July 2016 International Trade (Pulp, Paper & Paperboard)

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

On a month-to-month basis, July’s net exports increased for the first time since April 2016, increasing 104.9 thousand tonnes (6.8%): 1,551 to 1,656 thousand tonnes. July’s net exports were the fourth highest level of the year. Details for July, the prior six months, year-over-year, and year-to-date performance are presented in the table below.

Click image for larger view

Despite the MoM increase in net exports in July, both exports and imports decreased; exports declined by 8.1 thousand tonnes (-0.3%), and imports 113.0 thousand tonnes (-13.2%). Net exports increased because the decrease in exports was less than the decrease in imports.

July exports were down 188 thousand tonnes YoY and imports down 82 thousand tonnes, resulting in a YoY decrease in net exports of 106 thousand tonnes (-6.0%).

Exports are down 99 thousand tonnes YTD while imports are up 50 thousand tonnes, yielding an decrease in net exports of 149 thousand metric tonnes (-1.3%). On a YTD basis 2016 net exports (11,712 thousand tonnes) achieved the fourth highest level since 2006, 8.8% below the peak level of 12,847 thousand tonnes in 2011.

This year’s increase in imports and decrease in exports is consistent with a generally strong U.S. dollar (on trade-weighted basis 6.9% off peak level in 2002:02; for example see August 2016 Currency Exchange Rates). Further, the fact 2016’s YTD net exports are down 1.3% compared to 2015’s West Coast port strike/slowdown-impacted levels underscores a soft global economy. The graph below shows monthly, including a YTD monthly average (first data point of each line in graph below), from 2011 to 2016. 

Click image for larger view

Six-month Cumulative Activity and Trends:

Cumulative activity over the six months ending July 2016 shows net exports are 6.0% below the pace seen over the same months in 2015. Cumulative six-month net exports are lower due principally to lower exports, down 188 thousand tonnes (-7.3%), compared to imports which are down 82 thousand tonnes (-10.0%).

Six-month trend-lines were fit to the data to study recent trends beyond simple cumulative activity.  Two of the three trend lines were negative for the six-month period ending in July with only the net export trend line flat. There was a notable slope change for imports from last month’s six-month trend where the trend ending in June was positively sloped but turned negative for the six-month trend ending in July. This could augur a downshift in U.S. economic activity if the trend continues. Meanwhile the net export six-month trend slope shifted from flat in June to slightly negative in July.

Apart from trend lines, thus far during 2016 May was the export peak for the year, June this year’s import peak, and April is 2016’s net export peak. July’s exports were 5.5% below May’s peak, July’s imports were 13.2% below June’s import peak, and July’s net exports were 7.2% below April’s net export peak. 

Click image for larger view

Notable shifts in country-level details:

Pulp exports (15,896 thousand tonnes) are lower (-0.2%) compared to last year’s levels. Despite exports to China dropping by over 5%, it remains the chief destination of U.S. pulp by a wide margin in 2016, representing 56% of 2016 shipments; July 2015 YTD figures pegged exports to China at 58% of the U.S. total, indicating China’s share of U.S. pulp exports has declined in 2016 relative to 2015. Mexico continues to hold on as the second-ranked destination for U.S. pulp exports, representing 7.5% of 2015 exports compared to India’s 6.9% share. Pulp exports to both countries are up YTD: Mexico’s receipt of U.S. pulp exports has increased 10.4% and India’s are up 13.2%. Indonesia has pushed past Japan as claiming the sixth largest share of U.S. pulp exports by climbing nearly 21% thus far in 2016. 

Click image for larger view

2016 pulp imports (3,656 thousand tonnes YTD) increased 3.8% compared to 2015’s comparable YTD levels. Canada and Brazil, the 1^st and 2^nd ranked pulp import sources, respectively, account for 94% of the pulp imported. Both have posted increases during 2016: Canada an increase of 4.8% and Brazil an increase of 3.3%. Chile, the number three ranked source of pulp imports into the U.S., has declined by 5.8%. Sweden has climbed from number five on the list in 2015 to number four on the list in 2016 on a 7.3% increase in imports while Mexico, which was number four in 2015, has seen imports decline by 12%. The Philippines are up by 89% YTD while continuing to hold onto the number six position. Finland’s imports have more than doubled, pushing it into the top 10 sources for pulp imports into the U.S. As a region Africa shows the largest percentage increase at 89.7%, followed closely by Asia at 60.7%. 

Click image for larger view

Paper and paperboard imports (1,847 thousand tonnes) have dropped by 4.2% in 2016 compared to 2015’s activity. Once again Canada leads the way, providing nearly 83% of the total import volume, while posting a 7.9% drop and accounting for 159.3% of the YTD decrease (130 of 82 thousand tonnes). Finland and China changed positions with one another for the number 2 and 3 rankings as China’s 41.7% increase added over 21 thousand tonnes while Finland’s 5.6% decline deducted nearly 4 thousand tonnes from each respective country’s YTD totals. Among the top 10 import sources, Australia posted a 49.2% gain, Sweden a 59.7% gain, and Chile a 212.6% gain. Among the top 20 countries Germany posted the largest loss at 32.3%. Chile and Taiwan both increased in their ranking among the top 10 while South Korea fell back from 8th to 10th place.  Regionally, Latin American imports grew by 67.6%, Oceania by 48.5%, and Asia by 24.9% while North America, by far the largest import source, fell by 7.3%. 

Click image for larger view

Paper and paperboard exports (1,319 thousand tonnes) dropped by 4.7% YTD 2016. Canada, the number 1 ranked destination for U.S. paper and paperboard exports, holds a slim lead over Mexico, the number 2 ranked destination; exports to Canada have dropped by 0.4% in 2016 compared to 2015 YTD while Mexico has dropped by 4.8 percent. Among 2015’s Top 10 destinations, the “loss leader” in 2016 is India (-33 thousand tonnes, -53.2%, dropping from 4th ranked in 2015 to 10th ranked in 2016 ) followed by Taiwan (-3,602 tonnes, -9.7%, dropping from 5th to 8th). Bucking the general decline in paper and paperboard exports, the following countries showed strong growth thus far in 2016: Japan (+11.8%), Costa Rica (+44.3%), Guatemala (+13.8%), South Korea (+8.2%), Honduras (+44.3%), Colombia (+22.5%), United Kingdom (+15.3%), Hong Kong (+79.4%) and Ecuador (+44.5%). On a regional basis, only the Caribbean and Latin American regions posted increases U.S. paper and paperboard imports. 

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.