Hi all, this info. might also be helpful as to the direction of paper pricing for the next 6-12 months.
Global Pulp: Tighter Supplies To Fuel Continued Price Rally
Dow Jones Newswires 3/2/2010 20:30 GMT
World pulp supplies just got tighter, and prices, which have risen substantially over the past year, are likely to continue moving higher.
Prior to the magnitude 8.8 earthquake that struck just off the coast of Chile Saturday, world market pulp supplies already were tight. In the wake of the temblor, most wood and pulp mills in Chile, which accounts for about 8% of world pulp production capacity, have been shuttered owing to damage and power outages.
RISI, a market analysis firm, estimates at least 3.75 million metric tons of the country's 4.8 million tons of annual capacity is closed due to aftereffects of the earthquake.
Mark Wilde, research analyst at Deutsche Bank, said Tuesday the Chilean supply disruption, at a time of lean inventories, "makes it more likely that the rally will continue."
The current rally has seen prices for northern bleached softwood kraft pulp, the benchmark grade of pulp, rise about 30% over the last 11 months.
Meantime, "weather-related fiber issues in many parts of the Northern Hemisphere make it unlikely that other parts of the world can pick up the slack," Wilde said.
Celulosa Arauco, part of Chilean fuel and forestry conglomerate Copec (COPEC.SN), said it halted all operations following the earthquake, adding that some of its units suffered "important" damage. Because of transportation and communications problems, it is unclear when operations will restart, the world's second-larget pulp producer said in a statement.
CMPC Celulosa SA, Chile's second-largest pulp producer after Arauco, said none of its plants appeared to have suffered severe damage from the quake, although all appeared to have some damage. The company closed all facilities because of a lack of potable water and electricity, while declaring a 30-day force majeure. Under a force majeure, a typical clause in contracts, producers don't have to honor certain terms if operations are affected by extraordinary events such as natural disasters.
"The epicentre of this earthquake is located close to our pulp mills and as a result the whole supply chain has been heavily affected," CMPC Chief Executive Sergio Colvin and Sales Manager Guillermo Mullins said in a letter to customers dated March 1, a copy of which was obtained by Dow Jones. "Therefore it is very difficult to have clear picture as to when we could restart our operations."
Calls to Arauco's office in the U.S. seeking further details have not been returned. CMPC officials couldn't be reached for comment.
Deutsche Bank's Wilde said that CMPC's key mills are located farther from the earthquake's epicenter than are Arauco's and speculated that Arauco's facilities likely had more damage as a result.
Brian McClay, principal at TerraChoice Market Services, a paper and pulp consulting firm, said the Chilean production losses could have some paper makers either looking for alternative sources in an already very tight world market or they could stop making paper because they will run out of pulp.
Over the last 11 months, prices for most pulp grades have risen more than $200 a ton, and another round of increases began March 1.
Finland's index provider FOEX this week reported its U.S. list price index for northern bleached softwood kraft pulp was $875.23 a metric ton, up $1.10 from a week earlier and $45.23 higher than on Jan. 1.
FOEX also reported its index for European NBSK list pulp prices was up $6.13 from a week earlier, at $855.82 a ton. This takes the price up $57.19 from Jan. 1.
FOEX also reported its European list price index for bleached hardwood kraft pulp was up $1.75, at $758.21 a ton. This is $58.21 higher than it was on Jan. 1.
Pulpandpaper.net reported NBSK as of Feb. 1 in North America at $860 to $880 a ton, up $30 from a month earlier. In Europe, Pulpandpaper.net's price as of Feb. 1 was $840 to $860, up $30 from a month earlier.
Pulpandpaper.net reported bleached eucalyptus pulp in the U.S. as of Feb. 1 at $770 to $790, up $30 from a month earlier. In Europe, bleached eucalyptus pulp was $540 to $560 of Feb. 1, up $50 to $60 from a month earlier.
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