US northern bleached softwood kraft surges $100 with little relief in supply chain
China pulp price reaches $1,000 as West Fraser ups NBSK and BCTMP in April
Market pulp contract and spot prices have rallied in North America over the past month – with few signs that supply chains were improving and throttled back production at Canadian mills crimping availability. Benchmark northern bleached softwood kraft (NBSK) effective list prices closed in March at $1,615 per tonne, up $100 per tonne, according to two Fastmarkets’ PPI Pulp & Paper Week (P&PW) surveys.
Southern bleached softwood kraft (SBSK) supplies also dimmed because US producers focused on the robust fluff pulp market, reluctant to spare tonnes of fluff production that are coveted offshore, where prices skyrocketed. Final US SBSK effective list prices rose to $1,580, up $75.
After the year kicked off with unplanned downtime at major Canadian producers such as Canfor Pulp, Paper Excellence, and West Fraser, supply availability was expected to have improved by now. Instead, global supply chain bottlenecks worsened, and railroad operators proved unable to deliver enough railcars to mills, forcing various producers to slow down production.
Pulp buyers unable to get hands on supply
In many cases, producers didn’t announce the downtime even as they ran mills at 20%-30% below capacity and quietly found alternate routes to move pulp to customers such as trucking routes. Sometimes, they simply didn’t ship tonnes to buyers, who then scoured spot markets hoping to find tonnes. Taking that avenue has come at sharply higher prices, though.
“They can announce $100 (hikes) but who cares – we can’t get it. That’s been the problem in March, both in hardwood and softwood. Nobody’s got anything,” said an NBSK buyer contact, alluding to the lack of official price announcements on April business. “Then with all the logistics mess (one producer) just didn’t ship. They didn’t get rail cars so they didn’t ship to us.”
No producer announced a $100 hike on April business in the USA. Instead, the buyer was referring to expectations of NBSK spot market momentum, a factor that’s driven momentum in contract markets.
US NBSK spot market prices rose another $20 per tonne in P&PW’s survey through Mar. 30, bringing the latest spot prices to $930-970 per tonne net delivered to the US East and Midwest. The $20 rise came after a bigger $50 surge in mid-March, so the month-over-month average increase totaled $70, according to P&PW data.
Major producer Domtar announced an $80 per tonne price increase on NBSK and SBSK, effective April 1, but fewer official price hike notices on March and April business has occurred vs prior bull runs. Sources believe that’s because some producers are reluctant to alienate customers with price hike announcements during a time of increasing anger over shipment delays.
One producer contact said on April 1 that he decided not to announce an April price increase, not because of a lack of upwards momentum, but because US spot markets are continuing to rally, which would help sort out how much contract prices rise in April with or without announcements.
March NBSK price matches 2021 high
As it stands, with the March NBSK list closing at $1,615, effective list prices have now matched the all-time high of 2021 – an exceptional rally driven by unplanned mill downtime that topped out at the same list price before reversing in the summer of 2021.
“That $1,615 price was the top end of the market in 2021. I don’t think it’s coincidental they announced that,” another NBSK buyer source recently noted. “The rail issue is really bad. We know trucking is really bad… I’m hopeful we are close to the worst, and things improve.”
One improvement for the North American supply chain is the lock-out at Canadian Pacific (CP) only lasted two days, from Mar. 20-22 before management and Teamsters Canada Rail Union officials agreed to settle a wage and benefits dispute through arbitration. A longer lock-out or strike would’ve threatened mayhem for Canada-to-USA rail car deliveries, sources said (P&PW, Mar. 11, p. 1).
BHK ‘demand is crazy.’ In US BHK markets, effective list prices increased $90/tonne across-the-board, with low supplies leading three key grades to all close at $1,390, according to P&PW. At least two major Brazilian producers have announced $50 hikes on bleached eucalyptus kraft (BEK) in the USA, effective April 1.
“Demand is crazy. Customers are asking for extra volume,” said a BEK producer contact this week. “Logistics is terrible. Vessels are delayed by two weeks on average (and) inland transportation is even worse.”
Unlike Canadian and US mills, Latin American BEK producers are finding very little if any truck availability and when they do find it, the cost is three to four times higher than a year ago, added the BEK producer source whose experience was typical.
Brazilian BEK producers announce $100 increases to China
Suzano and Eldorado separately announced North American list prices of $1,460 and $1,250 in Europe with their $50 increases. Brazilian BEK producers have also announced $100 increases to China but most did not state new list or net price levels. Market participants mostly cited the new April allotments at $780 per tonne net CIF with the $100 hikes.
West Fraser informed customers in China that its April NBSK price would rise to $1,000 per tonne net CIF, and bleached chemi-thermomechanical (BCTMP) prices will increase to $730 per tonne net CIF, effective immediately, market participants told P&PW on March 31.
Vancouver-headquartered West Fraser started offering its new NBSK allotment late last week at $1,000 per tonne net CIF, effective with April orders, contacts said. The firm didn’t announce how much its NBSK rise was month-over-month, but market participants said that the $1,000 net level was up more than $100. By April 1, the firm had already sold out its April allotment at $1,000 net and it’s sold out in China until May business opens, contacts said.
The most aggressive monthly hike in China came from Paper Excellence (PE), which announced to customers that NBSK from its Crofton, BC, pulp mill will increase to $1,050-1,070 net CIF, effective immediately on March 15, sources told P&PW. PE cited exceptionally high inflation, unforeseen developments in global supply chains, and significant cost pressures.
With the most recent prices peaking at $1,000, market participants had mixed reactions on whether NBSK would soar even higher over the next month. Upwards pressure continues because supply chains remain backlogged and maintenance downtime season is coming up fast. Downwards pressures include growing Covid-19 lockdowns and expanding paper mill downtime in China.
“The resurgence of Covid in China, zero tolerance policy of the government, restrictions on inter-provincial movements, lockdowns, reduced operation rates,” are all potential drags, an Asian pulp seller contact said on April 1. “But inventories in both ports and users seem to be low. I started to feel that the pulp price cannot move up any further (but) maybe I’m just too pessimistic.”
Meantime, West Fraser’s new price of $730 per tonne net CIF applies to both softwood and hardwood BCTMP, effective immediately on March 31. The BCTMP hike would be up $80 vs its $650 net CIF price on March business, contacts said. China’s BCTMP market has rallied on unplanned downtime as well as the sharp runs in NBSK and BEK, among other comparable grades.
Canfor Pulp takes more BCTMP downtime
Canfor Pulp announced a minimum six-week extension of BCTMP production curtailment at its Taylor Pulp mill in British Columbia. The firm cited ongoing transportation shortages that have resulted in continued high finished product inventories at the pulp mill. The curtailment extension will further reduce the production of BCTMP by at least 25,000 tonnes, Canfor Pulp said in a release. The mill already lost at least 25,000 tonnes of output from a previous curtailment the firm announced on February 16.
“Unfortunately, the ongoing rail transportation situation has not improved, and we have no choice but to extend the current production curtailment,” said Canfor Pulp VP of operations Kevin Anderson. “We are very disappointed in the ongoing impact this is having on our employees, their families and the community.”