More softwood and hardwood pulp price increase announcements set stage for April global markets; Q2 expected to be solid for producers

Diane Keaton

LOS ANGELES , April 1, 2012 (Industry Intelligence) – April price plans coalesced in the last week of March with announcements for northern bleached softwood kraft (NBSK) pulp for Europe and for North American-produced bleached hardwood kraft pulp (BHKP) for domestic customers adding to earlier announcements for other grades or regions.

There were also announcements supporting what other producers had said they were slating for various grades or regions.

“March was another strong month, particularly for hardwood but softwood is shaping up,” said a sales executive for a major pulp producer.

The European NBSK producers’ announcements for Europe did not come until a week and a half after other NBSK producers had already announced April 1 price increases for North America and Asia. On March 26, Södra Cell AB of Sweden said it was going to a list price of US$870 per tonne, which was then followed by such European producers as Mercer International Inc., Metsä Fibre Oy (formerly Botnia), and Stora Enso Oyj.

The European producers did not specify the amount of their increases. But the new price is up $20/tonne from Södra’s announced March 1 price of $850/tonne, though it is not clear whether producers fully achieved the $850/tonne in March. On Friday, Canadian NBSK producer Canfor Pulp LP announced an April 1 $870/tonne price for Europe, describing it as a $20 per tonne increase. (On March 19, Canadian NBSK producer West Fraser Timber Co. announced a global $30/tonne increase but did not specify its price for Europe.)

Several major North American BHKP producers, Verso Paper Corp. Alberta-Pacific Forest Industries Inc. (Al-Pac), and Sappi Fine Paper North America on March 28 separately announced domestic northern bleached hardwood kraft (NBHK) price hikes for April. Verso is going up $30/tonne for maple grade, to $775/tonne, Al-Pac is up $20/tonne for aspen grade, to $755/tonne, and Sappi is up $30/tonne to $760/tonne for aspen and mixed grades and $770/tonne for maple grade.

In the previous week, Resolute Forest Products had announced no change from its $730/tonne list price for both aspen-based NBHK and for southern bleached hardwood kraft (SBHK). Also SBHK producer International Paper Co. (IP) did not announce a change for North America when it said it was raising its price in Asia by $30/tonne.

On March 30, Georgia-Pacific LLP (GP) announced it is increasing its April 1 SBHK price in North America by $20/tonne, to $750/tonne.

Also it said its new price of southern bleached softwood kraft (SBSK) for North America will be US$870 per tonne, up $30/tonne. Domtar Corp., too, said in recent days that it is raising its SBSK price by $30/tonne, but did it not specify the new level. A week earlier, Resolute had said its April SBSK price would increase by $10/tonne, to $860/tonne. For March, Resolute had announced a $20/tonne SBSK increase, to $850/tonne, but this was not supported by various key SBSK producers.

Domtar had led the April NBSK price hike announcements for North America, up $30/tonne, to $900/tonne, which has been followed by other producers across the board. (Domtar apparently has not announced April SBHK price changes.)

Meanwhile, three major Brazilian bleached eucalyptus kraft pulp (BEKP) producers, Fibria Celulose SA, Suzano Papel e Celulose SA, and Celulose Nipo-Brasileira SA (Cenibra) also are unchanged for April in North America, at $820/tonne, as well as in Europe, at $760/tonne, though they have announced a $30/tonne April 1 list price increase for Asia, to $670/tonne.

Chile’s Celulosa Arauco y Constitucion SA (Arauco) did not announce the Asia increase but has been closing business at the $670/tonne level in China, a company source said last week.

On the softwood pulp side, Arauco did formally announce price increases for China for bleached radiata kraft pulp (BRKP), up $20/tonne, to $700/tonne (net) and unbleached kraft pulp (UKP), up $10/tonne, to $630/tonne (net). This is in contrast to the $30/tonne announcements for NBSK for China, to $730/tonne (list) for standard grade and $740/tonne (list) for reinforcing grade.

Separately, late last week Arauco restarted two pulp mills it had shut down following a 7.1 earthquake on March 25 in the Maule Region where the mills are located. A company official said the mills were restarted after it was found that neither had suffered damage from the quake. The company’s 140,000 tonnes/year Licancel kraft pulp mill (half BRKP and half BEKP) restarted March 29 and its 355,000 tonnes/year Constitución UKP pulp mill restarted March 30. About 5,500 tonnes of UKP production were lost.

