Kevin Mason
The impacts of Russian-Ukraine war are broad-based and still developing; however, the focal point of the challenges remains Europe, particularly with respect to energy. Global currency shifts are in motion. Housing starts remained strong last month. Rising rates aren’t expected to meaningfully impact demand until 2023. R&R is softer. Log markets are good almost everywhere, with prices rising sharply in the Pacific Northwest and some parts of the U.S. South. Location matters.
After a sharp but short-lived correction, lumber prices appear to have found a floor and are poised to move higher again. Average prices this year will exceed 2021, we suspect. Panel prices have cracked, but they are likely to post upside surprises this year. OSB imports have seen a dramatic drop (war-related?). Pulp prices are still headed up in all markets amid supply challenges. Brutal logistics have kept markets tight, but China issues are a risk. Newsprint prices are climbing through April/May and we don’t believe we are at the peak yet. Offshore pricing is much higher than domestic. Paper prices are up everywhere, with more gains coming through Q2 and likely Q3. Buyers are panicked amid limited supply.
Containerboard markets are stable domestically, but the offshore market is picking up steam. The WestRock shut, coupled with improved offshore options, could be enough to support another U.S. price hike. Boxboard producers successfully pushed through more hikes in SBS and CRB. This should be the top, but macro factors could change that. Recovered-paper prices remain mixed, with SOP soaring to a new 10- year high and OCC stabilizing. European newsprint prices have record-breaking differentials between high and low prices. A convergence to the high end is coming. European paper-price increases continue, pressured by high energy costs. The UPM strike has been settled, so supply should increase. European packaging price hikes are being implemented, with testliner garnering more than kraftliner (the former has more energy-cost risk).
Excerpts from ERA Forest Products Monthly – a comprehensive analysis for the forest products sector (www.era-research.com)