September world pulp producer stocks drop by three days, to 38 days on 100% shipment-to-capacity rate, month-over-month shipments up 12.8%

LOS ANGELES , October 21, 2011 () – Forestweb Editor’s Note: This report has been expanded from the originally posted version.

World 20 chemical market pulp producer stocks fell by three days in September from August, to 38 days, according to statistics released today by the Pulp and Paper Products Council (PPPC).

Shipments of 3.844 million tonnes, the second-highest level of the year, were 12.8% ahead of August and 5.8% higher than those of September 2010. The September 2011 shipment-to-capacity rate was 100% whereas the August 2011 rate was only 85%; September 2010’s was 97%.

Shipments to China and Europe showed healthy month-over-month gains; the PPPC noted that shipments to China hit the fourth highest level in history. Shipments to all regions were up in September over August except for Japan and Oceania and all showed year-over-year gains except for Western Europe and Latin America.

Producers’ stocks of bleached softwood kraft pulp (BSKP) fell by two-days, to 32 days, and their bleached hardwood kraft pulp (BHKP) stocks dropped by six days, to 44 days (standard calculation).

In August, the production-to-shipment rate was 91%, while in September 2010, it was 94%. For the first three quarters of 2010, it was 93%. Figures for September of this year and for the first nine months of this year are not yet available.

Analyst reaction. The decrease in September producer stocks was a surprise in some quarters, given the ongoing pulp price declines and anecdotal information about reduced demand. In their research notes today, paper and forest products industry analysts were positive about the results, but remained cautious.

The statistics “were surprisingly strong, but the data is backward-looking – there has been a significant negative shift in market sentiment in recent weeks,” TD Securities analyst Sean Steuart commented today.

RBC Capital markets analyst Paul Quinn wrote that the September results were better than expected but that the market remains oversupplied in both softwood and hardwood pulp. He described balanced market levels at ~30 days for softwood and ~38 days for hardwood.

Vertical Research Partners analyst Chip Dillon observed that while the three-day overall inventory drop is deeper than the average 1.5 days of the previous 10 years, the 38 days of supply is nevertheless 15% more than the 33 days seen on average in September over the past 10 years. He noted that global producer inventories remain near a three-year high.

Shipments results. Year-to-date shipments of all grades reached 31.740 million tonnes, up 4.7% from the first three quarters of 2010. This year’s shipment-to-capacity rate was 90%, compared to 91% for the year-ago period. BSKP year-to-date was up by 6.0%, to 15.181 million tonnes on a 92% shipment-to-capacity rate (the PPPC said the expansion was on a 57% increase in sales to China) and BHKP rose by 3.2% year-to-date, to 14.571 million tonnes, on an 89% rate.

The September shipments to regions were as follows (respective month-over-month and year-over-year percentage differences in parentheses): North America - 669,000 tonnes (6.2%, 7.2%); Western Europe - 1.235 million tonnes (13.1%, -8.3%); China - 934,000 tonnes (21.0%, 36.0%); Eastern Europe – 75,000 tonnes (13.6%, 13.6%); Latin America – 263,000 tonnes (7.3%, -3.0%), Japan – 167,000 tonnes (-11.2%, 0.6%); Other Asia/Africa – 475,000 tonnes – 23.7%, 6.5%); Oceania – 26,000 tonnes (-16.1%, 4.0%).

Shipments year-to-date to regions were as follows (year-to-date percentage differences in parentheses): North America – 5.561 million tonnes (-2.7%); Western Europe – 10.974 million tonnes (-1.7%); China – 6.569 million tonnes (36.7%); Eastern Europe – 664,000 tonnes (0.4%); Latin America – 2.266 million tonnes (-2.7%); Japan – 1.554 million tonnes (4.1%), Other Asia/Africa 3.917 million tonnes (0.7%); Oceania – 236,000 tonnes (4.0%).

Shipments of BSKP totaled 1.860 million tonnes in September, with a shipment-to-capacity rate of 97%; the total was up by 7.6% from August and by 4.2% from a year ago. Deliveries of BHKP of 1.870 million tonnes jumped by 19.3% year-over-year and rose by 8.8% month-over-month; the shipment-to-capacity rate was 104%, bleached eucalyptus kraft pulp’s (BEKP) 108% rate accounting for all of the increase.

