FOEX: NBSK pulp prices flat in US, slightly higher in Europe due to tight markets, off slightly in China due to easy availability; BHK pulp prices up in China, Europe as Euro weakens; OCC prices still gaining on strong Chinese demand
March 26, 2013
– General Economy: US – Jobless benefit claims moved back up last week but the unemployment trend continues to head south and is now at its lowest level in five years. The rapid turnaround of the housing market will help the job market further. The combination of very low inventory levels and surging demand had sent home prices upwards. Manufacturing sector recovery appears to be picking up speed as well. Preliminary manufacturing PMI (by Markit) rose from 54.3 points in February to 54.9 points in March. Key drivers were quite positive. Both production and new orders, domestic as well as export, showed solid gains. Delivery times lengthened and stocks of finished goods came down. In spite of the strengthening market conditions, prices moved up only moderately.
Europe – The issues related to the rescue plans of the Cyprus banks continue to shake the markets and undermine the confidence in the Euro-zone economy in general. Lack of the security of bank deposits is a risk in countries trying to rebuild their economies. Business activity numbers underline the pessimistic tone. Euro-zone private sector business activity came to a 4-month low in March. The Flash Composite PMI index by Markit, one of key leading indicators, fell again deeper into the contraction territory with the index value landing at only 46.5 points, 1.4 points down from February. The retreat of the composite index was evenly divided between the service and manufacturing sectors. Both business and consumer confidence indicators fell further. The speeding up of the new order intake suggests that the stabilization of the economic conditions during the 2nd quarter, expected earlier by most analysts, may well not happen.
In Japan, exports lost ground in February, in spite of the weakening of the Yen. Still, the confidence of the Japanese producers of goods and services improved for the 4th month in a row, showing a continued belief that the economy is recovering from the 2012 recession. The nearly 3% drop was partly explained by the upward revision to +6.3% of the January export growth. Analysts share the belief that the positive impact from the Yen-depreciation and the stimulation packages, mainly in form of quantitative easing of the monetary policy will help exports and overall economy more in a few months’ time. Both Reuters’ monthly poll and the most recent Tankan corporate survey (by BoJ) show the corporate confidence numbers rising in both manufacturing and non-manufacturing sectors. Share value hikes also reflect the belief in a brighter economic short and medium-term future.
China’s latest economic indicators do not really show yet much impact from the measures taken of the new government. March manufacturing PMI, by HSBC, moved back up in March, after having weakened in February. Most of the rise of the index value from 50.4 points to 51.7 points is explained by the firm growth of the production output itself. Increases were recorded also in the new domestic and export orders. Employment numbers and order backlogs improved also, but more moderately. Prices headed lower. The slowing down of the inflation helps the government to continue their stimulation policies and ensure the continuation of the economic recovery.
Paper industry – The comparisons between February 2013 and February 2012 are somewhat misleading in the sense that we are comparing a 28-day month with a 29-day month. That means a natural 3.4% loss factor in February 2013 against last year. Furthermore, the different timing of the Chinese New Year embellished January 2013 but penalizes February 2013 against the previous year. Consequently, good comparisons were not to be expected in pulp and paper industry either. And in Europe, the first data seen over February certainly was not very good, even discounting the impact of the different number of operating and shipping days.
The monthly statistic over the printing and writing paper (including newsprint) performance, released by Euro-Graph showed the European estimated demand down by 6.4%, year-on-year. Total shipments were down marginally more as the exports were disappointingly down by 7.2% against February 2012. As January comparisons had been positive for most of the graphic paper grades, the cumulative change over the first two months was a bit less ugly with slightly over 3% declines registered in total shipments and in European internal demand and with exports down by just under 4%.
NBSK pulp Europe – Taking into account that February of this year was shorter than in 2012, pulp shipment numbers were not bad. Total shipments were down by 1.5% but up on an average daily shipment basis. Softwood deliveries were actually up by 1%. Total shipments to Western Europe showed a marginal retreat of 1% compared to February 2012. Producer stocks in bleached kraft grades remained unchanged from January but were up from February 2012, in softwood by one day only, though. With European consumer stocks as well as port stocks down from January, inventories in the pipeline moved back down and are lean in historical comparisons. Euro weakened against the USD from the previous week by 1.1%. Our PIX NBSK index moved up by 17 cents, or by 0.02%, and closed at 837.02 USD/ton. Converted into Euro, the index moved up by 6.95 euro, or by 1.09%, and closed at 646.45 EUR/ton.
