Jan 19, 2005. /Lesprom Network/. Very mixed signals have come in from the US economy, most, but not all of them, rather positive. Inflation for December showed a drop with energy prices falling and inflation rate was up only 0.1% also without oil. The US trade balance hit the new, all-time high monthly deficit of 60 billion USD and this at a period of a weak dollar. But, business confidence indexes are up, industrial production moved 0.8% higher in December and the capacity utilization number hit the 4-year high. Number of new jobs and hiring plans were both up, too. In Europe, ECB kept, as expected, the interest rates unchanged. Inflation is heading down with core inflation on its way from 2% towards 1.5%, and thus now below ECB’s threshold level. EU commission raised their Q1 GDP growth estimate marginally. Still, the GDP growth outlook for 2005 is quite low, 2% at best. Negotiations over the changes in the Growth and Stability Pact begin this week. In Asia, the worrying news is that the trade volumes appear to be heading down. In most countries, with a notable exception of China, there are fairly clear indications of such a deceleration since 2-3 months. China, however, had their biggest monthly trade surplus in December. Also in Japan, the trade surplus has shrunk and the economic growth rate has fallen substantially from the mini-boom of the early 2004. Structural changes are hoped to turn the trend by about mid 2005. A revaluation in China would go a long way of helping Japan. The probability of a modest Yuan appreciation is rising.

 

Very limited data is available over the pulp and paper industry performance in December. In the US, the demand growth flattened for several grades of paper towards the end of the year, including the packaging sector and uncoated woodfrees. Most analysts assume that December numbers continued that same recent trend. Low inventories in many sectors help the paper industry to resume higher growth if, economic growth continues to be robust over the 1st half of 2005. In Europe the end of the year mood was more bullish than in the US, in spite of the burden of the strong Euro. Annual growth rates in 2004 over 2003 will be high, even if December growth may have been more modest, as indicated by the small drop in the Utipulp’s pulp consumption data over December 2003. Price increases are attempted on most key grades of paper. The negotiations appear to be proceeding slowly with the suppliers taking a tough stance over the need of an upward move after the fall of prices in both 2003 and 2004.

 

In North America, the pulp price increase to 650 USD/ton for NBSKP went fully through already last week. Some announcements to 680 USD/ton for NBSKP have also been made but a very large majority of the quotes remains at 650, at least for the time being. Another reduction was seen in the US supply as the Samoa mill - with production in both UKP and BSKP market pulp - closed down, at least temporarily, in California. For our index, very limited changes in the quotes received were seen from the previous week. Our PIX US NBSKP benchmark stayed flat at 650.00 USD/ton.

 

Pulp market has remained tight. Supply cuts continued as yet another mill in North America (Samoa) was closed, at least temporarily. Global market pulp demand growth will end up most probably at 4-5% for BSKP and 6.5-7.5% for BHKP in 2004 over 2003. Inventory positions in Asia appear lower than earlier perceived by some observers and buying activity is good with a cyclical slowdown approaching during the Chinese New Year celebrations. Prices in Asia have moved up 10-30 dollars/ton, depending on the market and the grade. BHKP balance has firmed up more than the softwood and some narrowing of the price gap between softwood and hardwood has been seen in Asia. In Europe, port stocks, which typically go up substantially in December, came down this year by 8000 tons. On the other hand, Utipulp reported that the consumer stocks had risen. Both in North America and in Europe, the announced price increases have gone or appear to be going through. New increase announcements for February at USD 660 have just been made. In Europe, NBSKP prices announced for January shipments are either at 630 or 640 USD/ton CIF/Western Europe. Quotes received for our NBSKP index ranged from 620-640 with 630 as the most common quote. PIX benchmark closed at 628.12 USD/ton, 3.8 USD/ton, or 0.6%, up from last week. The USD strengthened against the Euro, this time by 0.8%. The NBSKP Euro-value ended - after conversion - at EUR 479.81/ton, an increase of 6.8 EUR/ton, or 1.45%, from the previous week.

 

In BHKP, price increases announced from the turn of the year are typically to 550 USD for eucalyptus pulp. Demand has been good in Asia, Europe and recently also in North America as the permanent or temporary closures of several lines have increased the market pulp needs of the partially integrated companies. BHKP quotes received ranged from 520 to 550 USD, with and increasing number of them already at 550 USD/ton. Prices reported in Euro ranged for most of the sales now from 400 to 415 with 410 as the most common quote. The USD strengthened by 0.8% against Euro. Euro 410 converted to 537 USD/ton. Average from the USD-quotes alone was USD 537.79, up by USD 7.2/ton or 1.4% from the previous week. Average of the quotes in Euro alone was 409.64, up by 4.2 Euro/ton or 1.0% from the previous week. Together with the currency impact, the official bench mark in Euro increased by nearly 8 EUR/ton, or 2.0%, to 410.46 EUR/ton. Converting this into USD meant, with the weaker Euro, an increase of USD 6.0 USD/ton or 1.1%, to 537.33 USD/ton.

