FOEX: Newsprint prices lose US$0.31/tonne for 30 lb. and US$0.57/tonne for 27.7 lb. indexes in US but increase €0.75/tonne in Europe, as early 2014 price talks progress; European prices down for LWC, coated woodfree papers but up for A4 B-copy paper

HELSINKI , March 4, 2014 (press release) – Newsprint – January statistics from Euro-Graph showed a yet another fairly sizeable drop from previous year in the total European shipment figures, which were down by 7.5% from January 2013. Both regional shipments as well as exports sank, by 8.7% and 0.6% respectively. With imports of newsprint to Europe up from a year ago, the estimated European newsprint demand for the first month of the year was down less than the shipments within the region, or by 6.9%. The early 2014 price negotiations, for varying price fixing periods, are in their final stages with some price increases agreed upon, at least in most cases. Euro strengthened by about 0.1% against the weighted basket of non-EMU currencies which caused some downward pressure on the index. The PIX Newsprint index inched still up by 75 cents, or by 0.16%, and closed at 480.57 EUR/ton.

LWC – Euro-Graph changes in European shipments for coated mechanical printing papers were all clearly in the red, as both regional shipments and exports in January showed, yet again, substantial declines against the same month last year. Regional demand was down by 5.0%, whereas exports lagged January 2013 relatively more and fell by as much as 10.9%. Total European shipments ended 6.5% below January 2013. The early intentions of the producers to raise prices turned into no change, in the best cases and in several cases into a disappointing modest decline. The approximately 0.1% strengthening of the Euro against the weighted basket of non-EMU currencies pressured the benchmark southwards. The PIX LWC index retreated by 1.51 EUR, or by 0.23%, and ended at 656.32 EUR/ton.

Coated woodfree –Regional European shipments of coated woodfree paper grades decreased by 4.6% in January, according to Euro-Graph. Exports outside Europe were up this time, even though only by 0.2%, y-o-y. This limited the change of the total European coated woodfree shipments to a 3.5% decline against January 2012. With imports to Europe declining as well, the estimated European demand was down, by 5.3% in January. In February, the activity in the market appears to have been weaker than in January. Suppliers were hoping to push prices higher in the early part of this year but with weak statistics and market outlook, had no success in January-February and no price increase announcements appear to have been made from March 1, nor from April 1. The 0.1% strengthening of the Euro against the basket of non-EMU currencies meant a negative force on the benchmark. The PIX Coated woodfree index trickled down by 1.39 Euro, or by 0.21%, to 663.65 EUR/ton.

Uncoated woodfree – While many of the copy-paper producers have reported fairly decent order inflow, the over-supply situation has persisted and prices have been under continuous downside pressure, partly also driven by the strength of the Euro and the recent small retreat in hardwood pulp prices in Euro-terms. In the statistics, the January data from Euro-Graph reflected the news heard over the decent order-books. The numbers showed a modest 2.3% increase in the regional shipments, as well as in the estimated European demand. Exports outside the region fell, however, by 3.4%, and the total shipments from the European producers ended up by 1.4% against January 2013. The 0.1% strengthening of the Euro against the basket of non-EMU currencies caused minor downward pressure on the benchmark. However, the PIX A4 B-copy headed higher by 2.11 Euro, or by 0.25%, and reached 832.42 EUR/ton.

US Newsprint – US production of newsprint was down in January by nearly 18%, driven down by weather, falling NA demand and maybe also partially impacted by the weakening of the Canadian dollar against the US dollar. The PPPC released the North American demand numbers which showed a big 9% drop but that was still less than the above-shown losses seen in the US production. Within the total newsprint demand retreat was, once again bigger in the daily newspapers than in inserts and other such “non-newspaper” end-uses, which actually showed a small gain in January. Not much change to these trends has been seen in February, either. Both our PIX US Newsprint indices slipped lower from last week, the 30 lb index by 31 cents, or by 0.05%, to 584.11 USD/ton and the 27.7 lb index by 57 cents, or by 0.1%, to 622.68 USD/ton.

