December 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, December's net exports increased for the first time since August 2015, rising by 57.6 thousand tonnes (3.7%) -- from 1,557 to 1,614 thousand tonnes.  December's net exports were the eighth highest level of the year.  Details for December, the prior six months, year-over-year, and year-to-date performance are presented in the table below.

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Both exports and imports increased between November and December: exports by 72.2 thousand tonnes (3.1%) and imports by 14.6 thousand tonnes (2.0%).  Net exports increased because the increase in exports was greater than the increase in imports.

December YoY exports were down 103 thousand tonnes and imports down 83 thousand tonnes, resulting in a YoY decrease in net exports of 19 thousand tonnes (-1.2%). 

YTD exports are up 493 thousand tonnes while imports are down 507 thousand tonnes, yielding an increase in net exports of 1,001 thousand tonnes (5.3%).  2015 net exports achieved the third highest level since 2005. 

This year's decline in imports and increase in exports is counterintuitive with reported stronger 2015 U.S. growth compared to global growth and a strengthening U.S. dollar.  The graph below shows monthly, including a YTD monthly average (first data point of each line in graph below), from 2010 to 2015. 

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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 annual results suggest other factors are responsible.

Six-month Cumulative Activity and Trends:

Cumulative activity over the six months ending December 2015 shows net exports are 6.1% above the pace seen over the six months ending in December 2014.  Cumulative six-month net exports are principally higher due to higher exports, up 228 thousand tonnes (1.6%), compared to imports which are down 339 thousand tonnes (6.9%). 

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 December. 

Apart from trend lines, in 2015 May was the export peak, June the import peak, and May the net export peak.  December's exports were 10.3% below May's export peak; December's imports were 11.1% below June's import peak; and December's net exports were 14.5% below May's net export peak. 

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In terms of notable shifts in country-level details:

Pulp exports (26,898 thousand tonnes 2015) are higher (2.0%) compared to last year's levels.  China remained the chief destination of U.S. pulp by a wide margin in 2015, representing 58% of 2015 shipments; December 2014 figures pegged exports to China at 56% of the U.S. total, indicating China's share of U.S. pulp exports has grown in 2015 relative to 2014.  China's 2015 exports have increased by 5.3% compared to the same period in 2014.  Mexico leapfrogged India as the second-ranked destination for U.S. pulp exports, representing 6.7% of 2015 exports compared to India's 6.4% 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 9%.  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 6.4% more pulp while Indonesia has purchased 7.3% less pulp.  

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2015 pulp imports (6,036 thousand tonnes YTD) decreased -4.9% compared to 2014's 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 (-6.6%) in pulp imported while Brazil has decreased (-0.3%) its imports compared to 2014's levels.  Chile, the number three ranked source of pulp imports into the U.S., has increased imports by 1.3%.  Norway has climbed from a 10th ranked place in 2014 to 8th in 2015 with an over 114% increase in pulp imports to the U.S., the Philippines from 12th ranked in 2014 to 6th ranked in 2015 with an increase over 300%, and Germany from 13th ranked to 10th ranked.  For the year China (9th in 2014, 12th in 2015) and Finland (8th in 2014, 11th in 2015) have fallen out of the top 10 importers of pulp into the US.  As a region Asia shows the largest percentage increase in imports into the U.S. at 59.7% while Caribbean nations collectively posted the largest percentage decline at 86.6%. 

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2015 Paper and paperboard imports (3,197 thousand tonnes ) dropped by 5.8% compared to 2014's activity.  Once again Canada led the way, accounting for nearly 86% of the total import volume and 114.2% of the YTD decrease (223 of 196 thousand tonnes).  Finland and China held onto their number 2 and 3 rankings despite posting respective 5.5% and 2.3% decreases in 2015 compared to 2014.  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 2015, posting an increase of 136.3%.  Mexico slipped from the 4th to 5th place ranking despite importing 15.8% more into the U.S.  In other top 10 changes from 2014, Sweden has dropped from 5th in 2014 to 6th in 2015 with a 12.5% 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 46.9%.   Meanwhile Taiwan vaulted to the 9th ranked spot from 12th ranked in 2014 with an increase of 105.5% in imports shipped to the U.S. 

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Paper and paperboard exports (2,375 thousand tonnes) dropped by 1.5% during 2015.  Canada, the top-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 0.3% in 2015 compared to 2014 while Mexico has grown by 16.1 percent from 2014 to 2015.  Among 2014's top 10 destinations, the "loss leader" in 2015 is India (-31 thousand tonnes, -23.6%) from 2014, followed by Costa Rica (-25 thousand, -31.9%) and Japan (-13 thousand tonnes, -7.9%).  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 (+10.2%), Guatemala (+3.9%), and China (+9.1%) are receiving more U.S. exports of paper and paperboard as well.  

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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.