July 2014 International Trade (Pulp, Paper & Paperboard)

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July's results essentially extended 2Q’s trend in pulp and paper trade: stronger domestic demand but generally weak global demand. Although July exports did tick higher, it barely did so, registering a scant 0.1 percent increase while showing the first increase in imports since April. Imports broke out of their recent trading range between 800,000 and 815,000 tonnes, posting a 15.9 percent increase over June's level. Sharply higher imports and barely higher exports yielded a decline in net exports, dropping by 7.8 percent on month-to-month basis ("M2M"), a year-over-year ("Y2Y") decline of 10.9 percent, and YTD decline of 3.0 percent.

The six-month export trend swapped from marginally negative to marginally positive, switching from a 1.6 percent January-to-June decline to a 1.5 percent February-to-July increase. The six-month trend on imports exploded higher, jumping from a 3.8 percent trend increase between January and June to a 17.4 percent increase between February and July. Despite the export trend shifting from negative to positive, the much higher trend on imports means the six-month net-export trend fell, dropping from -4.2 percent from January to June to -5.9 percent from February to July. 

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In terms of notable shifts in country-level details: Pulp exports (15.422 million tonnes YTD) increased by 0.3 percent compared to prior YTD levels. China remains the chief destination of U.S. pulp by a wide margin, representing 56 percent of YTD shipments compared to Mexico, the second-ranked destination at 7.3 percent. Nevertheless China's exports have declined by 2.2 percent YTD compared to the same period in 2013. Mexico's receipt of U.S. pulp export are up nearly 10 percent YTD and India's, the third ranked destination for U.S. pulp exports, are up by nearly 22 percent. Among 2013's top 10 destinations, the most significant change is Indonesia where U.S. pulp exports are over 41 percent higher than prior YTD levels, causing it to jump from the ninth-ranked 2013 YTD destination to the sixth-ranked 2014 YTD destination.

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Paper and paperboard exports (1.422 million tonnes) dropped by 7.0 percent on a YTD basis. Among 2013's Top 10 destinations, the "loss leader" is India (70,000 tonnes, -46.8 percent from prior YTD) followed by China (13,000 tonnes, -32.7 percent), Mexico (24,000 tonnes, -7.1 percent), and Japan (10,000 tonnes, -9.1 percent). Bucking the general decline in paper and paperboard exports, YTD paper and paperboard exports to Canada are up by 57,000 tonnes (+17.9 percent) compared to prior YTD levels. Costa Rica, Guatemala, and Peru are also receiving higher levels of U.S. paper and paperboard exports; Costa Rica's YTD receipts are up by nearly 16,000 tonnes (+48.1 percent), Guatemala is up nearly 6,000 tonnes (+18.5 percent) and Peru is up over 4,000 tonnes (+44.7 percent). 

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Pulp imports (3.729 million tonnes YTD) increased 2.5 percent compared to prior YTD levels. The most significant drop is from Brazil, which has fallen by 1.9 percent. However, imports from Canada, up by 2.0 percent YTD compared to prior year levels, overwhelms Brazil's reduction. Canada and Brazil, the 1st and 2nd ranked pulp import sources, respectively, account for over 94 percent of the pulp imported. Chile, while maintaining its number three rank, has nearly doubled its imports YTD. As a supply source, Indonesia has climbed from being the twelfth-ranked supplier during the first seven months of 2013 to the ninth-ranked supplier during the first seven months of 2014, posting a YTD increase of nearly 66 percent. 

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Paper and paperboard imports (1.762 million tonnes YTD) have expanded by over 10 percent year-to-date compared to prior YTD activity. Once again Canada leads the way, accounting for nearly 79 percent of the YTD increase (149,000 tonnes). Canada is by far the most significant source of imported paper and paperboard in 2014, accounting for 89 percent of all paper and paperboard imported. One notable development on a percentage basis is Australia, which has vaulted from being the 29th ranked supplier during the first seven months of 2013 to the 8th ranked supplier during the first seven months of 2014, posting an eye-popping increase over 63,600 percent -- from 13 tonnes to 8,472 tonnes.

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.