Pulp and paper markets – Foex

In North America, the number of producers announcing pulp price rises has increased, the new price being typically 650 USD/ton for NBSKP. Getting that through in November appears sticky as some of the producers announced increases only from December 1. For the Northern softwood kraft, a large majority of quotes were still at 620/ton but a few higher quotes were also seen. Our PIX US NBSKP index remained at 621.15 USD/ton, unchanged from the previous week.

US economic growth has softened. Stronger exports and lower oil imports have modestly improved the trade balance. Weak dollar and improved capacity utilization rates keep pricing conditions strong. This means higher inflation risk and to combat that, further interest rate hikes – after the early November increase to 2% - are expected. Retail sales were stronger than expected in October. Unemployment claims increased but only very moderately.

European economic growth continues to trail behind the rest of the world. Domestic demand has weakened in France and Benelux area and not improved much elsewhere. Slowing down of the world trade during the 2nd half of this year and the strength of the Euro have had a negative impact on European exports. GDP-estimates have been revised downwards for the Euro-zone both for this year and next.

Japan is stepping up their fight to address the fiscal deficit problem. The combination of major tax increases and spending cuts is politically impossible. Further deregulation and increased rate of privatization appear to be the roads towards a reduced deficit. A substantial decline of the economic growth is expected in 2005 after a strong 2004 performance.

The impact of the tightened credits is beginning to be seen in China, most clearly in the property sales and on the pressure of land asset prices. Chinese household debt ratio to income has risen sharply. A reduction of growth is still expected in China in 2005 and that will have repercussions in neighbouring countries and other business partners.

Paper consumption and delivery statistics for October are not out yet. The business sentiment remains predominantly positive. Advertising data from the US for October was very good with U.S ad pages up 8.4% from October 2003. Year-to-date growth climbed to 3%. In Europe, order books remain good and September numbers from both Cepiprint and Cepifine confirmed the continuation of growth in both regional demand and in exports – in spite of the Euro strength.

In market pulp, conferences and meetings during the London Pulp Week reflected more optimism than pessimism. Dollar weakness supports announced price increases from either November 1 or December 1 but is naturally painful to producers outside the dollar-zone. European buyers see little impact from the rising dollar-prices but find it also much more difficult to get the paper prices up than their colleagues in the US.

Pulp shipment data for October are expected to be strong but some of those high volumes are adding to inventories at consumer end, as already seen by the rise in the European port stocks. Recovered paper prices are moving up again. Pulp price increases announced for November, for NBSKP in Europe either to 600 or 610 USD/ton continue to go through.

Quotes received for our NBSKP index ranged from 580-610. The most common quotes were in the middle of the range at 590-600. Our PIX benchmark closed at 595.77 USD/ton, 6.6 USD/ton, or 1.1%, higher than a week ago. The USD weakened again, this time by 0.5% against the Euro. The NBSKP price was after conversion EUR 461.09/ton, an increase of 2.8 EUR/ton, or 0.6%, from the previous week.

In BHKP, price increases from November 1 were announced, mainly at 520 USD/ton. After a slower pace in the past two weeks, upward movement in prices was this week slightly faster than in NBSKP. Closures in Canada, switches to softwood from hardwood and the delay of the Hainan Pulp start-up help the BHKP supply/demand balance. BHKP prices received ranged mostly between 480 and 520 in the USD with 490-500 now the most common quotes.

Prices reported in Euro ranged for most of the sales still from 385 to 420 with 400/405 Euros now a typical quote. The USD weakened by 0.5% against Euro. Euro 400 converted to 517 USD/ton. Average from the USD-quotes alone was USD 493.91, up by 11 USD/ton or 2.3% from the previous week. Average of the quotes in Euro alone was 406.75 euro, up by 4.8 Euro/ton or 1.2% from the previous week. Together with the currency impact, the official benchmark in Euro increased by 6.3 EUR/ton, or 1.7%, to 387.32 EUR/ton. Converting this into USD meant an increase of  10.6 USD, or 2.2%, to 500.46 USD/ton.

Newsprint pricing remains unchanged while discussions over the 2005 have started. The quotes received remained, once again, largely unchanged. Euro strengthened by about 0.3% against the non-EMU basket. This led to a yet another small currency-led decline in the PIX Newsprint benchmark. The index ended up at EUR 466.75, down from the previous week by 18 cents/ton, or 0.04%.

In coated mechanical grades, the announced price increases in Europe have been made for Q4 or postponed from September into Q4. Getting those increases through continues to meet resistance, in spite of the presently high operating rates. Old prices still apply also due to the length of the order books. Again, much of the change seen in our benchmark was currency-related. The price quotes we received were largely unchanged with some small changes in both directions. The strengthening of the Euro against non-EMU currencies provided some downward pull. The index closed at 668.09 EUR/ton, 60 cents/ton or 0.1% lower than last week.

The coated woodfree market remains healthy but also in this grade, the announced increases are not reflected in our benchmark. Quotes received included both small increases and decreases. The 0.3% strengthening of the Euro against the weighted basket of the non-EMU currencies pulled the benchmark downwards. The index closed at EUR 707.63/ton, down by 1.1 EUR/ton or 0.2% from last week.

In uncoated woodfrees, the September shipments showed a clear strengthening in the demand. But, imports from Eastern Europe, Latin America and Asia continue weakening the supply/demand balance. For the B-copy benchmark, changes received were in both directions, decreases having this time the bigger share. The strengthening of the Euro also had some downward impact. After a larger gain in the previous week, the index fell this time by 1.5 EUR/ton or 0.2% closing at EUR 811.00/ton.

The slight softening of the world trade and the weak economic performance of the EU-area are likely to reduce the packaging industry activity in the near-term future. So far the demand for boxes continues to be quite good worldwide. Prices increases have gone largely through in North American market. Also in Europe prices are gradually creeping upwards. Recovered fibre demand has again been good in Asia and small price increases have been seen there.

In Europe the announced price increases in kraftliner have continued to be implemented, even if at a very gradual pace. In recovered paper based grades, price increases have been announced also, varying between grades and markets, and the prices shown on our indices are following kraftliner upwards.

The Euro continued its strengthening against both the USD (by 0.5%) and the non-EMU currencies (by 0.3%), limiting the increases on all our packaging indices. In kraftliner, quotes received were unchanged or up and the PIX Kraftliner index moved north by 51 cents/ton (or 0.1%) reaching EUR 454.83/ton. In the recycled fibre based grades, quotes were mainly unchanged or slightly up. The PIX Testliner 2 benchmark rose by 79 cents (or 0.2%) to EUR 351.77/ton. The PIX RB Fluting index gained 88 cents (or 0.3%) to EUR 319.59/ton.