Pulp Industry Perspective
3rd Quarter 2014
Hardwood prices
continue to decline
By Jesse Marzouk
North American paper-grade pulp prices continued on a similar path in
the third quarter of 2014
as they were on in the
second quarter. List prices for NBSK in North
America stayed at $1,030
per tonne. Demand has
remained relatively strong,
and there have not been
significant global capacity increases for softwood pulp
grades. However, amid increased capacity from eucalyptus mills in South America, list
prices for NBHK in the U.S.
declined $35 per tonne, to $835.
List prices for eucalyptus pulp,
which can be used as a substitute for NBHK in certain applications, declined $30 per tonne, to
$815.
Prices for hardwood grades
continued 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
discernible effect on the North
American pulp market.
Some analysts are calling for
a bottom in hardwood pulp pricing recently, as there have been
announced closures, including a
hardwood pulp mill in Maine and
a eucalyptus pulp mill in Spain.
Industry data from the Pulp and
Paper Products Council in August 2014, however, revealed
that the worldwide pulp market
remains oversupplied with hardwood pulp, totaling 46 days of
supply. A balanced market typically maintains between 38 and
40 days of supply. While the
announced closures will help with the oversupply situation, it is
unlikely that they alone will bring
price stabilization.
Recent U.S. dollar strength
against the euro and the Brazilian real could result in more incentive for mills in those countries to produce, as the break-even level for production is
pushed lower. Specifically for
producers of eucalyptus pulp in
Brazil, the collapse of the real
against the U.S. dollar by 10% in
September 2014 means the
sales price in U.S. dollars producers would be willing to accept
is lower than current levels. As a
result, Hilco expects further declines in prices of hardwood pulp
before stabilization ultimately
occurs.
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.