There is one known high-yield (bleached chemi-thermomechanical pulp, or BCTMP) announcement for April, from hardwood high-yield pulp producer Tembec Inc. in Canada, which said on March 23 it is going up $30/tonne in Asia.

North America announcements. There seems to be little doubt that the announced April 1 NBSK $30/tonne increase for North America, to $900/tonne, will go through.

The market for softwood and hardwood pulp is fairly stable, and there is some tightening of supply because of scheduled spring maintenance downtime.

Suppliers are trying “to grab what they can, call it a day” before the market slows in the summer, said a buyer, who meanwhile reported having no problem getting NBSK or BEKP.

As for the domestic announcements by North American BHKP producers, ranging from unchanged to increases of $20/tonne and $30/tonne, a buyer said, “It is very confused.” He said some suppliers are very adamant about the $30/tonne increase, while others are taking a wait-and-see attitude. He said hardwood pulp supply “really began tightening up” in the second week of March and that various suppliers don’t have any to spare. “My problem is I need the fiber,” he said, noting that his company, too, has a pulp mill shut coming up.

Some NBHK buyers were incensed about the price-hike announcements and protested openly to suppliers. One cited a rumor that a particular BHKP producer is intentionally holding volume back from the market and from regular customers “to create a story of tight supply.”

One of the arguments against the domestic BHKP producers’ April increase plans is that there were no April price increase announcements from BEKP producers, where the announced March 1 list price was $820/tonne, up $30/tonne. (Note: A typographical error in the originally posted version of this article showed the list price as $810/tonne.)

Others more sympathetic to suppliers note that there is still a wide gap between the price of BEKP and of North American-produced hardwood pulps. But a buyer complained that the domestic BHKP producers’ increases would lead BEKP producers to reduce their rebates, to the dismay of tissue producers.

(At the end of March, RISI Inc. showed the BEKP and North American-produced hardwood pulp prices rising by the announced $30/tonne. This put RISI’s prices at $800/tonne for BEKP, $730/tonne for aspen and mixed NBHK, and $740/tonne for maple NBHK.)

For the week ending March 24, FOEX Indexes Ltd. said the NBSK price in the U.S. remained unchanged at $870.00/tonne, where it has been since the week ending Feb. 4, except for the week ending Feb. 11, when it dropped by 6 cents/tonne.

FOEX said several factors point to a “cautiously improving pulp market balance in North America,” including supply reductions due to production shifts from paper grade to other pulps and to China’s continuing appetite for imported pulp. “Also slightly improved employment numbers and other somewhat brighter news from the U.S. economy are positively affecting the demand for various paper grades,” FOEX wrote.

Europe settles. European business for March was being finalized at the end of last week.

Industry sources have been saying for some weeks that the $30/tonne BEKP increase, to $760/tonne, was pretty much succeeding throughout Europe in April or in some cases that it might be stepped in during March-April. One South American supplier is said to have given a $5/tonne rebate off of the $760/tonne price in order to get rid of some additional volume.

But a sales executive for a BEKP producer said today that his company achieved the $760/tonne list price in March “without exception” and that he expects a $30-$40/tonne increase in May.

A market pulp consultant said that as of the end of March, the NBSK price in Northern Europe appeared to have settled in the $840-$845/tonne range. A stumbling block in achieving the announced price of $850/tonne is that the price in Italy, which he described as $820-$830/tonne, up $20/tonne, was still lower than that of the North.

One sales executive for a European NBSK producer said his company is struggling to fully achieve the $850/tonne price but that it is “not far off.”

Another such source said the range for his company was mainly $840-$850/tonne. As for Italy, he said his company concluded its business at $840/tonne. “It looks from a selling perspective that the NBSK market is tightening also in Italy, finally,” he said.

He said he expects the April $870/tonne NBSK price to be implemented during the month as maintenance shuts tighten supply. “We are already slowing down sales,” he said. And after April and before July-August he expects the price to move up another $20-$30/tonne.

For the week ending March 24, FOEX said the NBSK price in Europe increased by $2.84/tonne, to $843.85/tonne. In euros, it fell by €3.96/tonne, to €637.25/tonne. The euro strengthened by 1.0% against the U.S. dollar from the previous week.

As for BHKP, FOEX said the price increased by $6.30/tonne, to $752.61/tonne, and in euros it fell by 66 cents/tonne, to €568.35/tonne.

FOEX noted that spring maintenance shutdowns now underway have further tightened the hardwood market balance, but it said the decreasing demand for paper is limiting buyers’ willingness to accept the higher pulp prices.

