Global Pulp Numbers in November Were Better Than Expected

With demand trending positive and inventories in check, the November figures look positive for pulp producers.

Dec. 23, 2010 - According to data released by the Pulp & Paper Products Council, November global pulp shipments increased on a month/month and year/year basis, up 2.7% and 1.4%, respectively. Hardwood shipments were up 10.4% m/m, largely due to higher shipments into China.

Analysts at Deutsche Bank (DB) who cover the paper and forest products sector said that this sequential improvement was somewhat offset by softwood shipments (-3.5% m/m). Inventories declined by 2 days to 32 "days of supply."

"These numbers were stronger-than-expected and should help to support pulp prices," noted Mark Wilde, senior analyst at DB.

Production rose in November as operating rates rose from 87% in October to 92% in November. Global shipments also increased by 92,000 to 3,348K metric tons. Despite higher production levels, both softwood and hard wood inventories decreased by 1 day of supply: (1) hardwood fell from 43 to 42 days, and (2) softwood fell from 26 to 25 days.

Shipments to purchasers in Latam and China showed the strongest m/m comparisons, up 10.8% and 14.2%, respectively. The improvement was muted by weaker shipments to Japan (-5.4% m/m) and Western Europe (-1.9% y/y). Despite weaker paper volumes in North America, pulp shipments increased 1.3% m/m and 2.7% y/y.

"With demand trending positive and inventories in check, the November figures look positive for pulp producers," Wilde said in a sector report.

"Three large pulp producers, Arauco, Botnia, and Domtar have just announced $10/mton increases for softwood pulp to China in January; suggesting that they are also seeing bullish signals in the market," Wilde added.

SOURCE: Deutsche Bank