By Bryan Smith, Senior News Editor, PPI Pulp & Paper Week, RISI
SAN FRANCISCO,
May 12, 2009 (RISI) -
Another International Pulp Week is in the books and pulp industry participants ended last week wheeling their suitcases out of hotels across Vancouver, BC, for our long return trips home to destinations across the globe.
Having had a few days to digest everything, we are now back in our offices pondering things like: How long will the record demand for pulp continue in China, black liquor credits, and whether the folks who wore surgical masks at Vancouver International Airport were paranoid or courageous.
Liquor buzz
Mercer International CEO Jimmy Lee opened the week with a bang during the customer forum, calling the black liquor credits that are pumping millions of dollars into American producers a "subsidy" and demanding the practice end. Click here to learn more about this issue.
The black liquor issue came up repeatedly during International Pulp Week sessions and beyond Vancouver's Four Seasons Hotel, where the Pulp and Paper Products Council (PPPC) held its annual conference. In my private meetings at hotels, restaurants, and bars, producer contacts at virtually every firm outside the US voiced strong objections to the credit. The credits, which lower the variable cost of US mills by as much as $200/ton, will cease when champagne bottles pop this New Years Eve unless President Barack Obama has his way. In the meantime the Internal Revenue Service is writing some big checks.
Click here to learn more
The topic hovered over the Four Season's Park Ball Room all week. During the customary request to turn off our cell phones moderator Kevin Mason of Equity Research joked that anyone whose phone rang would have to contribute to a cocktail party fund "sponsored by the black liquor money going to International Paper and Domtar." Good reminder. I powered off my phone and resumed scribbling notes.
Introducing the Global 100
Later in the week Kevin McElhatton introduced the PPPC's Global 100 database, a new series I didn't even know existed that includes shipment results from all countries worldwide, not just the World-20 countries most of us track each month.
Yeah, we're in a recession. Global 100 demand dropped 7.2% during the first quarter vs. year-ago results and will post a 5.4% decline over the course of 2009, according to the PPPC. That suggests either the worst is behind us or the whole year will remain ugly, depending on whether your glass is half full or half empty. "Only China will post demand growth in this recession," said McElhatton.
Toasting with a half-full glass
At Robson Street's Zin Restaurant & Lounge Tuesday night my glass of blended cabernet from a British Columbia winery was half full. Global 100 market pulp demand growth to China surged by 1 million tonnes/month during the first quarter, up 53% gain year-over-year, McElhatton said. Away from the conference, contacts told me that producers successfully implemented their second straight price increase in China this month and recently slated price hikes in South Korea as well, suggesting that momentum is spreading across Asia.
For more information on this click here and here.
This is a double?
On Wednesday, room service delivered a double espresso from Yew Restaurant & Bar that was so disappointingly half-empty I had to add hot water just to get a caffeine fix.
A contact doing big business in China said producers shouldn't count on more record shipments because shore traders have huge volumes and this year's surge is largely due to restocking. Meanwhile, my guest at Zin said Chinese demand was already slowing down here in May, adding that not all the tonnage got sold at higher prices.
If I was a gambling man I would bet a colorful C$100 bill that May shipments to China are going to drop from high levels, volumes in June will dip further, and July will fall off a cliff. But no bet is safe. The latest I've heard about non-wood pulp closures in China is effectively a new wild card that could buoy demand.
More information here.
Pigs and poker
* cell phone rings *
"What's up, Bryan. Are you playing tonight?"
It was Pete, a poker player from San Francisco who forgot I was working in overcast and rainy Vancouver all week, unable to play no limit hold ‘em tournaments. Last time we both went deep and I made the final table.
Sorry, couldn't go. I had three more stories and two meetings to handle before flying home Thursday evening. Thanks to the Four Seasons staff for their late checkout policy in which nobody calls one or two or three times to ask when am I getting outta there -- a courtesy that many hotels don't recognize as the friend of deadline-chasing journalists worldwide.
The swine flu might have scared off a lot of pulp industry folks -- speakers from VCP and Weyerhaeuser canceled due to swine flu concerns and the week's cocktail parties sprinkled across downtown Vancouver weren't as full as usual -- but I'm glad I took my chances.
See you all in Chicago next May for International Pulp Week 2010.
