FOEX Pulp & Paper Indices - Feb. 28, 2012
February 28, 2012
– US NBSK – Market pulp shipments to the North American market were in January, according to PPPC, down by just under 2% against January 2011. Even though the decline continued, the drop was smaller than what the weakness of the graphic paper sector would have indicated. But, with tissue sector now the key demand driver and with further substitution of BSKP by BHKP, the softwood pulp demand continues to fall faster than the total market pulp demand. Regular paper grades BSKP supply is, however, down as well with Terrace Bay closed and with southern pine pulps continuing to be converted into fluff pulp. Fluff market is seeing again cautious improvement in demand, after a temporary – inventory change-related? – lull in shipments in late 2011- January 2012. Our PIX US NBSK index remained unchanged at 870.00 USD/ton.
US Newsprint – NAA reported the consumption of newsprint in the US dailies down by 11% in January. PPPC showed domestic shipments (including also other end-uses than dailies) down by 8%. Capacity utilization rate was recorded at 90%. After the conversion of a large machine from newsprint to packaging products, production capacity has continued to decline. Price pressures are downward from the demand side but up from the cost point-of-view. The PIX US Newsprint 30lb index fell by 1 cent, or by 0.00%, to 623.14 USD/ton, as did the 27.7lb index as it retreated by 1 cent, or by 0.00%, to 663.90 USD/ton.
General economy: US – Most of the analysts and a growing part of the US consumers believe that the US recovery will not only continue but it will even pick up some more momentum. Consumer sentiment indicators inched up again in February, after a minor drop in January, giving proof that the households are growing more confident about the economy's resilience. Part of the news received in February has not been fully encouraging, however. Housing remains muted with new home sales down in January. On the other hand, upward revisions to the prior months' data and a reduced supply maintain hopes of a turn-around. US unemployment rate fell to 8.3 per cent in January but the mid-month Gallup in February suggests a threat of a rebound. Fed’s super-easy monetary policy continues but a further easing, e.g. in form of the third round of major bond purchases, is expected – and justified - only if economic conditions start worsening anew.
Europe – The agreement over the Greek bailout money gave some confidence on the markets and led to a re-strengthening of the Euro, somewhat surprisingly as the economic outlook remains dismal and also unfortunately as the Euro-zone’s chances of getting out of the crisis would be easier if the long period of over-valued currency came to an end. The Euro-zone PMI (byMarkit) retreated back below the 50-point level, underlining the risks of the Euro-zone already being in a second phase of a recession, even if the economies of the region appear to be stabilizing – at a reduced level of activity. Consumer demand within the Zone and the export volumes need to recover a lot in the coming months and the ECB stimulation measures need to continue to draw the region back into a reasonable growth. The latest forecasts peg the Euro-zone economic growth slightly negative both for Q1 and for the year as a whole. In the UK, the second phase of the recession seems less likely than in the Euro-zone.
Japan – Export volumes were down over 2% in January and the current account deficit probably set a new all-time one-month record with also the service sector negative. But, a surplus is again expected in February-March. Recent further upward pressures on the Yen appear to be easing. Many analysts believe that the start of the depreciating is at hand and a move back below 80 Yen against the USD is likely. It appears that the private consumption fell slightly in Q4 2011 but is recovering in Q1 2012. Consumer sentiment indexes continue to move back and forth. Housing starts are deteriorating. Corporate sentiments as well as the corporate capital expenditures are both down. Increases in public spending and in industrial production, the latter an “automatic” rebound from the Thai flood depressed levels, support employment but without any major signs of recovery from that sector either. Despite many negative indicators at present, Japanese GDP is still projected to grow by nearly 2% in 2012 with manufacturing and exports as the key drivers.
China – China’s manufacturing PMI (flash report by HSBC) rose to 49.7, the highest monthly index value since September 2011 but still marginally below the 50-point level. This means that the economic growth is likely to slow down further. Among the key indicators, industrial output, order backlogs and input prices remain unchanged. The arrival of new orders, both domestically and for exports, as well as output prices are contracting. Employment and the stocks of the finished goods are expanding. The growth in domestic demand is mainly based on still excessive investments and the growth in consumer demand is not sufficient to compensate fully the weaknesses experienced in the external demand. Inflation rate picked up over the Lunar New Year holiday season but is projected to moderate again soon. Central Bank’s policy easing is expected to be speeded up as soon as those inflation pressures begin to fade away.
