FOEX: NBSKP benchmark increased by $8.54 or 1.3%, from the previous week

In North America, most key companies have publicly announced pulp price increases from February 1, typically to 680 USD/ton delivered for NBSKP. The earlier increase to 650 USD/ton went fully through in January and also this February increase is almost fully through by now. Most of the quotes received from NBSKP buyers and sellers are already at the new, higher levels. Last week no changes were included after the removal of the top 10% and bottom 10% of the quotes received. Our PIX US NBSKP benchmark stayed thus at the previous week’s level at 677.69 USD/ton, up 31 USD/ton from the turn of the year.

US economic growth shows mixed signals. Housing starts rose in January to the highest level in 21 years. The Fed signals faith in the economy by stating that respectable growth persists and inflation is under control. Interest rate hikes are expected to continue to keep that promise of inflation. But, the core producer price index (excludes food and energy) had, with a 0.8% increase, its highest monthly rise in six years in January. In addition, oil price is back up again in the 47-48 USD/barrel range. Year 2005 may be another year of reasonably strong growth but towards the end of the year the downside risks are becoming more evident.  

Latest economic news from Europe is also mixed. Quarterly GDP-growth turned out to be only 0.2%. In France, Q4 momentum was better than generally expected. Also Spanish economy performed well. But Germany, the largest economy, as well as Italy, showed both negative growths in Q4. Weakness of the job market and falling purchasing power continue to hold private consumption down. Business investments and exports are expected to help to maintain EU’s GDP growth at 2004 levels or at about 2%. European inflation is falling below the ECB target of 2%.  

Japan joined Germany and Italy in the ranks of those who showed negative real economic growth in Q4 2005. The rapid expansion of early 2004 turned out to be short-lived. Weak spending and the stalling of the exports were the main culprits for the contraction of the economy at the end of the year. The strengthening of the Yen adds to the worries. Still, the restructuring of the Japanese economy has proceeded to the stage where positive results can be expected, at least in mid, if not in short term.  

The soft landing in China is difficult to realize. Q4 2004 GDP growth jumped to 9.5%. Both internal and external demand growth contributed. Overheating worries have re-emerged. Positive news is that the inflation is slowing down. The same applies to fixed asset investments. For this year, a slowing down of the GDP-growth to approximately 8.5% is anticipated.

Paper consumption appears modestly positive in the US, after slowing down of the demand growth towards the end of 2004. Ad spend was up 4% in newspapers but, for magazines, ad pages registered a small decline. In Europe, the order book situation looks mixed. In coated papers first weeks of the year were still strong but shipments to the Western Europe have calmed down since. Exports to former Eastern Europe continue strong. Price-wise the quietness of the Q1 is over in the US with several companies announcing price increases in a number of grades from either March or April 1. In Asia, recovered paper prices are moving up again supporting upward price movement of RCP-based grades. In Europe, the price negotiations over the 2005 volumes are gradually coming to an end. In newsprint and other publication papers the increase attempts have succeeded, at least partially. They are also beginning to show in our indexes now that the 2004 contracts have been more fully delivered. In uncoated woodfrees and packaging grades the prices are struggling to maintain their recent levels.

In market pulp the UTIPULP numbers came out for January showing a 4% increase in the European consumption and a 30 000 drop in the inventories. Pulp market continues firm with supply still affected by recent closures and temporary downtime. Valdivia mill in Chile has received a permission to re-start but at a reduced rate. Port stocks in Europe rose in January but only very marginally. In Asia, price increases have been announced bringing, if successful, NBSKP price up to about 580 in China. Both in Europe and in the US, the February price increases appear to be going through, at least partially. The price announcements in softwood in Europe are either to 660 or 670 USD/ton CIF North Atlantic/North Sea port for NBSKP. Quotes received for our NBSKP index ranged from 630-670 with 640-650 now the most common quotes. PIX benchmark closed at 646.30 USD/ton, 8.5 USD/ton, or 1.3%, up from last week. The USD weakened substantially, or 1.6%, against the Euro last week. Due to this major exchange rate change, the NBSKP Euro-value ended - after conversion - at EUR 495.67/ton, showing thus a decrease of 45 euro cents/ton, or 0.1%, from the previous week. (Feb. 22)

