Market Pulp Prices Hit Record Highs, Containerboard Holding, OCC Easing

June 15, 2011 - Market Pulp. U.S. NBSK pulp prices rose $20 per metric tonne to a record $1,040/mton in June. "Is this the last leg upward for pulp prices?" ask analysts at Deutsche Bank (DB).

"Chinese demand is soft and spot prices are down as much as $100/mton. Reports suggest that local NBSK prices in China are [about] $60-70/mton below international levels," said Mark Wlde, senoir analyst at DB covering the paper and forest products sector.

In Europe, NBSK prices could rise further, mainly due to the weak US dollar. Meanwhile, sluggish paper demand and record pulp prices are forcing non-integrated mills to curtail or shutdown production, DB noted.

Containerboard. Will International Paper's bid for Temple-Inland table any effort to boost containerboard prices? Possibly, but not probably, DB says.

"The central focus remains industry fundamentals — supply and demand, as well as cost factors," Wilde said. "Recent data suggests that the economy is slowing. Escalating input costs and lower box prices are pressuring margins. With margin pressures mounting, we continue to expect an increase attempt by late summer. However, we aren't assuming a successful implementation in our forecasts."

Old Corrugated Containers (OCC). Domestic OCC rose $7/ton to $162/ton in June. DB said key drivers are lower OCC generation in the U.S., strong export demand, and expectation of higher OCC demand from the start-up of several new machines in China.

"Interestingly, Greif last week in its F2Q call said that they are seeing some easing in OCC prices," Wilde added.

SOURCE: Deutsche Bank - Dr. Paper's Pulse on Pricing