April pulp prices still up in air in some regions around world, but are generally moving up, with hardwood supply tighter than softwood; eucalyptus and fluff pulp producers plan May hikes
April 21, 2013
(Industry Intelligence Inc.)
– April pulp prices have risen in North America and they have also headed up some in Europe and China, where business will not fully close until the end of the month.
Last week saw May 1 US$40/tonne fluff pulp price announcements from at least two producers, led by Domtar Corp. on April 18. International Paper Co. followed with a global hike on April 19. Domtar’s new prices include $960/tonne for North America and Europe, where the price has been $920/tonne since September.
The only other known price announcements for May so far are from two major bleached eucalyptus kraft pulp (BEKP) producers, led by Fibria Celulose SA, and followed by Suzano Papel e Celulose SA, of $20/tonne worldwide, to $900/tonne in North America, $850/tonne in Europe, and $750/tonne in China. And other BEKP producers plan to follow market developments.
There are ongoing reports that hardwood pulp is still in fairly snug supply. A market pulp consultant said CMPC Celulosa SA’s 1.305 million tonnes/year BEKP Santa Fe mill in Chile had already lost 50,000 tonnes of production in January; the mill was to take more than 20 days of maintenance downtime in April. And he noted that Suzano Celulose e Papel SA’s supply is “pretty tight,” and that the company has been taking maintenance downtime amounting to about 14 days. Sources have said for months that Celulose Nipo-Brasileira SA’s (Cenibra) supply is limited, as well.
The consultant said the stoppage of Sappi Fine Paper North America’s Cloquet, Minnesota, mill has plugged up “a big hole” of pulp availability, and that it has had “a big impact on Asia.”
He said hardwood pulp supply has become limited in South Korea, including both kraft and bleached chemi-thermomechanical pulp (BCTMP), given various production and shipping issues among some suppliers upon which Korea is dependent.
But a buyer for a global papermaker said he doesn’t expect the May BEKP increase efforts to be fully successful. North America’s increase might go through because buyers “aren’t pushing back hard enough,” he said, but the price hike for Europe and Asia “definitely will be impossible.”
He said that while softwood and hardwood pulp producers are pushing for second quarter increases, he expects the third quarter to see a price reverse of “at least $30 across the globe.”
The third quarter will see increased BEKP supply from Eldorado Brasil and increased bleached softwood kraft pulp (BSKP) supply from Ilim Group’s new line in Bratsk, Russia, coupled with expected seasonally slower demand in the Northern summer, he reasoned.
North America movement. Some North American pulp buyers said softwood and hardwood prices have gone up in April, but not necessarily by the fully announced levels, while suppliers are saying the full amounts have been implemented.
The announced April BSKP list prices for North America are $930/tonne for NBSK and $890/tonne for southern bleached softwood kraft (SBSK), both up $30/tonne. Some suppliers contacted said the full $30/tonne had gone through. But some buyers have instead been describing increases of around $15-$20/tonne.
For the week ending April 13, FOEX Indexes Ltd. said the NBSK price in North America increased by $1.51/tonne, to $916.94/tonne. This followed a $14.70/tonne jump the week before.
Hardwood kraft pulp appears to be more snug than softwood kraft pulp, and some sources said North American bleached hardwood kraft pulp (BHKP) list and spot prices have gone up about $20/tonne, as announced, to $840/tonne for aspen-grade northern bleached hardwood kraft (NBHK) and southern bleached hardwood kraft (SBHK) and to $850/tonne for maple-grade NBHK.
NBSK buyers have been reporting April spot prices mostly in the mid-$600s/tonne. In some cases they have risen to $670-$680/tonne or so and in others they are as low as around $620/tonne, but there is less available now on the low end. Mostly the buyers report increases over March in the $10-$20/tonne range. Some SBSK buyers report spot prices of $630-$640/tonne.
“There is a wide spread between spot and list,” noted an NBSK buyer. “The big guys point at Terrace Bay, but buyers have to take advantage of it while they can.”
A pulp sales agent said he is still encountering some spot NBSK tonnage priced as low as $610/tonne in the eastern part of the continent, making it hard to compete. He said his spot tonnage is priced in the $660-$690/tonne range, up $10-$20/tonne from March. “Probably the $930 will be a struggle,” he said, predicting instead a $10-$20/tonne increase, to $910-$920/tonne. “It is going up a little bit but is not nearly as solid as hardwood,” he said.
A major buyer said he expects the NBSK price to increase to $910/tonne or so, up only $10/tonne. “The market is fairly balanced right now,” he said. “There is still spot activity, but not as much as we have seen in previous months.”
And, he added, “The Europe price is still far away from North America…Europe barely achieved the January increase in March and the March increase has not gone through at all.”
