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US linerboard export prices pressured by slow demand, excess supply

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US linerboard export prices pressured by slow demand, excess supply

July 18, 2014 - 11:13

OAKLAND, July 18, 2014 (PPI Pulp & Paper Week) -US linerboard export prices remain under pressure in global markets due to slow demand and excess supply as producers in the US, Europe and other exporting countries push more tons offshore in response to weak demand at home, according to traders.

"All those excess tonnes have been going into offshore but now the export market is saturated," one producer said.

But contacts are hopeful prices may start to stabilize in Europe after recent gradual erosion, while levels in Latin America have been almost holding. However, US producers recently dropped export prices to China in response to sudden price cuts by Russian suppliers.

US kraft linerboard exports to all global markets through May were up 0.5% to 1.6 million tonnes, while semichemical medium imports jumped 6.5% to 164,000 tonnes, according to US trade statistics.

European prices stabilizing?The European kraft linerboard market may be stabilizing after some erosion following last spring's attempted Euro 50/tonne price increase.

The European price increase fizzled due to slow box demand, the widening gap with recycled containerboard prices that dropped Euro 50-60/tonne or more since last January, new regional supply, and competitive linerboard export prices.

SKG hikes KLB Euro 50.But following a drawdown of high inventories at European box plants, recycled containerboard producers such as DS Smith, Emin Leydier, Hamburger, and most recently Smurfit Kappa Group (KPG), have announced price increases of Euro 60-70/tonne on brown recycled containerboard for Aug. 1, according toPPI Europe.

SKG, Europe's largest containerboard/box producer, also hiked brown KLB by $50/tonne for Sept. 1. US kraft linerboard export prices in Italy and Spain, the main European export markets, remain at around Euro 440-460/tonne CIF with some slight erosion (Euro 10-15/tonne) in recent months. Export shipments from American mills to Western Europe through May were down 2.4% to 336,000 tonnes.

More US exports into Mexico.Containerboard demand in Mexico picked up slightly in July and prices remained flat despite more export supply coming over the border from the US in addition to some new domestic capacity.

US linerboard export prices remained at $625-645/tonne at the Laredo border, with some contacts reporting lower prices at the $610-620/tonne level. Prices for domestic recycled linerboard remain at Peso 7,800-8,200/tonne ($600-630/tonne),PPI Latin Americareported.

Even though we are seeing an improving order file, we are far from a robust market," one US exporter noted. He said the improved demand may be due to some recent "on-shoring" by the maquiladora industry along the border with the US.

The increased supply coming over the border can be seen in US containerboard exports which increased 14.2% year-to-date through May and hit 415,000 tonnes -- an annualized run rate of almost 1.0 million tonnes.

US linerboard exports were up 8.6% to 309,000 tonnes, while medium exports jumped 34.2% to 106,000 tonnes, according to Global Trade Information Service (GTIS). Those figures include about 50,000 tonnes of recycled containerboard.

Grupak to start converted PM.More capacity will also be starting up in Mexico as Grupak's converted 178,000 tonnes/yr containerboard PM begins production in August at its Hidalgo plant in central/eastern Mexico.

The PM was purchased a few years ago from Sappi's idle coated free sheet mill in Muskegon, MI. Grupak also has a smaller 78,000 tonnes/yr containerboard mill in Cuernavaca, Morelos state, and a kraft paper mill in Emiliano Zapata, Hidalgo state, and two corrugated plants.

In addition, Cartones Ponderosa last year converted a newsprint machine to lightweight recycled containerboard and is reportedly producing 8,000-9,000 tonnes/month, according toPPI Latin America

Prices in Latin America flat.In Central and South America, the market remains flat for most of the region and is trading sideways with prices ranging from $480-490/ton FAS, according to traders.

"The issue is still weak demand, as the region remains dependent on commodity exports to countries like China and other industrialized nations," one US exporter said. "Offers continue to pour in from North America and Europe."

The World Cup and political uncertainty from on-going presidential elections in some countries in the region has created a "wait and see" mode among business leaders, the contact said. "The net result is a bit of paralysis on economic growth, which has a direct impact on the pulp and paper sector."

No lift from World Cup.Packaging demand in Brazil was weak during the World Cup games as workers took extra holidays, according toPPI Latin America. Brazilian corrugated shipments were 3.4% lower in June than a year ago, according to the Brazilian corrugated board association (ABPO). For the first half, shipments of boxes and sheets were up 0.3% from a year ago.

Brazilian linerboard exports through May were up 15.8% to 292,000 tonnes, according to Iba (formerly Bracelpa) statistics.

Increased competition from Brazilian and other regional mills as well as European suppliers may have contributed to a 20.1% decrease in US linerboard exports to South America to 163,000 tonnes through May, but exports to Central and South America were up 2.8% to 269,000 tonnes, according to US trade statistics.

Price drop in China.US KLB producers have dropped prices for 175-g liner in China by $15-20/tonne or more to around $640-660/tonne CIF, according to contacts.

The downward adjustment came after Russian suppliers dropped their prices in China by $50-60/tonne to around $615/tonne in two stages starting in April. The sudden downward price adjustment was reportedly caused by slow box demand, pressure for reductions from traders, and more export supply drawn by higher price levels in China.

US kraft linerboard export shipments to China/Hong Kong jumped 31.5% to 141,000 tonnes through the first five months, according to US trade statistics.

About 1.8 million tonnes of Chinese recycled containerboard capacity came on line during the first half of 2014, according toAsian Pulp and Paper Packaging Monitor.Lee & Man and Nine Dragons are scheduled to start up a couple of new machines in the second half. Overall, Chinese containerboard capacity is expected to grow 4.5% in 2014 to 53 million tonnes, according to RISI estimates.