March 2014 International Trade (Pulp, Paper & Paperboard)

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Net Exports turned higher in March after February’s drop, with both exports and imports separately posting increases. Exports erased February’s decline while imports posted the strongest monthly performance since August 2013. Despite the strong showing by U.S. pulp, paper, and paperboard exports (over 11 percent increase), due to the big increase in imports (over 20 percent) net exports grew by only 6.5 percent.

Exports remain locked on a negative six-month trend line while imports and net exports reversed recent trends; for imports, last month’s six-month negative trend switched positive and for net exports, last month’s six-month positive trend switched negative. Despite the pick-up in export activity in March, the general take-away from pulp, paper, and paperboard trade activity remains a slowing industry sector globally which in effect keeps more U.S. onshore in the U.S. Meanwhile, more product is being imported into the U.S., further increasing supply. This is consistent with the declining trend seen in pulp and paper sector industrial production levels.

In terms of notable shifts in country-level details:

• Pulp exports have dropped 1.8 percent compared to prior year-to-date levels. Italy accounts for 49 percent (60,000 tonnes) and China accounts for 47 percent (58,000 tonnes) of the 122,000 tonne drop. India (27,000 tonnes) and Canada (26,000 tonnes) have posted the largest year-to-date gains on an absolute basis.

• Pulp imports have dropped 2.4 percent (37,000 tonnes) compared to prior year-to-date levels. The most significant drop is from Brazil, which has fallen by nearly 17 percent from prior year-to-date imports (85,000 tonne reduction). Imports from Canada are up by just over 2 percent percent (23,000 tonnes) year-to-date compared to prior year levels. As a supply source, Indonesia has climbed from being the 12th ranked supplier during the first three months of 2013 to the 7th ranked supplier during the first three months of 2014, posting a year-to-date increase of nearly 66 percent.

• Paper and paperboard imports have expanded by nearly 14 percent (102,000 tonnes) year-to-date compared to prior year-to-date activity. Once again Canada leads the way, accounting for virtually all the increase (96,000 tonnes). However, what could be a notable development is Australia has vaulted from being the 29th ranked supplier during the first three months of 2013 to the 10th ranked supplier during the first three months of 2014, posting an eye-popping increase over 42,000% --- from 6 tonnes to 2,485 tonnes.

• Paper and paperboard exports have dropped by 5.2 percent (33,000 tonnes) on a year-to-date basis. The "loss leader" is India (18,000 tonnes) followed by Japan (5,000 tonnes). Bucking the general decline in paper and paperboard exports, paper and paperboard exports to Canada are up by 18,000 tonnes. Costa Rica and Peru are receiving higher levels of U.S. paper and paperboard exports; Costa Rica's YTD receipts are up by over 9,000 tonnes and Peru's up over 5,000 tonnes. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.