Paper industry – January turned out to be, as expected, yet another weak month in paper shipments in the US as well as in Europe. The US shipments of printing and writing papers were down, depending on the grade, between 1.3% (coated free sheet) and 18% (uncoated groundwood). Packaging sector did a bit better with box shipments up by 2.3% against January 2011. Containerboard production was down by 0.5% but operating rate still good at over 95% for the containerboard total. In Europe, most of the data is not out yet. EUROGRAPH/CEPIPRINT did come out with wood-containing paper data. Estimated European demand for all wood-containing grades, including newsprint, was down by 2.5%. Exports increased nicely, however, and the 14% gain registered helped the total shipments to only a marginal drop of 0.2%. The most positive result was shown by SC-grade where estimated European demand was up by nearly 13% from January 2011. Price pressures have continued on the downside and minor reductions have been seen for the level at the turn of the year. In some grades, producers have forewarned their customers of the need for price increases in March-April, due to the rising fibre costs.
NBSK pulp Europe – Producers’ stocks of market pulp were flat at 34 days in January. Seasonally adjusted, stocks came down by one day. For softwood pulp, producer stocks came down by 3 days and seasonally adjusted by as much as 5 days. As consumer stocks and port stocks in Europe also fell, the total inventories in the supply chain were also reduced. Market pulp shipments were very poor for Europe with an 8% decline against January 2011. Total shipments were, however, up by 3% and market BSKP shipments advanced over 5% against January 2011. Shipments represented 95% of BSKP production capacity. EUR strengthened by 1.9% against USD from the previous week. Our PIX NBSK index retreated this time, even if only slightly, i.e. by 32 US cents, or by 0.04%, and closed at 830.10 USD/ton. Converted into Euro, with the clear strengthening of the currency, the index fell by 12.15 euro, or by 1.93%, to 618.92 EUR/ton.
BHK pulp Europe – Producer stocks moved back up by 2 days without and by 1 day with seasonal adjustment. Shipments were one per cent higher than in January 2011. Shipments represented less than 85% of capacity. Price increase initiatives were taken by several BHKP market pulp producers, at least so far predominantly those from Latin America. The hikes announced in Europe were typically 30 USD/ton which would bring the BEKP price to 760 USD/ton. These announcements are said to be effective from March 1. EUR strengthened by 1.9% against the USD. The PIX BHKP index-value in EUR retreated by 4.19 Euro, or by 0.77%, and closed at 538.55 EUR/ton. The PIX BHKP index value in USD rose by 8.11 USD, or by 1.14%, and closed at 722.30 USD/ton.
BHK pulp China – Pulp shipments to China were substantially down from the record level seen in December but still quite good, 14% higher than in January 2011, according to PPPC. Pulp intake from ports to consumers was, however, down according to Chinese import statistics by as much as 17%. But for BHKP, the pulp intake was up by nearly 4%. Delays in shipments of hardwood pulp from Indonesia showed clearly with an 18% drop against January 2011 whilst imports from Brazil were up by nearly 50%. The PIX China BHKP continued to move up, this time by 5.89 USD, or by 0.98%, and closed at 606.04 USD/ton. Yuan weakened by 0.02% against USD. The conversion of the USD value into Yuan resulted in an increase of 37.67 RMB, or by 1.00%, to 3816.90 RMB/ton.
NBSK pulp China – Softwood pulp shipments to China appear to have been quite good, looking at the statistics from producers’ numbers. The intake was slow, however, according to the import statistics which showed a 22% drop against January 2011, most of it from Canada. The imports of NBSKP for textile use last year may well play a role in these comparisons. In China, also the BSKP producers are making an effort to raise prices. Our PIX China NBSK index value increased by 6.40 USD, or by 0.95%, and closed at 683.49 USD/ton. Yuan weakened by 0.02% against USD. The conversion of the USD value into Yuan meant an increase of 40.96 RMB, or of 0.96%, to 4304.68 RMB/ton.
Newsprint – EURO-GRAPH’s January statistics showed the estimated European demand down again, this time by 5.6%. Imports increased marginally against January 2011. Exports did well with a 17% gain over last year. This limited the drop in the total shipments to 3.3%. Production capacity is down, too, and will be further reduced when Follum’s newsprint machine closes down in March. Euro strengthened against the weighted basket of non-EMU currencies by about 1.4%, which caused some downward pressure to the benchmark. The PIX Newsprint index fell by 4.47 EUR, or 0.87%, to 509.41 EUR/ton.
