Paper prices have been stable in Q4 and are forecasted to show some recovery in 2021. Coated freesheet (CFS) producers in North America have announced a $1.50/cwt price increase, effective January 1, on CFS web grades. CFS mills have removed over 800,000 tons of annualized capacity since 2019, which is over 25% of the available capacity. As a result, CFS mill operating rates have climbed and are expected to reach 95% early next year. Additionally, N.A. newsprint producers have announced a $40/tonne price increase to be implemented over two months… $20/tonne effective January 1 and another $20/tonne effective February 1. Newsprint inventories are low, and producers have removed 650,000 tons of capacity this year. 1/3 of total newsprint capacity in North America has been removed since 2019. Additional newsprint machine closures are anticipated for 2021.
Kruger has permanently shut down its newsprint, specialty papers and pulp production at its Brompton mill in Quebec. This mill has been shuttered for the past 6 months due to unfavorable market conditions.
ND Paper has completed the conversion of PM12 at Rumford to kraft papers, and PM15 at Rumford will shift to linerboard by the end of 2020, removing another 294,000 tons/yr of coated paper capacity.
International Paper announced a plan to pursue a spin off of the Company’s printing papers segment into a standal one, publicly traded company (“SpinCo”). IP will accelerate profitability in corrugated packaging and absorbent cellulose fibers.
UPM shuttered one paper machine at its Kaipola mill in Finland on October 15 as part of the mill’s planned closure, while the remaining two PMs will be shut down by mid December. UPM announced its intention to permanently shut its Kaipola mill at the end of August. The facility produced 450,000 tonnes/yr of newsprint and 270,000 tonnes/yr of coated mechanical reels on three paper machines.
Paper Excellence Canada (formerly Catalyst) announced that it plans to restart PM3 at its Catalyst Paper mill in Crofton, British Columbia in early January 2021. PM3 was curtailed in the spring of 2020 after the impacts of an external malware attack, a forest fibre shortage, and the COVID 19 pandemic simultaneously impacted paper production as well as global paper demand.
Wood Pulp – Prices remained unchanged for November. Source: ERA Forest Products Research
Currency Exchange – A Biden presidency could lead to a softer approach on trade policy, which could weaken the dollar against the currencies of countries that faced tariff threats during President Trump’s administration. Source: Reuters
National Load to Truck Ratio data reveals a current ratio of almost 6 loads to each truck, up from 4 last month. Western states are seeing the highest ratio right now. Source: DAT Freight & Analytics
Paper Grade Review
Coated grades – With demand rising relative to earlier this year, so too is the outlook for coated paper operating rates for 2021. Fastmarkets RISI now projects operating rates for CGW and CFS producers to reach over 90% on average, in 2021, and that the CFS market will be tight while the CGW market will remain stable. CFS producers have announced a $1.50/cwt price increase for all coated #1, #2, #3 and #3.5 web grades, effective January 1, 2021.
Uncoated freesheet grades (UFS) – The UFS market remains relatively stable, with operating rates averaging almost 90%. Forecasts show 92% shipments/capacity rates for 2021, which would prevent UFS price erosion and potentially lead to a price increase attempt by mid-year.
Uncoated groundwood grades (UGW including SC) – UGW paper grades took a large hit from the pandemic disruption, forcing brick-and-mortar businesses to shut, and consequently reducing printed advertising. UGW mill operating rates reached an all-time low in Q2, with moderate recovery since. Demand shows a 25% decline YTD, with capacity reductions not yet sufficient to balance the market. SCA grades may see an uptick in 2021 as end users consider migrating away from lightweight coated to SCA and SCA+ grades in order to reduce paper costs.
Newsprint grades – Mills have announced a $40/tonne price increase for 45g newsprint, splitting implementation with a $20/tonne increase on January 1 and February 1 (other weights to be adjusted accordingly). Significant recovery in demand for this grade is unlikely, so mills will be forced to remove significant production capacity early in 2021 if they are to improve and maintain pricing.