December 22, 2022
Paper & Forest Products
Pulp stats: Tis the season: Seasonal demand edges shipments up
Our view: The Pulp and Paper Products Council (“PPPC”) reported World-20 market pulp stats for November.
Key takeaway — Pulp shipments were up 1.8% y/y (hardwood +1.3%; softwood +3.0%) in November. Shipments were up 1.6% m/m, with hardwood (+3.6%) and softwood (+0.6%) both trending slightly higher; however, on a seasonally adjusted basis, shipment volumes were relatively flat m/m (+0.2% vs. October). Unexpected downtime was down modestly m/m in November, driven by the restart of Ence's Pontevedra mill and improved availability of BHK from APP's OKI mill. Meanwhile, NBSK downtime continues in BC on the back of transportation issues, ongoing labour action and high-priced woodchips. Preliminary December list prices for US NBSK were down 1.4% m/m to $1,720/tonne, while SBSK was also down 1.5% m/m to $1,695/tonne. We forecast average NBSK list prices for 2023 of $1,600/tonne.
Softwood pulp shipments increased 3.0% y/y in November — Softwood shipments were up y/y in most regions, with higher shipments to Eastern Europe (+1.6%), Latin America (+3.8%), Japan (+23.7%), China (+8.8%), and Other Asia/Africa (+15.2%), partially offset by decreased shipments to North America (-4.2%), Western Europe (-7.1%), and Oceania (-6.3%). By grade, Radiata shipments increased nearly ~30.0% y/y, while NBSK shipments were flat y/y and SBSK shipments decreased 0.5% y/y. The softwood operating rate increased 2 points y/y to 89%, with NBSK at 86%, SBSK at 89%, and Radiata at 103%.
Hardwood pulp shipments were up 1.3% y/y in November — Hardwood shipments increased y/y in most regions, with higher shipments to Eastern Europe (+3.9%), Latin America (+1.3%), Japan (+2.6%), China (+18.7%), Oceania (+>100.0%), and Other Asia/Africa (+2.0%), partially offset by decreased shipments to North America (-15.7%) and Western Europe (-11.8%). By grade, the PPPC estimated that Eucalyptus shipments advanced 2.3% y/y, while NBHK shipments slid 1.8% y/y and SBHK shipments fell 24.0% y/y. The hardwood operating rate was unchanged y/y at 87%, with BEK at 87%, NBHK at 86%, and SBHK at 83%.
Inventories: days of supply relatively unchanged in November — According to the PPPC, global days of softwood supply (seasonally adjusted) in November were down 1 day m/m at 42 days, while hardwood supply was unchanged m/m at 43 days (seasonally adjusted). Producer inventories were up 1.0% m/m in October, with softwood inventories flat m/m but remaining above “balanced” levels. In China, port inventories decreased in November (-1.2% m/m), and have decreased by 14.9% since the end of June.
Canfor Pulp curtails Intercontinental Pulp Mill — On December 19, the company announced the immediate curtailment of its pulp mill in Prince George, BC. Canfor noted a lack of available economic fibre as driving the decision, with President and CEO, Kevin Edgson, stating “sawmill curtailments occurring in BC are materially reducing the residual fibre available for pulp mills.” Canfor expects the downtime to be in place for four weeks and remove approximately 24k tonnes of market kraft pulp. The company stated it will continue to monitor fibre supply and adjust its operating rates accordingly.
Stora Enso strengthens focus on specialized pulp grades. The company announced plans to invest: (1) €38MM in unbleached kraft pulp (“UKP”) production at its Enocell site in Finland to support the growing consumer demand for non-bleached renewable packaging materials; and (2) €42MM in fluff pulp production improvements at its Skutskar site in Sweden to support growing hygiene products demand. Following the investments, Enocell will flexibly produce UKP and NBSK pulp, while the Skutskar upgrades will allow Stora to meet customer demand for specific roll sizes, improve work safety, and grow fluff pulp production. The investment at Enocell is expected to be completed during Q424 and the Skutskar investment is expected to be completed during Q224.