Paper Market Update: March 2018
Paper markets have become increasingly difficult to navigate since last month. All paper markets are still very tight with many mill machines on allocation and not taking new business beyond current commitments. Order lead times have increased out to as much as 16 weeks for some grades. There are a number of factors playing out at the same time in the paper and transportation industries creating a supply and demand imbalance and chronic shortages and late paper for most grades. Paper prices continue to escalate…we’ve included the updated summary below.
- The U.S. Dept. of Commerce (DOC) will issue a preliminary decision in the antidumping (ADD) investigation regarding uncoated groundwood (UGW) and newsprint imports from Canada. If it is determined that these imports were sold at less than “fair market value”, the U.S. will impose ADD on shipments into the U.S.
- West Coast UGW mills are increasing the price for uncoated groundwood MF Hi-Brites, by $25/ton effective April 1.
- Verso plans to restart their paper machine in Jay, ME to manufacture packaging products.
- Whole Oceans, a Maine company, will launch a sustainable Atlantic salmon aquaculture operation at the former Verso paper mill in Bucksport, ME.
- Economists expect 2018 to be a positive year for the U.S. consumer, supported by a tight labor market, stronger economic growth and increasing consumer confidence.
- Wood pulp prices increased another $20-$25/tonne in
February, with $30/tonne increases announced for March.
- Paper mill total production costs for North America are forecasted to increase in 2018 as follows: UGW to rise 4.6%; UFS to rise 2.4%; CGW to rise 3%; CFS to rise 2%; Newsprint to rise 5.3%.
- US Dollar currency exchange: The euro is at 1.23 trending slightly upward (strengthening). The Canadian dollar is at
0.77 and trending downward (weakening).
- Transportation issues still burden the nation, with load to driver ratios in the U.S. reaching 14:1.
Paper Grade Review:
- Coated – Coated producers announced another price increase of $2/cwt for March 1 for all coated grades. Despite typical weakness in demand for coated grades this time of year, operating rates for January were 93% for coated freesheet (CFS) and 97% for coated groundwood (CGW) due to recent capacity shuts keeping the coated paper markets tight, even on allocation in many instances. Order lead times are out as far as 12 weeks.
- Uncoated freesheet – UFS prices continue to rise, with another $2/cwt increase announced for March. This market is tightening up quickly, and operating rates are on the rise. Supply is on allocation from some mills. Order lead times are out as far as 12 weeks.
- Uncoated groundwood (including SC) – Price increases for March 1 for SC and UGW grades…$25/ton on March 1 for MF hi-brites, and $40/ton on March 1 for SC grades. As Canadian mills pay the newly implemented CVDs for MF grades, expect these costs to be passed through to buyers. UGW market is tight with high operating rates due to machine shuts. Order lead times are out as far as 16 weeks.
- Newsprint - Higher newsprint prices this year are being caused by tight supply. 1.3 million tons of capacity was closed or idled in 2017, representing 23% of newsprint capacity. This has tightened the market considerably. Order lead times are out as far as 16 weeks for newsprint.