October 8, 2013
– NBSK pulp Europe – Softwood pulp market remains tight with supply reductions and with August producer inventories down from July by one day, including the seasonal adjustment factor. Softwood pulp shipments grew a bit less in August than earlier this year but still at 2.4%, according to PPPC. This meant nearly 50 000 tons more than in August 2012. The cumulative gain of 3.3% accounts to nearly 0.5 million tons of additional demand, some of which is fluff pulp. Prices moved up in September towards the 880 level announced by the producers and most producers have separately announced further price increases from October 1, typically by 20 USD/ton bringing the “list price” to 900 USD/ton. Euro strengthened last week again, this time by 0.4% against the USD. After removing the highest and lowest 10% of the values received, our PIX NBSK pulp index moved up by 2.49 dollars, or by 0.29%, and closed at 875.89 USD/ton. When converting this dollar-value into euro, the strengthening of the currency against the USD meant that the benchmark value fell by 82 cents, or by 0.13%, and the PIX NBSKP index ended at 644.37 EUR/ton.
BHK pulp Europe – Hardwood pulp shipments are reported to have been stronger in Asia in September, reflecting the growing price differential between softwood and hardwood pulps. In August the growth in shipments from the PPPC member countries was still relatively limited, or 1.5% up, compared to August 2012. Cumulatively, the shipments are up by about 350 000 tons, this again from countries reporting to PPPC. The growth in the world total is undoubtedly higher, though. E.g. the imports from Indonesia to China alone were up by about 450 000 tons during the first 8 months of the year. In Western Europe, BHKP consumption is down between 1.5-3%, depending on which statistics you look at (PPPC-deliveries vs. UTIPULP consumption numbers). With hardwood pulp producer inventories above average, the attempts by the producers to raise prices have proved to be much more challenging than in BSKP. Euro strengthened by 0.4% against the dollar from the previous week. With the strengthened Euro, the PIX BHKP index value in Euro retreated by 3.28 euro, or by 0.58%, and closed at 565.61 EUR/ton. The PIX BHKP index value in USD retreated by 1.28 dollars/ton, or by 0.17%, and settled at 768.83 USD/ton with the price gap between NBSKP and BHKP (euca & birch) now approaching 110 USD/ton.
BHK pulp China – Some of the price negotiations in China were postponed to take place after the Chinese National Holiday week in the beginning of October, i.e. the week where the quotes for this week’s index value came from. The market situation in BHKP is unclear with both downside and upside drivers. The weakening of the USD and the delays of new capacity, as well as the apparently increased purchasing volumes in China support the producers’ quest to change the direction of the price movement. Still high local and regional volumes from integrated to market pulp and above-normal producer stocks maintain the downside pressure. Chinese import statistics showed August intake of BHKP 100 000 tons higher than in July and nearly 200 000 up from the weak August 2012 volumes. Cumulatively, BHKP imports were up by 5.1% after the first 8 months. The PIX China BHKP index retreated again, this time by 65 cents, or by 0.1%, and closed at 654.54 USD/ton. Yuan weakened against the USD by 0.03%. The conversion of the USD value into Yuan led to a decrease of 2.90 RMB/ton, or of 0.07%, to 4005.92 RMB/ton.
NBSK pulp China – Chinese import statistics showed total pulp imports to China in August at 1.45 million tons, up against August 2012 by as much as 27%. The cumulative gain of the first 8 months is much lower, or 1.2%. In bleached softwood kraft pulp, August imports were 100 000 tons higher than in August 2012 but the cumulative shipments lagged 2012 still by 3.6% after eight months. BSKP markets are quite firm around the world, including China, where spot volumes offered are limited and at prices close to the contract business. Several softwood producers have separately announced price increases in China, varying between 10-20 dollars, with new commodity NBSKP price typically at 720. Some of the negotiations are only taking place this week. Some of the quotes remained below the 700-dollar mark. Our PIX China NBSK index headed higher by 1.91 dollars, or by 0.27%, and closed at 704.47 USD/ton. Yuan weakened by 0.03% against the USD. The conversion of the USD value into Yuan resulted in an increase of 12.85 RMB/ton, or of 0.30%, to 4311.50 RMB/ton.
US NBSK – Strong market pulp shipments to the North American market over the first eight months, coupled with some constraints/reductions in supply, has helped to keep the NA softwood pulp market tight, even if the BSKP shipments in the month of August were well below August 2012 volumes. Wet weather conditions in the US South-East have impacted southern pine and southern mixed hardwood supply and added to the cost pressures with wood prices in the region up over the past couple of months. Several companies have separately announced price increases in different BSKP grades, typically by 20 USD/ton from October 1. Our PIX US NBSK pulp index showed no change and remained thus at 948.38 USD/ton.