BHK pulp Europe – The global hardwood pulp shipments from the countries reporting to PPPC were down by 50 000 tons, or about 3%, against February 2012 but up from January 2013. Producer inventories were unchanged from end January but up by 5 days when compared to February 2012. European BHKP market consumption (from UTIPULP) was slightly up against February 2012 and consumer stocks retreated modestly from end January in tons but in number of days remained unchanged both against January and February 2012. Euro weakened by 1.1% against the USD from the previous week. The PIX BHKP index in Euro headed higher by 7.80 Euro per ton, or by 1.28%, and closed at 618.91 EUR/ton. The PIX BHKP index value in USD headed higher by 1.66 dollars, or by 0.21%, and settled at 801.36 USD/ton.
BHK pulp China – The spot market has softened a bit during March. In contract business, suppliers remain bullish and buyers sceptical. Guangzhou Pulp and Paper Exchange opened last Monday as a new major trading platform for physical trade with several warehouse locations around China. A few thousand tons of pulp were traded already during the first week of operations. Pulp shipments to China from PPPC member countries were up considerably from the low January and also up, even if only very marginally, against February 2013. The PIX China BHKP index moved up by 7.02 dollars, or by 1.04%, and closed at 683.70 USD/ton and narrowed the gap between NBSKP and BEKP. Yuan strengthened by 0.1% against the USD. The conversion of the USD value into Yuan resulted in an increase of 40.31 RMB, or of 0.96%, to 4247.15 RMB/ton.
NBSK pulp China – The reduced supply of softwood from Russia with old Bratsk line closed and new one not running yet has had little impact on the supply/demand balance of BSKP in China as the switches from integrated to market pulp have added to the softwood pulp supply more than what the temporary decrease of Ilim’s market pulp supply volumes has removed. The easy availability of the softwood volumes shows particularly on the spot volumes. Our PIX China NBSK benchmark value retreated marginally with the index value easing lower by 1.53 dollars, or by 0.22%, and closing at 686.02 USD/ton. Yuan strengthened by 0.1% against the USD. The conversion of the USD value into Yuan resulted in a decrease of 12.56 RMB, or of 0.30%, to 4261.56 RMB/ton.
Recovered Paper Europe – The pull from China is relatively good with export prices from North America and Europe to the Asian markets in a modest upward trend. In Europe, the OCC market appears to be picking up a bit, probably also impacted by the announced price hikes and the also otherwise bullish tones of the linerboard producers on both sides of the Atlantic Ocean. In ONP/OMG, the demand remains lacklustre but the supply is also down with the decreases continuing in graphic paper consumption in the western world. Our PIX OCC 1.04 dd index value inched up by 2 cents, or by 0.02%, closing at 110.58 EUR/ton. The margins to containerboards widened: to PIX Testliner 2 by 1.73 to 331.15 EUR/ton, to Testliner 3 by the same 1.73 euro to 304.60 EUR/ton and to RB Fluting by 1.30 euro to 291.23 EUR/ton.
The PIX ONP/OMG 1.11 dd benchmark broke the downward trend and rose this time by 6 cents, i.e. by 0.05%, closing at 122.07 EUR/ton. The price differential to PIX Newsprint narrowed by 3.33 euro to 356.51 EUR/ton.
US NBSK – February 2013 pulp shipments to the North American market were up by 33 000 tons, or by 6%, against February 2012, according to PPPC. The cumulative gain over the first two months stood at nearly 7%. The approaching Q2 maintenance downtime period, coupled with the seasonal peak period in paper sector in April-May, has pulp buyers on their toes and both softwood and hardwood markets appear to have tightened up during the latter part of March. The spot prices are up, even if only very moderately. On contract business side, several producers have announced a 30 USD/ton price hike from April, meaning for NBSKP a gross contract price of 930, if the hike attempt went fully through. The PIX US NBSK price index remained totally unchanged at 900.73 USD/ton.