• Paper mills, especially in Europe, have been operating at losses for years and it appears now they are pushing for price increases
• Dockers strikes in Finland – UPM has closed 3 mills and Stora Enso threatening to temporarily close mills this week which will cause a shortage
• Damage to plantations, mills and port in Chile means no pulp will be exported from Chile for at least a month and consequently pulp will be in short supply
World shortage of pulp
• Chile produces 4.8m tonnes of pulp per annum which represents 8% of world capacity.
• they are the lowest cost producer in the world
• almost two thirds of their production is sold to China and other Asian countries (one third China, one third other Asian countries).
• Mills that have been affected that were supplied Chilean pulp – Garda, Biberist, Hansol Paper, Gold Huasheng Paper, April, Stora Enso, APP, Motril, Finch
• The big question is how long will the affect of the earthquake stop production. Currently 3.7m tonnes of the 4.8m tonne capacity is closed as a direct result of the earthquake.
• The longer term damage has been caused to the timber plantations
• The current understanding is that damage to pulp plants varies depending on how far away they are from the epicenter of the earthquake, but some are structurally damaged. However, Chilean pulp suppliers are advising that most mills will be out of production for at least one month whilst they are checked for damage and essential repairs are made. Some will not start up for longer than that.
• Chile’s infrastructure has been badly damaged; bridges have collapsed, roads and railways are impassable and the main harbour serving the pulp industry at Concepcion was severely damaged. This has interrupted supplies of wood and chemicals to the pulp mills as well as transport of finished product out to customers. Electricity and water supplies are also unavailable to many mills.
Situation in FE
Paper situation in China/FE is very tough
• Prices are on the way up and are changing every day……
• Gold East and Cheng Ming mills have been refusing orders to push prices up with large increases which could bring Chinese paper prices up above European and Indian pricing levels.
• Mills are very slow in committing to schedules.
• Allocation is very tight .
Situation in Europe
Current Prices
In Europe there is a big drive to increase coated woodfree by 10% from 1st April. This would equate to around £50 per tonne. The continuing increase in pulp prices against the background where mills are already struggling to break even, means there is an increase required and no doubt pulp will continue to rise further.
Before the earthquake, pulp supply was already proving to be difficult and global prices had moved up in excess of 40% since April of 2009. The European paper industry now faces a severe lack of pulp and consequently it is inevitable that this will result in further steep pulp price rises.
The Euro continues to weaken against the US dollar which further exacerbates the poor margins of European paper producers at a time when paper selling prices in Europe are at an all time low.
Whereas demand for European woodfree papers, in particular, has been recovering strongly in recent months, both within Europe but also in exports markets, European selling prices have nevertheless continued their decline but this could be about to change..
Situation in India
It would appear that paper prices are stable and although they have been more than prices from China, with the new increases, prices from India may now look a little more competitive when the new pricing levels kick in.
