Pulp Industry Perspective 3rd Quarter 2013

Pulp Prices Largely Flat in Q3

By Jesse Marzouk

Pulp Perspectives Graph Q3 2013North American pulp prices moved little in the third quarter after increasing in the first two quarters of 2013. NBSK list prices in the U.S. declined $5 per tonne from $950 to $945. Prices for NBHK in the U.S. also decreased slightly, falling $5 per tonne to $870. While these list prices are near the highest since October 2011 for NBSK and September 2010 for NBHK, the effective selling prices are actually lower than at those points. Over the last few years there has been an increasing disconnect between list prices and actual prices paid by customers with contracts, as market discounts have increased from the 15% range to higher than 20%.

In the short term, it appears that prices of hardwood and softwood are set to diverge. Worldwide producer inventory levels for softwood is at 28 days, the low end of a range considered balanced. The slower than expected startup on Ilim Group’s large pulp mill in Russia has caught buyers off-guard, some of which have scrambled to secure softwood supplies. It is on the back of the inventory level figure that producers appear to be successful in raising the list price of NBSK $20 to $30 per tonne in October.

Hardwood prices, on the other hand, appear to be headed in the opposite direction. Worldwide producer inventory levels sit at 48 days, well above balanced levels. Additionally, as the capacity expansion of eucalyptus in South America continues, with 2.8 million tonnes of expected to come online in the fourth quarter, the situation may get worse. Further exacerbating the supply issue, is the likely transition of some production of Fortress Paper’s dissolving pulp to NBHK. This is an occurrence that Hilco mentioned as a rumor in its previous quarterly perspective, and now is likely as China probably will implement duties against dissolving pulp from Fortress and other producers over the next six months.

Jesse MarzoukJesse 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.