Pulp and Paper Update

A summary of Mark Wilde of Deutsche Banks recent comments-

The prices for uncoated freesheet remained flat in North America in November, with the exception of envelope papers, which rose $25-30/ton, catching up with the $35-40/ton hike on offset rolls last month. These hikes were driven by increased pulp prices, small increase in demand demand (October shipments -9.3% y/y, YTD -13.1% y/y), and slightly lower October mill inventories (-0.8% vs. October of 2008).
International Paper and Domtar recently announced 800,000TPAof permanent capacity closures by mid-2010, representing 7% of North American uncoated fresheet capacity.A recent example was International Paper just closed PM 6 — a 223,000TPA paper machine at its Franklin, Virginia mill.
Mark Wilde, senior analyst at Deutsche Bank covering the Paper & Forest Products sector, said that IP reported pick-up in demand in the direct mail and envelope converters segments.
"Outside the U.S., we understand that European producers have begun to announce price hikes for January 1. Additionally, we are becoming less concerned about the impact of tonnage from Europe, as we think the level of imports to the US will be smaller than we had anticipated."

Containerboard
 shipments for November as well as prices ($525/ton for linerboard and $500/ton for corrugating medium) remained flat. Two suppliers announced a price increase for January orders.
"When coupled with large supply reductions, expiration of black liquor credits, and a falling U.S. dollar, we expect similar domestic price hike initiatives from International Paper and Smurfit-Stone," Wilde said.
"We continue to believe Smurfit will announce 1.0-1.5 million of closures around year-end. If that occurs, it would push operating rates back into the mid-90's," he added
Market Pulp
Pulp prices rose $30/ton in November, the sixth month in a row in the U.S.A. and seventh in a row in Europe and Asia. NBSK (northern bleached softwood kraft ) rose to $830/MT. The increase was driven by a sharp rise in U.S. spot prices, low mill inventories in the U.S. and Europe, strong Chinese demand, and a weaker US Dollar.
Reports suggest that an additional hike is looming for December, Wilde said.
For China, NBSK rose to $675/ton (from $645/ton). However, anecdotal reports suggest demand in China may slow down in the coming months from inventory overhang — estimated to be around 400-500,000 m/tons.
Further, higher prices are drawing high-cost Chinese pulp mills back into production — as market prices are now well above cash-cost.
Meanwhile, other supply is also creeping back, pointed out Wilde. North American mills considering restarts include: Buchanan Forest Products' 475,000 tpy NBSK mill at Terrace Bay, Ontario; Mackenzie Pulp's 220,000 tpy NBSK mill at Mackenzie, British Columbia; and Fraser Papers' 250,000 tpy NBHK (northern bleached hardwood kraft) mill at Thurso, Quebec