By Sandy Lu, Economist, Graphic Papers, RISI
SHANGHAI,
March 4, 2010 (Viewpoint) -
It is no surprise that the earthquake in Chile will tighten the global market pulp supply and push up market pulp prices worldwide. This is because the market pulp capacity in Chile account for 8% of the world total. RISI estimates at least 3.75 million metric tons of the country's 4.8 million tons of annual capacity is closed due to aftereffects of the earthquake.
As of today, major Chilean pulp producers Arauco and CMPC have not given the production restart date for their pulp mills, and pulp shipments will also be held up due to the damages to the ports in Chile. RISI estimates BHK prices will jump more than $100/tonne in the second quarter from the first quarter prices level, while BSK prices will increase by at least $60 as a result of this "Force Majeure" case, ie: a shock of pulp tightness. There is even the possibility of some pulp prices rising to more than $1,000/tonne, higher than the last peak in 1995.
On the paper side, clearly this kind of rise in pulp prices will have an impact on production costs, especially for Asia's many non-integrated producers.
-Sandy Lu, RISI Asian Graphic Paper Economist, co-author of the monthly Asian Pulp and Paper Monitor, works out of RISI's Shanghai, China, office. Tel: +86 21 6875 8176; Email: slu@risi.com
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