Wood-Pulp Prices Surge as Speculators Pounce in China
Demand rises for premium napkins and toilet paper, with more people home during the Covid-19 pandemic
Wood-pulp prices are soaring thanks to speculators in China, with help from paper takeout containers, a weaker dollar and people using restrooms at home instead of the office.
Bleached softwood kraft pulp futures have risen 48% on the Shanghai Futures Exchange since Dec. 1, to about $1,037 a ton. Meanwhile, producers around the world are boosting prices for the wood mash at unusually sharp rates. Domtar Corp. UFS 2.90% , based in South Carolina, said it would raise prices this month between $100 and $130 a ton, depending on grade.
“Spot prices are really jumping,” said Brian McClay, a pulp-market consultant and a founder of pricing service Trade Tree Online. “I’ve been in the pulp business since 1978 and have been asking friends: No one has seen this before, no one has seen the scale of this.”
Prices are hottest for softwood pulp, the type that comes from coniferous trees and is used to make products such as premium toilet tissue, paper towels, junk mail and coffee cups. It is made from sawmill scraps as well as from trees too skinny, knotty or crooked to be cut into lumber.
China buys more than one-third of the world’s pulp and churns out paper products and packaging. Shanghai pulp futures, which began trading in 2018, serve as a price guide for an array of varieties and grades, similar to the way that West Texas Intermediate and Brent crude futures are reference points for oil prices.
Demand for virgin pulp, from trees as opposed to recycled cardboard and paper, has been on the rise in China, which has limited scrap imports that it once bought by the boatful to feed its factories. Pulp producers in Europe and North America have been diverting shipments from local spot markets to China to capture the surging prices, analysts say.
Though pulp was a poor performer for most of 2020, the Covid-19 pandemic shook up the market for paper products and set the stage for a rebound in demand.
The big change occurred in bathrooms and kitchens. More time at home during the pandemic meant greater demand for premium toilet tissue, napkins and paper towels made with virgin pulp—and a lot less for the scratchy stuff made from recycled material and found in offices, restaurants and other public places.
A big question lingering over the market is how much of the demand is from Chinese companies needing pulp to make products and how much is being bought by speculators who have bid up futures and need bales in case they get stuck having to deliver pulp to trade counterparties. In the latter scenario, futures prices are effectively pulling up physical, or spot, prices and there is risk of a sharp reversal of prices, Mr. McClay said.
It typically takes only about three days of pulp futures trading to match China’s total annual import volume of about nine million metric tons, he said. Frenzied trading among speculators and individual investors makes it difficult to gauge actual demand, especially because end users in China are known to get in on the action as well, reselling pulp purchases.
“It is unclear whether this is a short-term bubble or the beginning of a cyclical rebound,” said Mark Wilde, who studies forest products for BMO Capital Markets.
Reasons to be bullish include the push toward biodegradable packaging, an important component of many companies’ appeal to ESG funds, which aim to invest with environmental, social and governance issues in mind.
Graphic Packaging Holding Co. GPK 1.72% , an Atlanta-based maker of paper cups and folding cartons, estimates that $5 billion of plastic and plastic-foam cups, food trays, salad bowls, takeout containers, stand-up pouches and six-pack rings could be replaced with paper products each year.
Pulp also has gotten a boost from a weaker U.S. dollar, which makes it cheaper for buyers in China and elsewhere. Like many other commodities, pulp is priced in U.S. dollars. Over the past year the WSJ Dollar Index, which measures the dollar against a group of other currencies, has declined 5.6%.
If high prices are sustained, analysts say slimmer margins are likely among makers of tissues and hygiene products, such as Kimberly Clark Corp. KMB 0.86% and Procter & Gamble Co., along with potentially higher prices for consumers. Winners would be pulp makers, including Domtar, International Paper Co. IP -1.03% and Canadian firms Canfor Pulp Products Inc. CFX 7.07% and West Fraser Timber Co.