Recovered Paper Europe – Demand for recovered paper in China and other export markets continues to be “relatively good but not over-heated” and the export prices for recovered paper have been fairly stable since the small rise a few weeks ago. Also, there is not much difference between the export and regional prices for the export-quality lots.
In Europe, the situation remains thus relatively stable in brown and mixed grades. The low demand and downtime taken in the graphic paper sector has weakened the supply/demand balance for old news and mags grades after the holidays with the supply picking up a bit and with the demand in the regional market continuing to fall.
The PIX OCC 1.04 dd index moved up by 4 cents, or by 0.04%, and closed at 110.76 EUR/ton. The margins to the related containerboards widened again, this time as follows: to Testliner 2 by 4.23 euro to 360.97 EUR/ton (one of the highest gaps in a long time), to Testliner 3 by 2.87 euro to 336.15 EUR/ton and to RB Fluting by 1.67 euro to 325.69 EUR/ton.
Our PIX ONP/OMG 1.11 dd index turned back down, after several weeks of small increases, and lost 1.02 euro, or 0.78%, settling at 129.62 EUR/ton. The price differential to the PIX Newsprint index widened by 53 cents to 339.91 EUR/ton.
General Economy – US: US economy is facing major risks. Political disagreement over the lifting of the debt-ceiling was already followed by closures of a large number of public services and nearly one million federal workers have been laid off. An even more devastating threat to the US and world economy is the rapidly approaching day when the Treasury Department runs out of money and the US faces a federal default. That day is somewhere in mid-October, probably October 17th. Apart from this still solvable default threat, the US economic recovery, while still modest, appeared to be picking up speed in Q3 after a quite slow Q2. After encouraging July-August data, the September numbers, while still OK, show that the US economic activity has started to react to the growing risks. Consumer confidence readings from Gallup and Conference Board retreated from their August levels. Also, the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) recorded 52.8 points in September, after 53.1 in August, showing that the economic activity continued to grow but at a slower pace.
Europe – The Italian political situation provided yet another scary moment when Berlusconi ordered the ministers of his People of Liberty party to leave the government. The risk of the collapse of the government, with negative consequences on the economy, has now receded and the Euro-zone recovery appears to pick up speed. Export activity has been the key driver, in spite of the strengthening of the Euro against the US dollar. Markit’s Eurozone Composite Output index climbed from 51.5 points in August to 52.2 points in September. That is the highest reading seen in over two years. Output and new order volumes continued to grow whilst work backlogs remained unchanged and job numbers showed, unfortunately, yet another decline. Service sector had a bigger improvement than the manufacturing activities and the inter-region trade. Retail sales were, in fact, down in September. Outside the Euro-zone, economic growth continues quite strong in the UK.
Japanese economy grew at a 4% annual rate during the 1st half of the year. In Q3, the growth has persisted but at a slower pace (largely due to a higher comparison base). These positive growth numbers also increased the likelihood of the planned early 2014 VAT-hike. The economic indicators have continued to be positive. September PMI data has come out quite strong again. 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 which continued to stagnate in September. In the service sector, the activity rose more than in manufacturing with the Activity Index rising from 51.2 points in August to 53.0 points in September. Price rises show that Japan is truly leaving the deflationary conditions. The recent pace of about 0.7% (annualized) shows Japan returning into a “normal” inflation behaviour.
In China, the economy is beginning to show more and more signs of stabilising, after the falling production and weak indicator values over the early summer months. In September, the growth has continued but still 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 thus still only very marginally above 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 further. The service sector shows faster overall growth with the HSBC China Services Business Activity Index at 52.4 points in September. This was, however, lower than the value in August. The Composite Index was also still positive but lower than in August. All-in-all, Q3 shows higher growth than Q2 and a stabilization in the Chinese economy. However, US default could have quite severe consequences in China.
Paper industry – In addition to the general economic data already discussed in the sections above, the US ISM-index, which typically correlates well with the paper industry performance and especially with the packaging numbers, showed a fourth consecutive rise in September. The index rose to 56.2% in September, up by 0.5 percentage points from August's already high reading of 55.7%. Among the industrial sectors included in the manufacturing part of the index, both paper products and the separate printing and related support activities were again in September among those showing positive growth. The US packaging sector did show strong growth in August. However, the very high operating rates in containerboard production led to further stock-building.
In printing and writing papers, the August numbers were somewhat disappointing after more encouraging comparisons to 2012 over the early summer. NA total printing and writing demand retreated in August nearly 3% for the month and was down by 2.2% against 2012 after the first eight months. In Europe, the estimated regional demand numbers were much worse with August showing an 8% drop against August 2012. With exports down as well, the January-August total shipments were already about 1.2 million tons lower than those in 2012 over that same period.
Elsewhere in the world, packaging and tissue continue to do well but printing and writing paper sector results are mixed. Numbers improved in August in Japan as well as in other Asia but were very weak in Latin America.
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