MARKET PULP MONTHLY · PDF fileMARKET PULP MONTHLY January 2016 Brian McClay & Associates Inc. FOR SUBSCRIBERS ONLY ALL FIGURES IN METRIC TONS Volume 20

for January 20161-4 Pulp Markets in Brief 5-6 Economic Notes 7 Exchange Rates 8-10 Other Tables & Figures

Volume 20 Number 1• January 14, 2016 Brian McClay & Associates Inc.

F O R S U B S C R I B E R S O N L Y A L L F I G U R E S I N M E T R I C T O N S

MARKET PULP MONTHLY

World demand for paper grade market pulp is estimated to have reached around 61.5 million

tonnes in 2015, 2.7% or 1.6 million tonnes higher than in 2014 (table 1). It rose 3.7% y/y for bleached hardwood kraft (BHK), 1.3% y/y for bleached softwood kraft (BSK) and 4% for high yield pulp, about 80% of which is BCTMP.

China’s demand for paper grade market pulp is estimated to have grown 7.8% y/y or 1.4 million tonnes last year (just under 90% of the rise in total world demand), including increases of 8.4% for BHK, 4.6% for BSK and 15% for high yield pulp. China’s share of global paper grade pulp demand reached 31.4% last year, more than double its share in 2005 (table 2 and fi gure 1).

Pulp Markets in Brief

World Paper Grade Market Pulp1 Shipments by Region (Est.)(000’s tonnes)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Europe(2015/14 = 1.1%;AAGR 2005-2015 = -0.7%)

Japan(-4.2%; -2.6%)

China(7.8%; 10.2%)

North America(0.0%; -1.0%)

La n America(2.8%; 5.3%)

Sources: PPPC, Company Info, B McClay & Associates Inc. es mates1) All chemical and mechanical grades

Others(0.0%; 1.1%)

Fig. 1

World Paper Grade Market Pulp1 Shipments by Grade (Est.)(000’s tonnes)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

000'

s to

nnes

Other BSK(0%; 2%)

Other BHK(-1%; -2%)

Sulfite (-3%; -15%)

NBSK(2%; 0.5%)

BEK(2015/14 = 6.1%;AAGR 2005-2015 = 8.2%)

UKP (2.2%; -2.3%)

High Yield (80% BCTMP)(4%; 2%)

Sources: PPPC, Company Info, GTADATA, B McClay & Associates Inc. 1) All chemical and mechanical grades

Fig. 2

Table 1

Paper Grade Market PulpEstimated Annual World Demand

(millions tonnes)

Source: PPPC, Industry Sources and B McClay & Associates Inc.

1 - AAGR: Average Annual Growth Rate2 - Also includes UKP & sulphite pulp3 - High Yield Pulp: BCTMP & other mechanical pulp grades

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

AAGR1

2005-15

49.8

52.1

53.7

52.3

52.6

54.3

56.5

57.8

59.1

59.9

61.5

21.7

22.0

22.5

21.6

21.4

22.6

22.9

23.5

24.0

23.9

24.2

21.1

22.4

23.6

24.5

24.8

25.0

26.7

27.3

28.8

29.9

31.0

3.5

4.0

4.2

3.3

3.7

4.1

4.1

4.3

4.2

4.1

4.3

2.0

4.6

3.1

2.6

0.6

3.2

4.1

2.3

2.2

1.3

2.7

Year BSK BHK HYP3 Total2y/y

% change

1.1% 3.9% 2.1% 2.1%

Table 2

Estimated World Paper Grade Market Pulp1

Source: PPPC, Company Info., Brian McClay & Associates Inc.1) Includes high yield pulp which is about 80% Bleached Chemi-Thermo-Mechanical Pulp (BCTMP).

Demand by Region 2005 - 2015

8.6

20.3

2.2

3.0

7.3

8.4

49.8

7.8

18.8

3.6

2.4

17.9

9.4

59.9

7.8

19.0

3.7

2.3

19.3

9.4

61.5

-9.3

-6.4

68.2

-23.3

164.4

11.9

23.5

----

1.1

2.8

-4.2

7.8

----

2.7

17.3

40.8

4.4

6.0

14.6

16.9

100.0

12.7

30.9

6.0

3.7

31.4

15.3

100.0

000’s tonnes 2005 2015% of World

15/05 15/14% change

North America

Europe

Latin America

Japan

China

Others

TOTAL

2005 20152014

MARKET PULP MONTHLY January 2016

Brian McClay & Associates Inc.


Page 2 Volume 20 Number 1• January 14, 2016

Global pulp markets continued to weaken and became increasingly competitive through December 2015, driven in part by a stronger US dollar, particularly vs. China’s Yuan (CNY) and Canada’s dollar (CAD). Against the backdrop of darkening overall market sentiment, sellers worked to boost end-of-quarter and end-of-year invoiced sales volumes via a range of price concessions in most markets.

One exception was NBSK in China where demand revived considerably during the fi rst half of December and prices for some business rose $10 to $580-90 net after several Canadian suppliers announced $20 price hikes. However, that mini-rally was short-lived and prices are back under downwards pressure this month most directly due to the weakening of the CNY/USD - now down almost 3% (or around $20/tonne of pulp) since early December. Moreover, with the CAD/USD now below 70 US cents for the fi rst time since April 30, 2003, buyers in China expect suppliers to share some of their recent FX gains.

China also reportedly bought signifi cant volumes of BHK through December but only after suppliers had adjusted prices signifi cantly lower (to about $560-70 net). While buyers have had an increasing preference for domestic supply due to its roughly $20 discount to imported BEK with no exchange rate risk, China’s domestic BHK supply is capable of satisfying only about 20% of the country’s demand, especially now that its 3 swing-dissolving pulp mills are all producing DP and not paper pulp.