Russia’s Sputnik vaccine shows 91.6% efficacy in clinical trials
Lancet peer review confirms performance of country’s flagship two-shot jab
Russia’s flagship two-shot vaccine Sputnik V has shown 91.6 per cent efficacy against symptomatic Covid-19 in clinical trials, a Lancet peer review has confirmed, bringing the global total of vaccines whose efficacy is confirmed to be higher than 90 per cent to three.
The results from an interim analysis, now confirmed by peer review, also showed the jab provided full protection against moderate or severe cases of Covid-19.
Alexander Gintsburg, director of Russia’s Gamaleya Institute, the state-run virology research centre that developed the jab, said the results were a “monumental achievement” and “a great success in the battle against the global Covid-19 pandemic”.
Analysis of participants older than 60, about 2,000 of whom were in the trial, suggests the vaccine is similarly effective in that cohort. The trial is ongoing and will aim to enrol a total of 40,000 participants overall.
Participants were given two doses of the vaccine 21 days apart.
Because the study dates back a couple of weeks, it does not include efficacy figures on new variants, such as the one first identified in South Africa, that appear to be less susceptible to inoculation. The Gamaleya Institute has said it expects Sputnik V to protect against the new variants.
Concerns over vaccine shortages in Europe have prompted some politicians in the EU to question whether the bloc will need to turn to the Russian vaccine to help it emerge from the pandemic.
Hungary last month became the first EU state to approve Sputnik V, while candidate EU states in the Balkans such as Serbia have pursued vaccines from China and Russia while also negotiating for bloc-approved jabs.
Russian president Vladimir Putin made Sputnik V the world’s first registered vaccine last August before phase 3 trials had even begun, alarming scientists who said Moscow was cutting corners in a rush to beat its western rivals.
Ian Jones, a virology professor at the University of Reading, and Polly Roy, a virology professor at the London School of Hygiene & Tropical Medicine, said Russia now had the scientific data needed to back up Mr Putin’s efficacy claims.
“The outcome reported here is clear and the scientific principle of vaccination is demonstrated, which means another vaccine can now join the fight to reduce the incidence of Covid-19,” they said.
The state-run Russian Direct Investment Fund, which has sponsored research into the jab, says Moscow hopes to produce up to 1.4bn doses of the vaccine this year, including in countries such as China, Brazil, and India.
The European Medicines Agency is in talks over Sputnik, which is already approved in 16 countries, including Russia, Argentina and Iran.
“Russia has done everything right,” RDIF director Kirill Dmitriev said. “We were right to register it early, we were right to share with the world that we have one of the most efficient vaccines, and we were right to start vaccinating our at-risk personnel early. We saved lots of lives.”
Despite the promising results, Russia has struggled to get its population on board. Only 46 per cent of Russians expressed a readiness to take the vaccine in an Ipsos survey last week, results well behind the US (63 per cent), Germany (67 per cent) and the UK (86 per cent).
Gapping down
In reaction to earnings/guidance:
- CRUS -7%, RMBS -6.2%, PBI -5.7%, BP -4.7%, HOG -3.6%, RACE -3.4%, WWD -2.8% (also increases dividend), VRTX -2.1%, AQUA -2%, NXPI -1.7%, LITE -1.7%, ARCB -1.5%
Other news:
- IMVT -59% (announces a voluntary pause of dosing in its ongoing clinical trials for IMVT-1401)
- SNDL -14% (prices registered offering of 60.5 mln Series A Units and 14.0 mln Series B Units)
- FMS -10.7% (expects significant negative impact on 2021 net income from accelerated COVID-19 related excess mortality of dialysis patients)
- BBBY -5.4% (DE Shaw discloses 5% stake; also completes initial $225 mln share buyback program; will extend current program given recent volatility)
- MITK -5.2% (convertible notes offering)
- ARQT -3.8% (stock offering, and mixed shelf offering)
