Growing Imbalance Slowing Pulp Markets

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Pulp pricing is deteriorating faster and more dramatically than expected, reports Mark Wilde, senior analyst with Deutsche Bank, adding that China is the "epicenter of the upheaval." Last week, Arauco cut July prices by $40 - $50/metric ton on all grades. Trade reports suggest pressure for much larger cuts. Wilde says.

"More recently, a major Russian player is reported to have cut prices far more dramatically than Arauco. These latter cuts are so sharp that we expect global reverberations over the next several days. How quickly will producers respond to falling prices? Without black liquor credits, some high-cost U.S. mills may react more quickly than in the first quarter of 2009. Although visible inventories appear to be in good shape, slower summer demand coupled with restarts in Europe and North America, along with the June startup of April's 1.3 million metric ton Rizhao, China, mill, suggest a growing market imbalance. Lower prices seem certain," Wilde notes. Earlier this month, trade reports suggested that U.S. spot NBSK fell $35/metric ton (approximately 12% of June U.S. list price) to $870 - $920/metric ton, he adds.