in fact, the first clearly negative monthly reading from services since April.

China – Growth is beginning to sputter also in the world’s fastest growing major economy. If the Euro-zone were to disintegrate, that would have very severe consequences in China’s still very much export-driven economy. But, if the export sector continues to lose jobs, domestic consumption starts suffering very quickly, too. The idea of Chinese large reserves being used to rescue Europe is unlikely to fly as both sides see that as a politically very unpopular move.

Paper industry – In the US, declines in printing and writing paper demand were smaller in October than in the previous months. In Europe, large declines continued to be registered with the weakening of the general economy showing its impact on paper consumption, both in the deliveries themselves and in the desire to draw the stocks down further. In China, demand continues to grow but the recent capacity increases have clearly outpaced the demand growth and the oversupply situation threatens to persist. Early 2012 paper price negotiations are getting on the way. Few producers have come out in public with their pricing initiatives. There are drivers both supporting the price rise inspirations and those trying to pull prices lower from the present level or, at least, preventing the rises. Euro has weakened a bit, helping exports and thus improving regional balance.

NBSK pulp Europe – Weak shipment volumes in October, low capacity utilization rates, moderately risen inventory levels, the wide price differential between softwood and hardwood grades and the slight strengthening of the USD have all contributed to the persisting downward pressures on prices. EUR strengthened by 2.1% against USD from the previous week. Our PIX NBSK index continued to fall, this time by 16.29 dollars, or by 1.87%, and closed at 853.33 USD/ton. With the weaker USD, the PIX NBSK index, converted into Euro, moved down by 25.78 euro, or by 3.92%, ending at 631.58 EUR/ton.

BHK pulp Europe – Printing and writing paper demand falling in Europe in October has obviously some impact on market pulp demand. Fibria has announced a price of 730 USD/ton, well above the recent PIX-index values. Downtime is being taken in some cases but at least October production was above demand and inventories at producers moved up. EUR strengthened by 2.1% against USD from the previous week. With the dollar-weakening, the PIX BHKP index-value in EUR retreated by 20.83 Euro, or by 4.14%, and closed at 482.00 EUR/ton. The PIX BHKP index value in USD lost 13.96 dollars, or 2.1%, and closed at 651.23 USD/ton.

BHK pulp China – Risen prices of wood at the same time as the price of pulp has fallen have turned the Chinese integrated (and market pulp) mills buying imported chips for their pulp production unprofitable compared to the price of imported pulp. Price decline continued at a moderate pace. The PIX China BHKP retreated this time by 7.45 USD/ton, or by 1.3%, and closed at 565.31 USD/ton. Yuan strengthened by 0.5% against USD, compared to a week ago. The conversion of the USD value into Yuan resulted in a drop of 64.31 RMB, or by 1.76%, to 3585.83 RMB/ton.

NBSK pulp China – While the sales activity appears to have gone up also in BSKP, the change of pace is less marked than in BHKP. Downtime taken in the packaging sector and the still above average price differential to hardwood pulp both restrict the buying spree. Our PIX China NBSK index retreated by 15.48 USD, or by 2.26%, and closed at 669.17 USD/ton. Yuan strengthened by 0.5% against USD. The conversion of the USD value into Yuan meant a decrease of 118.57 RMB, or 2.7%, to 4244.63 RMB/ton.

Newsprint – October statistics were weak. This time the declines against October 2010 included also exports. The plans for temporary layoffs by UPM in Finland in early 2012 would include also newsprint. That comes on top of the decided closure of one newsprint machine. The EUR strengthened against the weighted basket of non-EMU currencies by about 0.2%, which had a negative effect on the index. However, the PIX Newsprint benchmark moved up slightly, i.e. by 35 cents, or by 0.07%, to 510.98 EUR/ton.

LWC – Coated mechanical paper fell in North America by 5.6%, according to PPPC. Regional shipments, as well as imports to North America declined. European statistics were fairly similar with export supporting total shipments down by 4.6% but the estimated regional demand down by as much as 8.6% for the month, against October 2010. In addition to already decided capacity closures by UPM, both in Finland, and on the Continent, UPM is planning substantial temporary shut-downs in 2012. The approximately 0.2% strengthening of the EUR against the weighted basket of non-EMU currencies pressed, theoretically, our benchmark downwards. In spite of this, the PIX LWC index gained 66 cents, or 0.1%, and closed at 701.04 EUR/ton.

Coated woodfree – October was a relatively better month for coated free sheet in North America than most of the prior months. Total North America shipments were down but only by 1.8% against October 2010. With imports and inventories at producing mills down, the operating rate was as high as 98%. In Europe, CEPIFINE reported big declines in exports but unchanged European demand. The 0.2% strengthening of the Euro against the weighted basket of non-EMU currencies played a role in pulling the benchmark lower. The PIX Coated Woodfree index value fell by 1.99 EUR, or by 0.3%, to 712.32 EUR/ton.

Uncoated woodfree – Declines continued in North America in October at similar rates to the Q1-Q3 monthly average. Total shipments, imports and estimated demand for uncoated free sheet all retreated again by about 4% or slightly more. In Europe, the downward trend in uncoated woodfree paper grades was similar to that seen in North America for the month of October; 3% down for total shipments, 5% down on the regional demand but 11% up for exports.The approximately 0.2% strengthening of the Euro against the weighted basket of non-EMU currencies meant a downward pressure on the benchmark. Our PIX A4 B-copy index lost 5.22 EUR, or 0.6%, and closed at 870.91 EUR/ton.

Containerboard Europe – The weakening of the demand has continued on both the regional and export markets. Inventories moved up over the first 10 months of the year. Recovered paper prices have been heading south which has added to the downside pressures also in containerboard prices. The currency movements also increased the downside pressures on our packaging indices as the euro strengthened by 2.1% against the USD and by about 0.2% against the weighted basket of the non-EMU currencies. Our PIX Kraftliner index retreated by 3.78 euro, or by 0.7%, to 547.56 EUR/ton. The PIX White-top Kraftliner index fell by 2.74 euro, or by 0.35%, and closed at 779.38 EUR/ton. Our PIX Testliner 2 index declined by 3.74 euro, or by 0.8%, settling at 453.48 EUR/ton. PIX Testliner 3 index dropped less, i.e. by 2.49 euro, or by 0.58%, landing at 423.43 EUR/ton. Our PIX RB Fluting index declined by 3.61 euro, or by 0.87%, to 412.15 EUR/ton.

Recovered paper Europe – The reduction of consumption of packaging products in Europe has started to reduce also the collection potential. The Chinese buyers are back now but the supply still exceeds demand. Inventory reductions at the consuming mills, typical at this time of the year, and the falling chemical pulp prices add to the downward pressures on RCP prices. Demand tends to go down in China just before the turn of the year with the Chinese New Year approaching. The PIX OCC 1.04 dd benchmark lost 3.44 euro, or 2.9%, and closed at 115.91 EUR/ton. The price gaps between end product and raw material were mixed. Against Testliner 2, the gap narrowed by 30 cents to 337.57 EUR/ton and against Testliner 3 it grew by 95 cents to 307.52 EUR/ton. Against RB Fluting the gap declined slightly, i.e. by 17 cents to 296.24 EUR/ton. Our PIX ONP/OMG 1.11 dd index retreated by 4.23 euro, or by 3.0%, landing at 138.50 EUR/ton. As the PIX Newsprint benchmark inched up, the differential to PIX ONP/OMG 1.11 widened by 4.58 euro to 372.48 EUR/ton.

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