BHK prices in China continue to be under downwards pressure so far in January and demand for all pulp grades will likely drop off over the next few weeks as buyers prepare for as much as a 2-week holiday around the Lunar New Year February 8 which will include considerably more paper machine downtime than usual. However, the secularly good news for pulp suppliers is that even through a very diffi cult year in China’s paper & paperboard business when output climbed only 1% according to government fi gures, the country’s appetite for market pulp continued to trend higher. Moreover, the fact that China has recently continued to buy signifi cant volumes of imported pulp (fi gure 4) in a clearly declining-price environment suggests

China Pulp Imports Monthly - All GradesActual and 3-month moving average through December 2015

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

2010 2011 2012 2013 2014 2015 2016

000'

s to

nnes

Source: China Customs Bureau

3-month moving avg.

monthly data

December 2015: 1.715 million tonnes2015/2014 = +5.9%Jan.-Dec. 2015 = 19.84 million tonnes2015/2014 = +10.5%

Fig. 4

Fig. 3

World BSK & BHK Monthly Shipments3-month moving average through December 2015 (est.)1

1800

1900

2000

2100

2200

2300

2400

2500

2600

2700

1800

1900

2000

2100

2200

2300

2400

2500

2600

2700

2012 2013 2014 2015 2016

000'

s to

nnes

BHK

BSK

1. Brian McClay & Associates es mate. Sources: PPPC, GTAData, China Customs, other industry informa on.

2015/2014 = +1.3%to China +4.8%

2015/2014 = +3.6%to China +8.3%

Table 3

United States

Northern Europe

Japan

Korea

China

NBSKSouthern PineBEKN Hardwood

NBSKSouthern PineBEK BCTMP 850 Aspen

NBSKBEK

NBSKRadiataBEKNBHKBAK2

BCTMP 850 Aspen

NBSK BRK4 RBSK3 BEK BAK UKP

December 2015 November 2015 December 2014

$940$900$900-910$885-895

$795-800$740-750$775-780(EUR720-745)$640-650

$670$600

$695$665$650$650$650$510

$590-610$590$550-560$590-605$580-590$570-620$400-410$370-390

$940$900$900-910$885-895

$805-810$750-760$790-795(EUR735-755)$655-665

$670$630

$695$675$670$670$670$510

$580-600$590$550-560$605-650$610-620$590-630$390$360-390

$1020-1030$970-980$840$830-840

$930-935$880$740-745(EUR595-610)$635-640

$790-795$615

$805$765$640$640$640$630

$690-720$680$620-630 $610$610$650-730$505$485

Market Pulp Prices1

Selected modal gross US$ & euro prices for contract/regular business at time

of sale on a mill delivered basis in the U.S. and a CIF port basis elsewhere

1 List prices (i.e. before discounts, rebates, etc.) unless specified otherwise.2 Bleached Acacia Kraft3 Net price.4 Bleached Radiata Kraft.

N/A = Not Available; R = revised; NST = No Significant Trading

BCTMP 800 Aspen BCTMP 750 Soft





that China’s increasing demand for pulp is closely aligned with actual pulp consumption. In Europe, December USD and Euro pulp prices were lower across the board although volumes remained solid. There was also still some jockeying for position concerning 2016 contract business with anecdotal information suggesting there will be higher discounts on 2016 contract business for both hardwood and softwood and more non-contracted business this year relative to 2015. December BEK prices were down roughly $15 while NBSK slid mostly $10 lower than in November. The major supply event in Europe last month was the December 19, 2015 restart of the completely rebuilt recovery boiler at Zellstoff Pöls AG’s 420k t/y partly integrated pulp mill in Austria that exploded on March 23, 2014; it will add about 260k t/y of NBSK supply to the market starting this month.

In North America, the demand/supply balance for BHK remains fi rmer than it is for BSK. While NBSK’s list price remained unchanged in December and almost certainly in January after contractual discounts rose considerably to start the year, spot prices continued to edge lower (fi gure 5). NBSK consumption is being reduced by increasing market-related downtime mainly at coated mechanical paper mills as demand for those grades continues to plunge (down 18% y/y in November and more than 8% lower ytd). NBSK is also facing growing competition in some end-uses from lower-priced SBSK in bales and rolls.

While the demand/supply balance in North America for BEK and BHK remain somewhat fi rmer than for

softwood grades, in part due to the continued growth of premium tissue as well as some supply reductions for domestic hardwood (Expera, Old Town, Maine; Verso Corp., Wycliffe, Kentucky), December prices were for the most part unchanged. However, they will likely move modestly lower this month, in part because several BEK suppliers have begun to link their monthly prices for some North American contract or ongoing business to FOEX’s European BHK PIX index and it has moved lower through December (fi gure 6).

Producers’ pulp stocks at the end of December will likely be lower than their end-November levels (fi gure 7) but with little or no market-related downtime announced for either BSK or BHK, stocks will almost certainly rise over the next two months. As such, it seems likely that prices for both BHK and BSK will remain under downwards pressure through February (especially if the US dollar

Fig. 6

Weekly Pulp PIX - US$ List CIF Europethrough January 12, 2016

-20

30

80

130

180

230

280

330

380

430

480

530

580

630

680

730

780

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US

$

NBSKLeft-hand scale

BEKLeft-hand scale

Source: FOEXwww.foex.fi

NBSK-BEK spreadRight-hand scale

NA: NBSK list & spot prices1 monthlythrough mid-January 2016

10

15

20

25

30

35

40

45

50

500

550

600

650

700

750

800

850

900

950

1000

1050

2010 2011 2012 2013 2014 2015 2016

US$

/AD

MT

NBSK List Left-hand scale

Source: Brian McClay & Associates Inc.1) Brian McClay & Associates Inc., Pulp & Paper Week (RISI), Industry Inteligence

spot/list discount (%) Right-hand scale

spot NBSK (e)(Mid-point of range)Left-hand scale

(%)

Fig. 5 Fig. 7

World1 Producers' Market BKP Stocks -Days Supply2

monthly through November 2015

10

15

20

25

30

35

40

45

50

55

60

65

10

15

20

25

30

35

40

45

50

55

60

65

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

BSK

BHK

1) Excludes data for Indonesia, Russia, Taiwan, Germany (included in data from January 2005 onwards), SwitzerlandFrom January 2005 onwards, also excludes data for Portugal and sulphite pulp from Sweden

2) Month-end producers' stocks devided by average daily shipments during most recent three months

BSK 10-year average, Dec. 2005-Nov. 2015 = 29.0 daysBHK 10-year average, Dec. 2005-Nov. 2015 = 38.8 days

Source: PPPC, Brian McClay & Associates Inc.