But some NBSK suppliers said they have achieved the full $930/tonne price. One such source said he got it from printing and writing papermakers as well as from one of the biggest tissue makers, but he said he heard that a competitor had agreed to step in the price for another tissue maker.
NBHK buyers, too, report April spot prices in the $600s/tonne, albeit in a bit lower range than for NBSK. Most NBHK reports are in the $600-$650/tonne range and most are up $15-$30/tonne from March. Whereas in March there were reports of some spot tonnage still priced in the high $500s/tonne, there is little of that talk now.
Though the supply of NBHK has tightened up, especially with the end of NBHK production at Sappi’s Cloquet mill, buyers report no problems getting the tonnage they need. “It feels like things are a little snugger,” said one of the buyers, adding that there are nevertheless “ample choices” for supply and no short-term worries.
Another said, “I haven’t had a problem at all. Multiple people are chasing buyers, more than I need.” However, this buyer said he is doing more contractual purchasing now that there is less spot tonnage floating around. “I felt there was a little more risk than in the past,” he said.
An agent selling hardwood pulp into Mexico said the price there jumped from about $620/tonne in March to about $655/tonne in April.
A sales executive for a BEKP producer said of the U.S./Canadian market, “Prices are pretty solid at $870 and there’s not a lot of extra around,” including, he said, no spot tonnage since last summer. But, he added, “I don’t know if there is room for another increase.” His is among companies that haven’t made a formal May announcement, but will follow the market. “It’ll be, ‘Let’s see,’” he said.
He said his customers are mostly tissue and specialty papermakers and that they have shown consistent demand month-over-month. Some printing and writing papermaker customers are in better shape than 30 to 60 days ago, mostly for seasonal reasons, he said.
Eldorado Brasil hasn’t had an impact yet, but “It’s here and competing for discounts,” he said. And as contracts turn over in the months to come, the competition from Eldorado will be felt, he said. The timing of the Eldorado startup was fortuitous, not only for taking advantage of the new tissue capacity starting up around the world, but also because of unexpected shut earlier this year of the Jari Celulose SA operations, he commented.
Separately regarding BEKP, there has been some shift to doing business on a net basis rather than according to the announced North American list price. This list price has been notably higher than in other markets even as there were many reports of “temporary discounts” before regular percentage discounts, which themselves grew substantially (and not only for BEKP).
As a buyer put it, “All I care about is the net.” And as for the global $30/tonne price hike plan for May, including to $900/tonne for North America, he said, “We’ll see what happens. I think it’s the end of the run.”
In its April 16 commentary, FOEX said, “Demand for market pulp in the NA market has remained quite good as some integrated units have bought market pulp to cover the losses of volume during maintenance downtime on their own fibre lines.”
FOEX said that not only had about half of the announced BSKP $30/tonne list price succeeded by mid-April, but also that spot prices “had moved up the same amount or slightly less, even if at a lower level, even after taking into account the impact of the large discounts applied on the contract business volumes.”
On the supply side regarding two NBSK mills in British Columbia, FOEX noted that the end-March closure of Domtar’s Kamloops, mill (about 120,000 tonnes/year) mainly affects exports outside North America and that the planned ownership change of Tembec Inc.’s Skookumchuck mill is not expected to affect production volumes.
Separately, Harbor Paper LLC has pushed back the original April 15 restart date of its 150,000 tons/year uncoated freesheet mill in Hoquiam, Washington, citing ongoing startup preparations. No new start date had been announced as of an April 11 local report.
Meanwhile, a buyer for a specialty papermaker said business has “very solid” all year, citing improved demand from the fast-food restaurant and the housing industry sectors, which reflect an apparently improving economy.
Europe market. Europe’s April pulp prices for the most part are not expected to settle until the end of the month. They have continued to inch up some, but buyers continue to resist the full list prices, announced for March 1, of $860/tonne for NBSK and $820/tonne for BEKP.
For the most part in Northern Europe, the end-of-March prices were $840/tonne for NBSK and $800/tonne for BEKP.
For the week ending April 13, FOEX showed NBSK and BHKP prices continuing to move up some from the previous week. FOEX said the NBSK price in Europe increased $2.68/tonne, to $843.43/tonne, while in euros it fell €3.32/tonne, to €646.21/tonne, as the euro again strengthened against the U.S. dollar from the previous week, this time by 0.8%.
FOEX said the BHKP price rose $3.69/tonne, to $807.19/tonne, while in euros it dropped €2.31/tonne, to €618.44/tonne.
A sales executive for a European NBSK producer said the price in Northern Europe could settle “close to $860” and that the price in Italy could narrow to $5/tonne below the Northern European price.
