Pulp Prices Jump in Early Nov but Face Headwind from Demand
Intro: In early November, imported wood pulp prices rose notably, driven by active inquiries from futures-spot traders and rising import costs from constantly raised market pulp offers. However, with insufficient response from end-use orders, paper mills are still facing obstacles in raising prices and hence show resistance to high-priced pulp. Thus, the sluggish paper demand may become a major constraint for the uptrend in pulp paper from late November to December.
Improved Market Sentiment Drives Notably Pulp Price Increase
Recently, boosted by multiple bullish factors, the imported wood pulp spot price experienced a relatively significant increase. The main drivers for the pulp price increase in early November were as follows. First, arbitrage opportunities between futures and spot markets gradually opened, which stimulated inquiries and trading for imported SWP. Second, a major market pulp supplier Bracell, announced a plan to convert a 1.5mtpa line dedicated to dissolving pulp production in 2026, and other suppliers also had various curtailment plans in November. In addition to shipment and logistics issues, the imported wood pulp supply is expected to tighten in the future. Last, HWP import offers have been raised constantly, lending cost support to imported market pulp for the coming months. Also, due to rising wood chip prices, the cost of domestic pulp production is on the increase. In addition to limited inventory pressure, local market pulp sellers are showing a stronger intention to raise prices.
As of November 11, the average price of imported SWP in China was RMB 5,574/mt, up RMB 83/mt or 1.5% from late October. The average price of imported HWP was RMB 4,335/mt, up RMB 96/mt or 2.3% from late October.
Paper mills experiencing higher cost pressure from rising pulp prices
The significant increase in pulp prices directly leads to higher procurement costs for paper mills, thereby pushing up overall production costs. Currently, paper mills struggle to pass down the increased production costs downstream as paper prices hardly increase. After the restocking phase for the “Double 11” shopping fest, the tissue demand is expected to gradually decrease, and cultural printing paper price hikes face challenges for implementation despite the ongoing publishing tenders. The ivory board market performance is slightly more bullish, but the price rise has decelerated slightly with insufficient end-use orders, which also squeezes producers’ profitability.
There is little room for profit improvement at paper mills, which hardly boosts their willingness to accept high-priced raw materials. Currently, after the pulp price increase, paper mills’ enthusiasm for making inquiries is limited, and the order book shows no apparent improvement.
For downstream paper mills, the cost support brought by rising pulp prices may lead to stronger paper price performance. However, entering late November, the traditional peak season market atmosphere in the downstream paper industry has been weaker than expected. End-use orders show no expected improvement yet, and market players lack confidence in the future market. Paper mills have a relatively cautious sentiment towards pulp purchasing, and the inventory replenishment pace is still relatively slow. This limits the incremental space for pulp market demand and becomes the main obstacle restricting further pulp price increases.
In conclusion, the core contradiction in the current pulp market lies in the fierce confrontation between the push from the upstream supply side and the weak performance from the demand side. Pulp prices still have some upside potential of within RMB 150/mt before the end of the year, but close attention should be paid to the procurement pace of downstream paper mills and market pulp shipments from overseas suppliers.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
