N.A. Softwood Pulp Markets Still Weak, Hardwood Bottoming

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North American softwood pulp markets remain weak, but hardwood appears to have bottomed, reports Mark Wilde, senior analyst with Deutsche Bank. December data released by PPPC were better-than-expected, he adds. Hardwood inventories fell eight days of supply to 33 days, largely driven by a big jump in shipments to China. In contrast, softwood inventories rose one day to 36 days of supply. January U.S. NBSK (northern bleached softwood kraft) prices fell $20/metric ton to $870/metric ton. Spot prices at $600 - $650/metric ton remain well below list price levels.

"We think spot prices are at/below mill cash-cost for higher-cost producers. This is apt to be among issues behind the continued idling of the 350,000 metric tpy Terrace Bay, Ont,, Canada, mill. In the hardwood grades, producers are attempting to raise offshore prices for some grades. In the softwood grades, while no producer has announced February price levels, we think the risk is skewed to the downside. The fluff pulp market is also weak with prices down ˜$35/metric ton m/m in January," Wilde says.

Referring to it as the possible build-up of a "pulp tidal wave," Wilde points to two recently announced chemical pulp expansion projects—Aauco’s plans to build a new 1.3 million metric tpy pulp mill in southern Chile with a late-2015 startup, and Asia Pulp & Paper’s reported plans to build the world’s largest pulp line (2 million metric tpy) in South Sumatra with a 2017 startup. Several new pulp mills, he adds, are planned for Latin America during the next three years.