40

30





NBSK, BEK & BCTMP List Prices in ChinaModal Effective List Price CIF Chinese Port - through December 2015

300

400

500

600

700

800

900

1000

300

400

500

600

700

800

900

1000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

NBSK

BEK

BCTMP1

Aspen 80

1) 80 bright Aspen board grade. Before April 2009 for 850 Aspen BCTMP

BCTMPSoftwood 75

Source: B McClay Inc.

Fig. 8

strengthens further during that time), increasing prospects that some market-related downtime could be tacked onto regular maintenance shuts during March through May 2016. This along with seasonally stronger demand should help to revive some modest positive pulp pricing traction until increased new supply begins to overwhelm demand before year end.

One potential exception to declining prices in the near-term could be hardwood BCTMP in China. Prices are still close to 13-year lows (fi gure 8) and Paper Excellence’s

240k t/y mill in Chetwynd BC has been down for market-related reasons since September and is unlikely to restart anytime soon. Prices have recently started to edge higher and demand will get a signifi catn boost from the start-up of new cartonboard capacity at the end of this month in Sweden (Metsa Board, Husum) and in Q2 in China (Stora Enso, Behai).

Dissolving Pulp

Prices for commodity-grade dissolving pulp in China have started to drop.

Prices for Viscose Staple Fibre (VSF) – the major end-use for commodity dissolving pulp – have recently been driven sharply lower (fi gure 9) by seasonal weakness at textile spinning mills (which should reverse after the Lunar New Year break) and by the re-start of production at a number of VSF plants that had been closed for environmental reasons. Lower priced polyester from cheaper oil has also been a contributing factor. As a result, prices for commodity grade dissolving wood pulp have dropped from a high of

just over $900 net in late November for hardwood DP to around $840-850 today. With paper grade BHK priced near the mid-$500s, it still makes business sense for swing mills to produce DP rather than BHK. However, if the spread narrows another $50-100, that could change.

Fluff Pulp

The global fl uff pulp market has also weakened and is expected to get worse later this year after considerable new capacity comes online from Klabin, IP and Domtar (table 6, page 10) - almost 1.1 million tonnes, equivalent to about 4 years of global demand.

Most of this additional capacity will be sold as commodity softwood (SBSK) initially, as each of these machines will have to go through a lengthy process to qualify for traditional fl uff applications.

In addition, Suzano just recently launched a Eucalyptus-based fl uff pulp extender product called Eucafl uff, although its supply is limited at 95k t/y and its success remains to be seen. In the medium term, there is a risk of even more new fl uff pulp supply with China’s Sun Paper exploring the potential for a greenfi eld 700k t/y mill in Arkansas although this project is unlikely to materialize during this decade, if ever.

Even with an average annual global fl uff pulp demand growth rate of around 3.7%, the coming surge in fl uff pulp capacity along with signifi cant additional NBSK supply over the next couple of years and a strong US dollar is likely to result in the permanent closure of some higher cost fl uff pulp capacity in the U.S. before the end of 2017.

Selected Monthly Pulp and VSF Prices in ChinaUSD/metric ton through mid-January 2015

0

300

600

900

1200

1500

1800

2100

2400

2700

3000

3300

3600

0

300

600

900

1200

1500

1800

2100

2400

2700

3000

3300

3600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

NBSK4

DWP3

VSF1

CLDP2

1) Viscose Staple Fibre FOB plant, most recent month reflects avg. weekly price - Source: Fibre2Fashion.com 2) Cotton Linter Dissolving Pulp FOB mill - Source: Fibre2Fashion.com3) Dissolving (VSF) Wood Pulp (gross avg. open-market sales price) CIF China Port - Source: Brian McClay & Associates4) NBSK list price CIF China Port - Source: Brian McClay & Associates

BEK5

Fig. 9





the unemployment rate remaining at a 7.5-year low of 5% in December (fi gure 12) in spite of a growing number of workers coming back into the labour market. Moreover, last month’s average hourly earnings of non-supervisory workers rose 2.4% y/y - a 16-month high - while December’s National Federation of Independent Business monthly employment survey found that the percentage of fi rms planning to raise compensation in 2016 rose to an 11-year high.

In the World Bank’s most recent Global Economic Prospects report released January 6, America’s 2016 GDP growth is projected to be 2.7%, up from 2.5% last year.

The Eurozone continues to show signs of modestly accelerating economic recovery. Consumer confi dence in Europe rose to a 6-month high in December while economic sentiment rose to its highest level since October 2007 (fi gure 13).

Economic Notes

America’s Q3 GDP grew 2% q/q annualized (fi gure 10) but some economic data have weakened since then,

particularly from the manufacturing sector (fi gure 11). This combined with reports of recent inventory destocking has led to expectations US Q4 GDP growth slowed to around 1%.

Nevertheless, consumer spending continues to expand at a more than a 3% annualized rate and both it and the housing market remain well supported by pent-up demand, a robust job market, rising income gains, solid household balance sheets, cheap gasoline and low borrowing costs.