In BHKP, the market remains firm even though the main consuming sector, uncoated woodfrees, continues to show weakness both in Europe as well as in the US. Price increases announced were typically to 550 USD for eucalyptus pulp, which increase has gone virtually fully through. Further increases from March aiming at 580 USD/ton CIF for eucalyptus pulp in the European market have been announced but, naturally, they do not show yet in our index. In Asia higher BHKP prices have been announced from March, supported by the supply/demand situation but also by the risen freight rates. Prices reported in Euro ranged from 415 to 425 with 420 still the most common quote. The USD weakened by 1.6% against Euro. Euro 420 converted to 548 USD/ton. Average from the USD-quotes alone was USD 550, same as the previous week. Average of the quotes in Euro alone was 420.36, up 3.00 EUR/ton from the previous week, or by 0.7%. With the major currency impact from the weakened USD, the official bench mark in Euro fell by 5.2 EUR/ton, or 1.2%, to 421.61 EUR/ton. Converting this into USD meant, with the weaker USD, an increase of 1.1 USD/ton or 0.2%, to 549.74 USD/ton. (Feb. 22)

In newsprint, capacity utilisation rates are high at 96-97% after a good demand growth in late 2004. This supports the ongoing price increase attempts. Price negotiations are not fully over yet and the final impact cannot thus yet be seen from our indexes as many shipments still continue against 2004 contracts and thus at the old prices. Euro weakened marginally – this time by the same 0.1% it came up the previous week - against the weighted non-EMU basket. This helped in a small way the PIX Newsprint. The index closed at EUR 475.31, up from the previous week by 1.05 EUR/ton, or 0.2%.

For coated mechanical reels, order books and exports continue to be good after a strong Q4 2004. Negotiations over the 2005 prices, with all key producers attempting price increases, are not fully over yet. With the good order books, deliveries still continue in many cases at old prices. The marginal weakening of the Euro against non-EMU currencies provided a small upward push helping the benchmark, together with some higher quotes received, to increase. The index closed at 690.88 EUR/ton, 2.0 EUR/ton, or 0.3%, up from last week.

In coated woodfree grades, the January shipments started strong but have since calmed down. The statistics for January will only be out in two weeks’ time but the Western European demand is now doing less well whilst in exports outside the region the strong performance continues. Price increase attempts are on but also in this grade some negotiations still continue and many shipments were last week still at the old prices. Some changes were reported, predominantly upwards. The small weakening of Euro against non-EMU currencies helped the benchmark higher, too. The index closed at EUR 719.13/ton, up by 2.1 EUR/ton or 0.3% from the previous week.

The uncoated woodfree market showed continues to be least tight of the major white paper grades and the price negotiations over the early 2005 volumes have been difficult. For our B-copy benchmark in Europe, most quotes were again unchanged. Among those changed, there were both upward and downward moves. The weakening of the Euro provided a minor upward push. Our A4 B-copy index increased by 14 cents/ton, or 0.02%, closing at EUR 803.54/ton.

The packaging sector in North America continues to enjoy high operating rates after several capacity closures in 2004. The prices have been mostly flat in January-February. New increases by 50 USD/ton for both linerboard and corrugating medium have been announced by at least one major supplier from March. In Europe the capacity development is quite different from the US. Although older machines are closed also here, including a line in Ireland in mid February, new large machines mean a clear net capacity increase in 2005. The new Adolf Jass machine in Germany is running and preparing for commercial production at the end of February. The supply push may have been a factor in the decline of the prices last week. The weakening of the USD against Euro, this time by as much as 1.6%, pulled the price of the dollar-based imports down after conversion into Euro. The slight weakening of the Euro against the weighted basket of the non-EMU currencies tried to push the indices slightly upwards. But this was in vain as the majority of the changes reported was down in all our packaging grades. In kraftliner the price quotes received were either unchanged or down. The PIX Kraftliner benchmark ended down by 2.2 euros (or 0.5%) closing at EUR 457.69/ton. In the recovered paper based grades, the price quotes received were also either unchanged or down this time. The PIX Testliner 2 index lost 1.4 euro (or 0.4%) landing at EUR 352.26/ton. The PIX RB Fluting benchmark fell by EUR 1.3 (or 0.4%) ending at EUR 316.63/ton.