Capacity Management Strengthens Paper Pricing

April 6, 2006 - In North America and Europe, capacity management in many grades appears to be keeping prices firm, said Finland's FOEX.


Paper capacity closures have continued in North America and active supply management has supported pricing even in those grades where the demand is flat or falling, such as newsprint and coated woodfrees, FOEX said.

The uncoated free sheet market has been the positive surprise of the year. In containerboards, several price hikes have made the domestic market more attractive than exports and reduced the earlier tightness.

In Europe, both newsprint and SC did well during the first two months of the year. In other uncoated mechanicals and in coated mechanical reels, the figures have been less encouraging, with February numbers down. Major capacity cuts announced—most of them by UPM—are expected to reduce the over-capacity which still prevails in the coated publication papers and wood-containing, as well as woodfree.

In Asia, paper demand volumes have been adequate, but capacity increases are keeping the market very competitive, FOEX reported. Increases in the price of pulp and other costs have tightened the margins.


In the North American pulp market—both in BSK and BHK—the dates of some of the earlier announced capacity cuts are getting near. Several producers have now announced revised pricing for NBSK of $690 per ton.

The European pulp market remains firm. February shipments were at 100% of the estimated capacity in white market pulps, and in spite of the high delivery volumes, the buyers' inventories are below average in the world and historically on a very low level in Europe. The quotes received for FOEX's European NBSK index did not strongly reflect the announced new prices, edging up slowly from the last week.


In packaging grades, markets continue to be good. In the US, operating rates are high and a clear gain in box shipments supports the latest price increase attempt, typically by +50 USD/ton from either late March or from April 1.

In Europe, the containerboard market continues to be firm even if the demand growth is limited, especially in terms of tons. Several capacity cuts announced by the large producers help to balance the market.


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