Pulp Industry Perspective 1st Quarter 2016
Pulp prices diverge in Q1
By Jesse Marzouk
North American softwood and hardwood pulp prices moved in different directions in the first quarter of 2016. NBSK list prices in the U.S. increased $10 per tonne, from $940 to $950. Prices for NBHK in the U.S., however, decreased slightly, falling $15 per tonne to $865. Prices further diverged in April, with softwood list prices increasing $10 per tonne, while hardwood prices declined $5 to $10 per tonne.
In the short term, prices of hardwood and softwood are anticipated to diverge even more. Worldwide inventory levels for softwood is at 31 days as of month-end March 2016, which is within the range that is considered balanced. In general, demand has remained strong and little supply has been added to the market over the last few years.
Hardwood prices, on the other hand, appear to be head-
ed in the opposite direction. Worldwide inventory levels sit at 45 days as of month-end March, which is well above balanced levels. Additionally, weaker emerging market currencies, including those in Brazil, are incentivizing producers to manufacture as much pulp as possible to take advantage of weak currencies.
As has been the case during various points throughout the last three to four years, hardwood producers are struggling with large capacity additions from South American eucalyptus pulp mills. Currently, the hardwood market is absorbing new supply from CMPC Celulosa’s 1.3 million-tonne facility in Brazil, which began operating in the summer of 2015. More recently, Klabin entered the market on March 4, 2016, with the start-up of a new 1.5 million-tonne mill in Ortigueira, Brazil, of which an estimated 1.1 million tonnes will comprise eucalyptus pulp. These mill starts have placed downward pressure on market prices for eucalyptus pulp, which have fallen $100 per tonne in China since December 2015. As market prices for eucalyptus pulp decline, it places downward pressure on other hardwood grades.
Jesse Marzouk is a vice president and forestry products specialist. He has appraised numerous U.S. and Canadian pulp, paper, and lumber-related companies involved in manufacturing and distribution. Jesse received his MBA in finance from Kellogg School of Management at Northwestern University, and has a degree in finance and accounting from Indiana University.