LWC – In the US, January shipments in coated groundwood grade were down by just over 3%. In Europe, the decline was bigger as the numbers from EURO-GRAPH showed a nearly 6% drop in the estimated European demand. Exports did very well, however, rising nearly 26% higher than in January 2011. The export gain compensated fully the decline in the regional demand and Europe’s total shipments rose by 0.7%. With lower capacity now than in early 2011, LWC shipment-to-capacity ratio improved. The currency effect of a roughly 1.4% strengthening of the EUR against the weighted basket of non-EMU currencies had a down-pulling impact on our benchmark. The PIX LWC index moved south by 2.34 EUR, or 0.33%, to 702.33 EUR/ton.
Coated woodfree – In the US, coated paper import tariffs from China may soon (i.e. on March 5) be lifted, unless new legislation is quickly introduced to continue the countervailing duties on Chinese imports. Meanwhile, January coated free sheet shipments were down, but only by 1.3%. In Europe, the woodfree paper statistics for January are not out yet. Judging by the level of order books and by the low market pulp consumption volumes – down by 4% according to UTIPULP – the slackness of demand has persisted. The strengthening of the Euro against the non-EMU currencies had a negative effect on the benchmark. The PIX Coated woodfree index retreated by 3.45 EUR, or 0.5%, to 707.59 EUR/ton.
Uncoated woodfree – In the US, shipments were down in this grade by just 0.5%. Capacity exits continue in March (Wausau’s Brokaw and Domtar). Prices have still been slipping down, however. In Europe, January statistics are not out yet. Order books appear to have remained relatively healthy, after the demand drop of over 6% registered in 2011. The rise in both BHKP and recovered paper prices has prompted some of the suppliers to warn their customers of price increase needs. The approximately 1.4% strengthening of the Euro against the weighted basket of non-EMU currencies tried to pull the benchmark lower. Nevertheless, the PIX A4 B-copy index inched up slightly, i.e. by 48 cents, or by 0.06%, and closed at 859.80 EUR/ton.
Containerboard Europe – January statistics from the US were relatively good. While exports are facing difficulties, both volume and price-wise, the domestic activity was good enough to bring box shipments up by 2.3% from a year ago. With over 4% drop in linerboard exports, containerboard production was, however, down by 0.5%. In Europe, minor demand increases have been reported from some countries, mainly in the recycled grades. Prices of virgin kraftliner have come down over the first 8 weeks of the year. On the other hand, the prices of the recycled fibre based containerboards have turned the corner and have been moving up, driven especially by the rising costs of the OCC and other recovered fibre grades. Substantial price increases (60 euros or more) have been announced from March in virgin fibre kraftliner and up to 100 EUR in recycled grades in February/March. Last week, the currency movements did their best to pull our packaging benchmarks lower. Euro strengthened by 1.9% against the USD and by about 1.4% against the weighted basket of the non-EMU currencies. Our virgin packaging benchmarks headed both down whilst all the recovered paper based grades continued upwards. The PIX Kraftliner index lost 87 cents, or 0.17%, and closed at 513.72 EUR/ton. The PIX White-top Kraftliner index retreated by 2.32 euro, or by 0.30%, and closed at 759.89 EUR/ton. Our PIX Testliner 2 index continued to head north by 1.97 euro, or by 0.46%, and settled at 426.85 EUR/ton. PIX Testliner 3 index value rose by 3.07 EUR, or by 0.76%, and landed at 407.13 EUR/ton. Our PIX RB Fluting index headed higher by 2.47 euro, or by 0.63%, to 397.54 EUR/ton.
Recovered paper Europe – Demand pull from China remains good after the Lunar New Year holidays. At least the buying activity appears good. January import statistics were, however, down by 580 000 tons (25%) from January 2011, about half of the reduction in OCC. The combination of good export demand and soft supply conditions continue to drive up the prices for the export volumes. With export prices above the regional quotations, it is obvious that the upside pressures prevail also within the EU-market. The PIX OCC 1.04 dd benchmark moved up by 2.21 euro, or by 1.73%, and closed at 130.27 EUR/ton. The price gaps to containerboard prices all narrowed. Against Testliner 2, the gap shrank by 24 cents to 296.58 EUR/ton. Against Testliner 3, the differential widened by 86 cents to 276.86 EUR/ton. Against RB Fluting, the gap grew by 26 cents to 267.27 EUR/ton. Our PIX ONP/OMG 1.11 dd index headed higher, too, but only more marginally, i.e. by 15 cents, or by 0.12%, landing at 125.78 EUR/ton. The differential of newsprint to PIX ONP/OMG 1.11 narrowed by 4.62 euro to 383.63 EUR/ton.