Pulp market roundup: Softwood producers hope to hold July prices in North America and Europe and see gains in China, but eucalyptus, other hardwood producers face ongoing pressure globally; lackluster paper markets challenge pulp prices
June 22, 2014
(Industry Intelligence Inc.)
– Bleached softwood kraft pulp (BSKP) producers see generally stable pricing in June and hope to have stable to rising prices in July, depending on the region, while bleached hardwood kraft pulp (BHKP) producers brace for further price pressure.
Global supply remains snug for BSKP but is increasing for BHKP.
On June 17, Celulosa Arauco y Constitución SA (Arauco) of Chile announced that it would increase its July price of bleached radiata kraft pulp (BRKP) in China by US$10/tonne, to $710/tonne. It is not changing its price of unbleached kraft pulp (UKP), currently at $690/tonne.
On June 13 Mercer International Inc. of Vancouver, British Columbia, had announced a $30/tonne July 1 price for China, to $750/tonne for commodity northern bleached softwood kraft (NBSK).
Late last week Canfor Pulp LP of Vancouver announced a $750/tonne price for its reinforcement-grade NBSK. Canfor Pulp didn’t say the amount of the increase, although some sources said the market for reinforcement-grade NBSK in China is currently at $730/tonne, so the July price would amount to a $20/tonne increase.
Some sales executives for South American bleached eucalyptus kraft pulp (BEKP) have been saying that the additional output from new mills will not have much of an effect on pricing, since prices have already dipped considerably, although no one is arguing the increasing availability of BEKP around the world.
“I don’t think the psychology has changed at all. The penalty in the market is already there,” said one such source in recent days. “The net delivered price is already very low. It’s not going to go any lower,” he said, adding that the list price “doesn’t matter.”
In recent months sources have noted various logistics problems affecting the timely delivery of pulp from some Brazilian BEKP mills. One of the latest concerns a company said to be resorting to trucks because low water levels are hampering delivery via barge. Also wood costs are said to have increased for Brazilian producers that have had to source wood from increased distances from their mills.
As for overall pulp supply, the Pulp and Paper Products Council (PPPC) released its World 20 chemical market pulp producer statistics on May 19, showing that producers had 36 days of supply in May, the same as April. Softwood sulfate pulp stocks fell one day, to 26 days, while hardwood sulfate pulp stocks rose one day, to 48 days (standard calculation). Shipments rose 1.9% on a shipment-to-capacity rate of 89%. The year-to-date shipments lagged compared to the first five months of 2013, falling 0.8% from the year-ago period, with declines to all of the major regions.
Supply of both BSKP and BHKP is expected to increase in the coming months, with many mills in the Northern Hemisphere back to running full following seasonal maintenance shuts, and as demand slows seasonally during the Northern summer. And there will be additional BEKP as new mills enter the markets.
“I’m cautiously optimistic over the next two or three months,” said a North American pulp sales agent. Whether prices fall during the summer will depend on when pulp is delivered, he said, noting that there is growth in the specialty pulp and tissue sectors.
“The Western economies haven’t collapsed and consumption has been pretty good,” he said. “I don’t see any reason for stress on the pulp market until it is delivered…I don’t see any change in the fundamentals for a couple of months.”
North America developments. Most, but not all, sources report that domestic hardwood pulp remains in fairly tight supply, with little extra for the market, due to wet-weather harvesting difficulties, ongoing swings to more softwood pulp production, and changes in some integrated operations.
List prices in North America of domestically produced pulp are unchanged in June, at $1,030/tonne for NBSK, $990/tonne for southern bleached softwood kraft (SBSK) and $870-$880/tonne for northern bleached hardwood kraft (NBHK) and southern bleached hardwood kraft (SBHK). These were also the prices in March, April, and May. The gross BEKP price in June was $855/tonne, down $10/tonne.
Contributing to the tighter softwood pulp supply in recent weeks was the unexpected shut, on June 10, of the 275,000 tonnes/year Northern Pulp Nova Scotia NBSK mill in Abercrombie Point, due to a broken effluent pipe. Repairs have been underway and the mill could reopen June 23, The Chronicle Herald in Halifax reported June 20.
And while railcars are generally available now following the severe winter, there are still snags. A source in the U.S. said that in recent days he was having problems getting railcars for one of his company’s mills.
A sales executive for a Canadian NBSK producer said he thinks the $1,030/tonne list price can hold in July. “We’re not hearing spot activity” and there is limited supply in Europe, he said. Also, he said, the paper markets “are doing a bit better.
