|January 3, 2018|
|Field Report - How to read fluids circuit diagrams, Part 2 hydraulics|
· Subscribe to Ahead of the Curve
· Ahead of the Curve archived issues
· Contact the Editor
Pulp in a Frenzy
Growth, inflation and uncertainly mark the industry’s global outlook; but markets should loosen in early 2018, according to this article from the forthcoming January/February issue of Paper360°. The article is excerpted here as a “sneak peek” for Ahead of the Curve readers.
Economists see hope for some sectors of the forest products industry—but the bad news for graphic papers seems to have no end.
Lassa Sinikallas, director, macroeconomics at RISI, was the kickoff speaker at the 32nd annual RISI North American Conference in Boston this past October. Sinikallas said the global economic outlook has three themes: growth, inflation and uncertainty. He is looking at moderate GDP growth globally.
In North America, the estimate is for 2.7 percent growth in 2018. China is still experiencing better growth than other regions with a 5.9 percent rise expected. Latin America is on pace for 2.4 percent growth in 2018 while Europe can look for an increase in GDP of 1.7 percent.
Both developed and developing economies are showing promise. The US is doing well while China is in transition, although the fiscal and monetary stimuli seem to have worked well.
There is positive momentum in Europe, Sinikallas continued, but there is some risk of deflation.
As well as the RISI economists, several guest speakers contributed to the event. Pete Madden, president, Drax Biomass, said industrial pellet demand continues to increase with significant growth in the UK, Japan, South Korea, and the Netherlands. Madden said that pellet-fueled bioenergy offers a cost-effective, reliable and low-carbon alternative to coal.
Rod Young, founder and now chief economic advisor of RISI, began the forecast for the various pulp, paper and board markets. Looking at pulp, he said the market is in a frenzy, with sustained momentum for bleached hardwood kraft (BHK). Prices have rebounded in bleached softwood kraft (BSK).
Factors that led to the situation include the environmental crackdown in China, combined with its moratorium on recovered paper (RCP) import licenses and its ban on imports of some RCP grades. There was also unexpected downtime and a slower than expected ramp up of the giant OKI mill. BSK producers are taking advantage of the high BHK prices in China.
Young described three near-term conditions:
Young said that, in 2018, world production of paper and board will increase—but very slowly (Fig. 1). Most of the growth will be in the packaging end. There will be little BHK expansion but more BSK expansion. Pulp markets will loosen in the first half of 2018 and the current high prices will be vulnerable. Later in the year, market conditions will tighten as capacity expansion slows.
A new retailer entering the North American market, Lidl, is a hard discounter. Therefore, the pressure will be on other retailers to reduce their prices. This will put pressure on producers as well.
North American prices have rallied since August 2016. The US corrugated box market accelerated in late 2016 and has stayed strong through August 2017. US kraftliner exports have been more resilient than expected between 2014 and 2016, almost five million metric tons. Containerboard exports should increase from 2018 onwards to reach about seven million metric tons.
Globally, demand growth in Latin America should increase as the Brazilian economy improves. However, Asian capacity growth should outstrip demand this year. It is the same picture in Europe. But, demand growth in emerging Europe will accelerate toward 2018
North American operating rates should improve through 2018 and stay above the rest of the world.
Newsprint and graphic paper
In 2017-18 the decline in demand for P&W paper should slow, but it varies by region: for example, North America at -2.4 percent; Western Europe at -4 percent; Eastern Europe at 1.4 percent; Latin America at 0.4 percent; and Asia remaining neutral.
Newsprint is still on the decline globally. The decline in demand for newsprint in North America is accelerating but capacity closures have allowed for some recovery in prices. The decline in magazine advertising pages is the main factor driving down paper use. As producers look to new markets to try to sell their paper, governments are increasingly resorting to tariffs to stem the tide of imports. Changes in capacity through 2019 show a net decline of 2.8 million metric tons.
For a modest investment of $174, receive more than US$ 1000 in benefits in return.