TSX:WFG - Post Discussion
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retiredcf on May 17, 2022 8:23am
TD Notes
Global Pulp Market Update - March 2022 Data
March Shipments Moderate; Softwood Mill Inventories Moderate Global Pulp Prices Setting Nominal Records in May
Event
The Pulp and Paper Products Council (PPPC) released "World-20" market pulp data for March this morning (data from producers representing 82% of global paper-grade chemical market pulp capacity). March shipments declined 3.2% on a year-over- year (y/y) basis - the 10th negative y/y comparison in the past 12 months. Volume pressure was evident for both softwood pulp (down 4.5% y/y versus the year-to-date and full year 2021 declines of 3.7%) and hardwood pulp (down 4.4% y/y versus the year-to-date decline of 0.8% and the full-year 2021 decline of 5.1%). Aggregate March-ending mill inventories decreased three days versus the preceding month ending March at 41 days of supply.
Impact: NEUTRAL
March shipments to China (the largest buying region) declined 11.4% y/y but jumped 19.1% m/m. This data is late, and we suspect that volumes to China are moderating in the wake of lockdowns there. Global softwood pulp mill inventories have declined from the peak at the beginning of 2021 but remain above-balanced levels. This reflects ongoing logistics challenges, although the pronounced m/ m inventory drawdown (336,000 tonnes versus the 10-year average m/m March decrease of 231,000 tonnes) is a sign that supply chain issues are slowly easing. Of note, unbleached kraft pulp shipments (up 26% y/y and 44% m/m) reached record levels.
Pulp producers in our coverage universe: MERC; CFX/CFP; RFP; WFG.
Key Points for March Data
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March y/y volume pressure was led by China - shipments to this country declined 11.4% y/y. This was the 12th consecutive y/y decline for shipments to China but partly reflects a difficult y/y comp. Shipments to Latin America declined 4.7% y/y while those to Western Europe softened 0.2% y/y. Japan was the only notable upside outlier (shipments up 24.3% y/y).
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Softwood days of supply decreased five days m/m to 40 days (versus a long- term average of 31 days). Hardwood days of supply were unchanged m/m at 43 days (two days above long-term average). Mill inventories decreased by an estimated 336,000 tonnes during March, better than the 10-year average m/ m March decrease of 231,000 tonnes.
Preliminary May price survey shows further positive pulp price momentum in North America. The preliminary May list price for Northern Bleached Softwood Kraft (NBSK) market pulp is US$1,730/tonne at the low end of the range, up US$50/tonne from April and another record. The current price for NBSK in Europe is US$1,390/ tonne, up 10% since the end of 2021 and also a record. Prices are treading water in China - the leading indicator. Reports note ongoing tight supply following widespread downtime (mostly seasonal maintenance) and stubborn transportation bottlenecks.
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