Pulp prices signpost a reversion to the mean $6 to $9 mean There has been some serious erosion from the $7000 RMB level to the $5700 level. That likely can bounce back though. Anyway, that's $827 USD. But the key thing is.... that's very high historically. I'll price out the historic per unit breakeven.
Looking back to when pulp was very flat -- like $4000 RMB in all of 2020, CFX lost cash of course.Q4-20 was a cash loss of $35/ton ($9MM lost in the pulp segment on 258M tons shipped). That's when the price was $637 USD del. China. The implication being that the breakeven then was ballpark $672.
JPow got it right by accident on transitory inflation if you consider BC residual prices. Logs and chips were indeed transitory on the upside and are normalizing. So, when conditions return to normal -- and if pulp pricing remains elevated -- this should look attractive to a buyer.
The macro conditions for NBSK and it's strength are solid, too. The $WFG Hinton conversion from 2-line NBSK to 1-line UKP is helpful as well. It's just a matter of eating the write-downs and rallying around the core 2 assets (with a pocket full of shells; they don't gotta burn the mills they just remove em...)
Anyway, FX is favorable too near term. What the playbook will look like for a violent non-M&A spike will be Q3-22 RYAM's run from $3 to $9 when they finally hit a decent operational set of numbers. Same with these dudes I suspect as if they can have a decent uptime Q or two where costs are sub $700 and realizations are $850+, then it's go time. Suddenly on a 800k ton run rate, you're going to see decent incoming cash. Like ballpark $150 per ton.
Lastly, I haven't got into it, but the parent gives these guys no quarter with respect to transfer pricing. They could, or they could have "helped" via sawing less aggro for LRF (recovery) metrics, but they opted not to. E.g if you go into a GreenFirst sawmill in Ontario they just "chip it to the cant" and don't take sideboards. That's great for the pulp boys. We don't do that out west, but sometimes you got to help a sister company out. CFX should NEVER have been chipping whole logs at $100/M3 a hit. But here we are today buying this at 25 cents on the dollar (or 50 based on a very conservative book value). *shrug icon* The change now is CFX needs much less fibre which is a good thing.