FOEX Pulp & Paper Indices - Oct. 25, 2011

Kendall Sinclair

HELSINKI , October 25, 2011 (press release) – US NBSK – During the first three quarters of 2011, while the global shipment data was positive, according to PPPC, the shipments to the North American market were for the first nine months. The global and local pressures on prices continued during October and the list prices dropped generally by 20 USD per ton. On the other hand, the large pulp production shutdowns continued in October and alleviated the imbalance on the market. Our PIX US NBSK index dropped further by 1.43 USD per ton, or by 0.15%, and closed at 950.47 USD/ton.

US Newsprint – PPPC figures report North American newsprint shipments down by 10% in September against 2010. It is noteworthy, that the average mill operating rate was as high as 99% in September, and at the same time mill inventories in September had come down by about 16% from August. While total shipment figures declined in the month, exports grew against last year, apparently contributing to the inventory decline. The PIX US Newsprint 30lb index lost 6 cents, or 0.01% and closed at 623.81 USD/ton while the 27.7lb index lost 4 cents, or 0.01%, landing on 664.58 USD/ton.

General economy: US –Few believe that US economy will slide back to a recession but even fewer believe in a fast or even moderate growth. Growth will be there but it will remain slow for some time. Growth in the US will be constrained next year mainly through domestic fiscal contraction. The Fed is expected to help create more stimuli, with housing as one of the most likely targets. A livelier housing market would be one of the best ways to create both new jobs and to increase private consumption.

Europe – Little was achieved in the political arena in solving the Euro-crisis over the week-end but hopes remain over a more comprehensive solution on Wednesday. The Euro-zone may already be in a recession but two consecutive quarters of negative growth are needed before the definition of a recession is met. The weakness has spread from the periphery to the core with French service sector and the German manufacturing growth stalling - or even falling. The slow decision-making in the efforts to prevent Greece from going bankrupt has only worsened the matters.

Japan – The growth in Japan has been so slow and the drop registered in 2009 was so steep that even if the Japanese economy grew again in 2010, the real GDP in 2010 was still lower than what it had been 18 years earlier in 1992. The appreciation of the Yen remains a major problem and the Japanese government and the BoJ are actively searching for solution in order to depreciate the Yen-value, at least against the USD, the Yuan and a number of other East-Asian currencies. The rise of Yen to a record high against the USD will, most likely, continue to hurt exporters' profits and hold back the general economic recovery.

China – According to preliminary numbers, the Chinese economy grew by as much as 9.1% still in Q3 2011. Manufacturing output rose back into the expansionary territory during October marking the first rise in the index since four months. Simultaneously, the inflation parameters (within these same PMI results) registered a stable growth in output prices but a slowing down of the input price inflation. These data suggest that the risk of a hard landing in China is either non-existent or at least very low.

Paper Industry – The American Forest & Paper Association, AF&PA, has revealed some key statistics over the printing & writing papers in September. Total shipments decreased for the month by 8% against last year. The major grade groups showed all declines in the month. Another point made, was that total printing & writing paper inventories decreased in September by 2% from August. The Pulp and Paper Products Council, PPPC, says that North American newsprint shipments were down by 10% in September against 2010, so the printing papers sector on total showed overall continued declines in shipment figures. European data over September is still due, but the general sentiment for September has poured out in various market comments as that of a slower upturn than expected from the summer months to the usually busier autumn.

NBSK pulp Europe – September pulp statistics from PPPC came out with, somewhat surprisingly, a clear drop of producers’ stocks. Contrary to the slowdown in paper demand growth, the pulp shipments have advanced well in the first three quarters, up by 4.7% for total shipments and by 6% for BSKP grade. Above normal pulp mill maintenance downtime in September played a role, too, in the decrease of stocks. In spite of the positive September pulp statistics, in October the market weakening continued and prices were under pressure. EUR weakened by 0.1% against USD from the previous week. Our PIX NBSK index continued to decrease, this time by 5.81 dollars, or by 0.6%, and closed at 922.03 USD/ton. The PIX NBSK index in EUR decreased by 3.78 euro, or by 0.56%, converting to 668.23 EUR/ton.

BHK pulp Europe – The September statistics by the PPPC were very positive for BHKP in spite of the worsening outlook for printing and writing paper demand and shipments in Europe. The fact that hardwood stocks were still six days higher than a year ago, or on average in September long-term, has pressed the prices and kept the market sentiment weak in October. EUR weakened by 0.1% against USD from the previous week. The PIX BHKP index-value in EUR fell by 5.18 euro, or by 1%, and closed at 534.42 EUR/ton. The PIX BHKP index value in USD lost 7.64 dollars, or 1%, and closed at 737.39 USD/ton.