A market pulp consultant was not so positive. He said that while the $1,030/tonne list price is likely to hold in June, despite pressure from two or three major buyers, he doesn’t think the price will hold in July. And he said it will be “really tough” for BHKP in the next two months. “The paper side is not doing well anywhere,” he said, commenting that the PPPC’s North American printing and writing paper statistics for May, which were released on June 20, were “really terrible.”
A North American pulp sales agent also said changes might be in the wind. He is “still seeing” spot pricing of $720-$740/tonne for NBSK and $700-$720/tonne for SBSK, the same as in May, he said, but “July is more of a waiting game. People may have inventory and don’t need spot and others are waiting.”
NBSK buyers said that while there doesn’t appear to be a lot of spot tonnage availability, it has increased now that the winter-related delayed-delivery issues are over.
Some regular spot buyers have been saying that their June prices are unchanged from May. For example, a small-scale buyer said his range is $715-$750/tonne, probably averaging $740/tonne. Another small-scale non-contractual buyer said he is still paying in the high $700s/tonne or so, also unchanged.
But some larger-scale buyers are reporting some downward movement. Earlier in the month one such buyer said his spot prices fell $10/tonne, to the $720s/tonne.
In recent days a U.S. buyer said he is getting more BSKP spot offers this month than last, and that his NBSK prices have dropped $40/tonne, to $690-$700/tonne, with SBSK down to $660-$675/tonne. “It seems there are additional tonnes right now. I’m getting spot offers on both, which surprised me, especially with the inventory numbers,” he said. (A pulp sales agent said that with the fluff pulp market being so firm, producers aren’t making as much bale pulp.)
On the hardwood pulp side, some North American pulp sales agents said spot domestic tonnage is in the mid- to upper $600s/tonne. One said he expects the July price to drop to the low $600s/tonne because customers won’t be bidding up for spot tonnage. Customers will have gone “a month from pricing at a premium to wanting a discount,” he said.
North American spot NBHK buyers are already mostly reporting prices in the low- to mid-$600s/tonne. A larger-scale U.S. buyer said he is not hearing quotes for NBHK in the mid- to upper-$600s, saying that he finds the market mainly to be in the range of $600-$620/tonne. Although spot NBHK is still relatively right, he said the paper side is very slow and that NBHK suppliers tell him demand is lackluster, so he expects more NBHK offers soon.
Some smaller-scale NBHK spot buyers report lower prices in June than in May. One, in the Midwest, said his price range has narrowed to about $625-$640/tonne, with the top price down $10/tonne, and another said several suppliers reduced their price by $10-$15/tonne, to around $615/tonne from around $630/tonne, to get his business. Contrary to some other spot NBHK buyers, he said, “There’s plenty of hardwood out there.” He added that BEKP pricing is “not aggressive enough” but that he would consider using it if the price were right.
He said he has received calls in the past week from people he hasn’t dealt with for a while, asking if he would be interested in more tonnage for the summer. He described the tonnage as NBSK and NBHK from Western Canadian.
“The pipeline has built back up a little, so things are not as tight” and the market is calmer now, he said, adding that the market is where it needs to be and that it’s OK if pricing goes down a bit more--but not a lot. “We’ve managed to get our specialty paper prices up a little. We don’t want a free fall,” he said. If NBSK producers can try to hold the $1,030/tonne price, “that’s fine,” he said.
One of the agents said people who were “very anxious for supply” in May and would pay a premium over contractual prices for that last tonne “now are taking regular volumes—they’re not taking any more.” Customers will buy their contractual tonnage but that they are not looking for spot tonnage, he said.
He noted that pulp mills are running better following recent maintenance shuts and because of improved weather, while at the same time, the paper side is in the early stages of the summer lull. Thus customers are not paying a premium, for pulp, he said, adding that there is not much pressure on softwood but that there is continued pressure on hardwood pulp, especially given that there is more availability of BEKP. He said there isn’t much domestic hardwood availability but that demand has pulled back and there will likely to be more tonnage available next month.
Another agent is not yet seeing spare hardwood pulp. He said people have been calling in the last week for it, citing outage problems and wood shortages, but that he hasn’t been able to find hardwood pulp for them. “There’s no extra hardwood around,” which has been the case since February, he said, adding that the difference now is that previously delayed deliveries are now arriving at paper mills. The situation should ease during the summer months, when pulp mills start running full, he said.
As for BEKP, he said that while there are spot deals, they “are not voluminous” and “not enough to move the market. He disputed a recent published report of a low spot price described as the market price, which he said “is a lower mill net than business in China and than business in Europe,” meaning, he said, that such low pricing wouldn’t occur in the U.S. because the tonnage would instead go to China. Such pricing can’t cover costs and cover debt of one of the new BEKP mills, “so it’s there but it’s not a sustainable price,” he said.