The Association of Fine Paper Manufacturers (CEPIFINE) said European papermakers in February delivered 1.244 million tonnes, for a decrease of 2.7% from a year ago, with coated woodfree (CWF) and uncoated woodfree (UWF) down by 5.3% and 0.2%, respectively.

Last week a sales executive for a North American supplier said his European customers, both integrated and non-integrated, are making money, although “not double-digit returns.”

An executive for a European integrated producer said, “So far the European paper market has been a disappointment, perhaps with the exception of UWF.” But this hasn’t left his company with excess pulp, so it is marketing its regular volumes, he said.

China prices. It isn’t clear how much of a softwood pulp increase there will be in April, given that there have been both $20/tonne and $30/tonne announcements.

But a sales executive for major softwood and hardwood pulp producer said he has no doubt that the April BEKP and NBSK prices will succeed. He added that at the beginning of March in China, the new NBSK prices were already a done deal.

Industry players “anticipate the second quarter to be OK, but they are worried about the summer,” said a pulp agent selling into China.

Chinese buyers need hardwood pulp–the tissue market is strong–and meanwhile hardwood pulp supply has tightened, he said. But he said buyers thought $20/tonne would have been a more reasonable increase than the announced $30/tonne, and he expects the April price to rise somewhere between $20/tonne and $30/tonne. With the announced BEKP price at $670/tonne, up $30/tonne, he noted that when imported hardwood pulp prices in China rise to as high as $650/tonne, local pulp producers start running their own mills at a higher rate.

Softwood pulp supply in China is quite ample and that the ports “are full” of softwood pulp but not hardwood pulp, he said.
But he said Canadian pulp suppliers themselves are tight on supply, in the face of second quarter maintenance shuts, so they haven’t been putting additional tonnes into China lately.

NBSK producers will be lucky if they get a $15-$20/tonne increase in April and their announced $30/tonne increase “is not a slam dunk,” he said. The printing and writing paper business in China “is not good,” he added.

Another pulp agent said the pricing situation in China “is pretty chaotic right now—that happens in a rising market.” Whether the softwood pulp price will go up $20/tonne or $30/tonne will depend on sellers’ fortitude and commitment, said the agent, who sells North American-produced softwood pulp into China. The two-tier pricing announcements of $30/tonne for NBSK and of $20/tonne for BRKP could cause prices to be stepped in during April and May, but there could also be another, small, increase in June, he said, adding that demand in China has remained strong, perhaps because of the new paper machine startups, including tissue machines.

The second quarter will be tight because of spring maintenance shuts by North American pulp producers, he said. “Then into the summer months it’s going to be sloppy” because there will be flat or “not dramatic growth” in the second quarter, and business usually slows during the third quarter before picking up in the fourth quarter, he commented.

A sales executive for a BCTMP producer said pulp demand is good in Asia and that paper demand is OK, with paper stocks having become “fairly reasonable” after being high at the beginning of the year, owing to both paper machine downtime in the region and a pickup in paper demand.

As reported on March 30, China imported 1,555,627 tonnes of pulp in February, soaring by 43.4% from a year ago and by 32.8% from January, according to China Customs Bureau statistics. This more than reversed the January results, in which the imports fell by 16.7% year-over-year and by 15.0% month over month. A market pulp consultant said this might have had to do with arrangements to delay the arrival of some shipments until February, due to the early Lunar New Year holiday this year, and he noted that the January/February total is more in the average range. As for the February total itself, he said, “But it’s still a lot of pulp.”

And he said there is a lot of softwood pulp in China, so much so that there are reports of shipments being delayed due to lack of warehouse space at some ports.

Chinese papermakers don’t have to buy pulp at this point and April-May volumes will be down from those of recent months, he said. However, Chinese customers don’t want to see a drop in pulp prices because this could lead to a decrease in paper prices, which are currently very low and are likely leaving manufacturers with little profit margin, he said, adding, that some papermakers “are in the red, for sure.”

He said Chinese buyers don’t want to pay the announced $30/tonne increase for NBSK, given that some BRKP suppliers and also some smaller-scale NBSK suppliers have announced increases of just $20/tonne. He is expecting overall bleached softwood kraft pulp prices in China to increase by $20/tonne, and even at this lesser number, there could be reduced demand, he said.

This could have a ripple effect for some Scandinavian suppliers, which, starting late last year, sold large quantities into China and have kept a presence there, reportedly having focused more on China and other markets in response to the ongoing reduced pulp demand from European printing and writing papermakers.