- IVR -3.2% (announces upsizing and pricing of its public offering of 24 million shares of its common stock at $3.83/share )
- NBEV -3% (stock offering)
- LI -2.3% (reports January deliveries)
- RVMD -2.2% (stock offering)
- AXTA -2.2% (delays Q4 earnings release due to operational matter; guides Q4 revs above consensus)
Analyst comments:
- LLNW -2.4% (downgraded to Market Perform from Outperform at Cowen)
Gapping up
In reaction to earnings/guidance:
- ATKR +18.2%, CTLT +5.1%, HAE +4.3%, WAT +4.1%, PINC +3.6%, UPS +3.5%, HCA +3%, HLIT +2.9%, MCK +2.9%, OMCL +2.8%, SKY +2.7%, EMR +2.7%, LII +2.4%, MPC +2.2%, MDC +2.1%, XOM +2.1%, MPLX +1.8%, ENTG +1.4%, COP +1.4%, SIRI +1.4%, FN +1.3%, KRC +1.3%, ETN +1.2%, PCH +1%
Other news:
- MBRX +46.8% (announces achievement of 100% survival in osteosarcoma lung metastases animal model)
- TLSA +42.4% (reports positive data from the clinical study of nasal administration with Foralumab in Brazil)
- HOL +36.4% (Holicity: Astra to become the first publicly traded space launch company on NASDAQ via merger with Holicity)
- PHGE +29.6% (announces "positive" results of a first-in-human Phase 1a pharmacokinetic study of BX002)
- PRTA +29.1% (to advance birtamimab into confirmatory Phase 3 AFFIRM-AL study)
- TVTX +20.7% (announces that the Company's ongoing pivotal Phase 3 DUPLEX Study of sparsentan in focal segmental glomerulosclerosis achieved its pre-specified interim FSGS partial remission of proteinuria endpoint after 36 weeks of treatment)
- ACAC +16.5% (enters into merger agreement with PLAYSTUDIOS)
- TTI +16.2% (regains NYSE compliance with minimum average closing price requirements)
- GSM +15.6% (extends momentum)
- LPG +12.6% (to commence tender offer to repurchase up to $100 million of its common shares)
- SPCE +11.2% (SpaceX announces first mission to space with all-civilian crew, according to NBC News)
- VRNA +10.8% (reports Phase 2 results with pMDI formulation of Ensifentrine in COPD)
- MBIO +9.7% (provides updates on MB-107 and MB-207, its lentiviral gene therapies for the treatment of X-linked severe combined immunodeficiency, also known as bubble boy disease)
- WBAI +8.9% (enters agreements to acquire two bitcoin mining machines)
- AI +8.2% (AI, RDS.A, BKR, and MSFT launch Open AI Energy Initiative)
- WTTR +7.4% (guides Q4 revs above consensus; announces commencement of two projects; announces $3 mln investment in Deep Imaging Tech)
- EYPT +6.7% (prices offering of 9.1 mln shares of common stock at $11.00 per share)
- MWK +6.2% (acquires Healing Solutions, an online seller of essential oils; raises guidance to include the acquisition)
- SHEN +5.4% (announces $1.95 bln cash sales price for its wireless assets and operations to T-Mobile (TMUS))
- KOPN +3.8% (Kopin and HMDmd have signed an agreement with a medical technology company to design a precision head-worn display system)
- DQ +3.5% (provides updates on the status of the proposed initial public offering (STAR Market IPO) and listing of the shares of its subsidiary Xinjiang Daqo New Energy)
- BDTX +3.3% (files for $150 mln mixed securities shelf offering)
- HOLX +3.1% (collaboration with Google Cloud)
- XOM +2.2% (creates new low-carbon solutions business)
- F +2% (invests $1 bln to modernize, expand South African manufacturing for all-new Ranger)
- CERC +1.9% (announces that the U.S. Food and Drug Administration has granted Fast Track designation to CERC-803 for the treatment of Leukocyte Adhesion Deficiency Type II)
- CLBK +1.7% (authorizes 5 mln share repurchase program)
Analyst comments:
- VIPS +4.1% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- PANW +3.5% (upgraded to Outperform from Neutral at Credit Suisse)
- DELL +3.2% (upgraded to Buy from Neutral at Goldman)
- RDY +3% (upgraded to Overweight from Equal Weight at Barclays)
- OMCL +2.8% (upgraded to Overweight from Neutral at Piper Sandler)
A new report from noted Apple analyst Ming-Chi Kuo potentially provides a lot of information about the Apple Car specs. He reiterates recent reports that Hyundai will be the key manufacturing partner for the Apple Car, but goes on to say that the vehicle will use the company’s electric car chassis known as E-GMP.
