RBC Capital Markets: Paper, Packaging & Forest Products-Capacity Round Up

January 13, 2023


CANADA – Lumber prices decreased; OSB prices flat. According to Random Lengths (“RL”), the Framing Lumber Composite decreased by $7 w/w to $373, while the OSB Composite remained unchanged w/w at $288.

For next week, RBC Elements™ forecasts that the RL Framing Lumber Composite will decrease $5 w/w to $368, and the RL OSB Composite will decrease $17 w/w to $271.

Sylvamo completes Nymölla acquisition. On January 2, the company announced the completion of its previously announced €150MM acquisition of Stora Enso’s uncoated freesheet paper mill in Nymölla, Sweden (please click here). The integrated mill has two pulp lines and the capacity to produce ~500k short tons of uncoated freesheet on two paper machines.

OCC pricing flat; SOP pricing drops. Old corrugated container (“OCC”) prices were roughly flat m/m in January, decreasing slightly by US$1/ton to an average of US$29/ton (down US$98/ton in six months).

Meanwhile, sorted office paper (“SOP”) prices fell by $10/ton in most U.S. regions on dried-up demand and oversupplied mills.

China lifts duties on certain paper and packaging products. According to RISI, the country has lowered its import tariff rates to 0-5% (from standard most-favoured-nation import duties of 5-6%) for certain paper and packaging products, including medium, recycled linerboard, virgin and recycled boxboard, and coated and uncoated fine paper, effective from January 1 until the end of 2023.

Capacity news round-up. This week, we highlight recent announcements regarding changes in capacity across the paper and forest products space:

  • Canfor extends temporary curtailments in BC – On January 3, the company announced plans to extend previously announced curtailments in BC due to “ongoing weak market conditions and the lack of available economic fibre”. The company noted that production capacity will be reduced through two-week curtailment extensions at “select solid wood facilities in BC” in January and remove ~21 mmfbm in addition to the 150 mmfbm previously announced on December 5, 2022.
  • Tolko announces additional downtime at BC lumber facilities – The company announced that as of January 2, its Soda Creek and Armstrong Lumber operations would take additional downtime through January, reducing production by ~35 mmfbm of stud lumber. The company cited “a lack of available economic fibre, “weak markets”, and a “steep decline in lumber demand and upward cost pressures in the province”. Tolko noted it would evaluate downtime at month’s end to determine its next steps.
  • Opal Australian Paper suspends uncoated fine paper machine at Maryvale mill – According to RISI, the company indefinitely suspended its 195k tpy uncoated fine paper machine on December 23, 2022, at its Maryvale mill in Victoria due to a lack of viable alternate sources of pulpwood.
  • Packaging Corporation of America resumes production at Jackson mill – Following a temporary curtailment announced on November 16, 2022 (please click here) due to economic conditions and lower demand, the company will restart production at its Jackson, Alabama containerboard mill on January 9.
  • SCA’s Östrand pulp mill restarts production – Following a recovery boiler leak reported on December 23, 2022 (please click here), the company has resumed production at its 900k tonnes/yr NBSK pulp mill in Sweden, according to RISI.
  • RDM restarts production at Villa Santa Lucia mill – The company has resumed production at its 230k tonnes/yr white-lined chipboard and linerboard mill in Frosinone, Italy. According to RISI, the plant was offline since August due to a sludge filtering issue at a municipal effluent treatment plant.

Paul Quinn is an analyst with RBC Dominion Securities

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