Weaker demand for pulp (and fibre in general) but prices holding up – just!

Tensions in global pulp markets are tightening, by all accounts, with nervous energy on both sides of the transaction ledger seeming to lead to little change in prices in April. It would however be best to say ‘yet’, because weaker demand for pulp is now being matched with production at the top of the capacity arc.

In the main Chinese market, despite the activity, prices for Bleached Softwood Kraft (BSK) settled USD10/t lower at USD730/t, while Bleached Hardwood Kraft (BHK) pulp prices were stable at USD690/t. We are advised that the latter price is probably the low-end of the range, the top of which has come in from USD760/t to no more than USD740/t by the end of April.

The chart displays this data, along with the spread between the two main chemical pulps. The spread is relatively small, but insufficient in the current market to result in substitution to any extent relevant to the market.

Chinese Chemical Pulp Prices & Spread: Jan ’06 – May ’19 (USD/t)

Source: Hawkins Wright, Brian McClay & Associates & IndustryEdge

The authoritative Hawkins Wright reports that pulp demand has weakened over 2019, with even demand from the tissue sector softening, on general economic lines, even as printing and communication paper and paperboard demand has been weaker across the globe. There is of course a hint of global economic slowdown in this data, along with a reasonable smattering of ‘trade war blues’ with which to contend.

For pulp markets, this may all be tolerable, if it were not for the fact that the last two years saw global pulp capacity increase, only for a series of outages to cause production to be below capacity until the beginning of the year. Despite the demand-side pressures, BHK inventories remain relatively high in China and will be supplemented by record Brazilian exports in March, that were delivered into April.

Peripheral sellers of BHK pulp in China – rather than the main South American producers – took prices down in April, albeit by the soft margins set out above and in the table.

For BSK pulp, supplies are being maximised ahead of the traditional maintenance season. Given the demand softness, this will have some impact on prices. However, as is regularly observed, the maturity of the global BSK market delivers more balanced market behaviours than are usually evident in the BHK market.

As to pulp market outlooks: the position is downbeat on both a volume and price basis. In Australia, those relying on imports might expect some price relief over coming months, while those supplying fibre (woodchips and recovered paper), will be working to retain existing margins. In New Zealand, other than for the specialties, pulp prices will be expected to soften on global lines.

This item first appeared in the May 2019 edition (Edition 164) of Pulp & Paper Edge.

Free Stuff

Sign up right now for instant access to market information, samples of our publications, various market and product guides and analysis and view some of our forum presentations. You will also be regularly updated via our blog.

> sign up now

Subscribe

Receive special offers and news.

Contact Us

IndustryEdge Pty Ltd
PO Box 7596
Geelong West, Victoria 3218

Ph +61 (0) 3 5229 2470
Fx +61 (0) 3 5229 0034
Em info@industryedge.com.au