Pulp Prices Remain Below 5-Year Trend

As of February 2013, the Forestweb N.A. Pulp Index indicates that pulp prices remain below the 5-year trend line. They have been under trend since November of 2011. Still, since hitting a 2012 low in September, the index has shown improvement, gaining 8 percent through February 2013 (nearly at the same level of February 2012).

In March of last year, we wrote that we expected pulp prices to climb through second quarter before falling again in third quarter. This is exactly what transpired. At the end of the second quarter of 2012, prices neared the 5-year trend, and then quickly fell back in third quarter. Some recovery took place in the fourth quarter, though prices are still well below trend. The following figure shows the index, normalized (yearly highs all pegged at 100) so that seasonal patterns can be isolated. Prices in 2012 appear to be a hybrid of 2011 (the first half of the year) and 2010 (the second half of the year). For all years, however, prices were highest in June.

Based on the seasonal trends, prices are likely to push higher through the second quarter. Domtar, Tembec and Canfor all announced a $30/tonne NBSK price hike for North America, Domtar and Tembec for March and Canfor for April. According to Diane Keaton of Industry Intelligence, the motivation behind these announcements may be a desire to solidify January’s price hike to $900/tonne. FOEX reports that NBSK in February stood at $894.44/tonne.