Supplying pulp consumer data for paper mills in 10 European countries is no easy task. Utipulp's chairman explains how the association faces up to the challenge

By Rhiannon James

Utipulp keeps track of consumer habits

During its 20 years of existence, Utipulp has seen a number of organizational changes, mainly the addition of countries as the European Union has opened its doors to more members. But as Byrne explains, "Despite these evolutions, the aim of the association has remained the same - to give its members a better knowledge and understanding of the world pulp markets and of their evolution."

From the very beginning, the founders of Utipulp were convinced that to achieve a rounded picture of the pulp markets, and especially the stock situation, it was essential to gather figures on pulp stocks at the consuming mills. Along with the pulp producer stocks from Norscan, Utipulp provides a clearer picture of what is going on in the pulp market from behind (formerly) closed doors.

Gathering the data from the mills is no easy task though, according to Byrne. Utipulp members, which are mainly national associations, send an estimate to the head office in France for 100% of the national volumes. Byrne explains why this method is used, saying, "The reason is quite simple. We want to give a picture of the market pulp situation as close to the reality as possible. Furthermore, when some companies are too late to give an answer to the national associations, an estimate has to be made, otherwise no comparison can be made with the previous month or the situation one year ago."

The figures are then issued in the form of a press release to a wide audience, which even includes bankers and brokers. In January 1998, Utipulp decided to start issuing a monthly press release instead of providing quarterly statistics from time to time. As Byrne explains, "We consider that this release gives more transparency to world pulp markets. Transparency is essential in order to avoid dramatic fluctuations in market pulp prices. In our opinion, these do not benefit the producers or the buyers in the long run."

José Manuel Byrne sits at the head of Utipulp

Acting on accuracy

Although Utipulp is distributed to a large global audience, some of the people who receive the figures are not entirely happy with the association's calculations. Their main criticisms are that the figures are often revised and reflect comfortable levels of inventories at the mills. But Byrne is quick to defend the association's reputation, saying, "It appears quite difficult sometimes for the countries to have all the figures available on a fixed date. When this is the case, estimates are needed. This happens to all the organizations that collect data on a regular basis. This is not a special feature of Utipulp."

In addition, Byrne explains that the association's main goal lies in distributing the numbers quickly, rather than aiming for 100% accuracy. He says, "Fundamentally, we think that quick availability is more important than strict accuracy. Consequently, revisions have to remain possible, as it is the price to pay for estimates and quick release. Of course, only limited revisions are acceptable in order to get a satisfying level of reliability."

He also adds that the declaring countries are asked to be extremely careful with the statistics they provide and ensure that they arrive on time.

On the subject of whether the data paints an overly rosy picture of stock levels at paper mills, Byrne is equally as protective of Utipulp's high standards. He explains that, "Tightness is rarely an industry phenomenon that affects all market participants to the same extent. It is currently obvious in bleached hardwood kraft pulp and probably dramatic with a handful of consumers. Actually, market pulp buyers in Europe have until now managed to keep sufficiently in line with consumption. But from the peak of August 1999 to the level of February 2000, stocks have gone down by almost 10%, and this in fact reflects a tightening market."

He adds, "We have absolutely no reason to doubt the correctness of the overall Utipulp statistics."

Going global

Utipulp may have its detractors, but the association is certainly a valuable resource for Europe's market pulp followers. It is also an information source that is not readily available in other parts of the world. As Byrne points out, "As far as we know, Utipulp is the only regional market pulp users association in the world."

Utipulp does exchange information with national associations representing individual countries, such as the AF&PA (American Forest & Paper Association) and the Japan Paper Association. But so far, there are no plans to copy the increasingly global pulp and paper industry and create a worldwide statistics organization. Byrne did not rule out other types of global action though, saying that, "We remain open to statistics exchanges or links as soon as it increases transparency and quality of information. Broadening the scope of our coverage may be envisaged if it contributes to higher transparency and does not cause any damage to reliability."

Of course, globalization is not the only trend in the pulp and paper industry at the moment and Utipulp has been taking a keen interest in the other hot topics of the day. In particular, the association has been keeping track of developments in the pulp futures market and in euro-based transactions.

As far as the euro is concerned, Byrne is an enthusiastic supporter. "We think that step by step, the use of euro for market pulp buying will widen in Europe. Several points have to be mentioned in favor of this evolution. First, countries and companies from the European Union represent more than one third of the world market pulp consumption. Second, the use of euro avoids excessive exchange rate fluctuations for European buyers and producers of pulp. The exchange rate fluctuations between the dollar and the euro have had a major impact on the evolution of prices for European buyers over the last few months." He believes that using the euro for pulp transactions is a logical step for the majority of market pulp producers and consumers in Europe and this trend will accelerate in 2002 when the euro is adopted as the only currency in many countries.

Future trends

But on the topic of the futures markets, Byrne is slightly more reserved. "Actually, we do not have any official positions or recommendations to give to our members. This is not our role. Some companies whose representatives are sitting in Utipulp for their national associations have already tested the future markets though."

But as with the euro, Byrne does believe that the future exchanges will grow in popularity over time. "Pulpex must be seen as a financial tool to protect oneself against volatility and even if the number of operators is pretty limited on Pulpex today, it will develop in the future as it has been the case for other commodities previously," he comments.

This is likely to be one of the many topics on Utipulp's meeting agenda for this year. According to the chairman, the meetings include discussions on various important issues such as forest certification, the environment, the futures markets and so on.

The association gathers its members twice a year, which includes representatives from 30-35 of the biggest European market pulp consuming companies as part of the national delegations. Byrne himself is also on the board of the Portuguese papermaker, Papeis Inapa.

Naturally, another topic that is likely to crop up at the meetings is the question of supplying ever more accurate data. And Byrne is among the first to ensure that the association is hard at work on improving the information. He says that, "Utipulp and all its members have made strong efforts and will continue to improve the quality of their statistics." Supplying statistics for a third of the world's pulp consumption is no mean feat, but Utipulp certainly seems to be rising to the challenge.

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