America’s employment situation continues to improve with

U.S. and Eurozone - Real GDP Growth% change from previous quarter annualized - through Q3 2015

-11

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

-11

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013 2014 2015

% c

hang

e

U.S.AEurozone

Source: U.S. Bureau of Economic Analysis & Eurostat

US ISM - Purchasing Managers' Indicesthrough December 2015

30

35

40

45

50

55

60

65

70

30

35

40

45

50

55

60

65

70

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Manufacturing

Services

RecessionMar 2001 - Nov 2001

RecessionDec 2007 - Jun 2009

NB: Results above 50 generally signal economic expansion Source: Ins tute for Supply Management

Fig. 11

U.S. Unemployment Rate & Non-Farm Payrolls Changethrough December 2015

-900

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

10.5

11

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Thou

sand

s

Perc

ent

Source: US Bureau of Labor Statistics & US Dept. of Labor

Unemployment Rate(left-hand side)

New jobs(right-hand side)

Fig. 12

Fig. 10

EU Economic Sentiment & Consumer Confidencethrough December 2015

-35

-31

-27

-23

-19

-15

-11

-7

-3

1

5

60

65

70

75

80

85

90

95

100

105

110

115

120

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Consumer Confidence(Right-hand scale)

Economic Sentiment(Left-hand scale)

Source: European Commission

Fig. 13





Eurozone Manufacturing & Services Activity Indicesthrough December 2015

32

34

36

38

40

42

44

46

48

50

52

54

56

58

60

62

32

34

36

38

40

42

44

46

48

50

52

54

56

58

60

62

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

NB: Results above 50 generally signal economic expansion.Source: Markit.com

Manufacturing

Services

China Purchasing Managers' IndicesSeasonally adjusted through December 2015; (50 = no change from previous month)

46

48

50

52

54

56

58

46

48

50

52

54

56

58

2012 2013 2014 2015 2016

Caixin1

(manufacturing)

CFLP2

(manufacturing)

1 - Caixin through Markit Partners (Manufacturing)2 - China Federa on of Logis cs and Purchasing (Manufacturing)3 - China Federa on of Logis cs and Purchasing (Services)

CFLP3

(services)

Fig. 16

Fig. 15

Moreover, unemployment declined to a 4-year low of 10.5% in November and it likely came down again last month as a survey of private sector activity showed December employment in the services sector rose at its fastest pace in just over 5 years.

December’s growth in Eurozone private sector activity (fi gure 15) likely pushed Q4’s overall economic performance close to its best level in 4.5 years, driven by a robust increase in incoming new business and the sharpest accumulation of European manufacturing order backlogs in almost two years. The Eurozone’s economic recovery is expected to continue to gain momentum according to the January World Bank forecast, with real GDP growth of 1.7% y/y this year, up from 1.5% in 2015.

Recent economic data out of China show the manufacturing sector continues to struggle with December’s PMIs (fi gure 16) from both the ‘offi cial’ China Federation of Logistics and Purchasing survey (which tends to measure the activity of large, SOE, industrial enterprises) and the Caixin survey (which is more focussed on medium to smaller-sized private sector fi rms) still in contraction territory. However, China’s services sector activity continued to expand through December with the offi cial PMI services index rising to an 18-month high.

Average prices of new homes in 100 of the biggest cities in China climbed for the 8th straight month in December – up 0.74% on a m/m basis and 4.15% on a y/y basis according to the Chinese Index Academy, a private research group.

According to the National Bureau of Statistics, China’s CPI rose 1.6% y/y in December bringing the annual rate for 2015 to 1.4%, its slowest increase since 2009 and well below Beijing’s 3% target. At the same time, December’s 5.9% y/y drop in producers’ prices, its 46th in a row, brought the 2015 total down 5.2% y/y vs. a decline of 1.4% in 2014.

In a report published December 16, the PBOC predicted GDP growth to reach 6.9% in 2015 and 6.8% this year which is modestly more optimistic that the most recent World Bank forecast that sees China’s 2016 GDP gaining 6.7% followed by 6.5% increases in 2017 and 2018.

Eurozone Unemployment Rates by Country (November 2015, seasonally adjusted)

0.0

5.0

10.0

15.0

20.0

25.0

0.0

5.0

10.0

15.0

20.0

25.0

Ger

man

y

Cze

ch R

ep.

Mal

ta UK

Aus

tria

Den

mar

k

Luxe

mbo

urg

Esto

nia

Hun

gary

Rom

ania

Net

herl

ands

Swed

en

Pol

and

Bel

gium

Lith

uani

a

Slov

enia

Bul

gari

a

Irel

and

EU28

Finl

and

Latv

ia

Fran

ce

EU29

Slov

akia

Ital

y

Por

tuga

l

Cyp

rus

Cro

atia

Spai

n

Gre

ece

Perc

ent

Source: Eurostat

Fig. 14





Exchange Rates

The USD was mixed against pulp-related currencies through December but sharply higher on a year-over-year basis

across the board (table 4).

While many analysts think the dollar’s biggest gains have already been made - on a trade-weighted basis it has soared 20% over the past two years – it will likely strengthen further in the near-term on interest rate differentials and safe-haven infl ows but start to weaken before mid-year as the Federal Reserve pulls back somewhat from its unexpected aggressive interest rate hiking campaign.

On January 13, Canada’s dollar (CAD) dropped below US$0.70 for the fi rst time since April 2003 as oil prices continue to slide and as traders start to factor in another interest rate cut by the Bank of Canada this month. Given that the US Energy Information Agency recently reduced its forecasted 2016 average WTI crude oil price to only US$ 38.54 vs. around US$30 today, Canada’s dollar will likely recover only modestly through 2016 to average USD 0.73 – lower than average in the fi rst half year and higher in the second.

The EUR/USD has recently been supported by better Eurozone economic news, some safe-haven infl ows and the ECB’s lighter-than-expected boost to its QE program in early December. However, it should soon head lower as infl ation weakens (due mostly to lower oil prices), increasing chances the ECB will cut interest rates and/or increase or extend its existing QE measures at or before its March meeting. The EUR/USD should average 1.04 through 2016.