Hyundai announced the chassis a couple of months ago, with some impressive specs. Range is shown as over 300 miles on a full charge, and fast-charging gets it up to 80% capacity within 18 minutes. You can top up the range by up to 60 miles with just a 5-minute fast-charge.
Hyundai’s cited top speed and acceleration figures are also impressive, but those need to be viewed in context …
Hyundai’s spec sheet says that the maximum top speed is 160mph, and 0-60mph time is less than 3.5 seconds.
However, it should be noted that these figures are for ‘the high-performance model’ of the chassis. It’s also not known what assumptions are made about the all-in weight and aerodynamic performance of the finished car. It might be that those numbers are only achievable with a highly-streamlined, lightweight body.
The chassis is designed exclusively for BEVs – Battery Electric Vehicles – and not for hybrids. Here’s how Hyundai describes it.
Designed exclusively for BEVs, E-GMP provides various advantages compared to the Group’s existing platforms, which have each been engineered predominantly to accommodate internal combustion engines. Benefits include increased development flexibility, powerful driving performance, increased driving range, strengthened safety features, and more interior space for occupants and luggage […]E-GMP reduces complexity through modularization and standardization, allowing rapid and flexible development of products which can be used across most vehicle segments, such as sedans, SUVs and CUVs. Moreover, flexible development can satisfy various customer needs for vehicle performance. Among these, a high performance model will accelerate from zero to 100kph in less than 3.5 seconds and achieve a maximum speed of 260km/h […]E-GMP is engineered to offer improved cornering performance and driving stability at high speed. This is due to optimal weight distribution between front and rear, a design which enables a low center of gravity thanks to its low-mounted battery pack, and the adoption of electric motors located in the space previously occupied by an engine.The high-speed electric motor raises the driving performance of E-GMP vehicles. A five-link rear suspension system, which is typically used for mid and large sized vehicle segments, and the world’s first mass-produced integrated drive axle (IDA), which combines wheel bearings with the drive shaft to transmit power to the wheels, enhance ride comfort and handling stability.The platform secures battery safety through a battery support structure made of ultra-high strength steel. Hot-stamped steel components surround this structure for additional rigidity. Collision energy can be absorbed efficiently thanks to energy-absorbent sections of the body and chassis, effective energy load paths, and a central section of the battery pack tightly bound to the vehicle body […]A standardized battery system can be tuned to offer performance appropriate for a specific vehicle segment, to maximize driving range, or to meet various customer needs.
Exciting as it is to get some tentative specifications on the predicted Apple Car, Kuo’s note does caution that it will take some years to develop.
We predict that Apple will launch the Apple Car in 2025 at the earliest. The new iPhone takes about 18–24 months from initial specification definition to mass production based on experience. Given the longer development time, higher validation requirements, more complicated supply chain management, and very different sales/after-sales service channels for the automobiles, we believe that Apple, which lacks car building experience, is already on a tight schedule if it wants to launch the Apple Car in 2025.
Kuo also warns that things could be delayed further, depending on the extent to which Apple wants to design its own components versus using off-the-shelf ones.
We believe that Apple will leverage existing automaker resources and focus on self-driving hardware and software, semiconductors, battery-related technologies, form factor and internal space designs, innovative user experience, and integration with Apple’s existing ecosystem.Leveraging existing automaker resources means using a large number of qualified components from current automaker partners. Each EV has about 40–50 times more components than each smartphone, so if Apple wants to build a complete automotive supply chain on its own, the Apple Car will be released significantly later than 2025 and hurt the competitive advantage.
One issue may be how involved Hyundai wants to get. A report last week suggested that the company was nervous about taking on a mere contract manufacturer role.
UK watchdog orders partial unwinding of StubHub-Viagogo deal
Regulator avoids total sale in favour of middle path proposed by both companies
The UK Competition and Markets Authority has ordered a partial unwinding of Viagogo’s $4bn purchase of StubHub, forcing a sale of US-based Stubhub’s international business, including that in the UK.
