China's imported pulp market is currently facing serious challenges. Resale prices in the domestic market and pulp futures prices on the Shanghai Futures Exchange (SHFE) have continued to fall, both of which reveal weakening domestic demand. Despite this, suppliers remain firm on the price of their products, while customers are reluctant to engage in negotiations.
On the price side, buyers are under intense pressure. Pulp import prices are already prohibitively high, but sellers are still seeking higher prices. For example, the price of radiata pine pulp is proposed to increase by $20 per ton to $840. The price of South American bleached hardwood kraft paper (BHK) pulp is also recommended to increase by $30 per ton, with a target price of $770- $780.
Northern bleached softwood kraft paper (NBSK) pulp is quoted at $820-880 per tonne. Fastmarkets this week valued resale NBSK at Rmb6,367 a tonne, down Rmb116 from two weeks ago. The price is equivalent to $758 per tonne, excluding a 13 per cent value-added tax (VAT) and logistics costs of Rmb150 per tonne.
The price of reselling South American BHK plummeted even more, falling 140 renminbi a tonne to 5,630 renminbi, or $668 a tonne, after VAT and logistics costs. On June 20, the most active September bleached softwood kraft paper (BSK) contract on the Shanghai Stock Exchange closed at 5,930 yuan per ton, equivalent to $708 per ton, excluding VAT and logistics costs of 120 yuan per ton.
The stagnant state of the market is reflected in the wait-and-see attitude of large buyers and the complete cessation of purchases of imported pulp by small customers. Some South American suppliers have tried to hold meetings with old buyers, proposing to maintain current prices and urging customers to buy pulp together for June and July. However, even when sellers canceled planned price increases, buyers refused to place orders. This shows that the market is not very enthusiastic about commercial negotiations.
Sellers have begun to quietly pull back on planned price increases, accepting that June's commercial negotiations could spill over into next month. Negotiations will revolve around gross tonnage for June and July.
Suppliers say they have a backlog of orders for several months and can wait out the summer lull. At the same time, sea freight costs for shipping goods from China to North America and Europe have soared, forcing Chinese producers to stop exporting high-grade paper, ivory cardboard and tissue products to the two regions. This will give mills in North America and Europe the opportunity to increase production and domestic market share of these native fiber grades, while increasing pulp prices. The net price of BSK and BHK in these two regions is $100 / ton higher than in China, which is the main reason why suppliers have not lowered the price of pulp in the Chinese market.
Canadian and Nordic NBSK prices have stabilized at $810- $840 per tonne over the past two weeks, with the midpoint flat at $825 per tonne. Radiata pine prices remain at $790-810 per ton. But the premium for reselling NBSK and radiosone has risen from 150-200 yuan per tonne to 350-400 yuan per tonne, with prices linked to the futures market.
As imports of these two grades decline, so does the availability of resale tonnage. Factories continue to snap up resale Russian BSK to reduce production costs. The rapid sale of Russian BSK could change the dynamic of futures trading. Most of the 500,000 tonnes of pulp stored in designated warehouses on the Shanghai Futures Exchange belongs to Russia's BSK. In the next three months, the Ilim Group plans to reduce the supply of BSK to China by switching part of its production from BSK to products made from a mixture of BSK and BHK or pure BHK at its plant in Siberia.
South American BHK prices remain at $740-750 per ton as producers no longer push for price increases. Arauco plans a half-month maintenance outage at its Horcones plant in Chile, known as the MAPA project, which will result in a 50 percent reduction in its BHK quota to China. The Chinese customer believes that the BHK segment faces downward price pressure due to the upcoming start-up of Suzano's 2.5 million tonne/year Cerrado project in Brazil and Liansheng Pulp & Paper's 1.2 million tonne/year production line in China. The two companies have promised to have BHK in production by the end of this month.
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Source: Paper industry network