The most recent Banco Central do Brasil survey of 100 economists (January 8, 2016) sees the BRL/USD at 4.25 at the end of 2016 and 4.23 at the end of 2017.

China’s Yuan (CNY/USD) is now trading at close to a 5-year low in very volatile markets having dropped 4.5% since the end of October. While authorities continue to intervene in FX markets to help stabilize the currency, it seems likely the CNY will continue to depreciate modestly, especially with another interest rate cut likely in the near-term. Several global banks have cut their CNY/USD forecasts to around 7 by year-end 2016 while ABN Amro Bank NV, ranked by Bloomberg as the most-accurate yuan forecaster over the last 4 quarters, has a 6.70 year-end target, 2% lower than today.

Source: UBC Pacific Exchange Rate Service & B McClay Inc.

Currency Monthly Avg. December 2015

Canadian $

Swedish Krona

Euro

Yen

Brazil Real

Chilean Peso

Korean Won

Indo. Rupiah

Russian Ruble

New Zealand $

S. African Rand

Chinese Yuan (RMB)

.72968

.11762

1.0882

.0082168

.25755

.0014195

.00085105

.0000723

.014281

.67409

.066696

.15501

15.8

10.2

11.7

1.9

31.9

13.0

6.1

10.1

18.8

13.2

23.3

4.0

3.1

2.2

1.5

0.8

2.5

0.1

1.7

1.1

7.1

2.9

5.6

1.2

Exchange Rates : local currency in USD

% change from

Nov. 2015 Dec. 2014

Table 4

Fig. 17

Fig. 18

Local Currency BEK List Price IndicesMonthly median price CIF Northern Europe - January 2002 = 1, through December 2015

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

3.2

3.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

3.2

3.4

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US $

Euro

Brazil Real

Source: B McClay Inc. & Pacific Exchange Rate Service

Local Currency NBSK List Price IndicesMonthly median price CIF Northern Europe -January 2002 = 1, through December 2015

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

2.1

2.2

2.3

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

2.1

2.2

2.3

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

C$

US $

Euro






Pulp Producers CurrenciesIndex of Monthly Average Values - January 2002 US$ Value=1, through December 2015

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

2.1

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

2.1

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

BrazilReal

ChileanPeso

C$

Swedish Krona

Euro

IndonesianRupiah


NZ$

Fig. 20

Fig. 21

Fig. 22

Fig. 23

Fig. 24

China's Paper Grade Pulp Imports -11 months 2015(000's tonnes)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2014 2015Hardwood Kraft Softwood Kraft Total

% Share of Pulp Imports - 11 Months 2015 2014 2013

Canada 24% 23% 25% Indonesia 12 13 14 Chile 11 11 11Brazil 20 20 15Russia 8 8 6United States 9 10 11Other 16 15 18

11 mos. 15/14+11.6% Total+13.8% HW+8.9% SW

Source: China Customs Bureau & B McClay Inc.

Year-to-date

China's Monthly Imports of Paper Grade Pulp3-month moving average through November 2015

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

750

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

750

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

000'

s to

nnes

BHK

BSK

High Yield pulp

Dissolving pulp

Source: China Customs Bureau

Fig. 19

List prices for NBSK, BEK & Aspen in North AmericaDelivered mill basis through December 2015

500

550

600

650

700

750

800

850

900

950

1000

1050

500

550

600

650

700

750

800

850

900

950

1000

1050

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US$

/AD

MT

NBSK

BEK

Aspen

Source: B McClay Inc.

Brazil monthly BEK exports3-month moving average through December 2015

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Source of Data: SECEX – Foreign Trade Secretariat, PIG (PULP INFO GLOBAL)

Total

To China

3-month moving average

monthly total

Baltic Dry Indexthrough January 6, 2016

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Capital Link Shipping





Ma

jor

Ha

rdw

oo

d P

ulp

Ca

pa

cit

y C

ha

ng

es

: 2

01

5 -

20

19

Sou

rce:

Bri

an M

cCla

y &

Ass

oci

ates

Inc.

Red

font

mea

ns u

ncer

tain

Blue

font

mea

ns c

hang

e fr

om la

st re

port

Purp

le fo

nt m

eans

bot

h

Com

pany

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eM

ill L

oca

onG

rade

(s)

Effec

veD

ate

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nnes

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es

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ra S

peci

alty

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uon

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ld T

own,

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USA

NBH

KJa

n. 9

, 201

520

0Re

star

t of m

ill c

lose

d in

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ust 2

014.

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al p

rodu

con

BHK

. Mos

tly affi

liate

d.Ja

ri Ce

lulo

seM

onte

Dou

rado

, Par

á, B

razil

BEK

Jan.

9, 2

015

330

Switc

h to

DP

Q1

2016

Eldo

rado

Pap

el e

Cel

ulos

eTr

ês L

agoa

s, M

ato

Gros

so d

o Su

l, Br

azil

BEK

Jan.

201

520

0Pe

rmit

incr

ease

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per E

xcel

lenc

eCh

etw

ynd,

BC,

Can

ada

BCTM

P-H

May

1, 2

015

240

Rest

art o

f mill

idle

d by

pre

viou

s ow

ner T

embe

c in

Sep

tem

ber 2

012.

CMPC

Guaí

ba, R

io G

rand

e do

Sul

, Bra

zilBE

KM

ay 3

, 201

513

00Su

zano

Suza

no, S

ão P

aulo

, Bra

zilBE

KM

ay 2

015

35M

ostly

inte

grat

ed.

Celu

losa

Ara

uco

San

José

de

la M

ariq

uina

, Val

divi

a, C

hile

BEK

Q2

2015

180

Switc

h ba

ck to

BEK

.As

ia P

ulp

& P

aper

Haik

ou, H

aina

n Is

land

, Chi

naBE

KH1

201

5-5

0Sw

itch

from

mar

ket t

o in

tegr

ated

pul

p w

ith st

art-

up o

f new

ss

ue P

Ms

Altr

i SGP

SCo

nstâ

ncia

, Por

tuga

lBE

K Su

lphi

teM

id Ju

ly 2

015

-120

Step

wise

con

vers

ion

to d

issol

ving

pul

p st

arte

d in

201

2 co

mpl

eted

in m

id-J

uly

2015

.