For several months some buyer sources have been citing some spot BEKP prices that are 28%-30% or more off of the gross price.
Some sources have been saying that all or nearly all of the South American BEKP producers are sending spot tonnage to North America these days. “Everyone is pounding the pavement to try to move tonnes,” said a buyer in recent days. “I don’t know any that I haven’t heard from in the last two weeks.”
A sales executive for a South American BEKP producer source said NBHK is not readily available and is not being pushed into the market, citing the “mud season” in the Northeast. He said SBHK “is hard to get.”
(As for the southeastern U.S., Clearwater Paper Corp., in a June 18 press release updating its second quarter outlook, said wet weather conditions in that region have driven fiber prices higher. It noted operational issues at its Cypress Bend, Arkansas, pulp and paperboard facility and it said the challenges with the pulp mill “are not expected to be fully resolved until the next major maintenance,” which is scheduled for March 2015. A source said the mill has recovery boiler issues. Also Clearwater said in its release that “persistently high market pulp prices and lower conventional tissue pricing” have offset a progressive strengthening in tissue orders in May and June.)
Regarding domestic hardwood pulp and BEKP supply dynamics, the aforementioned BEKP source said the longer it takes for the new BEKP tonnage to get into the market, the more customers will transition from domestic NBHK to BEKP. “A little here, a little there, 300 [tonnes], 400, 500, then boom!” he said, adding, “We knew it was going to happen.” He said regular buyers of BEKP “are behaving like normal.”
He said some of the spot BEKP tonnage that has been appearing in North America is from suppliers who would typically be supplying other parts of the world, “where the price is even lower,” so they are pushing it to North America, particularly to destinations close to ports, he said, adding that this tonnage is disrupting the North American market and holding down pricing.
Also he said that in February, when winter-related deliveries were so problematic for domestic pulp producers, some Brazilian producers decided to ship extra pulp to North America to take advantage of the situation, but that by the time it arrived, the domestic delivery problems were over, resulting in more pulp supply than was needed, with consequences on the spot market.
Printing/writing stats. The PPPC’s North American printing and writing paper statistics for May showed accelerating demand declines for all grades, with overall demand down 5.7% year-over-year and 5.5% month-over-month. Demand fell 2.2% year-over-year for uncoated groundwood (UCGW) and 9.7% for coated groundwood (CGW), with groundwood markets having had to absorb ~10% annual declines in North American newsprint demand, wrote RBC Capital Markets paper and forest products industry analyst Paul Quinn in a June 20 research note.
He said demand for coated freesheet (CFS) dropped 5.7% year-over-year and that uncoated freesheet (UFS) declined 5.7%, marking an acceleration on the year-to-date decline of 2.9%.
Printing and writing paper producers’ inventories increased 2.8% month-over-month, or 39,000 tonnes, to 1,426,000 tonnes.
Quinn said shipments fell 7.6% year-over-year and 5.4% month-over-month.
Quinn said increasing white paper imports are weighing on North American producer shipments. He said supercalendered (SC) grades show signs of softness, with prices down ~$15/ton since March. He said SC producers continue to face competitive pressures from weaker lightweight coated (LWC) paper prices (-$65/ton since September) and strong European SC exports into North America (up 12% in 2013).
He said UFS producers are implementing the$70/ton March hike following the industry’s $60/ton October 2013 price initiative, but that International Paper Co.’s closure of significant cutsize capacity in early February—cutsize amounts to 40% of industry shipments—“was somewhat offset by the record inflow of imports and that expectation of a price run-up has somewhat softened,” Quinn wrote. However, importers like APP are gaining share by selling cutsize for $80-$130/tone less than North American producers, while CFS producers are increasingly turning off their coaters and producing more uncoated offset as UFS realizations become more attractive, Quinn wrote. (CFS producers have announced $40/ton hikes in June/July.)
Quinn said UFS cutsize imports, which amount to 77% of total UFS imports, increased 17.7% year-over-year and 37.6% year-to-date, to represent 19% of North American cutsize demand.
Europe market. The softwood pulp market is very firm in Europe and the euro is up again, noted a market pulp consultant, which will contribute to the price stability. As for pricing in June, “I think it will be pretty much the same,” he said. (Today it is at US$1.36109.)
NBSK supply is “very tight. We don’t have any extra,” said a sales executive for a major European NBSK producer. He said his company is receiving many inquiries for volumes from the Mediterranean region, a typical source of spot business for European suppliers, “but we will have none until late August.”
