Pulp Industry Perspective
2nd Quarter 2012
Pulp Prices Head Down into Q3
By Jesse Marzouk
Pulp prices
were higher in
the second
quarter after a
big decline in
the second half
of 2011 and the
first quarter of
2012. NBSK list
prices in the
U.S. increased
$30 per tonne
to $900 per tonne. Prices for
NBHK in the U.S. also rose,
jumping $50 per tonne to $785.
The second quarter increase for NBSK was short-lived, however, as prices have
come under pressure in the
third quarter. NBSK producers
lowered U.S. list prices $20 per
tonne in July to $880 per tonne.
Furthermore, three major players in the market already have
announced U.S. list prices of
$850 per tonne for August shipments. Other major producers
will be forced to follow suit.
While the current supply demand balance in terms of days
of supply is not significantly out
of whack, the market is obviously weak. Demand from China,
which has been the pulp market
driver over the last few years, is
expected to be weak in the third
quarter as reports indicate a
significant amount of pulp in the
supply chain there. Furthermore, the recent strength of the
U.S. dollar against the Euro has
not helped prices as pulp has
become more expensive in Euro
terms. In fact, European pulp
producers have begun to target
the U.S. spot market for pulp shipments because of the weakness in demand for pulp in Europe and the strength of the
U.S. dollar. This has not happened in years.
While producers have not
announced decreases for NBHK
prices as of yet, the weakness
in the softwood market will almost certainly trickle down to
hardwood grades. Looking
further out, the North American
and European hardwood mills
will also have to compete with
low cost capacity that is coming
online in South America over
the next few years.
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.