Pulp Shipments Weaken
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February Pulp and Paper Products Council pulp figures this past week came in slightly weaker than expected, "but supply/demand remains balanced in our view," reports Mark Wilde, senior analyst with Deutsche Bank. Total shipments decreased by 1.6% Y/Y. The overall inventory level rose by 1 day m/m (+1 day for softwood, +2 days for hardwood). "We attribute some of the weakness to North America, where shipments declined 9.6% y/y to 557,000 metric tons, with weather-related issues likely impacting volumes. Looking ahead, we don't expect such a sharp rate of decline to continue over the remainder of the year. Additionally, we are mindful of the month–to–month volatility in these numbers." Wilde said.
"A tale of two pulp grades?" Wilde asks. Hardwood fundamentals are still weaker than that of softwood, he notes. For February, China hardwood shipments were down 30.4% y/y to 219,000 metric tons and North America fell 17.4% y/y to 208,000 metric tons. The softwood market remained relatively stable with overall shipments up 2.8% y/y. In contrast with hardwood, y/y improvement was driven by China, where shipments were up 14.9% to 325,000 metric tons. This continued strength helped to offset weakness in North America, where softwood shipments declined 5.7% y/y, Wilde says.
The data are marginally supportive of recent $30/metric ton price hike announcements for softwood pulp slated for April 1, Wilde explains. "Despite the two-day increase in hardwood inventories, we believe the recently announced $30 BEK hike will be successfully implemented considering that overall pulp inventories were basically flat, softwood prices are rising, and some of the shipment weakness in February may have resulted from weather conditions and/or month-to-month demand volatility. Our expectation is still that pulp demand/supply will remain relatively balanced in the months ahead," he notes.
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