The CMA concluded that the deal between businesses with a combined market share of more than 90 per cent posed substantial risks to competition in the UK’s secondary ticketing market, with customers at risk of higher fees or poorer service in the future.
“Creating a fully independent StubHub international business will maintain competition in the UK and help ensure that the users of these ticketing platforms don’t face higher prices or poorer quality of service,” said Stuart McIntosh, chair of the CMA inquiry group.
The watchdog will now determine conditions of the sale of the StubHub brand, and will have to approve the purchaser. Viagogo will not have to sell StubHub’s business in North America.
The CMA provisionally blocked the merger last October, after an in-depth investigation into the deal drew competition concerns and after the companies failed to amend the terms to assuage the watchdog.
A partial sale was proposed by both companies as a middle-ground solution, although in October the CMA said it had reservations as to whether it would fully solve the competition problems.
In November the companies told the watchdog it would be “disproportionate” to demand Viagogo sell all of StubHub.
“After examining all the options, including unwinding the merger in full, the evidence shows that Viagogo selling StubHub’s international business will resolve our competition concerns, effectively and proportionately,” said Mr McIntosh.
“We are pleased to have found a remedy that is acceptable to the CMA that will allow everyone involved to move forward with clarity and certainty,” said Viagogo, adding that both companies would continue to offer a “safe and secure” platform for the secondary ticketing industry worldwide.
StubHub said it was happy to have found common ground with the CMA that allowed a continued merger with Viagogo in North America, while the international business continued under new ownership. “We will continue to work with the CMA to implement the agreed-upon remedy,” it said.
The CMA has taken an increasingly aggressive approach to tech sector mergers in recent months, launching investigations into deals including Facebook and Giphy, Uber and Autocab and Nvidia’s acquisition of Arm. Its new Digital Markets Unit is also set to launch this April, with the aim of holding the power of big tech platforms in check.
Early premarket gappers
- Gapping up:
- TLSA +47.9%, GSM +27.9%, PRTA +27.3%, ACAC +17.6%, SPCE +11.4%, VRNA +11.4%, TTI +9.5%, LPG +8.7%, AI +7.8%, WTTR +7.4%, PME +6.7%, HAE +4%, UPS +3%, HLIT +2.8%, ATKR +2.6%, MDC +2.1%, CLBK +1.7%, XOM +1.6%, NBEV +1.6%, OMCL +1.5%, SPOT +1.3%, CX +1.3%, FN +1.3%, KRC +1.3%, SKY +1.3%, DIS +1.2%, TSLA +1.1%, PCH +1%, ENTG +0.9%
- Gapping down:
- FMS -11.7%, HOG -8%, CRUS -6%, MITK -5.2%, ARQT -4.9%, BP -4.3%, EYPT -3.2%, IVR -3%, RVMD -2.9%, RMBS -2.9%, AXTA -2.8%, LI -2.8%, CACC -2.8%, WWD -2.8%, VRTX -2.5%, WMG -2.4%, ARCB -1.5%, BBBY -1%, NXPI -0.9%
Local Chinese media reported that Tesla is pushing to acquire a stake in BYD, China, which is the third largest electric vehicle market in China and fourth largest battery market in the world.
On the 1st, Chinese online media, OFWeek, and others reported that "Tesla is discussing a plan to buy a 20% stake in BYD for $36 billion (about 40 trillion won)." It is reported that Tesla is considering buying 10% of its stake in cash and exchanging the remaining 10% for Tesla stock.
BYD ranked third in the Chinese electric vehicle market last year, following Shanghai GM Wuling (165,609 units) and Tesla (138,069 units). In addition, the world's battery supply is ranked No. 4, making it the most competitive Chinese electric vehicle maker that can make both batteries and finished cars. In 2008, Warren Buffett invested a 9.9% stake. Tesla's attempt to secure a stake in BYD seems to be a strategy to quickly dominate the electric vehicle market in China and secure battery supply stability. From the standpoint of BYD, Tesla can help in autonomous vehicles and luxury electric vehicles.