Containerboard, OCC Prices Stable, Market Pulp Still Shakey

Jan. 11, 2012 - Contrary to previous forecasts for containerboard pricing in 2012, domestic prices have remained relatively stable and demand appears to be modestly positive, say analysts at Deutsche Bank (DB).

"OCC (Old Corrugated Containers) costs have stabilized at a relatively high level and export prices appear to be bottoming. Although we're still forecasting about $45/ton year/year drop in containerboard prices in FY12, we've become a bit more optimistic about FY12 prices," said Mark Wilde, senior analyst at DB who covers the paper and forest products sector.

"Our current estimate may prove too bearish," he added.

Market Pulp
Are global NBSK pulp prices approaching a bottom? In Europe, NBSK producers are attempting to raise January ($850/mton) prices. Canfor recently announced January North American NBSK at $870/mton, -$20 month/month.

"We remain cautious. Pulp demand in Europe is weak, paper demand in other developed countries remains soft and pulp inventories remain high. A weakening Euro is reducing the "break-even" point for high-cost European pulp mills and could drive US$-based prices lower," Wilde warned.

Old Corrugated Containers
Domestic OCC appears to be stabilizing at $110-120/ton level and is beginning to rebound, up about $5/ton in the last two weeks, driven largely by renewed export demand.

"We view this as positive for containerboard producers as high OCC prices translate into a higher global containerboard cost curve. At the same time, improving OCC demand is typically an indicator of strength in the global containerboard market," Wilde noted.

SOURCE: Deutsche Bank