Some European producer sources, he among them, said they had some May business in Europe at $930/tonne, although most was at the $925/tonne gross price that has been in place since March. June prices will be negotiated at the end of the month, and he said pricing would depend on inventories but that the market “is very strong for softwood” so he expects it to at least remain even.
He said the tissue business is OK but he noted that the overall paper demand situation in Europe is “lower and lower” every year. As for pulp demand this summer, he said he thinks it will be a bit better than usual, and he commented that Finnish papermakers typically “don’t take much” downtime in the summer.
Noting the good NBSK prices in spot markets—he said they are “surprisingly high” in the Mediterranean, at around $760-$770/tonne—he said there is no need to lower gross prices.
Sources continue to say they aren’t seeing extra spot NBSK tonnage available for export out of Europe. “The Scans have no extra supply looking into July,” said a North American pulp sales agent. “There’s no change on availability on the softwood side. It’s very, very tight…NBSK is oversold into the summer in Europe.”
BEKP pricing for June will become clearer at the end of the month. Buyer pressure continues. Sources reported May pricing down $5-$10/tonne, mostly to about $740-$750/tonne or so, depending on the deal, with the lower end of the range in southern Europe.
One of the suppliers said the price of BEKP in Europe has dropped so much that a disconnect has developed with birch pulp, which previously had been priced essentially the same as BEKP.
Separately, Utipulp released its May statistics on June 16, showing that European consumers’ inventories of woodpulp dropped 2.8% in May over April, to 585,817 tonnes, a near-record low. Consumers had 19 days of stocks, the same as in April and down from 20 days in May 2013.
China situation. A market pulp consultant said BSKP prices in China “probably went too deep too fast--$40 in one month.” But he said there is considerable negative sentiment regarding market conditions from the buyer side, where there is “lots of inventory, lots of downtime, very little intention to buy pulp, with buyers now having more inventory than a month ago because of arrivals of tonnage in May.
Nevertheless, the June price announcements are “not a bad idea,” because some customers will buy at higher prices and the plans spark conversations about whether prices will go up rather than how much they will go down, he said.
“The [overall] NBSK market is quite stable,” said a sales executive for a Western Canadian NBSK producer. “Demand has come back up in China and prices are coming up.”
A sales executive for a European NBSK producer said prices are improving in China and that customers are asking for spot tonnage, but that his company focuses on contractual business. As for some producers’ price announcements, he said gross prices aren’t much of an issue in China, but rather what price can be negotiated.
In China during May, he said, “There was quite a diversity of net prices.” He said a lot of tonnes were sold at a net price of $720/tonne and a bit below. As for talk that some prices were in the $690-$700/tonne range, he said those were the “low guys.” He said some prices went down too far and that they are recovering. “Certainly the direction for prices is upward,” he said.
A North American pulp sales agent said it could be difficult to increase the price of softwood pulp beyond where it is now, given that there is “too wide a gap” with hardwood pulp and that softwood pulp is “still a commodity.” The price of softwood pulp is now related to paper prices and I don’t think they can put it up any more,” he said, but added, “I don’t necessarily believe softwood will go down because of paper pricing.”
On the hardwood pulp side, as previously reported, the May net prices in China of Brazilian BEKP were typically in the $550-$590/tonne range, with some said to be down to $540/tonne, and June net prices are expected to be similar.
A sales executive for a Canadian bleached chemi-thermomechanical pulp (BCTMP) producer said softwood BCTMP is “stable” and he noted that the price has not dropped since the beginning of the year and that extra is not available. “It’s not around,” he said.
On the hardwood BCTMP side, sources have observed that the pricing has been following the decline in pricing of BHKP.
In his June Market Pulp Monthly, market pulp consultant Brian McClay said the 80-brightness aspen BCTMP price in May in China was $565/tonne, down $20/tonne, and that 75-brightness softwood BCTMP was $570/tonne, unchanged from April.
FOEX changes. Separately, in the wake of RISI Inc.’s recent acquisition of FOEX Indexes Ltd., some pulp and paper players are grumbling about now having to pay for access to the FOEX price data and other information that they previously saw for no charge. In some cases, these are players who have been providing price data to FOEX all along and/or those who have been paying for access to RISI all along. The change is also affecting those who have contracts tied to FOEX pricing.
Sources said there is a reluctance to pay for access to FOEX. It is unclear at this time whether those who are complaining will go ahead and buy the FOEX service, as well.
The change in ownership has also meant that other publications and pulp and paper producers that had put FOEX data and information on their websites, per agreements with FOEX, are no longer allowed to do so.
“There are more restrictions on how to use the FOEX numbers [yet] we are giving the numbers to them,” commented a pulp producer source.