HWP Spot Market May Return to Traditional Seasonality in Q4
Overview: In 2024, the imported HWP price surged and fell, which deviated from the traditional seasonal pattern. In Q4 2024, the market price will likely to regress toward normal seasonality affected by anticipated loose supply and insufficient profit recovery in downstream paper markets.
Imported HWP spot price deviated from traditional seasonality
HWP is the major raw material for downstream cultural printing paper, ivory board and tissue production. Due to fixed tenders and holiday-related demand, the HWP price trend displays certain seasonal patterns. Usually, the imported HWP market tends to rise in Q1 and Q3, while in other months, the price is more likely to decrease. During the first 9 months of 2024, the HWP price generally deviated from the traditional seasonality except for a few months including March, June and September. As of mid-September, the average market price of imported HWP was RMB 4,794.32/mt, down 4.54% YoY.
Imported HWP price is expected to regress back toward normal seasonality
Considering the pulp market situations and the progress in domestic economic recovery, it is estimated that the HWP market price will return to normal seasonal pattern in Q4, and the main drivers include the following:
On the demand side, the downstream paper industry will shift from a traditional peak season to a slack season in Q4, but publishers' tenders for textbook printing and inventory preparation ahead of the e-commercial shopping fest will still lend support in October. In addition to the release of newly added paper capacity, pulp consumption is likely to rise, which may offset the market downtrend. In November, the influence of the market slack season will become more apparent. Despite that ivory board mills will receive orders for gift packaging ahead of the New Year’s Day and Spring Festival holiday, the boost to the pulp market may be limited as ivory board production is highly integrated. It is estimated that the pulp market supply will continue to edge up in November and December, putting pressure on pulp prices. Besides, the low profits in paper production still restrict participants' purchasing appetites.
On the supply side, the market supply will likely rise mainly bolstered by the ramp-up of domestic new capacity, while import volume may see limited increases. Due to the launch and release of new capacity at Fujian Liansheng, Nine Dragons Beihai and Guangxi Xianhe New Materials, the domestic pulp production will grow steadily. Some domestic market pulp sellers compete for market share with lower prices, which may destabilize the spot market. In terms of imports, the purchase of August volumes was normal, but the order status for September and October volumes is not clear. If the reduction in import offers fails to meet expectations, it will affect pulp imports. Besides, it is advised to pay attention to the ramp-up of the new Cerrado project in Brazil.
In terms of cost, the import offers were lowered consecutively in July, August and September. Despite the supply from the peak season demand, the import offers are still expected to drop from November to December. The weaker cost support may drag down the spot market.
As for sentiment, the pulp futures price fluctuated, and participants’ expectations varied. Besides, supply-side uncertainties may still affect pulp price trends.
In conclusion, the imported HWP spot market may still suffer downward pressure affected by rising supply from new capacity and restrained demand by low paper margins. However, the potential demand increase and uncertainties from cost and sentiment may still provide support, so the price drop may be limited.
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