The PPPC released North American Printing & Writing Paper stats for December. 

North American Printing & Writing (“P&W”) operating rates decreased in Q4 — In Q422, North American P&W paper production was +2.0% y/y but -4.8% q/q, with UFS production +2.2% y/y, CFS production +2.2% y/y, and UGW production +0.9% y/y, while CGW production was -5.0% y/y. Industry operating rates in October, November, and December were 93%, 89%, and 79%, respectively. By grade, Q4 operating rates were 90% for UFS, 88% for CGW, 86% for CFS, and 83% for UGW.

Uncoated Freesheet (“UFS”) operating rates trended lower q/q in Q4 — Demand for UFS in Q4 was +5.2% y/y and -2.3% q/q, while shipments were -2.1% y/y and -9.6% q/q. The mismatch between demand and shipments can be attributed to increased UFS imports (+56.9 y/y; +50.8% q/q). Shipments were +0.3% y/y in October, -1.2% y/y in November, and -5.4% y/y in December. The UFS operating rate decreased 8 percentage points q/q to average 90% in Q4, with an operating rate of 94% in October, 91% in November, and 84% in December. Mill inventories of UFS increased by 74k mt from the end of Q322, to 463k mt.

Coated Freesheet (“CFS”) operating rates decreased q/q in Q4 — Demand for CFS in Q4 was +15.3% y/y and -0.3% q/q, while shipments were -5.7% y/y and -14.0% q/q. The mismatch between demand and shipments can be attributed to increased CFS imports (+61.8 y/y; +25.1% q/q). CFS shipments were +2.1% y/y in October and +1.9% y/y in November, but -20.2% y/y in December. The CFS operating rate decreased 13 percentage points q/q to average 86% in Q4, with an operating rate of 97% in October, 84% in November, and 77% in December. Mill inventories of CFS increased by 28k mt from the end of Q322, to 159k mt.

UFS pricing moved materially higher through 2022 — UFS pricing (20-lb copy paper, 92 bright) was flat in Q422, but ended the year up 19% from January 2022 and up 42% from January 2021. CFS pricing trends were similar at +18% and +36% over the same timeframes for premium 80-lb sheets. For 2023, we expect UFS pricing to trend near current levels through H1/23 before softening slightly in H2/23 (we forecast prices to ease by $25/ton).

Outlook for 2023: Sylvamo is a favourite name as we start the year — Please click here to access our outlook and preview. In Canada, our favorite names across our coverage group are CFP, CAS, DBM, and IFP; in the US, LPX, PCH, SLVM, and WY. We think Sylvamo is well positioned in the UFS market