Shipments of unbleached kraft pulp (UKP) of 99,000 tonnes rose by 1.0% month-over-month but fell by 16.1% year-over-year. There were 15,000 tonnes of sulfite pulp shipped, compared to 14,000 tonnes in August and 11,000 tonnes in September 2010.

Northern bleached softwood kraft (NBSK) shipments in September totaled 1.111 million tonnes, up by 12.1% month-over-month and by 11.9% year-over-year. Southern bleached softwood kraft (SBSK) deliveries of 522,000 tonnes rose by 3.4% from August and by 6.1% from a year ago. Bleached radiata kraft pulp (BRKP) shipments of 227,000 tonnes fell by 2.5% month-over-month and by 24.6% year-over-year.

BEKP shipments of 1.419 million tonnes rose by 23.1% in September over August but fell by 12.5% from September 2010. Northern bleached hardwood kraft (NBHK) shipments were 288,000 tonnes in September, up 6.7% month-over-month and up 0.7% year-over-year. Southern bleached hardwood kraft (SBHK) shipments totaled 163,000 tonnes, or 12.4% higher than in August but 4.7% lower than in September 2010.

For the first three quarters of 2011, producers shipped 9.436 million tonnes of NBSK, up 6.6% from the year-ago period; 4.489 million tonnes of SBSK, up 3.6%, 2.169 million tonnes of BRKP, up 8.4%, 10.639 million tonnes of BEKP, up 3.6%, 2.565 million tonnes of NBHK, up 3.4%, and 1.367 million tonnes of SBHK, down 0.5%.

Days of supply. Using the standard calculation, the 38 days of supply in September compared to 41 days in August and 39 days in July; the September 2010 figure was 32 days. For BSKP, the figure of 32 days in September was down two days from August but unchanged from July; it was five days higher than a year ago. For BHKP, the 44 days compared to 50 in September, 48 in July, and 38 in September 2010.

The seasonally adjusted calculation had the same September 2011 days of supply as the standard calculation (38 for the total, 32 for BSKP, 44 for BHKP. For the total, the figures were 40 in August, 39 in July, and 33 in September 2010. BSKP was 33 days in August, 32 days in July, and 26 days in September 2010. BHKP was 48 days in both August and July and 40 days a year ago.

Raw data. In the previous 10 years, September stocks averaged 3.395 million tonnes, dropping by an average 127,800 tonnes (the five-year average decrease was 73,400 tonnes). (This includes the PPPC’s revised September 2010 figure today of 3.552 million tonnes.) TD Securities’ Sean Steuart estimated the September 2011 inventories fell by 256,000 tonnes and Vertical Research Partners’ Chip Dillon estimated a 121,000 tonne drop.

The PPPC said today that the August 2011 producers’ inventories totaled 4.640 million tonnes, up 229,000 tonnes from July. In the previous 10 years, August stocks totaled 3.522 million tonnes on the average, increasing by an average 101,400 tonnes (the five-year average increase was 144,600 tonnes).

Looking ahead, the 10-year averages include 3.403 million tonnes in October, up 6,000 tonnes (up 92,200 tonnes on the five-year average); 3.449 million tonnes in November, up 46,400 tonnes (five-year: up 26,600 tonnes), and 3.370 million tonnes in December, down 78,100 tonnes (five-year: down 66,400 tonnes)

World 20. The world pulp figures are sometimes referred to as the "World 20," representing 80% of world capacity and including the stocks of Argentina, Austria, Belgium, Brazil, Canada, Chile, Finland, France, Germany, Japan, Morocco, New Zealand, Norway, South Africa, South Korea, Spain, Swaziland, Sweden, Uruguay, and the U.S.

The monthly world figures do not represent 100% of world capacity because they do not include stocks for the major producing countries of Portugal, Indonesia, and Russia, or those for Thailand, Taiwan, Switzerland, and the Czech Republic.

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