November 2015 International Trade (Pulp, Paper & Paperboard)

Month-over-Month (MoM), Year-over-Year (YoY), and Year-to-Date (YTD):

On a month-to-month basis, November's net exports posted the third consecutive monthly decline, dropping 51.8 thousand tonnes (-3.2%): 1,608 to 1,557 thousand tonnes. November's net exports were the second lowest level of the year thus far, supplanting October for that title and pushing it third lowest for the year. While February was lower than September, October, and November net exports, both January and March, it was likely impacted by the West Coast port slowdown. Details for November, the prior six months, year-over-year, and year-to-date performance are presented in the table below.

Click image for larger view

Both exports and imports fell between November and October; exports decreased by 138.1 thousand tonnes (-5.7%) and imports decreased by 86.4 thousand tonnes (-10.5%). The reason net exports fell is because the decline in exports was greater than the decline in imports.

On a year-over-year basis November exports were down 76.2 thousand tonnes and imports up 25.1 thousand tonnes, resulting in a year-over-year decrease in net exports of 101.3 thousand tonnes (-6.1%).

On a year-to-date basis exports are up 596 thousand tonnes while imports are down 424 thousand tonnes, yielding an increase in net exports of 1,020 thousand metric tonnes (5.9%). Net exports are on track to achieve the third highest level since 2005.

The year-to-date decline in imports and increase in exports is counterintuitive with reported stronger 2015 US growth compared to global growth and a strengthening U.S. dollar. As noted in prior repots, this trend has been consistently evident from April 2015's YTD through October 2015's YTD results; in the seven months of reported data since April four of the seven have been the second highest month of net exports since 2005 and two have been the third highest month. However, this pattern was broken in October when October 2015's monthly result ranked as the seventh highest monthly total of eleven since 2005. November improved modestly, increasing to the sixth highest monthly total of eleven Novembers since 2005. The graph below shows monthly, including a YTD monthly average (first data point of each line in graph below), from 2010 to 2015. 

Click image for larger view

While the West Coast port slowdown may explain some of the early 2015 results, and 2Q results reflect some degree of "catch-up" from the port slowdown, the YTD results suggests other factors are responsible for the YTD performance.

In particular, the reduction in YTD imports might suggest US economic activity may not be as strong as is generally believed. With a strong U.S. dollar and active U.S. growth compared to global growth the expectation would be imports would increase to support U.S. domestic economic growth. Cheap oil should have made such an outcome even more likely. The most notable drop in imports is from Canada. The bulk of the YTD increase in exports was driven by exports to China, suggesting China's economic slowdown has not yet adversely impacted sectors consuming pulp. More country by country details are covered below.

Six-month Cumulative Activity and Trends:

Cumulative activity over the six months ending November 2015 shows net exports are 7.1% above the pace seen over the six months ending in November 2014. Cumulative six-month net exports are principally higher due to higher exports, up 451 thousand tonnes or 3.2 percent, compared to imports which are down 211 thousand tonnes, or 4.3 percent.

Six-month trend-lines were fit to the data to study recent trends beyond simple cumulative activity. All three trend lines remained negative for the six-month period ending in November.

Apart from trend lines, thus far in 2015 May was the export peak, June the import peak, and May the net export peak. November's exports were 12.8% below May's export peak, November's imports were 13.0% below June's import peak, and November's net exports were 17.5% below May's net export peak. 

Click image for larger view

In terms of notable shifts in country-level details:

Pulp exports (24,720 thousand tonnes YTD) are higher (2.6%) compared to last year's YTD levels. China remains the chief destination of U.S. pulp by a wide margin, representing 58% of YTD shipments; November 2014 YTD figures pegged exports to China at 56% of the U.S. total, indicating China's share of US pulp exports has grown in 2015 relative to 2014. China's exports have increased by 6.9% YTD compared to the same period in 2014. Mexico leapfrogged India as the second-ranked destination for U.S. pulp exports, representing 6.7% of YTD exports compared to India's 6.3% share. Pulp exports to both countries are down YTD: Mexico's receipt of U.S. pulp export have fallen by over 4% and India's are down by nearly 12%. In addition to Mexico and India swapping spots in 2015, among 2014's top 10 destinations Japan and Indonesia also swapped, Japan moving up from number 7 to number 6 by purchasing 5.1% more pulp YTD while Indonesia has purchased 7.6% less pulp YTD. 

Click image for larger view

Pulp imports (5,537 thousand tonnes YTD) decreased -4.2% compared to prior YTD levels. Canada and Brazil, the 1st and 2nd ranked pulp import sources, respectively, account for nearly 94% of the pulp imported. Despite their top ranking, Canada has logged a decline (-7.1%) in pulp imported while Brazil has increased (+2.9%) its imports compared to prior YTD levels. Chile, the number three ranked source of pulp imports into the U.S., has increased its imports YTD by nearly 2%. Norway has climbed from a 10th ranked place in 2014 to 8th in 2015 with an over 330% increase in pulp imports to the U.S., the Philippines from 12th ranked in 2014 to 7th ranked in 2015 with an increase over 260%, and Germany from 13th ranked to 10th ranked. On a YTD basis China (9th in 2014, 11th in 2015) and Finland (8th in 2014, 12th in 2015) have fallen out of the 10 ten importers of pulp into the US. As a region Asia shows the largest percentage increase in imports into the U.S. at 44.6% while Caribbean nations collectively posted the largest percentage decline at 87.0%. 

Click image for larger view

Paper and paperboard imports (2,944 thousand tonnes YTD) have dropped by nearly 6% year-to-date compared to prior YTD activity. Once again Canada leads the way, accounting for nearly 86% of the total import volume and 117.5% of the YTD decrease (215 of 183 thousand tonnes). Finland and China held onto their number 2 and 3 rankings despite posting 2.2% and 3.7% decreases YTD, respectively. One notable development on a percentage basis is Australia, which has vaulted from being the 7th ranked supplier during the first ten months of 2014 to the 4th ranked supplier during the first ten months of 2015, posting an increase of 161.6%. Mexico slipped from the 4th to 5th place ranking despite importing 14.8% more into the U.S. YTD. In other top 10 changes from 2014, Swedan has dropped from 5th in 2014 to 6th in 2015 with a 7.7% drop in paper and paperboard imports into the U.S and South Korea slipped from 6th to 8th with pulp and paperboard imports declining by over 50%. Meanwhile Taiwan vaulted to the 9th ranked spot from 12th ranked in 2014 with an increase of 171.9% in imports shipped to the U.S. 

Click image for larger view

Paper and paperboard exports (2,188 thousand tonnes) dropped by 1.2% on a YTD basis. Canada, the number 1 ranked destination for U.S. paper and paperboard exports, holds a slim lead over Mexico, the number 2 ranked destination, despite exports to Canada dropping by 0.4% YTD compared to 2014 while Mexico has grown by 18.9 percent 2014 to 2015 YTD. Among 2014's Top 10 destinations, the "loss leader" in 2015 is India (-34 thousand tonnes, -27.4% from prior YTD) followed by Costa Rica (-23 thousand, -31.5% from prior YTD), and Japan (-14 thousand tonnes, -9.4% from prior YTD). Bucking the general decline in paper and paperboard exports, as already noted, Mexico's receipts of U.S. paper and paperboard exports is up. South Korea (+12.0%) and China (+9.1%) are both receiving more U.S. exports of paper and paperboard as well. 

Click image for larger view

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.