January 7, 2014
– Newsprint – In 2013, the newsprint price in Europe retreated by 25 EUR/ton, or by 5.0% when comparing the change in our benchmark values between monthly averages in December 2013 and December 2012. Newsprint production in CEPI-countries was down by just under 6% from 2012 over the first 10 months. November was yet another weak month in statistics but no worse than the average of the year so far. The estimated European demand was down by 5.9% for the month, against November 2012, and the cumulative decline stood at 6.1%, indicating a 0.5 million ton decline for the year as a whole. Negotiations over 2014 prices have resumed after the holidays. Euro weakened by 0.7% against the basket of non-EMU currencies which meant a clear upward push on the benchmark. The PIX Newsprint index gained 25 cents, or 0.05%, and settled at 473.16 EUR/ton.
LWC – During the year 2013, the LWC price in Europe came down by nearly 30 EUR/ton, or by 4.1% when comparing the change in our benchmark values between monthly averages in December 2013 and December 2012. Coated mechanicals are the grade with the largest relative decline among the graphic papers in Europe. After the first ten months, production was down by 9%. In November, another 8.6% drop, y-o-y, in the estimated European demand brought the cumulative 11-month consumption retreat to 7.6%. For the full year, the regional demand for coated mechanical reels will be about 450-475 000 tons. On top of that, exports will end up approximately 150 000 tons lower than in 2012. The approximately 0.7% weakening of the Euro against the weighted basket of non-EMU currencies gave an upward push on our benchmark. The PIX LWC index slipped down, however, by 1.14 EUR, or by 0.17%, and landed on 660.65 EUR/ton.
Coated woodfree – Within the year 2013, the CWF price in Europe retreated by just over 30 EUR/ton, or by 4.4%, when comparing the change in our benchmark values between the monthly average values recorded in December 2013 and December 2012. Production of CWF was down in the CEPI-countries by 4.6% in January-October, compared to the corresponding period in 2012. In this grade, the estimated European demand was down by 7.1% in November and by 7.4% cumulatively. This suggests that the regional demand will fall volume-wise just about as much as in coated mechanical reels, or by about 450-475 000 tons. In this grade exports are down much less, though, or by 3% over the first 11 months with November exports actually slightly above November 2012 volumes. The 0.7% weakening of the Euro against the basket of non-EMU currencies gave an upward boost to the benchmark. The PIX Coated woodfree index headed higher by 85 cents, or by 0.13%, and reached 667.44 EUR/ton.
Uncoated woodfree – In 2013, the B-copy price in Europe retreated by about 25 EUR/ton, or by 3.0% when comparing the change in our benchmark values between monthly averages in December 2013 and December 2012. Uncoated woodfrees is the largest graphic paper grade in Europe, excluding newsprint. In this grade, production is down the least of the main graphic paper grades, just 1.2% over the first 10 months. The regional demand shows a 4% decline over the first 11 months, suggesting a drop of about 275 000 tons for the year as a whole. Uncoated woodfree exports are up from 2012 by nearly 5%, which partly explains the small drop in production. However, as total shipments are down by over 3% and production by just over 1%, some inventory decrease in 2012 or inventory increase in 2013 – or a bit of both – is needed to explain the differences. The 0.7% weakening of the Euro against the basket of non-EMU currencies helped the benchmark value higher. Supported by the exchange rate development, our PIX A4 B-copy index climbed up by 25 cents, or by 0.03%, and closed at 837.63 EUR/ton.
US Newsprint – In the course of the year 2013, the newsprint price in the US market (U.S. East) retreated by 34 USD/ton for the 30 lb index and by 37 USD/ton for the 27.7 lb index, or by -5.5% and -5.6%, respectively, when comparing the change in our benchmark values between monthly averages in December 2013 and December 2012. Analysts expect the downward trend in demand to continue in 2014, although special events (Winter Olympics, World Cup in soccer and the US elections) should help to limit the fall. In November, North American newsprint capacity was operating at about a 92.5% rate, slightly higher in Canada than in the US. If the demand continues to fall, as assumed, more supply cuts can be expected. Around the turn of the year, some mills were taking downtime either for market reasons, or to save energy which is badly needed for private heating along the East Coast which has been struck by untypically harsh winter conditions. Newsprint price negotiations have not yet been concluded. The 30 lb index lost a minimal one cent, or 0.0%, and slipped to 585.79 USD/ton, and the 27.7 lb index saw the same change of one cent down, or 0.0%, closing at 623.89 USD/ton.
