Pulp and Paper Canada

Features Global Trends Markets
INDUSTRY NEWS QUARTERLY RESULTS


July 1, 1999
By Pulp & Paper Canada

Topics

For the three-month period ending Mar. 31, 1999EarningsSales$M$M…

For the three-month period ending Mar. 31, 1999
Earnings Sales
$M $M
1999 1998 1999 1998
Abitibi-Consolidated (83.0) 35.0 967.0 998.0
Alliance 2.7 6.5 259.0 270.2
Canfor 13.5 1.1 421.8 368.1
Cascades 4.0 14.0 624.0 656.0
Domtar 15.0 17.0 699.0 493.0
Donohue 50.0 46.9 585.7 447.1
Harmac Pacific (0.3) (0.6) 56.2 51.4
MacMillan Bloedel 33.0 16.0 1014 990
Millar Western 3.5 (1.2) 48.1 46.5
Norampac (5.8) (3.9) 200.3 215.5
Paperboard Industries (4.9) (3.4) 195.9 199.3
Perkins 5.3 5.1 69.4 56.0
Rolland 1.6 6.1 168.4 168.3
St. Laurent Paperboard 2.3 0.4 198.4 206.4
Tembec (21.0) 7.8 361.5 336.6
Unifort (4.0) (6.5) 63.0 74.4
West Fraser 14.2 1.1 443.9 405.9

PRICING PULP AND PAPER

Newsprint prices are showing weakness. At the end of the fourth quarter last year prices were at the $540-$550 range. In May, prices were as low as $430. Part of the problem, says Zaheer Khan, Canadian Bond Rating Service, is the decline in the commercial printing sector. The real culprit, however, is the high inventory level. Large publishers have close to 1.8 months of supply. Khan estimates a total inventory of about 1.58 million tonnes (t).

Producers have announced downtime that will take 330 000 t out of the market, 175 000 t of that permanent and 155 000 t incremental. Despite the downtime, Khan does not expect prices to rebound soon. He foresees a strengthening of prices closer to the start of next year. “Probably earlier downtime would have helped,” said Khan. Operating rates have been high, close to 95%.

Another area that concerns Khan is the consumption rate. “The consumption increase in newsprint was not as high as expected and the beginning of the year,” said Khan. “The incremental downtime, though, should help the supply/ demand balance.”

Market pulp has had a better year. The price for NBSK started the year at close to $500, but two increases of $20 each have brought the list price up to $540. The most recent increase was June 1. “The June price will still be tested,” said Khan.

NORSCAN inventory is below 1.51 million t in North America. “As long as you are near that number you are fine,” Khan said. Inventory level dropped about 49 000 t in April due to production downtime, but Khan said that the average decline in April, for the past 10 years, has been 77 000 t. He suspects that the reason inventory is not falling faster is that users expected prices to go up, and stocked up. Fortunately, demand “is fairly buoyant” in North America and Europe, and operating rates are coming down. Khan says that if producers are willing to keep inventory down they will spur prices.

He believes that we may climb out of the trough that saw prices hit a low of $470/t in the third quarter of 1998. “This may be the beginning of a sustained recovery.”

Joan Bailey