By ROBERT GIBBENS, Freelance
Softwood pulp, the fluffy stuff that goes into a host of products from tissue and office papers to newsprint, has been on a bull run for six months, but analysts say prices are near their peak.
Other forest products, including lumber and building panels, have shared in the upsurge, raising hope among industry players that the price collapse accompanying the recession of 2008-09 is finally past.
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The Chilean earthquake, bad weather in the U.S. south, off-and-on Chinese buying and tightening inventories have spurred much of the surge in forest products, but conditions are improving and many say prices will level off this summer.
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About 4.6 million tonnes of pulp capacity was silenced by the Chilean earthquake, or eight per cent of a global market of 50 million tonnes. The mills are getting back into production and are exporting again. The flow of export pulp will be fully restored by late June.
Softwood pulp, a major product of Quebec and British Columbia, will hit a list price of $1,000 U.S. a tonne in North America next month, after several increases by leading producers, including one posted next week.
It has almost doubled in a year and will equal the record high set in the boom year of 1995.
With 15 years of steady inflation, pulp would now have to fetch about $1,300 a tonne to test the record in real terms.
World pulp inventories are down 36 per cent from March 2009, but BMO Capital Markets analyst Stephen Atkinson said the price surge may spur restarts of higher-cost facilities in China and Canada.
More costly pulp spells higher paper product prices. Newsprint producers are seeking an increase next month, citing higher pulp prices.
Paul Quinn, an analyst with RBC Capital Markets, said pulp should remain strong through summer. His average 2010 price forecast is $950 U.S. a tonne while for 2011 it is $900 U.S.
In the area of business/copying papers, Domtar and International Paper hold 60 per cent of the North American market and a price hike of $60 U.S. a tonne next month to about $1,100 a short ton may meet resistance, analysts said. Demand is strong but European producers will be tempted to ship to the East Coast.As for lumber, prices are reported at about $385 U.S. per thousand board feet, double the year-earlier lows, with bad weather and log shortages in the U.S. south.
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