BHK pulp China – Pulp shipments to the Chinese market were stronger again in September, according to PPPC. The shipments of market pulp to China grew in September from August. Reports from the market suggest, however, that the demand has remained slow in October and the pressure on prices has continued, both in softwood and in hardwood. The PIX China BHKP index continued to decrease, this time by 6.32 USD, or by 1%, and closed at 637.06 USD/ton. Yuan remained almost unchanged against USD compared to a week ago. The conversion of the USD value into Yuan resulted in a drop of 40.39 RMB, or by 1%, to 4068.54 RMB/ton.

NBSK pulp China – China has had a major influence in the strong total shipments of BSKP so far this year. Continuing need for downtime at paper mills and tight credit conditions are keeping the pulp markets in slow motion and pressing the prices further down. Our PIX China NBSK index retreated by 6.81 USD, or by 0.85%, and closed at 796.05 USD/ton. Yuan remained almost unchanged against USD compared to a week ago. The conversion of the USD value into Yuan meant a decrease of 43.52 RMB, or 0.85%, to 5083.92 RMB/ton.

Newsprint – The signals from the European newsprint market are very mixed, judging from recent news stories, as producers on one hand claim their need for further improved prices in the negotiation round for next year’s business, and buyers on the other hand have voiced standpoints of prices staying on current levels or declining. Sounds like a very typical setting for the initial discussion scene. The EUR weakened against the weighted basket of non-EMU currencies by about 0.7%, which had an upward impact on the index. The PIX Newsprint index improved by 62 cents, or 0.12%, to 510.11 EUR/ton.

LWC – Coated mechanical papers appear to be in fairly good demand around mid-October. Latest pulp producer inventories of paper grade pulps declined in September by 3 days’ worth of supply, maybe indicating either livelier intake by pulp clients, or the effects of pulp production downtime, or a combination of both. The currency effect of a roughly 0.7% weakening of the EUR against the weighted basket of non-EMU currencies created a positive force on the benchmark. The PIX LWC index inched up by 31 cents, or 0.04%, settling at 698.60 EUR/ton.

Coated woodfree – The woodfree coated papers market in Europe is regarded mediocre, concerning recent paper consumption and successes of latest price improvement attempts, except for the UK market, where some improvement to coated woodfree paper prices has been reported, as of recent. The 0.7% weakening of the Euro against the weighted basket of non-EMU currencies had a positive effect on the index. The PIX Coated woodfree index moved up by 1.16 EUR, or by 0.16%, to 713.63 EUR/ton.

Uncoated woodfree – The uncoated woodfree paper market in Europe lingers on in same moods as it has for the past months. At least on an average perspective, as sentiments of both improved order intake at paper mills, as well as news bits about good availability and fast deliveries are being heard of. Recent efforts to improve uncoated woodfree paper prices have apparently given mixed results. The roughly 0.7% weakening of the Euro against the weighted basket of non-EMU currencies tried to push the index upwards. The PIX A4 B-copy index slipped modestly, or by 47 cents, or 0.05%, and closed at 877.85 EUR/ton.

Containerboard Europe – US corrugated box shipments fell by just 0.4% in September compared to a year ago. Inventories increased by 42 000 tons but they remain still at low level historically. Linerboard exports declined in September, for the first time since February. In Europe, declined prices were reported to us for October business except for white-top kraftliner. The currency development had a small upward push on our benchmarks as the Euro weakened against both the USD (by just 0.1%) and the weighted basket of the non-EMU currencies (by about 0.7%). Our PIX Kraftliner index ended up losing 69 cents, or 0.12%, closing at 563.71 EUR/ton. The PIX White-top Kraftliner index gained 2.59 euro, or 0.33%, to 787.11 EUR/ton. Our PIX Testliner 2 index went up by 10 cents, or by 0.02%, to 478.59 EUR/ton. PIX Testliner 3 index lost 7.40 euro, or 1.64%, settling at 443.66 EUR/ton. Finally, our PIX RB Fluting index fell by 3.56 euro, or by 0.8%, to 435.97 EUR/ton.

Recovered paper Europe – Export prices to China and other Asia have been higher now than the mill prices in Europe, although they have declined recently. Downtime has been taken at containerboard mills in Europe to fight the prevailing over-capacity. Based on last week’s quotes our OCC 1.04 index went down by 3.56 euro, or 2.56%, settling at 135.73 EUR/ton. The price differentials to containerboards were mixed this time: against Testliner 2 the gap widened by 3.66 euro to 342.86 EUR/ton, but it shrank against Testliner 3 by 3.84 euro to 307.93 EUR/ton, and remained unchanged against RB Fluting at 300.24 EUR/ton. Our PIX ONP/OMG 1.11 dd index declined by 3.81 euro, or 2.3%, to 160.53 EUR/ton. As the PIX Newsprint benchmark gained, the differential to PIX ONP/OMG 1.11 widened by 4.43 euro to 349.58 EUR/ton.

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