Global market pulp capacity growth is ahead of demand, especially in hardwood pulp, which could lead to unsustainable operating rates and closures or conversions, but softwood balance is stable, says the PPPC's Emanuele Bona at International Pulp Week
May 10, 2014
(Industry Intelligence Inc.)
– Global market pulp capacity growth is ahead of demand, especially in hardwood pulp, said Emanuele Bona, the Pulp and Paper Products Council’s (PPPC) vice president, Europe.
Bona spoke on May 6 to attendees at International Pulp Week in Chicago.
He said the global operating rate would slow to 91% in 2014 and 92% in 2015 from 93% in 2013. “It’s quite different when analyzing softwood versus hardwood,” he said, noting that the softwood pulp balance was “pretty stable,” around 94%. “The situation is less positive for hardwood, (which was) 93% last year and is going down rapidly with the new projects” and expected to reach 85% in 2017, he said. An operating rate of 85%-86% is “not sustainable,” he said, “so there will be closures or conversions.”
He said global chemical market pulp capacity rose 2.4% in 2013 and is expected to go up 3.5% in 2014.
Bona forecasts the capacity to grow 2.6%/year on average from 2014-2018, including 0.7%/year for softwood pulp, up 950,000 tonnes, and 4.1%/year for hardwood pulp, shooting up 7 million tonnes, with Brazil, Uruguay, and Indonesia accounting for most of the growth.
He expects demand to rise 4.9 million tonnes from 2014-2018, with growth in emerging markets and declines in mature markets.
Bona said demand growth was above trend in 2013 and that from 2006 through 2013 it was up 2.0%/year on the average, whereas before the recession, the trend was at about 3.2%.
He said demand might be a bit slower in 2014, at about 1.5%, with the 2014-2018 period averaging an increase of 1.7%/year, including 0.7% higher for softwood and 2.6% higher for hardwood.
During this period, China’s demand is expected to jump 5.4%/year, including 5.3% in 2014—Bona said there would be an adjustment in inventories—and 7.2% in 2015.
North American demand is expected to decline 1.0%/year in 2014-2018, including a 1.7% decrease in 2014, while demand from Western Europe is expected to drop 1.1%/year; Bona said the key is the woodfree writing sector.
First quarter. Based on the PPPCs Global-100 database, Bona said that for the first three months of 2014, global chemical market pulp demand has declined 0.8% from the year-ago period. The port strike in Chile and the truckers strike in Vancouver, British Columbia, were factors, he noted. He said March demand fell 2.6% year-over year and that it was stronger in absolute terms, yet seasonally adjusted demand fell 1% month-over-month.
The bulk of the first quarter 2014 demand drop was in bleached hardwood pulp (BHP), which saw a 1.3% year-over-year decline (only tropical BHP was up strongly) with the shipment-to-capacity ratio falling to 87% from 91% year-to-date—eucalyptus and northern hardwood pulps were below the 80% level—while capacity rose 2.8%.
Bona said bleached softwood pulp (BSP) shipments were affected by the Vancouver port strike in the first quarter of 2014, with global demand falling 0.1% but with the shipment-to-capacity ratio unchanged at 93%.
Overall first quarter 2014 stocks were at 36 days, with BSP at 27 days and BHP at 47 days, “a little on the high side,” Bona said.
There were mixed demand results by region for the first quarter of 2014, with Western Europe the most negative, down 3.9%, said Bona, adding that tissue demand was not enough to compensate for the decline from the printing and writing paper sector.
North America demand fell 2.1%, but the decline was in BSK, affected by the Vancouver port strike.
China was the most positive, with demand increasing 2.4% year-over-year in the first quarter of 2014, including increases of 4.1% for BSP and 1.8% for BHP. But in March the China demand fell 4.1%; Bona said this was “a big surprise” for a “normally strong” time of year. He noted China is very volatile and he said the situation might change.
Chinese BSP demand grew 4.1% in the first three months of 2014, including a 6.6% increase in northern softwood pulp. Demand increased 64% from Russia and 13% from Western Europe, while declining 10% from Canada.
BHP demand from China rose 1.8% in the first quarter, with strong results for tropical hardwood pulp, Bona said.