Pulp Prices Near 2008 Peak

Higher pulp prices result in higher costs for non-integrated coated and other value-added paper producers. These higher costs do not have a significant impact on paper prices (see Absolute Truth #1), but do raise the pricing floor for paper somewhat, and this limits how far prices can fall in an over-supplied market. Obviously, the paper grades that use the highest percentage of kraft fiber are effected most seriously.

U.S. pulp prices have oscillated wildly over the last few years. After peaking in August, 2008, at $885/tonne, prices plummeted to $640  in just eight months. Now, after another eight months, pricing has nearly reached the 2008 peak again. Prices in December average about $830 and another $30/tonne has been announced for January.

As more supply comes into the market (re-starts primarily), and China eventually reduces its purchases, this strong market will end.  However, that will not occur during the next several months, and maybe not even until the second half of the year. 

Attached is a very interesting one-page monthly pulp update for November – courtesy of Equity Research Associates. 091223 Pulp Shipments Up Inventories Down

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