 

In newsprint, the last months of 2004 showed good volumes in Europe whilst US demand declined. Specialities were doing particularly well. High capacity utilization rates, rising costs and price declines in 2003-2004 have prompted price increase attempts in the vicinity of 10%, varying a little on the specific grade, producer and market. Negotiations appear to be proceeding slowly. As there are still order books left at 2004 prices, shipments at new prices are not taking place yet and are not part of our benchmark either. Quotes received remained thus largely unchanged. Euro weakened again marginally – or by about 0.2% - against the weighted non-EMU basket. This led to a small currency-related increase in the PIX newsprint benchmark. The index closed at EUR 465.89, up from the previous week by 15 cents/ton, or 0.03%.

 

US newsprint shipments had yet another disappointing year in 2004 with demand falling for the year as a whole. Supply reductions and low inventories helped the pricing in course of last year. Analysts report the new price increase attempts (+35 USD/ton) having been at least partly successful. This does not show clearly in our benchmark, not yet at least. Most of the quotes received remained unchanged from the previous week. And, among those changed, there were this time more downward than upward changes. Our PIX US Newsprint benchmark closed at USD 553.19/ton, down by 47 cents/ton, or 0.08%, from the previous week.

 

For coated mechanical reels, December statistics are not out yet but for the first 11 months, at least, the shipping volumes were good and capacity utilization rates higher than predicted in the beginning of last year. Inventories at consuming end appear to be below average. In spite of the good demand, price increases announced for Q4 did not go through. A new attempt to raise prices from the turn of the year is under way. With order books left from the 2004 sales, most of the price quotes received for our LWC index were still at old prices and thus mainly unchanged. However, those changes which were reported were upwards. The small weakening of the Euro against non-EMU currencies helped the benchmark further north. The index closed at 674.81 EUR/ton, 2.5 EUR/ton, or 0.4%, up from last week.

 

In coated woodfree grades, the shipments were very strong in September-November. Numbers for December are not out yet. The announced price increases in Europe for Q4 led only to a very limited upward movement. New price increases of 5% or more are being attempted at present. Both upward and downward changes were seen in the quotes received with increases being again more numerous. The benchmark was helped upwards by the modest push from the 0.2% weakening of the Euro against the weighted basket of the non-EMU currencies. The index closed at EUR 711.70/ton, up by 2 EUR/ton or 0.3% from the previous week.

 

In uncoated woodfrees the demand increase towards the end of the year was stronger than in the early part of the year. Even so, the uncoated woodfree market shows less strength than the coated grades. With some import pressure from Eastern Europe, Asia and Latin America, the pricing environment has been disappointing from the producers’ point-of-view. For our B-copy benchmark, changes were once again seen both downwards and upwards. The weakening of the Euro provided a small upward push but it was too small to counterbalance the impact of the lower quotes. The index fell by modest 64 cents/ton, or 0.08%, closing at EUR 803.44/ton.

 

The US shipment numbers for containerboard showed the growth slowing down during Q4 2004 and the inventories headed upwards. In Europe, demand has kept growing but the production capacity is growing as well. The sluggishness of the economic growth in the old EU does not help, but the good growth in the recently joined member countries helps the total European demand. Price increases in Europe went partially through during Q4 but now, entering January the momentum has stopped. Strengthening of the USD against Euro by 0.8% last week and a modest 0.2% weakening of the Euro against the basket of the non-EMU currencies helped the indexes upward.In the price quotes received, very few changes were seen this time. The kraftliner benchmark inched up by 22 cents/ton (or 0.05%) closing at EUR 455.93/ton. The PIX Testliner 2 index also gained but only minimal 7 cents/ton (or 0.02%) ending at EUR 353.00/ton. The PIX RB Fluting crept upwards by 21 cents/ton (or 0.07%) and closed at EUR 318.82/ton.

 

PIX INDICES

Price/Tonne

 

EUROPE

18.1.2005

From
previous week

From beginning
of 2005

Pulp

NBSK (dollars)

 628.12

+3.80

+5.83

NBSK (euros)

479.81

+6.84

+22.95

BHKP (euros)

410.46

+7.96

+21.91

BHKP (dollars)

537.33

+6.03

+8.09

Paper

LWC (euros)

674.81

+2.49

+5.67

Coated WF (euros)

711.70

+1.99

+3.65

A4 B-copy (euros)

803.44

-0.64

-4.49

Newsprint (euros)

465.89

+0.15

+0.38

Packaging

Kraftliner (euros)

455.93

+0.22

-2.28

Testliner 2 (euros)

353.00

+0.07

+0.43

RB Fluting (euros)

318.82

+0.21

-1.43

USA

18.1.2004

From
previous week

From beginning
of 2005

US NBSK (dollars)

650.00

0.00

+3.41

US Newsprint (dollars)

553.19

-0.47

+2.41

Notes:

Newsprint = European prices are for 45 g grade, US prices are for 30 lb grade

LWC = 60 g offset reels

Coated woodfree = 100 g reels

A4 B-grade copy paper = 80 g sheets

Kraftliner = 175 g

Testliner 2 = 140-150 g

Recycled fluting = 100-105 g