North American printing and writing paper markets appear weak in preliminary data, creating uncertainty about the few price hikes announced in the US for Q2; in Europe, producers are failing to implement price hikes in Q1, sources report

Debra Garcia

LOS ANGELES , March 15, 2013 (Industry Intelligence Inc.) – Price increases for printing and writing papers in Europe and the U.S. appear to be tenuous as market conditions remain weak in those regions; however, that is not the case in China, based on data and reports from industry sources.

Preliminary data for North American printing and writing papers indicate that the deceleration in the negative trend in January proved to be just an anomaly because the downturn regained momentum in February, stated TD Securities in a March 13 research note.

During February, aggregate shipments fell 8.8% year-over-year, which was sharply worse than January’s data and well below 2012’s 4.8% decline, according to the preliminary statistics reported by the Pulp and Paper Products Council.

Even when accounting for the extra day last February, shipments still fell 5.5% year-over-year, and the downturn affected all printing and writing grades. To succeed in raising prices will require capacity closures, noted TD Securities.

Coated freesheet hikes floundering in Europe. Attempts to raise coated freesheet prices so far this year have not been successful in Europe, where various producers had announced the price increases for the first quarter, according to FOEX Indexes Ltd.

In the U.S., Verso Paper Corp. is the only producer known to have announced a price increase on coated freesheet. The company plans a US$50/ton hike to take effect with shipments starting on April 1.

Price hikes also have been announced in the U.S. on carbonless sheets, effective April 1. So far, P.H. Glatfelter Corp., Nekoosa Coated Products LLC and Appleton Papers Inc. are onboard. Customers of Glatfelter and Appleton are to pay 6% more, but details on Nekoosa’s hike were not available.

Freesheet markets looking strong in China. In China, February prices for premium coated freesheet were up for the second consecutive month, while uncoated freesheet prices were flat and expected to increase with rising seasonal demand, according to Brian McClay & Associates Inc.’s March MarketPulpMonthly.

FOEX reported on March 12 that its benchmarks on coated and uncoated woodfree papers had slid in the week prior. It noted that regional demand remains weak, but exports have helped offset the decline, citing January statistics.

Price indexes for lightweight coated (LWC) groundwood papers also were off in the week earlier. Like woodfree papers, this was attributed to a downward trend in regional demand, although the decline moderated to just 1% in January, according to FOEX.

In the U.S., coated groundwood paper prices are holding up surprisingly well, according to The Reel Time Report’s March issue.

However, coated freesheet non-contract prices fell by $20/ton in January, dropped about $5/ton in February and might dip again in March. On Verso’s price increase attempt, the publication indicated that it was “dead” unless Sappi Ltd. follows suit.

US coated freesheet market needs capacity cuts. Even with Sappi’s support, the industry would need to take capacity offline permanently to firm up the market enough to allow the increase to stick because coated freesheet demand is steadily declining, according to The Reel Time Report.

The Reel Time Report’s February price for 60-lb. No. 3 coated freesheet is $905/ton, down $5/ton from January and down $25/ton from December.

For uncoated freesheet, the publication lists a price of $865/ton for 50-lb. offset rolls and $1,095/ton for 20-lb. cut-size. Both prices have been unchanged for two consecutive months.

The uncoated freesheet price quoted by TD Securities was $1,010/ton, which the firm stated has been steady for three months after dropping by $25/ton in first-half 2012. Uncoated freesheet capacity, however, has been reduced.

In 2012, uncoated freesheet capacity closures kept the market firm for much of the year until two restarts occurred. Now, it appears as though Harbor Paper LLC in Hoquiam, Washington, will idle its mill at least temporarily, TD Securities stated.

More bad news for US uncoated freesheet. On the demand side, uncoated freesheet is likely to suffer as a result of the merger of OfficeMax and Office Depot, as well as the U.S. Post Office’s plan to stop Saturday mail delivery in August, according to RBC Capital Markets.

In addition, more and more coated freesheet producers are shutting off their coaters and swinging to uncoated freesheet production, thereby increasing the supply, RBC Capital Markets indicated in a Feb. 28 research note.

Uncoated freesheet prices showed little improvement in February and were under pressure to fall in March, especially for cut-size grades. The chances for prices to increase are poor, especially if imports continue to gain, according to MarketPulpMonthly.

Attempts to raise uncoated freesheet prices in Europe in February were not entirely successful and producers are expected to continue to push for higher prices in March and April. The implementation could hinge on further capacity cuts, according to The Reel Time Report.

However, the former Metsa Board Corp., 300,000 tonnes/year uncoated freesheet mill in Alizay, France, is set to restart by June, according to a March 14 announcement by the new owner, Thailand-based Double A Public Co. Ltd.

Switch between groundwood, newsprint noted. A trend to watch is the substitution opportunities across groundwood paper and newsprint, TD Securities noted, adding that the shutdown of Resolute Forest Products Inc.’s newsprint and groundwood papers machine in Calhoun, Tennessee, would help firm both markets.

Another trend is the demand shift away from coated groundwood to supercalendered grade A (SCA), leading The Reel Time Report to project a price drop in coated groundwood by April.

The publication’s price for 35-lb. SCA has stayed at $770/ton for the past two months after dropping by $45/ton in December. However, The Reel Time Report does not expect a price change for SCA through the second quarter of this year.

For SCB, which has stayed at $750/ton for the past two months after dropping by $10/ton in December, The Reel Time Report notes that prices have held up better than expected. This could be because the insert business is relatively firm in North America, bolstering demand for SC as well as uncoated groundwood papers.

Port Hawkesbury’s SC output being absorbed. In addition, the startup of Port Hawkesbury Paper LP’s mill in Point Tupper, Nova Scotia, last October has not upset the North American SC market as much as originally feared, the publication reported.

SC supply increased by 30% when the Port Hawkesbury mill restarted, as it has 395,000 tonnes/year of SCA production capacity, RBC Capital Markets indicated in its research note.

In Europe, Holmen Paper AG will help support the market with plans to close 13% of European SC capacity this year, two-thirds of it in the first half, according to The Reel Time Report.

LWC prices, however, could fall further than they already have in Europe as no capacity closures are planned, although UPM-Kymmene Oyj closed its magazine paper mill in Stracel, France last November, reported the publication.

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