FOEX: Prices for BHKP rise in China and in euros in Europe on stronger US dollar but fall in US dollars in Europe, while NBSK index increases in US, China and in euros in Europe but drops in US dollars in Europe; OCC gains in Europe while ONP/OMG falls

HELSINKI , February 4, 2014 (press release) – NBSK pulp Europe – The demand growth for market BSKP was tapering off towards the end of the year as the price gap to hardwood pulps widening and some substitution toward BHKP was obvious. Some supply was added by either fluff pulp mills producing paper pulp or through conversions from integrated to market pulp. But production was also lost at some mills, due to technical problems (e.g. Skoghall in Sweden) or wood supply issue (Tarascon in France) or through harsh weather conditions, obviously a fairly major production and delivery stopper in America. Euro weakened last week back against the USD, and by as much as 1.2%. Our PIX NBSK index drew back by 0.32 dollars, or by 0.04%, and closed at 912.55 USD/ton. When converting this dollar-value into euro, the clear strengthening of the USD against the EUR made the benchmark jump up by 8.20 Euros, or by 1.23%, and the PIX NBSK index in Euro ended at 675.16 EUR/ton.

BHK pulp Europe – The feared supply glut may be around the corner, once not only the Maranhao volumes but also pulp from Montes del Plata and from Oji’s mill in China reach the customers, but at present the hardwood pulp market is probably a bit firmer than what most observers expected. This shows in the quasi-absence of spot volumes, from the 2-day fall of the BHKP producer stocks in December and, in spite of the strong pressure from the buyers, a rather steady level in hardwood pulp prices. Euro weakened by 1.2% against the dollar from the previous week. With the clearly stronger dollar, the PIX BHKP index value in Euro gained 5.34 euros, or 0.95%, and closed at 568.84 EUR/ton. The PIX BHKP index value in dollars decreased by 2.42 dollars, or by 0.31%, and settled at 768.84 USD/ton.

BHK pulp China – Indonesian shipments of BHKP to China increased by more than 400 000 tons in 2013 over 2012. In early 2014, some tapering off of this growth is expected, however. The rainy season has reduced the wood supply to the mills. APRIL is taking downtime at their mills for technical and market reasons. Several producers have announced a price increase in BEKP and, at least judged by this week’s numbers, with some success, at least for now, after the hardwood prices losing a bit of ground around the year-turn. Our PIX China BHKP index gained back 4.98 USD, or 0.76%, and closed at 658.17 USD/ton. Yuan weakened against the USD by 0.2%. The conversion of the USD BHKP price into Yuan resulted in an increase of 37.32 RMB, or by 0.94%, to 3989.29 RMB/ton.

NBSK pulp China – In BSKP, the 2013 delivery volumes to China fell slightly from 2012, according to the customs statistics but the market remains pretty firm, all the same. Delivery problems from the strike-impacted Chile and frost-bitten North America and Siberia keep a lid on the deliveries in Q1. One interesting question to be resolved within a couple of months’ time is the anti-dumping duty issue. At present the very weak prices for dissolving pulp and the over-capacity situation in fluff pulp are pushing producers to produce more softwood paper pulp. Our PIX China NBSK index value headed higher by 2.04 USD, or by 0.27%, and closed at 746.92 USD/ton. Yuan weakened against the USD by 0.2%. The conversion of the USD value into Yuan resulted in an increase of 20.50 RMB/ton, or of 0.45%, to 4527.22 RMB/ton.

US NBSK – North American pulp markets have stayed firm, especially in softwood but also in hardwood. Higher list prices were implemented in both grades in January and list prices keep indexes. showing a larger-than-normal gap to other pulp purchasing regions. Weather-related rail and truck
transportation problems have for sure played a role during the winter storms in January but also other technical misruptions in production and firmness of the softwood markets elsewhere in the world have helped in keeping the market tight. Our PIX US NBSK pulp index continued this week to head higher as it rose by 4.17 USD, or 0.42%, and closed at 1005.88 USD/ton.

