Thursday, March 18, 2010 10:30:23 AM
Earthquake in Chile, strike in Finland have squeezed global supply of pulp, driving up prices and benefiting Canadian producers
Bertrand Marotte
Montreal — Globe and Mail Update
Published on Wednesday, Mar. 17, 2010 8:15PM EDT
Last updated on Thursday, Mar. 18, 2010 6:22AM EDT
Disruptions to the global supply of pulp, some related to the fallout from last month's earthquake in Chile, are proving to be a godsend for Canada's beleaguered forest products sector.
Chile, a major pulp exporter, was hit by a severe earthquake on Feb. 27 that left many forestry companies devastated and forced to halt production for an indefinite period.
Several facilities were located at the epicentre of the quake and some mills were destroyed. Others face disruptions resulting from extensive infrastructure damage as well as interruptions in the supply of electricity, water, wood fibre and chemicals.
Meanwhile, pulp producers in Finland, also major global players, have suspended work at several plants in the face of a crippling strike by dock workers that has halted most pulp exports from the country. The workers have been on strike since March 4 in a conflict over issues such as severance pay and job security.
Chile and Finland together account for more than 10 per cent of the globe's pulp market and the supply squeeze is happening just as China ramps up demand for pulp to feed continued expansion of its paper-making capacity.
The result is an unexpected rally in pulp prices, a welcome development for big Canadian pulp producers such as Domtar Corp., (UFS-T69.65-0.47-0.67%) Canfor Corp. (CFP-T8.950.010.11%) and Tembec Inc. (TMB-T1.890.084.42%)
“This is that rare opportunity,” said Kevin Mason, an analyst with Vancouver-based Equity Research Associates.
Canadian pulp makers stand to be the among the biggest beneficiaries of the runup in pulp prices because they have relatively high costs and weaker balance sheets, Mr. Mason said. A sustained rally in prices will allow them to generate significant cash flow to help repair their balance sheets and prepare for future dips and troughs, he said.
“Inventories were already reasonably snug,” but the events in Chile and Finland are putting additional pressure on the global supply situation, he said.
Domtar senior vice-president and chief financial officer Daniel Buron cited the events in Chile and Finland, as well as heightened demand in China, as a “good news” scenario for his company in the short to medium term.
Mr. Mason said the rally comes just in time.
Global prices for pulp had been expected to stabilize and then begin to fall after recovering from a steep falloff in 2008 and recently reaching $900 (U.S.) a tonne.
Many observers expect the price to soon match or surpass the $1,000-a-tonne record high set in 1995.
“If Chile stays out a little longer, we could surpass those highs,” Mr. Mason said.
Mr. Buron, however, was reluctant to go out on a limb and predict prices will reach $1,000.
“It's not impossible it goes to $1,000. But it's a tough call. We still have to assess the extent of the damages in Chile and establish how sustainable the demand in China is. We also don't know how long the strike in Finland could go on for.”
Recent MERC News
- Mercer International Inc. Announces Conference Call for First Quarter 2024 Results • GlobeNewswire Inc. • 04/16/2024 08:30:00 PM
- West Fraser and Mercer Announce Dissolution of Cariboo Pulp and Paper Joint Venture • GlobeNewswire Inc. • 04/02/2024 09:00:00 PM
- Jimmy Lee Appointed As Chairman Emeritus Of Mercer International Inc. • GlobeNewswire Inc. • 02/26/2024 09:05:38 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 10:28:44 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 09:46:30 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 09:19:34 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 09:04:11 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 08:44:27 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 07:44:33 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 07:23:34 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 07:05:09 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 06:47:54 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/16/2024 05:58:28 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 02/15/2024 09:31:25 PM
- Mercer International Inc. Reports Fourth Quarter and Year End 2023 Results and Announces Quarterly Cash Dividend of $0.075 • GlobeNewswire Inc. • 02/15/2024 09:30:00 PM
- Form SC 13G - Statement of acquisition of beneficial ownership by individuals • Edgar (US Regulatory) • 02/14/2024 02:48:48 PM
- Mercer International Inc. Announces Conference Call for Fourth Quarter 2023 Results • GlobeNewswire Inc. • 01/22/2024 09:30:00 PM
- Mercer International Inc. to Present at Upcoming CIBC Investor Conference • GlobeNewswire Inc. • 01/09/2024 09:30:00 PM
- Mercer International Inc. to Present at Upcoming Investor Conferences • GlobeNewswire Inc. • 11/14/2023 09:30:00 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 11/02/2023 08:34:19 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 11/02/2023 08:33:24 PM
- Mercer International Inc. Reports Third Quarter and First Nine Months of 2023 Results and Announces Quarterly Cash Dividend of $0.075 • GlobeNewswire Inc. • 11/02/2023 08:30:12 PM
- Mercer International Inc. Announces Conference Call for Third Quarter 2023 Results • GlobeNewswire Inc. • 09/28/2023 08:30:00 PM
- Mercer International Inc. to Present at Upcoming 2023 TD Securities Paper and Forest Products Conference • GlobeNewswire Inc. • 09/22/2023 05:05:55 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 09/21/2023 05:00:59 PM
VPR Brands LP Reports Record Annual Financial Performance for Fiscal Year 2023 • VPRB • Apr 19, 2024 11:24 AM
Coinllectibles' Subsidiary, Grand Town Development Limited, Acquires Rare Song Dynasty Ceramics Worth Over USD28million • COSG • Apr 18, 2024 8:03 AM
ILUS Provides Form 10-K Filing Update • ILUS • Apr 17, 2024 9:54 AM
Glucotrack Announces Expansion of Its Continuous Glucose Monitoring Technology to Epidural Glucose Monitoring • GCTK • Apr 17, 2024 8:00 AM
Maybacks Global Entertainment To Fire Up 24 New Stations in Louisiana • AHRO • Apr 16, 2024 1:30 PM
Cannabix Technologies Begins Certification of Contactless Alcohol Breathalyzer, Re-Brands product series to Breath Logix • BLOZF • Apr 16, 2024 8:52 AM