Market Pulp Price Cuts Spreading

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In the global market pulp arena, reports suggest that Russian producer Ilim has offered $150 - $160/metric ton price cuts, Mark Wilde, senior analyst with Deutsche Bank, reports.. In South America, he adds, Arauco has already announced price cuts of $40 – $50/metric ton. While North America and Europe appear stronger, the ripple effects are inevitable.

The effects can already be felt in the hardwood markets, with NBHK list prices in July down $15/metric ton and SBHK process down $10/metric ton. NBSK list prices remained flat in July. However, with U.S. spot NBSK prices declining (-$25/metric ton to $850 - $890 net delivered U.S. East), expectations of a rise in producer inventories in June, and sharp cuts in Chinese prices, a decline in prices seem likely, Wilde notes. The key question, he says, is 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 quarte of 2009.

While inventories still appear to be in a reasonable shape by historical levels, slower summer demand coupled with restarts in Europe and North America, along with the June startup of APRIL’s 1.3 million metric tpy Rizhao, China, mill, suggest that market imbalance is growing. This may further put a downward pressure on prices, Wilde explains.