The consultant cited one major BEKP producer said to have done its April business in China, but at $20/tonne less than its public price, before its regular rebates. The approach is said to be aimed at shoring up the company’s market share in the face of extra supply for the market after the start-up, targeted for the end of this year, of the new 1.5 million tonnes/year Eldorado Celulose e Papel mill in Três Lagoas, Mato Grosso do Sul.

But a sales executive for major softwood and hardwood pulp producer said he has no doubt that the April BEKP and NBSK prices will succeed. He added that at the beginning of March in China, the new NBSK prices were already a done deal.

For the week ending March 24, FOEX said the NBSK price in China increased by $2.10/tonne, to $696.75/tonne. The BSKP price moved up by $1.19/tonne, to $635.01/tonne.

FOEX noted that shipments of softwood pulp to China jumped to a new one-month record February after low volume in January during the Lunar New Year holidays. Reduced credit restrictions and the closures of the local non-wood or wood-based pulp capacity are supporting the demand growth for imported fiber, FOEX commented.

Korea results. In March in South Korea, the softwood pulp list prices increased by $20/tonne, to $765/tonne for NBSK, $755/tonne for BRKP, and $745/tonne for SBSK, said a South Korean pulp agent.

He said the BEKP price was the announced $640/tonne, up $35/tonne, with the net around $605-$615/tonne, as was the net price for NBHK.

The announced price for one company’s Indonesian hardwood pulp was also $640/tonne, up $30/tonne, with the net price about $600-$610/tonne for acacia and $590-$600/tonne for mixed, he said.

The price of 85% brightness aspen BCTMP went up $25/tonne in March, to $635/tonne and the price of 75% brightness softwood BCTMP in Korea was, as usual, $10/tonne lower, he said, adding that most of the BCTMP imported into Korea is 85% brightness hardwood.

As for UKP, the March list/net price for some producers was $620/tonne, up $10/tonne.

Dissolving pulp. Viscose rayon dissolving pulp (DP) prices “have rebounded as of late” and are now at $1,250-$1,300/tonne, up ~20% from a couple of months ago, said Dundee Capital Markets paper and forest products industry analyst Richard Kelertas in a March 26 research note.

This was in contrast to a March 22 research note from industry analyst Paul Quinn of RBC Capital Markets, who said commodity dissolving pulp (DP) prices had declined in recent weeks to ~$1,190/tonne, which he said was down 25% since early October and reflected the ~20% or more increase in nameplate capacity that has come online in the last six months.

In his note, Kelertas said Fortress Paper Ltd.’s DP mill in Thurso, Quebec, is expected to be running at 95% of capacity by early June. Once it is fully ramped up, Fortress Paper will start developing higher-alpha ultra specialty DP, which management expects to account for one-third of the mill’s output by the end of 2013.

Kelertas described the specialty DP as commanding a $300-$500/tonne premium to viscose rayon DP. And in his March 22 note, Quinn commented that specialty DP prices have increased by 12%-15% year-over-year.

In a March 28 research note, Quinn wrote that there have been increased musings by commodity DP producers about entering the specialty market, which is a “real” threat of increased competition “and more serious now given the pricing uncertainty for commodity DP.”

He said Sateri Holdings Ltd., the No. 6 specialty DP producer, is going to sell ~40,000 tonnes more of specialty pulp in 2012, yet, Quinn said, global demand is growing only 45,000-75,000 tonnes each year, and he estimates mill creep of 25,000 tonnes in 2012. Quinn said Sateri believes it can produce up to 320,000 tonnes/year of specialty DP—it produced 92,000 tonnes in 2011—and it is focused on growing market share in acetate-grade DP.

Sateri produces DP at Bahia Specialty Cellulose in Brazil and viscose staple fiber at Sateri (Jiangxi) Chemical Fiber in China. The company said its current DP capacity 485,000 tonnes/year.

Quinn said Sappi has recently begun talking about eventually putting some of its 330,000 tonnes/year conversion of its kraft pulp mill in Cloquet, Minnesota, into the acetate-grade DP market. The conversion comes on line in the first half of 2013.

And Quinn wrote that Fortress Paper has “high ambitions” of putting 50% (~218,000 tonnes/year) of the capacity of its Thurso mill into specialty DP within five years.

Quinn also noted that Buckeye Technologies Inc. and Rayonier Inc have upcoming fluff-to-DP conversions (232,000 tonnes/year combined).

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