Pulp importers feel the pleasure, and the pain

Australia’s pulp importers – mainly the tissue manufacturers – have felt the pleasures and the pains of global pulp markets over the last two years. Imports year-ended November 2019 totalled a very typical 285.7 kt, down 2.7% from a year earlier.

There are few alternatives for the local tissue producers and the other supplies are specialty grades used as cement sheet stabiliser (Unbleached Softwood Kraft), wet strength additives (Semi-chemical) and other small tonnages. The table below shows the fairly stable imports of pulp, except and until November 2019, when it appears pulp importers reduced their imports to 17.3 kt, the lowest monthly volume in more than six years.

 

Australian Pulp Imports by Main Grade: YE Nov ’18 v YE Nov ’19 (tpm & %)

Pulp Grade

YE Nov ’18

YE Nov ’19

% Change

Bleached Hardwood & Eucalypt Kraft

105,055

107,527

2.4%

Bleached Softwood Kraft

143,105

134,092

-6.3%

Semi-Chemical

2,091

3,550

69.8%

Unbleached Softwood Kraft

41,027

37,468

-8.7%

Other

2,272

3,029

33.3%

Total

293,550

285,666

-2.7%

Source: ABS

 

IndustryEdge checked with one end-user whose response was that they anticipated inventories were sufficient to allow an import ‘holiday’ with pulp prices tracking higher in the Australian market than in the main Chinese market. We note that the main interest here is the larger Bleached Hardwood & Eucalypt Kraft (BHK/BEK) and Bleached Softwood Kraft (BSK), so we focus attention on those grades in the next chart.

Data to the end of November 2019 shows that in US dollar terms, import prices for the main grades of pulp experienced more subdued growth than that witnessed in the Chinese market. Similarly, however, by mid 2019 when prices in China had declined below the January 2017 reference point, local prices did not fall by as much, or as quickly, as the chart below shows. It is swings and roundabouts in the Australian pulp market.

 

Australian and Chinese Pulp Market Price Index: Jan ’17 – Nov ’19

Source: ABS, RBA, Hawkins Wright and IndustryEdge

 

IndustryEdge is advised that the nature of the contracts for the BEK/BHK supply is mainly shorter term and less committed on volume than is the case for the softwood supply. That implies inventory management is more immediate for those hardwood grades and somewhat slower for the softwood grades.

In part, this could be because of the distances the softwood pulp has to travel (none is from Asia for instance) compared with the hardwood pulps. We think that is partly true, but the other factor that has a large impact is that the softwood pulp market is more mature and stable than the ever-evolving hardwood pulp sector.

Hardwood producers typically establish supply well ahead of demand, often needing to sell volume at prices they would prefer not to accept. That does lend itself to more spot market behaviour.

 

This is an edited extract of an item that first appeared in Edition 172 of Pulp & Paper Edge in January 2020

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