Published on March 12th, 2010
The Canadian Press
http://www.ngnews.ca/Business/2010-03-12/article-903583/Canadian-pulp-producers-expected-to-benefit-as-prices-rise-due-to-Chilean-quake/1
MONTREAL — Canadian pulp producers are expected to benefit from a sustained improvement in prices caused by the Chilean earthquake and a strike in Finland, analysts say.
Chile accounts for about eight per cent of the world’s supply of softwood and hardwood pulp, used in making various paper products.
Reports suggest that six of the South American country’s pulp mills have been shut since the 8.8-magnitude earthquake last month and they may remain idled at least another month.
The mills produce an estimated 3.8 million tonnes of pulp annually.
In Finland, a strike by 10,000 truckers and port workers has cut off most exports and forced newsprint and pulp mills to close. The Nordic country exports up to 1.8 million tonnes of pulp annually.
The consequence has been an increase in pulp prices in the United States, Europe, and China.
NBSK pulp prices in the U.S., Europe, and China increased by US$24.77 per tonne this week.
As of March 9, North American prices were US$900 per tonne, up US$70 this year and 42 per cent from the low of US$635 last April. European prices have risen 53 per cent from the 2009 lows.
Additional increases are expected over the next three to six months because suppliers have limited ability to build inventories ahead of normal spring maintenance downtime.
Wet weather in the U.S. South, cold weather in Northern Europe and flooding in parts of Brazil have added to the difficulties.
The beneficiaries include Canfor Pulp (TSX:CRX.UN), Tembec (TSX:TMB) and SKF Pulp (TSX:SFK.UN), Domtar (TSX:UFS) and West Fraser Timber (TSX:WFT).
Benoit Laprade of Scotia Capital said the earthquake will likely extend the pulp price bull run at least through the second quarter of 2010.A small decrease in pulp prices was anticipated in the second half of the year as paper company margins are squeezed and the full effect of the weakened Euro is felt.
“While we had been cautious on the sustainability of further increases given the potential for slowdown in Chinese demand and weakening margins for European papermakers, we now expect prices to continue to rise beyond March,” added Paul Quinn of RBC Capital Markets.All but one of the Canadian producers saw their shares gained in afternoon trading on the Toronto Stock Exchange.
Tembec was up 3.52 per cent, Canfor 2.63 per cent, Domtar by 1.1 per cent and West Fraser by 0.35 per cent. SFK Pulp was unchanged.
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