HWP Price Likely to Drop in August
In July, the imported hardwood pulp price went don under pressure. Due to the consecutive release of new capacity in China and overseas countries and the tepid demand downstream, paper mills lacked purchasing interest. The paper market will still be in a slack season in August, and the profitability of downstream paper industries may improve limitedly. Therefore, the HWP spot market is likely to continue to go down in August.
The HWP market deviated from the seasonal pattern
As of late June, the monthly average HWP spot market price was RMB 5,154.9/mt, down 7.95% M-O-M but up 18.22% Y-O-Y. As seen from the price fluctuation in recent years, the HWP price was at a level above the historical average. Besides, due to low profitability in downstream production, paper mills showed limited purchasing interest. In addition to the HWP capacity release in China and seasonal supply increase, the spot market price may come down under pressure. As seen from the seasonal pattern, the seasonality index in July 2023 was 0.97, up 0.01pp from that in July. However, in July 2024, the seasonal index was 0.92, down 0.09pp, which deviated from the seasonal pattern.
It is advised to pay attention to the following aspects in August:
Market supply: The overseas capacity expansion affected the overall supply pattern, and the HWP supply is expected to increase in July due to capacity expansion. The Cerrado project can boost the Suzano’s total capacity by over 20% to 13.5 million tons/a. In addition to the release of capacity in Fujian, China, the capacity ramp-up will be the key focus of pulp price adjustments.
Price adjustments of leading players: The price adjustments may affect market sentiment and lend guidance to the market as a whole. The new round of import offers lent clear guidance to the spot. The announced SWP offer was lowered, and HWP offers were lowered by around $100/mt. Therefore, participants lack confidence.
Downstream demand: The paper industry is still in a traditional slack season, and downstream paper mills generally suffer from poor profits. Despite that some paper mills lower prices, the demand is still insufficient. Therefore, they showed resistance to high-priced pulp. The actual pulp consumption will also affect the pulp price adjustments.
SCI reckons that the anticipated supply high and narrowing demand in August may expand the market supply-demand balance, and the paper market is in a traditional slack season. The ineffective price hike in downstream markets had led to low profits in paper production, dragging the overall sales of high-priced HWP. It is estimated that the market will still face downward pressure in August, and it is advised to pay attention to quotations from the newly-started domestic HWP producer, cost optimization of paper mills, pulp market supply-demand changes, the market sentiment and the futures market trend.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
