Containerboard: US linerboard export prices stable in global markets as supply pressures persist

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Containerboard: US linerboard export prices stable in global markets as supply pressures persist

September 26, 2014 - 11:42

OAKLAND, Sept. 26, 2014 (PPI Pulp & Paper Week) -US kraft linerboard export prices remain stable in most global markets in September despite sluggish economic growth in many countries and plenty of supply from mills around the world, according to contacts.

Also not helping US export producers was the recent surge in the value of the dollar, which this week climbed to a nearly two-year high against the euro on anemic eurozone business reports.

By contrast, US GDP for the second quarter was just revised upward again to a 4.6% annualized rate, increasing expectations for further gains in the dollar.

Though July, US kraft linerboard export shipments were up 2.2% to 2.3 million tonnes (vs shipments through July 2013), according to US Bureau of Census. Exports of semichemical corrugating medium were up 17% to 224,000 tonnes from a year ago.

KLB price rise in Europe.In Europe, prices for unbleached kraft linerboard started rising in mid-September following announcements by all major producers of Euro 50-60/ton hikes starting Sept. 1, accordingto PPI Europe.

Contacts toldPPIEthat market players in Germany and France agreed to price increases of up to Euro 30/tonne -- "in line with test liner price increases." The increases were reported to be up to Euro 30/tonne in Germany and France, but only Euro 5-10 in Italy, the main competitive European import market along with Spain, where US and other non-European exporters play.

"We have not concluded orders yet but Euro 10/tonne may be possible in Italy," one US exporter said. "However, some customers are stating they will not order if there is an increase. In Spain, I expect a small increase."

Pressure on dollar realizations.US producers need a price increase in Europe because of the strengthening of the dollar that has reduced realizations in dollar terms even though US unbleached kraft linerboard in Southern Europe remained stable in price since June at around the Euro 460/tonne CIF level.

With the Euro at 1.27 to the US dollar on Sept. 26, the price level in dollars would be around $585/tonne CIF, down about 4.5% since June. Such a level would translate into around $460/short ton on an FAS basis.

Half of testliner hike sticks.The price hike on kraft linerboard in Europe follows the recent price increase on recycled containerboard, which increased Euro 30/tonne in France and Germany, and Euro 20/tonne in Italy. Some producers said they intend to push for the full announced Euro 60-70/ton, citing tighter supply,PPIE reported. However, contacts noted that Papierfabrik Palm just restarted its 650,000 tonnes/yr recycled containerboard machine at Worth in Germany. The Palm PM was down since Aug. 26 due to an electrical failure.

US unbleached kraft linerboard shipments to Western Europe through July were up 5.3% to 486,000 tonnes, according to US government figures.

Latin American prices steady.Any improvement in European containerboard prices would take some pressure off the Latin American market, contacts said.

"European mills would have an additional Euro 30 ($38)/tonne to keep the tonnage at home rather than throw it in the export market," one US trader said.

Although some pressure persists from abundant supply and weak demand in some Latin American markets, US linerboard export prices remained relatively stable at $470-480/short ton FAS, with some lower prices reported. Prices gradually declined from about $530-550/ton at their peak in the summer of 2013.

"Customers say there is pressure on the market, but there really isn't any," one US trader said.

The trader said that demand was reasonably good in the main US export markets on the Pacific side of Latin America going into the winter produce season.

But another trader told of not being surprised to see the market erode another $10/ton or more later this fall because of slow demand in Brazil, spurring Brazilian mills to export more linerboard to neighboring countries, and economic chaos in Argentina and Venezuela.

Export semichemical medium prices in Latin America, which sometimes sell at a premium, lagged linerboard by $20-30/ton, according to one contact.

US kraft linerboard exports to Central America (and the Caribbean) were up 3.3% to 361,000 through July, according to US trade statistics. But exports to South America were off 22.3% to 221,000 tons, reflecting increased competition from mills in the region as well as exports from mills in Europe and other countries.

Laredo price stable.In Mexico, prices at the Laredo border remained stable at $630-640/ton despite plenty of domestic supply plus more US imports.

One trader said that smaller customers are at the higher end of the range, while larger converters are at the lower end. Some larger converters, however, have recently been pushing for further $10-15/ton reductions.

US kraft linerboard exports to Mexico rose 10.7% to 395,000 tonnes through July, while semichemical medium exports were up 41.3% to 103,000 tonnes, according to US trade statistics.

More supply will be coming into the market from Grupak's 180,000 tonnes/yr recycled containerboard machine at its Hidalgo mill in central Mexico, which is expected to start producing in the fourth quarter. The PM was purchased from Sappi's coated printing and writing paper mill in Muskegon, MI. More supply will also come from some mills owned by industry leaders Bio-PAPPEL and Grupo Gondi, according toPPI Latin America.

Contacts expect box demand to pick up later this year, with Mexico economy projected to grow 2% in 2014, up from an annualized pace of only 1% during the second quarter.

Russian mills drop China price.Despite increasing signs that China may not meet the government 7.5% growth target for GDP, US linerboard export demand remains healthy and prices remained around the $640-660/tonne C&F, according to traders.

But prices could come under some pressure because of a $30/tonne drop in Russian kraft linerboard prices last month, reported by RISI'sAsian Pulp & Paper Monitor. Russian mills benefitted from about a 14% drop in the value of the ruble against the US dollar since the end of the second quarter due to Ukrainian crisis. This follows a $50-60/tonne drop in Russian prices to China in the second quarter.

US linerboard export shipments to China/Hong Kong jumped 20.1% to 191,000 tonnes through July, according to US trade statistics. But some of that tonnage could include unbleached kraft roll pulp shipments which are sometimes categorized as kraft linerboard.

Nine Dragons Paperstarted up its new 350,000 tonnes/yr PM 37 that produces recycled-content kraft-top linerboard this month at a greenfield mill in Shenyang city, Liaoning province,PPI Asiareported. Also, the company is reconsidering a 500,000 tonnes/yr containerboard PM project in Binh Duong province, Vietnam. Also, the company said it is planning to build two private 2,000-tonne berths at the Humen Port in Dongguan city, Guangdong province, southern China, to help with shipments of raw materials such as recovered paper and pulp to its almost 5.5 million tonnes/yr Dongguan mill. The two berths will be able to handle 170,000 tonnes of bulk cargo annually. The firm now operates a public 50,000-tonne berth for recovered paper and pulp at a port that is 7.5 miles from the Dongguan mill. Nine Dragons generated RMB 28.9 billion ($4.71 billion) in sales for its fiscal year ending June 2014, up by 0.7% vs the annual sales in the previous fiscal year. Nine Dragons said that the tonnes sold increased by 5.6%, but was offset by lower sales prices, which declined 4.7%. Even so, Nine Dragons reported that its net profit increased by 12.5% to RMB 1.76 billion because of cost saving measures. That would indicate the company had a 6.1% operating margin for the year.

International Paper's (IP) earnings estimate was dropped by by $0.20/share byVertical Research Partnersdue to the impact of the 14% drop in the ruble against the US dollar since the second quarter on IP's 50% ownedIlimpulp/containerboard Russian joint venture's $1.5 billion in US denominated debt.