(PPI Pulp & Paper Week) – A seasonal bounce in demand and a two days-of-supply reduction in bleached softwood kraft (BSK) stock led overall worldwide chemical market pulp producer inventory to decline by one day in March.
The inventory total closed at 35 days of supply, the Pulp and Paper Products Council (PPPC) has reported.
But different from softwood’s supply position, producer inventories of bleached hardwood kraft (BHK) were above balanced at 41 days-of-supply at the end of March and buyers are expected to mount an aggressive pushback against $30/tonne hikes that Latin American producers proposed for 1 May in key global markets, according to contacts.
Global BSK producer inventories closed March at 29 days-of-supply, down the two days from a revised 31 days of stock. The 29 days returned stocks into the range of 28-30 days that most producers and analysts consider balanced.
A contact at a major northern bleached softwood kraft (NBSK) producer who reported implementing the $930/tonne list price this month in the USA said: “Our order volumes are very good this month and demand has been quite good.”
Tissue demand impact. Year-to-date pulp sales to North America totaled 658,000 tonnes, up 8.3% vs year-ago results “in part due to new tissue capacity,” the PPPC said. Since last September, four virgin- and deinked pulp-fibred tissue paper machines started up in the USA.
Kimberly-Clark recently reported about a $15 million higher cost paid for market pulp in the first quarter 2013 (vs first quarter 2012). K-C president and chief executive Tom Falk told analysts on a conference call that the firm expected additional commodity costs of $150 million to $250 million in 2013 – with two-thirds of that additional cost for buying pulp.
North American shipments posted bigger gains in March, up 10% from March 2012 and up 14.8% sequentially. The newly ramped up tissue machines buoyed demand for NBSK and bleached eucalyptus kraft (BEK), according to producer sources.
Worldwide shipments of BSK totaled 1.964 million tonnes in March, up 8.5% sequentially and up 2.3% from year-ago results of 1.920 million tonnes, according to PPPC data. Year-to-date, BSK deliveries of 5.571 million tonnes were down 0.3% from the same period in 2012.
While April’s NBSK price increase went through relatively easily domestically, a proposed $30/tonne global hike from BEK producers Fibria and Suzano is bound to face spirited resistance from US buyers who’ve bristled at lower prices offshore and the high reported BHK inventories. The firms separately announced 1 May list prices at $900/tonne in North America, $850/tonne in Europe, and $750/tonne in Asia.
The PPPC revised February overall inventories to 36 days-of-supply, up from 35 days originally reported, with BSK revised up one day and BHK to 41 days-of-supply (up from 39). March BHK producer stocks closed at 41 days-of-supply, flat from the February’s revised total. That’s a level widely considered above balanced.
A small poll of analyst sources on 26 April said the one day-of-supply drop in overall producer stocks corresponded to an estimated 125,000-tonne decrease. Based on the PPPC’s February raw inventory of 4.340 million tonnes, that would put March’s closing level at an estimated 4.215 million tonnes.
‘Hardwood inventory disappointing.’ Deutsche Bank analyst Josh Milberg called the BHK stock results “disappointing,” adding, “we think they suggest a more challenging environment for implementing the May $30 global BEK price hike even taking into account somewhat better than expected Chinese volumes.”
March PPPC data also showed a 14.5% rise in global BHK shipments month-over-month, with 1.827 million tonnes flat from year-ago results of 1.824 million tonnes. A rebound in shipments to China, where overall deliveries of 954,000 tonnes was up 9.7% vs 870,000 tonnes in February, contributed to the BHK shipment rise.
Arauco sets flat BSK in China. At least three producers recently announced their May prices in China. Arauco and Ilim separately announced flat prices on bleached radiata pine and Russian BSK, respectively, while Tembec on Friday announced an increase on high-yield pulp.
Arauco announced flat May prices on its bleached radiata pine (BKP) and unbleached kraft (UKP) in China, at $690/tonne net and $620 net, respectively. Ilim’s Russian BSK price was to remain at $680 net CFR to major ports, while the China/ Manzhouli border would be $650 net.
While Arauco’s flat BKP and UKP were slated flat, the firm told customers its BEK list price would rise $30/tonne to $750. That’s the same list in China Fibria and Suzano announced previously for 1 May (P&PW, 5 April).
Tembec out on BTCMP. Tembec, meantime, said its “high-freeness” aspen 80 high-yield pulp, also called bleached chemi-thermomechanical (BCTMP), would be $590/tonne in China effective 1 May.
Tembec did not state how much the increase would be, but BCTMP producer sources in recent months said demand was increasing for hardwood BCTMP in part because Asian buyers have sought tonnes as they resist BHK price increases.