paperloop.com
SAN FRANCISCO, July 18, 2001 (paperloop.com) - North American market pulp prices tumbled for the seventh time in as many months on seasonal weak demand and continued papermaker downtime. Benchmark northern bleached softwood kraft (NBSK) declined 7.4 percent or $40/tonne to $500/tonne, while other pulp grades fell less. 
Some producers indicated they "have no list" prices anymore as deals have increasingly occurred on a case-by-case basis, while one major producer said it had abandoned its list two months ago and has simply discounted. 
The sustained drop in prices prompted both sellers and buyers to note last week that even suppliers holding low inventories aren't able to leverage themselves in pricing. A large-volume buyer source said that his firm's discounts "are anywhere from 5 percent to double digits," even off the latest prices.
Many producers continued offloading pulp to markets such as China, South Korea and Taiwan as prices there appear to have leveled off at low levels. Market watchers last week expressed concern with global inventories and the wholesale exports to non-Japan Asian markets.
"I'm concerned with what will happen (to inventories) through July and August," said a Canadian industry consultant, who said that although pricing dynamics could improve after September, producers may fight inventory surges all year. "I hope they don't overproduce. This cycle is harsher than most cycles because of paper downtime."
Salomon Smith Barney analyst Chip Dillon noted in a report that the latest inventories are, "well above the 1.5 million tonne 'inflection' level...total inventories combined typically rise over 230,000 tonnes during July and August (so) we believe pulp prices will remain under pressure."
Various North American producers have declined selling pulp to Asian markets on below cash-cost prices, but buyers there continue to bargain hunt from second or third suppliers. Because of lower operating costs and the availability of cheap NBSK, a buyer source said that his firm's paper machines are profitably running at 100 percent through the summer season. "Some suppliers have more inventory than others and have no choice but to sell," noted the buyer.
Meanwhile, several pulp producers have attempted to offset poor demand conditions by further curtailing production. Tembec Inc. said it would slash its pulp output by at least 100,000 tonnes during the third quarter, matching the downtime it had taken through the first two quarters combined. Although Tembec didn't announce which mills or grades of pulp would be affected, an industry source said that Tembec was taking a month of downtime at its Crestbrook mill in Skookumchuck, B.C. With capacity to produce 227,000 tonnes/yr of NBSK, the mill's downtime would represent about 19,440 tonnes.
Weyerhaeuser recently told customers it would take about 54,000 tonnes of primarily NBSK market-related downtime during the third quarter. A Weyerhaeuser official said its mill in Prince Albert, Sask., would trim about 14,000 tonnes of NBSK and NBHK; 24,000 tonnes of NBSK would be cut at its mill in Grand Prairie, Alta., at a time to be determined later; and its Kamloops, B.C., mill would cut 16,500 tonnes of NBSK during outages in August and September. 
Additionally, the official expected that incremental tonnage would be lost during some maintenance downtime during the quarter. The downtime at Weyerhaeuser "reflects softness in fine paper demand," said the official. "Demand to Europe is particularly soft and with the strong dollar we have currency issues."
Other producers are reducing supplies without acknowledging their curtailments. Producer sources in British Columbia said that Celgar Pulp Co. in Castlegar, B.C., would shut down production for about 35 days due to market reasons. With capacity to produce about 425,000 tonnes/yr of NBSK, the outage could clip about 42,490 tonnes from supplies.
A source at Western Pulp Ltd. said the Vancouver, B.C., firm had extended the shutdown its 255,000 tonne/yr NBSK pulp mill in Squamish due to continued soft demand. The downtime, which began on June 1, is expected to total six weeks, said the source. Western Pulp's Squamish operation will likely cut at least 30,000 tonnes from supplies during the closure, said the source.
In Wisconsin, an NBHK mill is currently shut down for market reasons and a company source said it would chop about 20,000 tonnes from production before restarting later this month. 
"In the fourth quarter, these kraft mills can't shut down," said the source. "You have to run during the winter, but right now you can take a mill down. If the downtime isn't taken now, you will see a real bloodletting in the fourth quarter."