Global pulp prices turning down

[First published in Edition 208 of IndustryEdge’s monthly Pulp & Paper Edge in October 2022]

Led lower by Bleached Softwood Kraft (BSK) grades, the global pulp market turned down in September, with the US and European markets showing the first signs of weakness in over a year. BSK prices were stable in China at USD950/t after falling USD45/t last month, but other markets followed suit in September.

The Bleached Eucalypt Kraft (BEK) price was stable in all major markets and remains at a record USD855/t.

Prices are still high for bleached chemical pulps, in particular when considered against the prevailing and emerging economic conditions. There may be a little life left in these higher prices, but the demand-side conditions appear relatively poor in the northern hemisphere.

China Chemical Pulp Prices by Grade and Spread: Jan ’12 – Sep ‘22 (USD/t)

Source: Hawkins Wright, Brian McClay & Associates & IndustryEdge

Price pressures are all to the downside for pulp prices, mainly because of global macro-economic conditions.

A surging US dollar makes traded pulp more expensive for most buyers. That will have a significant impact in countries like China where demand for many grades of paper and board is weak. The Chinese economy is struggling to lift itself from the constraints of a zero Covid policy, amidst a symmetrical softening of demand for its manufactured goods around the world.

As Hawkins Wright describes in its benchmark monthly Pulp Watch, global shipments of pulp have softened since peaking in May 2021, due almost exclusively to what is now medium-term Chinese pulp market contraction. As they point out, that impacts the global pulp market and has as much to do with the swing to local Chinese production of packaging and tissue grades that utilize hardwood chip imports (up 4.0 million bone dried metric tonnes) over the last two years.

The chart below from IndustryEdge’s Wood Market Edge online data service demonstrates the big increases to accommodate that growth in local production in China.

Hardwood Chip Imports to China: YE Jul ’20 – YE Jul ’22 (bdmt)

Source: GTA, country reports and IndustryEdge

The downturn in prices is coming for pulp. One further indicator is the price of recovered paper around the world has slumped in September and October as the monthly Recovered Paper Market Briefing explains.

All the headwinds point to declining prices, but the commentators suggesting China is in deep trouble in the pulp and paper sector may need to look a little deeper before they confirm that prognosis. For all that China faces economic challenges that have been mounting for years, it has successfully avoided the pitfalls and snares that have routinely captured other major global economies.

Meantime, lower prices will be soaked up by the raging US dollar, so net-net, the price structures for pulp may not change for a few months yet.

Global Chemical Pulp Prices: Sep ‘22 (USDCif/t)

Source: Hawkins Wright, Brian McClay & Associates, Pachem and IndustryEdge research

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