Market Pulp Price Trending Down, Containerboard Feeling Pressure

Dec. 14, 2010 - Domestic market pulp prices have decreased $5-10/mton in December and the overall trend remains downward, said analysts at Deutsche Bank (DB).

However, the exception is NBSK (Northern Bleached Softwood Kraft) in China as dissolving pulp customers in the rayon market are reportedly adding NBSK to their mix, DB noted.

Domestic NBSK prices on the West Coast (USA) are being aided by robust Chinese demand. In the Mid-West and East, there are reports of spot deals. Overall, North American NBSK prices are down $10/mton to $960/mton in December.

In China, export NBSK prices are up $10-30/mton and could rise further by $10-20/mton in January, DB said, and NBSK price in the local Chinese markets is also rising.

Hardwood fundamentals are much weaker and prices are declining in all the major regions. Brazilian producers cut bleached eucalyptus kraft (BEK) prices by $50/mton in Asia and by $20/mton in Europe in December.

In North America, BEK prices fell $10/mton to $890/mton. North American fluff pulp was down $10/mton to $1,030-1,050/mton.

In Europe, pulp prices were down $5-25/mton depending on the grade, DB said.

CONTAINERBOARD

It is becoming quite clear: producers can't rely on exports to absorb increased US output, DB said. Lower prices in many export markets suggest a combination of too much incremental supply/too little demand.

The upshot? “We think market downtime will be required in December and January to keep inventories lean and markets balanced, Said Mark Wilde, senior analyst at DB covering the paper and forest products sector.

“We believe some major producers are already throttling back production in order to avoid inventory building,” Wilde added.

“Discussions with the trade suggest that Smurfit's idled Missoula, Montana mill could be converted to the production of dissolving pulp, Wilde said.

On the cost side, domestic OCC (Dec = $166/ton) rose for the fifth consecutive month, up $43/ton since July, according to DB.

“In the near-term, this is apt to squeeze margins for recycled mills and could create some cost-push pressure on prices,” Wilde said.

Specialty Paper Mills started a 72,000 tons per year recycled medium paper machine in Santa Fe Springs, California, DB noted.

SOURCE: Deutsche Bank