Pulp Industry Perspective
2nd Quarter 2014
Softwood and Hardwood Diverge
By Jesse Marzouk
North American paper grade
pulp prices began to diverge in
the second quarter of 2014. Prices for NBHK in
the U.S. declined
$5 per tonne to
$870. List prices
for Eucalyptus
pulp, which can
be used as a substitute for
NBHK in certain applications,
declined a larger $25 per ton,
however, to $845. This could
be the beginning of a long
awaited divergence between
hardwood grades and softwood
grades. NBSK list prices in
North America remained at
$1,030 per ton, even with some
weakness being experienced in
China, the largest world import
market.
Prices for hardwood grades
began to weaken during the
quarter as it is now clear that
mills in South America producing eucalyptus pulp are looking
for a permanent home for a
significant amount of tonnage that has come online since
2012. The widely expected
capacity surge has hit a number
of bumps over the last few
years, but now appears to be
having a discernable effect on
the North American pulp market.
Industry data from the Pulp
and Paper Products Council
(PPPC) for May revealed that
the worldwide pulp market remains oversupplied with hardwood pulp, which totaled 48
days of supply. A balanced market typically maintains between
38 and 40 days of supply. Softwood supplies on the other hand
remain undersupplied or at worst
balanced, with 26 days of supply. A balanced market for softwood is typically considered to
be between 28 and 30 days of
supply. The difference of 22
days of supply between hardwood and softwood is the largest
number ever recorded since the
PPPC began collecting data
Purchasers of hardwood
pulp, such as tissue and paper
manufacturers, are looking to
move prices down more significantly than the recent small declines in NBHK. It appears that
they will have the ability to do so
in the coming months as NBHK
producers will still need to keep
their mills running at capacity
and supplies are running too
high.
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.