Recovered Paper Europe – Chinese buyers are now looking at mid-March when the Chinese New Year is over and paper producers are back, purchasing growing volumes of recovered paper for mid-March arrival to China. After a fairly large drop in imports over December, Chinese buyers are out quite actively again. As the testliner mills in Europe continue to run full, the regional demand is also growing here. Consequently, the prices are on their way up in OCC. In old news and mags, the external demand is not growing – at least not rapidly – prices are under a slight downward pressure. The PIX OCC 1.04 dd index ended up gaining 9 cents, or 0.08%, to 114.13 EUR/ton. The margins against linerboards and fluting showed changes as follows: against Testliner 2 the price differential narrowed by 9 cents to 365.63 EUR/ton, compared to Testliner 3 the gap widened by 37 cents to 346.69 EUR/ton and, compared to RB Fluting, the margin grew by 30 cents to 338.60 EUR/ton. Our PIX ONP/OMG 1.11 dd benchmark lost a minor 2 cents, or 0.02%, to 130.46 EUR/ton. The price differential to the PIX Newsprint index widened by 1.45 euro to 347.57 EUR/ton.

General Economy – US: Although the pace of growth slowed down in the two largest single- country economies, the US and China and the adverse weather conditions impacted the expansion in a number of countries, the global recovery process moved into the new year at the same pace it ended the year 2013, at least as far as the manufacturing activity was concerned. The J.P. Morgan Global Manufacturing PMI recorded 52.9 points in January, off most marginally from 53.0 points seen in December. In the US, the particularly rigorous winter weather has extended all the way to the southernmost states and hampered economic activity. Weakening data, especially the thinning
of order books, did scare the stock markets into a decline.

Europe – The only nation that can prosper within Euro-zone at the recent exchange rates is Germany. Others suffer from the lack of competitiveness, in various degrees. Still, the recovery is picking up momentum also in these smaller and weaker countries. Greece started the New Year by moving into the recovery mode with 51.2 points, the first positive value seen in five and a half years! Spain and Italy are also doing clearly better. In spite of the rebound in growth, inflation slowed down further in January, reminding of the risk of deflation if the service sector and private spending do not follow manufacturing on the way up.

Japan provided a major boost to the global economic recovery by showing the best growth the country has recorded in manufacturing since 2006. The Markit/JMMA Japan Manufacturing PMI rose from the already good 55.2 point expansion in December to 56.6 points in January. Purchasing activity grew even more. Work backlogs lengthened and in some sectors and geographical regions it was difficult to find enough man-power. Prices were moving up fast as well, with the weakness of the Yen and the tightening work-force availability being the key drivers.

China continues to struggle just to maintain the recent activity levels. The HSBC Manufacturing PMI (by HSBC) ended in the contraction zone when the index value slipped from 50.5 points in December to a reading of just 49.6 points in January. Retreat was seen both in the domestic activity and in exports. Rising inventories within China reflect the weakening of the consumer (and other client) demand and explain the reduced output growth. Employment levels continue to contract which is bad news for the domestic household spending outlook.

Paper industry – AF&PA published the US December statistics over the pulp, paper and board industries. December was one of the weakest months of the year with the total paper and paperboard production volume falling 1.0% below the December 2012 performance. For the year as a whole, there was also a decline but only by 0.5%, paperboard up by 1.0% and paper sector down by 2.6%. The New Year has started with major further capacity cuts in uncoated woodfree and with most of the paper companies showing decent, if not outright good financial results. In Europe, all the full year numbers are not out yet. The graphic paper sector lost 1.4 million tons of demand in 2013, compared to the full year 2012. The recovered paper-based packaging business continues to do well and tissue is compensating for part of the losses in the graphic paper domain. The financial results of the European paper companies are nothing to really write home about. Many rumours continue to circulate over the restructuring options.

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