But a sales executive for a Canadian NBSK producer said he expects the April price to settle at $850/tonne. As for the $860/tonne price, “I don’t see it happening,” he said. “It depends on the resolve of suppliers.”
He said his company has had to reduce its Europe price forecast. “Paper production is coming down. Demand is okay but it’s down from last year,” he said.
A mid-sized North American pulp buyer commented that it’s hard to envision the April prices ending up at $930/tonne in North America and $850/tonne in Europe, since that would be an $80/tonne gap. “They have a ways to go to implement the $860 (in Europe),” he said. “They are trying to raise prices to secure the previous increase.”
The European NBSK producer source commented that currency “has gotten back to normal,” adding that it is always a wild card. And although the price of pulp is about the same as a year ago, the rebates have moved up a couple of percents this year, “so actually we’re going backward.”
(Today the euro was at US$1.30596, little changed from US$1.30980 on April 14, when it increased from US$1.29257 on April 7.)
He said his company’s mills have full order books and that it is a bit short on pulp. There is normal demand in the first quarter going into the second quarter, including many inquiries for spot tonnage, but also some of which are too low to entertain, he said.
With the longer-than-usual winter, wood prices have risen, so it might be less expensive for some mills to buy pulp than make it, he commented.
Regarding supply, FOEX commented that the fate of Södra Cell AB’s mill in Tofte, Norway, remains open and that recently it was producing only NBSK. Södra has said that it plans to shutter the 400,000 tonnes/year mill on May 1, but in recent weeks Industry Intelligence sources have said that the government of Norway is pushing to keep the high-cost open. (A European pulp source said Norwegian wood prices have gotten particularly high, adding to the difficulty of meeting the costs of running a pulp mill in that country.)
FOEX also said that Chile’s president declared on April 14 that the country’s recent port strikes were over. (This contradicts earlier reports that they ended April 6.) “Some tension apparently remains and it will take some time before the situation is back at normal and delays have been caught up,” FOEX wrote.
FOEX said that although second quarter practical supply will be affected by pulp mill maintenance downtime, the paper side’s earlier closures and downtime continue to make additional volumes of integrated pulp available as market pulp.
Looking at BHKP, FOEX noted that buyers have been slow to accept the announced (for March 1) list price of $820/tonne, albeit during a period of “already clearly tighter-than-normal pulp vs. paper price ratio.”
But FOEX said market conditions remain relatively firm, despite the weak economic and paper demand outlook. It noted that pulp inventories in Europe are low in the supply chain and that the Chilean port strike and the recently congested conditions in some Brazilian ports have slowed down shipments of contracted tonnage.
Separately, on April 18, Utipulp released data showing that European consumers’ inventories of woodpulp dropped 26,718 tonnes, or 4.0%, in March over February, to 636,383 tonnes, with year-over-year stocks dropping 3.4%. Stocks fell by one day, to 20 days, from February. There were 21 days’ worth of stocks in March 2012. March 2013 consumption dropped 14,476 tonnes, or 1.4%, year-over-year, to 1,009,972 tonnes.
On April 19, Europulp released March data showing that European woodpulp port stocks inched up 0.6%, or 5,395 tonnes, month-over-month, to 971,897 tonnes. They decreased 4.5%, or 45,388 tonnes, over those of March 2012’s 1,017,285 tonnes.
Middle East. A pulp sales agent doing business in the Middle East said that for April, suppliers have offered a price of $710/tonne “for everything, eucalyptus and everything, at least a $40 difference” from March.
Buyers so far are resisting, he said, adding that he doesn’t expect the month’s pricing to become clear until the end of this week. China’s apparent reluctance to continue paying higher prices is influencing the current hesitation of Middle Eastern buyers, he said.
He said the March spot prices included $660-$665/tonne for NBSK and $650-$660/tonne for BEKP.
Buyers usually keep two or three months’ worth of stock on hand, and at the moment they can hold on for a couple weeks and very few feel they have to buy, he said.
He said the Cellulose du Maroc (Celluma) BEKP mill in Kénitra, Morocco, is still shut down and that its pattern of starts and stops seems related to the strength of its order books. The company website said the mill produced a record 151,000 tonnes in 2010 and that its main customers are Western European and Mediterranean countries.
China pricing. The April prices in China include Ilim’s BSKP at $650/tonne DAF and $680/tonne CFR, and bleached radiata kraft pulp at $690/tonne (net), all up $20/tonne, which have been implemented.
NBSK producers are still trying to close their full allocations for April but buyers are resisting. In some cases they are also resisting the full announced prices (for March) of $700-$710/tonne for commodity grade and $720/tonne for reinforcing grade. For the most part, the commodity NBSK net price range was $680-$695/tonne, and that’s where it still is, sources have been saying.
