Fibria increases December eucalyptus pulp list price in Europe to US$730/tonne, followed by Ence; November market mostly in the mid-US$600s/tonne or so

Diane Keaton

LOS ANGELES , November 29, 2011 (Industry Intelligence) – Bleached eucalyptus kraft pulp (BEKP) producer Fibria Celulose SA in Brazil has told customers in Europe that its December price will be US$730 per tonne, according to market sources.

Fibria, the world’s largest BEKP producer, made the announcement yesterday.

This was followed by BEKP producer El Grupo Empresarial (Ence) of Spain, which began notifying customers today, according to a knowledgeable source.

The effective November BEKP list prices in Europe are largely down $30/tonne, mostly to between $650-$680/tonne. Most pricing in Northern Europe is around $660-$670/tonne but some is at $680/tonne and some may be as low as $650/tonne. Business in Italy for large-scale buyers is around $660/tonne, while smaller buyers are at $670-$680/tonne, said a sales executive for a BEKP supplier this week, but a consultant said the price in Italy could drop to $640-$650/tonne by the time business closes at the end of the month.

Given current market conditions, pulp players see the Fibria move as a defensive tactic against further price drops rather than one that will lead to a price increase in December.

The aforementioned BEKP supplier said it is “absolutely useful for stopping the market collapse” as well as for helping close business for November. “We think this is the moment of stopping this drop. The fundamentals of the industry are not that bad,” he said. The price collapse was driven by the political and economic issues in Europe, “not really the lack of demand for pulp,” he said.

Also, he said, certain major BEKP producers in Brazil cannot go below $600/tonne because of their various costs.

In a research note today, paper and forest products industry analyst Chip Dillon wrote, “We see this move more as an attempt to stop the relentless erosion seen since mid-year, when BEK prices crested for several months at about $875/tonne…We see Fibria’s move as a reasonable sign that market pulp prices, at least for hardwood grades, are near a bottom.”

Dillon added that “as bad as the Euro debt-related headlines are, demand in that and other regions is not falling off a cliff as we saw during the ‘great recession,’” when prices temporarily sank to the low $500s/tonne in Europe.

Also once respective softwood and hardwood pulp prices fell last year to below $700/tonne and $600/tonne, “producers seemed to largely turn off their mills, allowing inventories to quickly plummet and prices to rocket in the second half of 2009 (despite the still-weak economy),” Dillon wrote.

Fibria’s most recent price announcement for Europe was when it dropped its August list price by $30/tonne, to $820/tonne.

BEKP producers have not announced list prices since then, as the market has continued to erode month-over-month.

Fibria’s BEKP capacity is 5.35 million tonnes/year.

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