Markets in Brief: Market Pulp, Uncoated Free Sheet, Containerboard

Sept. 22, 2011 - Market Pulp. Sluggish paper markets have contributed to a decline in the price of market pulp. U.S. NBSK list price fell $20/metric ton to $970/mton in September.

According to analysts at Deutsch Bank (DB), spot prices are weak and far below these reported list prices.

"Falling prices are beginning to trigger supply responses. Several producers have announced downtime for [the fourth quarter]," said Mark Wilde, senior analyst at DB who covers the paper and forest products sector. "We're watching FX closely. If the US dollar appreciates against the Euro or Canadian dollar, it will aid margins for high-cost producers and could produce lower-than-expected 'trough' prices," Wilde said.

"We're also watching recent declines in Brazilian Real," he added.

Uncoated Free Sheet (UFS)
UFS prices are easing. Estimated offset prices fell $5/ton to $930-950/ton in September. Cut-size estimated prices fell $10/ton to $1,075-1,125/ton in September. Preliminary August shipments fell 2.6% year/year.

"Even with the recent closures, there appears to be excess UFS supply in the domestic market," Wilde said. "We suspect some CFS (Coated Free Sheet) mills are running UFS. We're watching FX closely as a rise in US dollar could pull more imports from Brazil or Europe."

August box data was in line with DB's expectations — down 0.4% year/year on avgerage week basis. Inventories remain at their second lowest level in 20 years and operating rates remain strong. Exports were +8.9% year/year.

"We have become more concerned about the prospect of price slippage as we move toward year-end. In the past couple of weeks, we have begun receiving fresh reports of some pricing cuts on boxes," Wilde noted.

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