A market pulp consultant said buyers in China appear to be “waiting for Ilim to say what May prices will be” before finalizing their April NBSK prices. If Ilim is unchanged, then NBSK prices will be unchanged, and if Ilim goes up, so would NBSK prices, he said, but added, “At the end of the day they all work back to a net (price).”
Arauco’s April price in China of unbleached kraft pulp (UKP) is $620/tonne (net), up $20/tonne. Meanwhile, Russian UKP producer Solombalsky, which has a capacity of more than 200,000 tonnes/year, is down with major financial problems. The aforementioned market pulp consultant said Ilim, which is said to be producing UKP in the initial startup phase of its new Bratsk line, could be replacing some of the lost Solombalsky tonnage.
(Arauco also announced $20/tonne April UKP increase for South Korea about a week ago, said a pulp sales agent in that country, who expects other UKP suppliers to follow it. He said BKP suppliers have not yet announced their Apriil prices.)
BEKP producers started April in China with a $700/tonne gross price and are trying to get the $720/tonne price they had announced for March. The consultant said the effort is said to be succeeding.
The announced April price by Alberta-Pacific Forest Industries Inc. (Al-Pac) of Canada is $680/tonne, up $20/tonne, for its aspen-grade NBHK.
In the last few weeks, sources have been commenting that local NBSK prices in China have dropped a bit, so buyers, thinking pricing will decrease, have become somewhat hesitant to commit to pricing. Meanwhile, sources said, suppliers are sticking to their prices.
Traders came into the market some weeks ago to sell their stocks, but sources have been saying that traders have dropped NBSK prices lately, thus causing hesitation among buyers who think prices might drop further.
A sales executive for a Canadian NBSK supplier said the local price has fallen $10-$15/tonne in the last two weeks.
He said his company had sold 50% of its allocation to China as of April 15, whereas for March it had sold about 80% by March 10. “We’re behind,” he said, estimating that for April, Canadian producers have sold 40% to 75% of their allocations so far. He said he hears assertions that people won’t place more orders, but he noted that under his company’s contracts, buyers are obligated to place orders on a monthly basis, and that his company has no intention of dropping its price.
The traders’ sell-off also means their inventories are going down, as well, he commented, adding that he expects traders to start buying again, perhaps by the end of the month, at a time when the pulp mill maintenance shuts have had an effect, “and the price will go up again.” But he said traders have tended to be “careful” before International Pulp Week. “We saw it this year and last year, as well,” he said.
So far he hasn’t seen indications that Chinese buyers are concerned about restricted supply, but he noted the unknowns in the China market. “It comes down to supply and demand and we don’t know the consumption,” he said. “We do believe on-the-ground inventory is lower than what they say and that consumption is higher than what they say.”
Sources have commented recently that at least one NBSK pulp producer that sells into China has been trying to change the market to straight net pricing. This has been driven at least partly by the fact that discounts off of gross prices have grown some in China recently, and by the disinclination to see them jump as they have in North America and Europe.
“The rebates and discounts are such ridiculous propositions. Paper consumers know exactly what’s going on,” said a pulp producer sales source who favors the move to net pricing, first in China, then perhaps spreading to other markets. “In the old days the price would be $680 or $690 with a couple of percents off of it,” he recalled.
For the week ending April 13, FOEX said the NBSK pulp price in China moved up by $2.51/tonne, closing at $695.61/tonne. The BHKP price rose by just 5 cents, to $694.09/tonne.
In its April 16 commentary, FOEX wrote that while waiting for higher volumes to become available from Russia, Chinese buyers were active in March but that suppliers remained reluctant to accept buyers’ price bids. “In April, suppliers have been trying to profit from the Bratsk start-up delay and the Chilean port strike impact by standing firmer behind the announced price increases, FOEX wrote. “Buyers have been resisting the higher levels, especially as their needs have been down, probably temporarily, by the paper machine downtime. With traders off-loading some of their volumes, domestic prices have been lower than the quotes from the overseas suppliers.”
Regarding BHKP, FOEX wrote that imports of pulp to China are clearly down from Q1 2012 and that the recent demand pull has not been very strong because paper producers in China have taken downtime due to oversupply problems. FOEX said traders’ inventory reductions appear to be another driver for the slower pulp purchasing activity.
After a big drop in February, preliminary information suggests that import volumes were down also in March but less than in February, FOEX said, adding that it is important to note that the number of first quarter shipping days was lower this year and that early 2013 pulp shipments were a tough comparison with historically high volumes delivered. Also, FOEX wrote, the slower closing of contract volumes may have been compensated partially by an increased share of spot purchases.