General Economy – US: The still very preliminary data over December is predominantly quite good as is the outlook for early 2014. Positive signals are coming from many fronts, including manufacturing, services as well as consumer spending. Furthermore, the risk of a major political stand-off over the budget or loan issues appears smaller than in 2013 as the parties have agreed on several potential conflict issues, at least until spring-time. The US Manufacturing PMI, by Markit over December showed the fastest growth since Q1 2012. The index value moved further up from the already high 54.7 points in November to 55.0 points in December. Both the manufacturing output and the new order intake remained virtually unchanged at their high November levels. Order backlogs moved up and more jobs were now created also in the manufacturing sector. Stocks of purchases and stocks of the finished goods contracted but at a slower rate than hereto. The somewhat worrisome element was the rapid rise in prices.
Europe – While the European recovery remains fragile and very unevenly divided between the individual countries, the overall picture seems to be brightening, even if the private spending and, with it, the retail sector remains constricted. The Euro-zone Manufacturing PMI, by Markit, came out in December at 52.7 points, up from 51.6 points in November and showing the strongest monthly growth since May 2011. The service sector showed growth as well, but at 51.0 points in December compared to 51.2 in November, the rate of growth slowed down marginally. With the strong showing by the manufacturing sector, the Composite PMI moved up to 52.1 points in December from 51.7 points in November. The 4th quarter turned out the best quarterly growth since Q2 2011. The best news moving into 2014 were the improvement in the consumer confidence and the halt in the earlier very persistent loss of jobs.
Japan - The BOJ Tankan survey results published before Christmas showed that not only the recent statistics over the economic growth but also the near-term future outlook remains good. According to the survey, the Japanese business confidence improved over the three months to December to its highest value in 6 years. Composite Output PMI, by Markit, remained unchanged at 55.0 points in December. The seasonally adjusted business activity index moved up from 51.7 points in November to 52.0 points in December. Just as in manufacturing, the volume of incoming new business increased. However, the outstanding business volume fell. All-in-all, the total Japanese private sector activity grew quite rapidly in December. Japanese firms are not yet operating at full capacity. It could well be that in 2014, the earlier investments into manufacturing and service capacities will turn out to be beneficial.
In China, the growth momentum slowed down in December. The HSBC China Composite PMI (compiled by Markit) fell from 52.3 points in November to 51.2 points in December. The biggest driver of the decline was the weakening of the service sector with the activity index retreating from 52.5 points in November to a mere 50.9 points in December. On a more positive note, the labour market conditions improved, somewhat curiously on the service sector while jobs continued to be lost in manufacturing. Oversupply of production capacity, as well as of labour, helped to reduce the inflationary pressures, bringing China CPI to a 5-month low. The reduced inflation rates make it easier for Chinese government to introduce – soon – another dose of stimulation. That stimulation may well be needed, too, even if the improving global economic growth will support Chinese export industries in 2014. The three major near-term challenges are the need to increase productivity without increasing unemployment, the environmental problems which are already slowing down GDP-growth and the risen indebtedness of the state as well as the provinces.
Paper industry – The year 2013 has been a reasonably good year for the North American producers in terms of profitability, even if the graphic paper volumes are down by about 4% against 2012. But paperboards are up, in the US, by nearly 2% and tissue by more than 4%. November was not a very strong month in packaging as box volumes fell by over 2% in absolute terms (but were up when taking into account the number of the shipping days).
European numbers are available for November only in graphic papers, which showed a 6% drop against November 2012 in the estimated regional demand and a 5.7% decline in total shipments. Including packaging and tissue, the picture is a bit brighter. Over the first ten months of the year, total paper and paperboard production was down in CEPI-countries by 1.3%. Within the total, graphic papers showed a 5.1% decline. This fall was partially compensated by a 0.4% increase in tissue production and a 2.6% gain seen in total packaging. The two last months of the year are not expected to change this picture much.
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