US prices steady for SC, high-bright groundwood papers but down for uncoated freesheet and coated grades; general stability projected through year-end except for possible weakness in coated grades toward December: The Reel Time Report
October 15, 2013
– The U.S. market for publication and communication papers has been relatively steady to strong, depending on the grade, over the past month, according to The Reel Time Report’s October issue.
This is occurring in spite of industry data showing August shipments down 3.2% year-over-year for total North American printing and writing paper shipments, according to the latest figures from the Pulp and Paper Products Council (PPPC) in Canada.
However, uncoated groundwood was a bright spot, with shipments in August up 2.4% year-over-year, while shipments fell 9.2% for coated groundwood, 2.9% for coated freesheet and 3.4% for uncoated freesheet, the PPPC reported.
The market for high-bright and super-bright uncoated groundwood papers was particularly strong this past summer, contacts told The Reel Time Report, which cited evidence for these comments in two events.
One was Resolute Forest Products Inc.’s restart of its uncoated groundwood paper machine in Fort Frances, Ontario, in mid-July for a 90-day period; and the other was a US$40/ton price hike announced to take effect Nov. 1.
Price increases. So far, Resolute, North Pacific Paper Corp. (Norpac) and Catalyst Paper Corp. are onboard with the high-bright uncoated groundwood price hike, according to The Reel Time Report.
Uncoated freesheet producers also are attempting to raise prices, with Domtar Corp. leading the charge following International Paper Corp.’s (IP) announcement that it would shut down its Courtland, Alabama, mill by first-quarter 2014.
Domtar announced a $60/ton price increase on offset grades to take effect in mid-October and a $60/ton hike on cut-size for Nov. 1. IP followed with a $60/ton price hike on both offset and cut-size, effective Oct. 23.
Twin Rivers Paper Co. plans a $3/cwt price increase on all its publishing, label, packaging and specialty paper grades, effective on or after Nov. 1, according to a Sept. 20 letter to customers.
RBC Capital Markets indicated in a Sept. 23 research note that it expects other uncoated freesheet producers--including IP, Boise Inc., P.H. Glatfelter Corp. and Georgia-Pacific LLC (GP)--to follow with their own price increases.
Other producers have since followed, according to The Reel Time Report’s October issue, which also commented that uncoated freesheet prices have been slowly eroding for more than two years.
The publication is projecting that the price increases will be delayed until at least December for offset and later for cut-size as the cut-size capacity closures will not be fully implemented until first-quarter 2014.
Capacity closures. Longer-term, uncoated freesheet prices should rise as annual demand is declining at the rate of 350,000-400,000 tons, while the planned IP capacity cut is 765,000 tons/year. This should keep the market firm for a while, according to The Reel Time report.
Other uncoated freesheet capacity closures at two other mills also will help to firm up the market in the U.S., according to RBC Capital Markets’ Sept. 22 report.
Last month, Boise completed the permanent shutdown of two uncoated freesheet paper machines and one off-machine coater at its mill in International Falls, Minnesota, eliminating 115,000 tons/year of capacity.
GP plans to discontinue uncoated freesheet paper production at its mill in Crossett, Arkansas in November. This will wipe out another 93,000 tons/year of production, according to RBC Capital Markets.
Higher uncoated freesheet prices will subsequently lead to higher coated freesheet prices, The Reel Time Report forecasts, noting that publications printed on coated freesheet tend to fare “much better” than those printed on coated groundwood paper.
Between 2004 and 2012, U.S. coated freesheet shipments to magazines have fallen by 18%, while coated groundwood shipments to magazines have plummeted by 33%, The Reel Time report noted.
Magazine producers are switching to SC paper from coated groundwood. The Reel Time Report expects that this year 214,000 tons of magazine paper demand will shift to SC paper from coated groundwood.
Price gap. Currently, the price for 34-lb. coated groundwood is about $165/ton higher than for 35-lb. SCA paper. This price gap for the two grades has narrowed from as much as $230/ton in January, the publication reported.
For September, 34-lb. No. 5 coated groundwood was at $980/ton, down $5/ton from a month earlier, while 35-lb. SCA was at $815/ton, unchanged from August, according to The Reel Time Report.
September prices were off $5/ton for both 50-lb. offset in rolls and 20-lb. cut-size, to $805/ton and $1,050/ton, respectively. No. 3 coated freesheet in 60-lb. was also off by $5/ton, to $915/ton, the publication reported.
The month-over-month $5/ton drop on coated grades reflects an adjustment for the less-than-complete implementation of a $20/ton price hike that was slated to take effect in July, according to The Reel Time Report.
Prices are presently holding up for the coated grades but weakness is predicted starting late November. However, price deterioration could be minimal for coated freesheet as that market is stronger than the coated groundwood market.
The near certainty that coated groundwood prices will fall before year-end--unless machines are closed--makes it unlikely that a price hike will be attempted for SCA in the fourth quarter, despite the tightness of that market, according to The Reel Time Report.
SCA and SCB are both expected to remain robust through the remainder of this year and in 2014, The Reel Time Report forecasts.