General Economy – US: The rising tensions in Ukraine will impact negatively the hereto promising beginning of the year for the global economy. Meanwhile, the US Commerce Department lowered its earlier estimate over Q4 2013 GDP-growth in a major way. US GDP appears to have grown by just 2.4% on an annual basis, instead of the earlier published 3.2% estimate. Much of the downward revision came from the public sector. The harsh winter played a role, too, in late December. But things are beginning to look up now. The private consumer is getting more active and consumer confidence remains stronger than anticipated. Manufacturing did really well in February. Even with the weather still posing problems, the Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) recorded 57.1 points in February, up from 53.7 points in January. This is the largest monthly gain seen since May 2010. The jump was even more impressive in the manufacturing output number, where the index moved up from 53.5 points in January to 57.8 points in February. New domestic orders approached 60 points and new export orders moved from the contracting zone position seen in January to a modest growth position at 51.6 points.
Europe – In the Euro-zone, the basis of the recovery is widening, both geographically and by economic sectors. Almost all of the countries are now out of the recession and the drivers of the growth are now found also outside the export-oriented manufacturing industries. Still, the manufacturing is the strongest driver and Germany, Netherlands and the UK are the key countries providing upward momentum. The Euro-zone Manufacturing PMI, by Markit, retreated slightly in February to 53.2 points from 54.0  in January but while down a bit, that still showed a comfortable strength, especially as almost every country showed a positive index value (France being, again, the exception). New orders, manufacturing output itself and order backlogs showed good growth but job numbers improved only modestly. The first quarter growth could reach 1.0%, just for the quarter, a very good start when most analysts have expected less than 2% growth in industrial production and 1.0% GDP growth for the year as a whole.
Japanese economy is pretty upbeat in the eve of the April 1 sales tax hike, but the growth has not been quite as strong as some of the analysts have expected. Also, the trade deficit of the year 2013 turned out to be the all-time record, which was not what PM Abe had hoped for when he launched the major quantitative easing and other stimulation program last year. The upturn in February 2014 was still quite robust. The Markit/JMMA Japan Manufacturing PMI brought the output to its 12th consecutive month of expansion. The February benchmark value was down from January but still quite strong at 55.5 points. There was a big increase in the volume of new orders as well as in the work backlogs. With the positive backing, February’s employment growth accelerated as well and turned out to be at a 7-year high in February. The rapid rise of prices in February is a source of some concern, though.
China’s growth shows more and more signs of tapering down, at the same time as most developed economies and a number of emerging economies are coming out with a clearly stronger growth outlook. China’s Manufacturing PMI (by HSBC) fell from 49.5 points in January deeper in the contraction zone as it posted just 48.5 points in February. The number of new orders was down. Domestic demand deteriorated and order backlogs shortened. Few jobs were offered and the drop in employment in the manufacturing sector was the sharpest seen since 2009. Input costs fell again as did the output charges. The weakening inflation numbers paved the way to another round of economic stimulation which can be expected soon, unless the economic outlook improves very soon without the need to start taking such measures. Downward revisions are likely to be seen soon in the 2014 GDP-forecast which now stands at 7.5%
Paper industry – January was yet another month in the long string of negative comparisons against the same month in the previous year in North America as well as in Europe on the publication paper sector. This time it was marginally negative in the US also in the packaging side but it is pretty safe to say that the weather played a key role in that retreat as several mills in the US South, unaccustomed to negative temperatures, had production problems and shipments were much more widely affected by the severe January weather. The AF&PA statistics on US paper and board production in January came out with a 7.5% drop in the paper production with newsprint down by nearly 18%, other printing and writing papers by 8.2% and even tissue showing a 3.4% retreat. On packaging side, total paperboard was 0.1% below January 2013 with containerboards down by 0.6% but boxboard up by 1.3%.
In Europe, total paper and paperboard numbers are not yet available. But, Euro-Graph published the graphic paper numbers a week ago. They showed the estimated European demand down for the total of graphic papers by 4.1%. Newsprint demand in Europe was down by 6.9% and other printing and writing paper demand by 3.2%. Exports outside Europe were slightly weaker than in January 2013 with total graphic paper down by 2.1%. Within the total, newsprint exports fell by 0.6% and other printing and writing papers by 2.7%. Total European shipments of graphic papers retreated by the same percentage than the European demand, i.e. by 4.1%. Imports to Europe were practically unchanged from a year ago.
The improvement of the economic outlook should start bringing out less negative comparisons as the year advances.

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