paperloop.com
SAN FRANCISCO, Aug. 16, 2001 (paperloop.com) - Primary grades of North American market pulp declined last week as producers waited for their proactive downtime plans to take effect and many buyers easily talked down prices. Benchmark northern bleached softwood kraft (NBSK) fell another 4 percent, dropping $20/tonne to $480/tonne while other grades declined even further. 
Although many producers are moving to align supplies with moderate demand conditions, various sources said that softwood pulps in particular were still too abundant in the U.S and Canada. But over the short to middle term, market watchers appear less concerned with inventory levels and indicated that a cyclical bottom was very close. 
Some producer sources suggested that downward pressure had eased compared to last month. However, several buyers noted they had easily pushed down prices for most pulp grades. Effective list prices for southern bleached softwood kraft slipped $30/tonne to $430-$440/tonne on oversupply. But differential prices showed a slight anomaly as northern bleached hardwood kraft dipped only $10/tonne to $420-$440/tonne as the grade was said to be less abundant on the contract market. Suppliers also claimed its specialty uses allowed it to hold up compared to other grades. But southern bleached hardwood kraft (SBHK) prices saw the month's largest percentage drop, down 7 percent or $30/tonne to $390-$410/tonne. Still, market participants appear to be looking to the near term future with guarded optimism. 
Tuesday's North American/Scandinavian (Norscan) chemical paper-grade market pulp producer inventory report may have been the first sign that producers have been able to control their stocks this year. Norscan inventories rose only 5,000 tonnes in July, well off an average July increase of 143,500 tonnes recorded over the past 10 years. 
Norscan stocks stood at 1.785 million tonnes at the end of July, representing 32 days of supply. Producers also held 32 days of supply in June. July inventories closed at 42.3 percent higher than year-ago results, a large improvement over the prior month's year over year 66.9 percent differential. 
"When you consider the downtime and how much production is being taken out of the market in the next three months, it's quite staggering," said a U.S.-based agent. "Also, look at Asian and European buyers who are building inventories in anticipation of a bottom. There are some fundamental and psychological changes in the market (that will occur) in the next month as inventories are announced and downtime continues." 
Guaranteed pricing offers. Both pulp sellers and buyers indicated there have recently been more attempts at guaranteed prices for anywhere from two to five months. A U.S.-based producer source said some buyers had proposed guaranteed prices for their contracted tonnes through the end of the year on concern of a sudden price rebound. 
Export markets showed mixed results. European prices again slid while Asian markets such as China and Korea appeared to level off. Consumer downtime continues to hit suppliers, but an Asian buyer said downtime at his firm's paper mills averaging a week per month were tempered by already low pulp prices. Hardwood pulps also appear to have leveled off there despite continued aggressive maneuvering from Brazilian producers that over the past few months have adjusted their prices to compete with Indonesian and other suppliers. 
In U.S. spot markets, NBSK pulp prices recently declined just over 2 percent compared to recent weeks, and apparently have come to mirror contract prices in non-Japan Asia. 
"NBSK spot prices seem to have bottomed out. List and spot prices are converging, which has always (signaled) a bottom," said Gordon Floe of NLK Consultants, who suggested that NBSK spot prices in the U.S. had already bottomed at $400/tonne weeks ago. "But there is still a lot of pain for the producers in contract tonnage. Contract and spot needs to converge before a recovery will happen." 
Prices for spot NBSK delivered in the Northeast or Midwest declined $10/tonne to $410-$440/tonne last week on paperloop's spot market price index. Recent paperloop spot prices represent a middle range of transactions, and closed 11.5 percent below August contract prices.