Ence

Nav

ia, A

stur

ias,

Spai

nBH

KPJu

ly 2

015

40Ca

paci

ty in

crea

se in

stag

es w

ith c

ompl

eon

in Ju

ly 2

015.

Port

ucel

Sop

orce

lCa

cia,

Por

tuga

lBE

KJu

ly 2

015

70BE

K ex

pans

ion.

U

PMKu

usan

kosk

i, Fi

nlan

dN

BHK

Oct

. 201

510

0EU

R 16

0 m

illio

n to

add

new

pul

p dr

yer a

nd o

ther

impr

ovem

ents

. Not

all

mar

ket.

Vers

o Co

rp.

Wic

kliff

e, K

Y, U

SASB

HKN

ov. 2

, 201

5-3

0Fl

ash-

drie

dEx

pera

Spe

cial

ty S

olu

ons

Old

Tow

n, M

E, U

SAN

BHK/

NBS

KN

ov. 2

015

-200

Mill

clo

sure

.Yu

en F

oong

Yu

Zhao

qing

cou

nty,

Gua

ngdo

ng, C

hina

BHKP

Dec.

8, 2

015

-20

Switc

h fr

om m

arke

t to

inte

grat

ed p

ulp

with

the

star

t up

of n

ew

ssue

PM

.Re

solu

te F

ores

t Pro

d.Ca

lhou

n, T

N, U

SASB

HKLa

te D

ec. 2

015

100

New

con

nuou

s dig

este

r. So

me

inte

grat

ed.

Altr

i SGP

SCe

lbi,

Figu

eira

da

Foz,

Port

ugal

BEK

End

2015

30Bu

rgo

Grou

pHa

rnon

cour

t/Vi

rton

, Bel

gium

NBH

KEn

d 20

1530

Yuen

Foo

ng Y

uZh

aoqi

ng c

ount

y, G

uang

dong

, Chi

naBH

KPLa

te Ja

n. 2

016

-20

Switc

h fr

om m

arke

t to

inte

grat

ed p

ulp

with

the

star

t up

of n

ew

ssue

PM

.Kl

abin

Or

guei

ra, P

aran

á, B

razil

BEK

Mar

. 201

690

01.

5 m

illio

n tp

y (1

.1 m

illio

n BE

K of

whi

ch 2

00k

inte

grat

ed ,

400k

BSK

/fluff

).Ja

ri Ce

lulo

seM

onte

Dou

rado

, Par

á, B

razil

BEK

Q1

2016

-330

Switc

h to

DP.

Doub

le A

Aliza

y, F

ranc

eBH

KPM

ay 2

016

300

Inte

grat

ed a

nd m

arke

t.Sv

etlo

gors

ky P

ulp

& P

aper

Svet

logo

rsk,

Gom

elsk

aya,

Bel

arus

NBH

KQ

2 20

1628

0N

BHK.

Fle

x' p

ulp

mill

- 30

% B

SK, 7

0% B

HK w

ith fu

ture

abi

lity

to m

ake

90k

t/y

DP.

Ence

Nav

ia, A

stur

ias,

Spai

nBH

KPJu

ly 2

016

40Fi

rst s

tage

cap

acity

incr

ease

. Th

e se

cond

com

plet

ed b

y 20

20.

See

belo

w.

ITC

Grou

pBh

adra

chal

am, A

ndhr

a Pr

ades

h, In

dia

BCTM

P-H

Q3

2016

105

Inte

grat

ed.

Asia

Pul

p &

Pap

erSo

uth

Sum

atra

, Ind

ones

iaBA

K/BE

KQ

4 20

1628

00Tw

o 1.

4 m

illio

n tp

a lin

es.

Stor

a En

soBe

ihai

, Gua

ngxi

, Chi

naBC

TMP-

HQ

4 20

1623

0In

tegr

ated

to F

BB B

M st

arng

up

Q2

2016

.Al

tri S

GPS

Celb

i, Fi

guei

ra d

a Fo

z, Po

rtug

alBE

K20

1630

Bukó

zaHe

ncov

ce, S

lova

kia

NBH

K20

16-2

0Po

ssib

ly in

stal

ling

a ss

ue m

achi

ne.

Met

sä B

oard

Kask

inen

, Fin

land

BCTM

P-H

2016

-160

Phas

ed-in

inte

gra

on to

new

400

k FB

B PM

at c

ompa

ny's

Husu

m, S

wed

en m

illVi

trac

imex

Qua

ng N

gai,

Viet

nam

BEK

Early

201

740

0Eq

uipm

ent f

rom

Söd

ra's

Toe

Mill

in N

orw

ay.

Reso

lute

For

est P

rod.

Calh

oun,

TN

, USA

BHKP

Q1

2017

-60

Inte

gra

on w

ith n

ew

ssue

mac

hine

.Po

rtuc

el S

opor

cel

Caci

a, P

ortu

gal

BEK

H1 2

017

-70

Inte

gra

on w

ith n

ew

ssue

PM

, sub

ject

to a

ppro

val b

y Po

rtug

uese

aut

hori

es.

Celu

losa

Ara

uco

San

José

de

la M

ariq

uina

, Val

divi

a, C

hile

BEK

Mid

201

7-2

00Co

nver

sion

to D

P. A

wai

ng S

upre

me

Cour

t rul

ing.

