Canfor Pulp Products Inc. [on April 29] reported first quarter 2021 results.
The Company reported operating income of $4.9 million for the first quarter of 2021, an improvement of $33.2 million from the reported operating loss of $28.3 million for the fourth quarter of 2020, reflecting improving global pulp market conditions, combined with a 25% increase in pulp production quarter-over-quarter.
During the first quarter of 2021, global pulp markets experienced a surge in US-dollar list prices in response to an uptick in demand, particularly from China, combined with ongoing global logistic constraints and supported by strong price increases on the Shanghai Futures Exchange. As a result, Northern Bleached Softwood Kraft (“NBSK”) pulp list prices on orders from China saw sharp increases throughout the period, reaching a high of US$973 per tonne in March to average US$883 per tonne for the current quarter, up US$246 per tonne, or 39%, from the previous quarter. Prices to North America also saw sharp increases, although not at the same levels as those in China, up US$164 per tonne, or 14%, quarter-over-quarter to US$1,302 per tonne (before discounts). Reflecting the lag between orders and shipments, the significant majority of these price gains will be realized in the second quarter.
NBSK pulp unit sales realizations reflected improved prices on shipments in the current period, which more than offset a 2 cent, or 3%, stronger Canadian dollar. Average Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) unit sales realizations were broadly in line with the previous quarter as more modest upward positive trends in BCTMP US-dollar pricing were largely offset by the stronger Canadian dollar.
Energy revenues increased in the current quarter reflecting a return to more normalized power generation levels combined with seasonally higher energy prices.
Pulp production was 292,000 tonnes for the current quarter, up 59,000 tonnes, or 25%, from the previous quarter, principally reflecting the benefit of increased operating days following the completion in mid-January of the Company’s Northwood NBSK pulp mill’s (“Northwood”) recovery boiler number five (“RB5”) capital-related downtime, offset in part by several operational issues experienced at the Company’s Prince George NBSK pulp mill in the current period.
Pulp shipments were up 7,000 tonnes, or 3%, from the previous quarter, largely due to the aforementioned increase in pulp production quarter-over-quarter, offset in part by the replenishment of inventory levels significantly drawn down during the fourth quarter of 2020 due to the Northwood outage. Global transportation constraints also impacted shipment volumes through the current period.
Pulp unit manufacturing costs were moderately lower than the prior quarter as the benefit of increased production in the current quarter was offset in part by seasonally higher energy prices and, to a lesser extent, planned maintenance spend. Fibre costs were broadly in line with the previous period as higher market-based prices for sawmill residual chips offset seasonal pricing adjustments.
Operating income in the Company’s paper segment was $4.2 million, down $0.6 million from the previous quarter as a modest uptick in US-dollar pricing and an increase in paper shipments were more than offset by the stronger Canadian dollar and higher paper unit manufacturing costs in the current quarter, resulting from increases in slush pulp costs (linked to higher Canadian dollar NBSK market pulp prices).
Global softwood kraft pulp markets are projected to remain well positioned through the second quarter of 2021, driven by both continued solid demand and tight supply arising from the current global supply chain challenges, as well as the traditional spring maintenance period. Reflecting this ongoing positive momentum, the Company announced increases to its NBSK pulp list prices to China and North America for April 2021 to US$1,010 per tonne and US$1,565 per tonne, respectively. High yield markets are anticipated to see continued improvement through the second quarter of 2021, largely driven by strong demand for board products, especially in Asia, tempered somewhat by available supply.
Results in the second quarter of 2021 are anticipated to reflect the record-high pricing as well as a scheduled maintenance outage at the Company’s Intercontinental NBSK pulp mill, with a projected 14,000 tonnes of reduced NBSK pulp production, combined with higher associated maintenance costs and lower projected shipment volume.
Bleached kraft paper demand is currently anticipated to show continued strength through the second quarter of 2021 and stabilize through the balance of 2021.
Commenting on the Company’s first quarter’s results, CPPI’s Chief Executive Officer, Don Kayne, said, “For over a year our employees have faced the challenges of the COVID-19 pandemic by staying focused on their commitment to safety and producing high quality products for our global customers. We thank them for their hard work and dedication. With the Northwood pulp mill recovering well after its RB5 capital-upgrade, we are focused on fully capitalizing on the current strong pulp market conditions.”