FOEX: European prices fall for LWC, coated woodfree benchmarks amid weak demand, but uncoated woodfree index gains, helped by weaker euro, stronger exports; newsprint prices up in Europe but only by €0.01/tonne, flat to down by US$0.01/tonne in US
October 1, 2013
– Newsprint – August statistics from Euro-Graph showed total European newsprint shipments falling 11.2% behind August 2012. Exports outside the region were down by as much as 20.5% while regional deliveries shrank by 8.8%. In the 8-month cumulative comparison, total shipments lagged 2012 by 7.5% and regional shipments and exports were down by 5.5% and 15.6% respectively. The mid-year price increase attempts came out with some success. Some supply contracts are still priced annually but with the increases in the semi-annual (or quarterly) contract price, the rise of our benchmark by the end of September has been about 5 euros from mid-year levels. Euro weakened but by a mere 0.1% against the weighted basket of non-EMU currencies, which had a slight upward impact on the benchmark. The PIX Newsprint index inched up by 1 cent, or by 0.00%, and settled at 470.02 EUR/ton.
LWC – Coated mechanical reels showed rather uniform changes for August in the latest Euro-Graph figures. Whether looking at shipments within the region, exports or estimated European demand, all these elements had changes of about -11 % against August 2012. The cumulative changes for the first eight months were also in a narrow bracket, all of them at around -8 %. The third quarter contained only limited price movements of the PIX LWC benchmark, up and down, with the benchmark value hovering between 660 and 665 EUR/ton. The approximately 0.1% weakening of the Euro against the weighted basket of non-EMU currencies gave a minor upward push on the benchmark. Still, the PIX LWC index lost 45 cents, or 0.07%, ending at 662.23 EUR/ton.
Coated woodfree – The changes in the Euro-graph statistics for coated woodfree paper grades showed clear decreases against 2012 with most of the monthly declines in the single digit range, except for exports which lagged August 2012 by 16.5%. Exports accounted for 19.7 % of total shipments in the month, which was less than the first eight month export share of 21.1% of total shipments. Estimated European demand slipped by 7.4% for August and 8.0% cumulatively. The monthly averages of our benchmark remained in a narrow range of 672 – 675 EUR/ton throughout 3Q 2013. The weakening of the EUR against the non-EMU currencies meant a weak upward push on the benchmark. However, our PIX coated woodfree index slipped lower by 2.85 euros, or by 0.42%, and landed on 668.83 EUR/ton.
Uncoated woodfree – European estimated demand for uncoated woodfree paper grades fell in August by 5.7% against August 2012 and the January-August cumulative figure showed a decline of 5.1%. This was the only major grade among these printing & writing grades which recorded growing exports against 2012, both for the month of August as well as cumulatively, + 6.0% and +9.8% respectively in the Euro-graph comparison. Looking at the monthly averages, our benchmark lost during the 3rd quarter 11 EUR ending in September with 838 EUR/ton. The 0.1% weakening of the EUR against the basket of non-EMU currencies helped with a modest upward impact on the benchmark. The PIX A4 B-copy index gained 19 cents, or 0.02%, and closed at 839.74 EUR/ton.
US Newsprint – Newsprint demand in North America declined by 10% in the first eight months against 2012. Last month that change was slightly smaller, or -9.7%, according to PPPC. Production has been down even more, with first 7 months’ US production volumes reported down by almost 15%. The 30 lb index remained unchanged at 590.22 USD/ton, while the 27.7 lb index lost the most minor 1 cent, or 0.00 %, and moved to 627.68 USD/ton.
General Economy – US: The political fights risk, once again, the health of the economic recovery. A budget showdown ending sadly with no compromise and with lay-offs of a million federal workers in the US and a new government crisis in Italy undermine the consumers’ and business leaders’ faith in the continuation of the economic revival. In the US, many government offices, including those providing economic data could be forced to close down. Recent economic data on the US is not all that bad but e.g. Gallup’s Economic Confidence Index fell last week to -20, a 6-month low. On a more positive note, housing market continues to gain strength with sales of the new homes up by almost 8% in August. Sales of durable goods were up, too, even if only marginally. Unemployment has crept further down to 7.3% but there is a long way to go to the 6.5% target of the Fed (with easing seen not be needed when unemployment falls to those levels).
Europe – The Centre-right party (Berlusconi’s) ministers walked out of the Government creating yet another political crisis in Italy. This new show of political instability brought already the bond-yields higher. Apart from that, the Euro-zone recovery appears to pick up speed, in spite of the strengthening of the Euro against the USD. Markit’s Flash Eurozone Composite Output index climbed from 51.5 points in August to 52.1 points in September, the highest reading in over two years. Both the service sector activity and the manufacturing output ended at that same index value. Output and new order volumes continued to grow whilst work backlogs remained unchanged and job numbers showed yet another decline. On the other hand, retail sales were down in September. Prices are rising very slowly which would provide room for the ECB to lower interest rates later this week. Hope they finally do it.
Japanese economic data continues to be predominantly positive. Industrial output did retreat in August by 0.7% but as that came after a very strong month and as the September preliminary data appears positive, the output drop is expected to be only temporary. In September, the manufacturing production appears to have risen at the fastest rate since early 2011. The manufacturing PMI by JMMA & Markit rose from 52.2 points in August to 52.5 in September. Both domestic demand and the export sector contributed to the improvement. New order intake grew very rapidly, order backlogs continued to rise and suppliers’ delivery times lengthened. The only sour point was employment. After weak numbers already in August, employment in Japan continued to stagnate in September. But, it often takes several months of good performance by the corporate sector, before the firms get more active in hiring people again.
In China, the growth continues but at a very slow pace, according to Chinese standards. The HSBC China Manufacturing PMI benchmark showed only infinitely small growth in September with the index value at 50.2 after 50.1 points in August. These growth rates are only very marginally up from the contraction zone. New order intake was flat. Work backlogs have grown, however, which is good, especially as the stocks of the finished goods appear to have declined. Rapid input price increases and a fall in the employment levels brought sour notes to the otherwise moderately positive outlook. The numbers received were weak enough for the Central Bank to continue the stimulation efforts in order to reach a point where the recovery was self-sustainable.
Paper industry – Paper industries in the US and Europe have had quite different comparisons against 2012 in the past few months and that shows also in the cumulative numbers. Looking first at the July data with all grades included, we see that the US total paper and paperboard production was in July 2% higher than in July 2012 with linerboard showing the biggest gain, both in volume and in relative terms. Good comparisons over the summer have helped also the cumulative numbers but after seven months, there was still a small 0.5% defeat against January-July 2012. In any case, if positive monthly comparisons continue, 2013 could show higher totals in the US than 2012. In Europe, retreat against 2012 continues to be substantial. In July, CEPI reported paper and paperboard production down by 1.3% against July 2012. Cumulatively, the drop was 1.4%. In Europe, carton boards have had the biggest gain against a weak 2012.
In printing and writing papers, the differential is even bigger. August numbers are out and in Europe, printing and writing paper shipments, excluding newsprint were down against 2012 by 7.8% for the month of August and by 5.5% for the cumulative 8-month total. Newsprint fared even worse. In North America, July shipments were also down against 2012 but much less than in Europe, or by 3.2%. Cumulatively, this year showed a 3.1% drop against January-August 2012. Operating rates in North America remain at around 90% but in Europe they are down at only 84%.
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