Met

sä F

ibre

Ääne

kosk

i, Fi

nlan

dN

BHK

Q3

2017

500

NBH

K. 1

.3 m

illio

n tp

a pa

rtly

inte

grat

ed B

SK/B

HK (8

00k/

500k

) mill

.M

etsä

Fib

reÄä

neko

ski,

Finl

and

NBH

KQ

3 20

17-3

60Cl

osur

e of

exi

sng

520

BSK

/BHK

(100

k /4

20k)

mill

. Not

all

mar

ket p

ulp.

Suza

noIm

pera

z, M

aran

hão,

Bra

zilBE

KQ

3 20

1714

0In

add

ion

to th

is 60

k tp

a in

crea

sed

capa

city

will

be

inte

grat

ed w

ith a

new

ss

ue P

M.

Fibr

ia C

elul

ose

Três

Lag

oas,

Mat

o Gr

osso

do

Sul,

Braz

ilBE

KQ

4 20

1718

50Su

zano

Muc

uri,

Bahi

a, B

razil

BEK

Q4

2017

140

In a

ddi

on to

this

60k

tpa

incr

ease

d ca

paci

ty w

ill b

e in

tegr

ated

with

a n

ew

ssue

PM

.El

dora

do P

apel

e C

elul

ose

Três

Lag

oas,

Mat

o Gr

osso

do

Sul,

Braz

ilBE

KQ

4 20

1820

00Es

toni

an C

ell

Kund

a, E

ston

iaBC

TMP-

H20

1830

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losa

Ara

uco

Los H

orco

nes,

Bío

Bío,

Chi

leBE

K20

18/2

019

1560

New

1.5

6 M

MT

BEK

line.

Gov

't ap

prov

al o

btai

ned.

Dec

ision

del

ayed

.Ce

lulo

sa A

rauc

oLo

s Hor

cone

s, Bí

o Bí

o, C

hile

BEK

2018

/201

9-2

80Cl

osur

e of

exi

sng

line

.St

ora

Enso

Beih

ai, G

uang

xi, C

hina

BEK

2018

/201

945

070

0k B

EK li

ne p

aral

ly-in

tegr

ated

to a

450

K co

nsum

er p

aper

boar

d m

ill.

Ence

Pont

éved

ra, G

alic

ia, S

pain

BHKP

2020

3017

0k tp

a ca

paci

ty in

crea

se w

ill b

e sp

lit b

etw

een

this

mill

and

Nav

ia-A

stur

ias M

ill.

Ence

Nav

ia, A

stur

ias,

Spai

nBH

KP20

2010

0Se

cond

stag

e ca

paci

ty in

crea

se.

The fir

st c

ompl

eted

in Ju

ly 2

016.

Tabl

e 5





Ma

jor

So

ftw

oo

d P

ulp

Ca

pa

cit

y C

ha

ng

es

: 2

01

5 -

20

19

Sou

rce:

Bri

an M

cCla

y &

Ass

oci

ates

Inc.

Red

font

mea

ns u

ncer

tain

Blue

font

mea

ns c

hang

e fr

om la

st re

port

Purp

le fo

nt m

eans

bot

h

Com

pany

Nam

eM

ill L

oca

onG

rade

(s)

Effec

veD

ate

000'

sTo

nnes

Not

es

Guan

gxi N

anni

ng P

hoen

ixN

anni

ng, G

uang

xi, C

hina

BSKP

Feb.

201

5-5

0M

ill c

losu

reCe

lulo

sa A

rauc

oSa

n Jo

sé d

e la

Mar

iqui

na, V

aldi

via,

Chi

leRa

diat

aQ

2 20

15-1

80Sw

itch

back

to B

EK.

Wag

gery

dW

agge

ryd,

Sw

eden

BCTM

P-S

Sept

. 201

520

New

air

to h

eat e

xcha

nger

s.U

PMKu

usan

kosk

i, Fi

nlan

dN

BSK

Oct

. 201

570

Inte

grat

ed. E

UR

160

mill

ion

to a

dd n

ew p

ulp

drye

r and

oth

er im

prov

emen

tsVe

rso

Corp

.An

dros

cogg

in, J

ay, M

E, U

SAN

BSK

Oct

. 201

5-9

0Ro

ll pu

lpHo

lmen

Igge

sund

, Sw

eden

NBS

KN

ov. 8

, 201

550

Mos

tly in

tegr

ated

.Sö

dra

Cell

Mör

rum

, Sw

eden

NBS

KDe

c. 1

1, 2

015

30He

inze

l Gro

upPö

ls, S

tyria

, Aus

tria

NBS

KDe

c. 2

2, 2

015

240

Rest

art o

f rep

aire

d #2

boi

ler t

hat e

xplo

ded

Mar

ch 2

3, 2

014

Irvin

g Fo

rest

Ser

vice

sSa

int J

ohn,

NB,

Can

ada

NBS

KM

ar. 2

016

30Kl

abin

Or

guei

ra, P

aran

á, B

razil

Fluff

-SBS

KM

ar. 2

016

400

1.5

mill

ion

tpy

(1.1

mill

ion

BEK,

400

k BS

K/flu

ff) u

nder

con

stru

con

, on

sche

dule

.Sö

dra

Cell

Värö

, Sw

eden

NBS

KM

id Ju

ne 2

016

275

$610

mill

ion

inve

stm

ent t

o ex

pand

this

exis

ng 4

25k

NBS

K m

ill.

