Notes from Deutsche Bank Conference, Brian McClay
>Spot pricing and demand for market pulp has been increasing for past 60-90 days (formal price increase announced June 1).
>Most of rally caused by increase in Chinese demand (up 60% YTD +2.3million tons - through May). Advanced price also driven by most pulp mills taking down time and mill closures (2Q2009 – 20% idled / 5.4million tons out of market last 12 months).
>Why China up? Buying lower cost imported pulp (vs. domestic); willing to inventory higher level of finished paper; pulp inventory high.
>Forecast is for additional 2million tons of pulp production curtailed by end of 2009; BUT, new capacity from Brazil (VCP) and Chili (Arauco).
>Conclusion, McClay believes pulp rally will stall out. Watch for seasonal summer depressed demand. China most likely not continue to stock pile. USA and Europe demand remains weak.
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