August 2010
Over The Wire Tissue Edition
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Market Pulp Decline Picks up Speed

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Global pulp prices are expected to decline $30 - $50/metric ton in August as more producers announce price cuts, reports Mark Wilde, senior analyst, Deutsche Bank. Fibria announced a $50/metric ton price drop on bleached eucalyptus kraft (BEK) in North America, Europe, and China, effective the beginning of this month. Domtar also announced a $50/metric ton cut on U.S. bleached hardwood kraft (BHK), also effective at the beginning of this month.

In the U.S., several major producers have already announced a $30/metric ton price cut on northern bleached softwood kraft (NBSK), effective August 1. These list price reductions don't capture the bloating discounts given to medium/large customers or the low prices seen from some producers of northern hardwood pulp, Wilde says. Discounts appear to be as high as 20% - 25%, rendering "list" prices less and less relevant.

June pulp data came as a positive surprise—inventories down 2 days of supply to 25 days, global shipments +9% m/m, and operating rates of 96% (May = 87%). However, Wilde notes, with U.S. spot prices coming under increasing pressure, Chinese demand weak, additional mills restarting in August, and seasonally slower summer demand, North American prices seem destined to continue correcting downward. A sharp fall in pulp prices could lead to some high-cost Canadian and U.S. mills announcing curtailments/downtime, he warns.

 

 

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