Svet

logo

rsky

Pul

p &

Pap

erSv

etlo

gors

k, G

omel

skay

a, B

elar

usN

BSK

Q2

2016

120

Flex

' pul

p m

ill -

30%

BSK

, 70%

BHK

with

futu

re a

bilit

y to

mak

e 90

k t/

y DP

.In

tl. P

aper

Rieg

elw

ood,

NC,

USA

Fluff

-SBS

KM

id 2

016

360

Fluff

and

sow

ood

pape

r pul

pW

agge

ryd

Wag

gery

d, S

wed

enBC

TMP-

SSe

pt. 2

016

20Do

mta

r Cor

p.As

hdow

n, A

R, U

SAFl

uff-S

BSK

Q3

2016

315

Conv

erng

UW

F PM

64

to b

aled

SBS

K an

d ro

lled flu

ff pu

lp o

utpu

t.M

etsä

Boa

rdHu

sum

, Sw

eden

NBS

K20

1610

0Ph

ased

-in c

apac

ity fr

om c

losu

re o

f 600

k t/

y CM

/UW

F ca

paci

ty a

nd 4

00k

adde

d FB

B.Ce

lulo

sa A

rauc

oSa

n Jo

sé d

e la

Mar

iqui

na, V

aldi

via,

Chi

leRa

diat

aM

id 2

017

-350

Conv

ersio

n to

DP.

Aw

aing

Sup

rem

e Co

urt r

ulin

g.M

etsä

Fib

reÄä

neko

ski,

Finl

and

NBS

KQ

3 20

1780

01.

3 m

illio

n tp

a pa

rtly

inte

grat

ed B

SK/B

HK (8

00k/

500k

) mill

.M

etsä

Fib

reÄä

neko

ski,

Finl

and

NBS

KQ

3 20

17-1

00Cl

osur

e of

exi

sng

520

k BS

K/BH

K (1

00k/

420k

) mill

. Par

tly in

tegr

ated

to F

BB m

ill c

lose

by.

Sh

ando

ng C

henm

ing

Huan

ggan

g, H

ubei

, Chi

naSB

SK20

1730

0Gr

eenfi

eld

mill

.SC

ATi

mrå

, Sw

eden

NBS

KM

id 2

018

470

Appr

ox. 1

00k

for u

se a

t affi

liate

d m

ills.

Adity

a Bi

rlaTe

rrac

e Ba

y, O

N, C

anad

aN

BSK

2018

/201

9-3

50Co

nver

si on

to D

P.Si

berw

ood

Kras

noya

rsk,

Rus

siaN

BSK

2019

700

Gree

nfiel

d m

ill

Tabl

e 6

Dis

so

lvin

g P

ulp

Ca

pa

cit

y C

ha

ng

es

: 2

01

5 -

20

20 So

urc

e: B

rian

McC

lay

& A

sso

ciat

es In

c.Re

d fo

nt m

eans

unc

erta

inBl

ue fo

nt m

eans

cha

nge

from

last

repo

rtPu

rple

font

mea

ns b

oth

Com

pany

Nam

eM

ill L

oca

onG

rade

(s)

Effec

veD

ate

000'

sTo

nnes

Not

es

Sapp

iCl

oque

t, M

N, U

SAN

BHK

Q1

2015

-130

NBH

K. S

witc

h ba

ck to

par

al B

HK p

rodu

con

.

Altr

i SGP

SCo

nstâ

ncia

, Por

tuga

lEU

C Su

lphi

teM

id Ju

ly 2

015

105

BEK.

Ste

pwise

con

vers

ion

to d

issol

ving

pul

p st

arte

d in

201

2 - c

ompl

eted

in m

id-J

uly

2015

.

Sun

Pape

rYa

nzho

u, S

hand

ong,

Chi

naBH

KEn

d Q

3 20

15-3

00Sw

ing

exis

ng D

P lin

e to

inte

grat

ed B

HK.

Sun

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rZo

uche

ng, S

hand

ong,

Chi

naBH

KEa

rly N

ov. 2

015

350

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pmen

t fro

m c

ance

lled

mill

in L

aos.

Tem

bec

Tem

iscam

ing,

QC,

Can

ada

Sulp

hite

2015

35Su

lphi

te. S

peci

alty

- 5K

add

ed b

y la

te 2

013/

early

201

4Sö

dra

Cell

Mör

rum

, Sw

eden

NBH

KM

ar. 2

016

15N

BHK.

Jari

Celu

lose

Mon

te D

oura

do, P

ará,

Bra

zilBE

KQ

1 20

1625

0O

nly

pape

r gra

de p

ulp

since

Jan

2014

rest

art.

Switc

h to

DP.

Tim

ing

unce

rtai

n.Ra

yoni

er A

dvan

ced

Mat

eria

lsJe

sup,

GA,

USA

SBSK

Q1

2016

-190

C lin

e re

built

to m

ake

spec

ialty

DP

in 2

013

but h

as m

ade

mos

tly fl

uff a

nd v

iscos

e-DP

.Ba

llarp

ur In

d. L

td.

Kam

alap

uram

, And

hra

Prad

esh,

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aBH

K20

1690

Rest

art -

m

ing

unce

rtai

n.Ce

lulo

sa A

rauc

oSa

n Jo

sé d

e la

Mar

iqui

na, V

aldi

via,

Chi

leBE

KM

id 2

017

500

US$

185

mill

ion

conv

ersio

n fr

om p

aper

pul

p. A

wai

ng S

upre

me

Cour

t rul

ing.

Svet

logo

rsky

Pul

p &

Pap

erSv

etlo

gors

k, G

omel

skay

a, B

elar

usN

BHK

2017

90N

BHK.

Fle

x' p

ulp

mill

- 30

% B

SK, 7

0% B

HK w

ith fu

ture

abi

lity

to m

ake

90k

t/y

DP.

Adity

a Bi

rlaTe

rrac

e Ba

y, O

N, C

anad

aN

BSK

2018

/201

928

0Co

nver

sion

from

pap

er g

rade

NBS

K.Si

berw

ood

Kras

noya

rsk,

Rus

siaN

BSK

2019

200

Gree

nfiel

d N

BSK

mill

.In

dust

rial P

ulp

Chus

ovoy

, Per

m, R

ussia

NBH

K20

2025

0

Tabl

e 7

Documents

MARKET PULP MONTHLY · PDF fileMARKET PULP MONTHLY January 2016 Brian McClay & Associates Inc. FOR SUBSCRIBERS ONLY ALL FIGURES IN METRIC TONS Volume 20