6.2 Wood pulp, Paper Products and Panels
New Zealand has a fairly stable production capacity for pulp and paper, which is unlikely to increase over the medium term (except for relatively minor incremental increases from improving production efficiency). Export volumes for pulp and paper (including paper products) tend to be the residuals after domestic commitments have been met. New Zealand is largely a price-taker for pulp and paper, which generally is set according to world supply and demand cycles.
Pulp
Pulp production fell in 2001/02 against 2000/01 mainly because stocks were drawn on, being reduced by 12%. Also, there was a 43% rise in imports. The provisional result for the year ended March 2003 is for a slight increase back to the long-run average. Out-year growth will be constrained by production capacity.
There was a slight rise in pulp export volumes in 2001/02 versus 2000/01 with the sales out of stocks mentioned above going to export, as the domestic market is steady. A small rise in domestic consumption per year is forecast through 2002/03 to 2007/08, thereby slightly reducing the volume available for export (unless the increase is met from imports, which are not forecast).
International pulp prices follow clear cycles according to shifts in the balance between demand for pulp and installed capacity. New Zealand tends to be a price-taker, following international price trends. Pulp export prices increased 68% in 2000/01 compared to the previous year, which was partly driven by favourable exchange rates and partly a cyclical upswing.
The converse was true for 2001/02, when pulp export prices fell by 28%. The benchmark NBSK pulp price fell 29% in the year to March 2002. But after bouncing along the bottom of a cyclical trough it rose 7% in the 6 months from August 2002 to February 2003, and is showing signs of further recovery. The provisional pulp export price for the year ending March 2003 was $637/tonne, down only 1.2% against the previous year. Strong buying from Asia late last year created a perceived shortage of pulp, putting upward pressure on prices. Out-year price movements are based on historical cyclical patterns, which indicates the next peak occurring in 2004/05.
Paper
Forecasts of year-on-year increases in paper production are small and incremental, along the track of the long-run average and based on domestic consumption patterns, until capacity is reached in 2006/07.
The estimated 3 paper export volume for the March 2003 year was 515,000 tonnes, up 1% from the previous year. Export volume growth for paper in out-years is expected to reflect only small year-on-year increases. Overseas markets are available, but production capacity could be a constraint, with no foreseeable capacity increases.
International paper prices follow clear cycles according to shifts in the balance between demand for paper, installed capacity and the price of pulp. New Zealand tends to be a price-taker, following international price trends. The estimated result for the year ending March 2003 is for a drop of 4% compared to 2001/02. This is partly driven by exchange rate factors and is partly a cyclical drop.
Panels
Out-year growth in production of wood panels follows domestic consumption patterns plus exports volumes, but of these, increases or decreases in export orders are the biggest influence on production levels, as the domestic market is relatively steady.
Provisional export volumes of wood panels for the March 2003 year was 962,000 cubic metres, up 16% on the previous year. Projected out-year growth is based on expected economic growth in New Zealand's main wood panel markets, for example Australia at around 3% to 4% per year.
Provisional export prices of wood panels for the March 2003 year averaged $560 per cubic metre, down 10% on the previous year. This decrease is mainly due to the appreciating NZD in the 2003 March quarter.
Wood panel prices display a cyclical pattern for similar reasons that are behind pulp and paper price cycles (price/production/capacity pressures). However, panel price cycles are weaker, especially with medium density fibreboard (MDF). Prices are expected to drop into a trough in 2003/04, exacerbated by the stronger NZD, with a 20% fall against 2002/03 to $450 per cubic metre. Rises of around 7% to 9% per year are expected through to 2007/08.
3 A provisional result for paper products is not available at the time of writing
Contact for further information:
John Eyre
Phone: (04) 498 9827
Email: john.eyre@maf.govt.nz
