The international paper supply chain will be in trouble in the second half of 2021
On July 29, international paper executives said that for the rest of 2021, the company will struggle with the blocked supply chain, replenish inventory and strive to increase production.
Cfotimeothy Nicholls of international paper said at the company’s financial report conference call for the second quarter of 2021 that the company’s rising raw material costs in the second quarter were compensated by raising product prices, but it is expected that the supply chain, including raw material supply to product sales, will continue to face challenges in the next few months.
“Although the pressure of some cost increases may be temporary, such as the impact of the rainstorm in the Gulf of Mexico on our wood costs, the extremely tight transportation environment will continue to put pressure on all inbound raw materials. Because every mode of transportation is very tense, we expect this tension to continue in the second half of the year. “
Caustic soda supply is tight
These input raw materials include caustic soda, a key raw material in the pulp and paper industry. Caustic soda supplies in the United States and Europe have been tight since the deep frost that hit the Gulf coast of the United States in mid February. In mid June, the continuous heavy rain and operation problems brought by the tropical storm once interrupted production in the United States and Europe.
In 2021, the export price and domestic spot price of caustic soda in the United States are US $225 / dry metric ton (offshore in the Gulf of Mexico) and US $245 / dry short ton (ex works) respectively.
As of July 27, the prices were $475 / dry ton (offshore in the Gulf of Mexico) and $650 (ex works).
The caustic soda industry in the United States experienced a downturn in demand in 2019 and 2020. It began to pick up in 2021, and the price of global caustic soda also showed a similar rise. The main reason was COVID-19′s initial success, global economic activity began to be active, but the supply of caustic soda was tightened. The FOB price of caustic soda in northwest Europe increased from US $245 / dry metric ton on January 5 to US $650 / dry metric ton on July 27.
Proctor energy data show that the FOB price of caustic soda in Northeast Asia increased by 50% from US $240 / dry metric ton on January 5 to US $360 / dry metric ton on July 27, while the CFR CIF price in Southeast Asia increased by 47% from US $265 / dry metric ton to US $390 / dry metric ton.
Low inventory of raw materials
International Paper CEO Mark Sutton said on July 29 that in the second quarter, due to the lingering aftereffects caused by frost disaster and plant shutdown and maintenance, the inventory of carton paper used by the company to manufacture corrugated boxes was “very low”.
The frost disaster forced large-scale shutdown of petrochemical plants. The international paper industry saw that the supply of raw materials was squeezed and some of its factories were shut down. Record high freight rates, container shortages and tight truck capacity continue to exacerbate this impact.
“Cost and freight are one of the biggest obstacles,” Sutton said. The sharp rise in the cost of recycled fiber in North America and Europe will certainly have a significant impact on the cost, but it is also another sign of a strong demand environment. “
The company’s net income in the second quarter was $432 million, an increase of 62% over the same period last year (the two quarter of last year was the peak of COVID-19′s closure). Net sales increased by 15.4% to US $5.6 billion from US $4.86 billion a year ago.
Cultural paper demand recovers, Domtar restarts 655000 capacity
At present, the American cultural paper market seems to be recovering. In mid July, Domtar decided to restart the production of cultural paper that was cut during COVID-19 last year.
Since April 2020, Domtar has reduced the production capacity of 655000 tons of uncoated printing and writing paper, and is now taking a step in the opposite direction. The company has announced that it will restart the uncoated printing and writing paper machine at Ashdown paper plant in Arkansas. The capacity of the paper machine is 16.8 tons. It is expected to resume full operation in January 2022 after a period of production increase. Domtar has allocated US $10 million for start-up.
Since April 2020, several paper machines in Ashdown plant have been shut down. Domtar said at that time that it must respond to the continuous decline in demand in the graphic paper market. Last year, it withdrew 655000 tons of wood pulp uncoated paper production capacity, including Kingsport, porthuron and Ashdown factories.
Now, the cultural paper market environment has improved, and Domtar has decided to restart production in Ashdown. Rob Melton, senior vice president of Domtar pulp and paper business, said: “the epidemic is under control, the economy is recovering, and the demand for paper is also recovering. Our customers’ business is growing steadily, so we respond. “
It is reported that in addition to the cultural paper production line, Ashdown factory also has three other pulp production lines, with the production capacity of needle pulp and fluff pulp reaching 775000 tons / year.
The restart of cultural paper production capacity in Ashdown plant will reduce the production capacity of Southern bleached softwood sulfate (SBSK) pulp by 185000 tons / year, but the production of fluff pulp will not be affected.
Domtar said it would also increase the production capacity of thermal coated paper at its plant in West Carrolton, Ohio, to meet the growing demand for its thermal paper sales.
Post time: Aug-17-2021