HWP and Tissue Price Correlation Analysis
Intro: From January to September, the price trends of pulp and tissue were generally consistent, maintaining a strong correlation. However, in October, the attempted increase in pulp prices failed to effectively drive tissue prices higher, leading to a weakening correlation between the two. Looking from late October to December, supply-side pressure is expected to dominate their respective price trends. The correlation between pulp and tissue is forecast to continue weakening in late October but is expected to rebound from November to December. Looking ahead to next year, the reliance of tissue on HWP will increase. The transmission effect of pulp price fluctuations on tissue prices may further strengthen, and the pulp-tissue correlation is expected to continue rising.
Pulp and tissue price trends slightly differed during Jan-Sep, with a weakening correlation
From the price trends of pulp and paper from 2021 to 2025, it can be observed that HWP and tissue show a strong correlation. As the primary raw material for tissue, HWP accounts for over 70% of the raw material cost. Therefore, fluctuations in HWP prices directly impact the production cost of tissue, which is then transmitted to changes in tissue product prices. As shown in Figure 2, the correlation coefficient between HWP and tissue fluctuated upwards from 2021 to 2025, reaching 0.91 in 2025. Their price trends tend to align, showing a high degree of correlation in their change patterns.
The imported HWP market is significantly influenced by import cost, domestic demand changes, and Chinese-made pulp prices. From January to March, increased import offers and paper mill restocking drove the market price of imported HWP up from January to early February. From mid-to-late February to July, tariff policies and weak demand led to fluctuating price declines. In August and September, the cost pressure from raised import offers prompted an increase in imported HWP spot prices.
The tissue market is primarily influenced by its own supply-demand dynamics and costs. Affected by supply-demand changes, the post-Spring Festival production resumption pushed prices up in January and February. Supply-demand pressure and macroeconomic negative factors led to price declines from March to July. Rising raw material prices and improved supply-demand relations supported price stabilization in August and September.
Overall, from January to July, the rising phases of pulp and tissue prices coincided. The transmission effect of pulp price fluctuations on tissue prices strengthened, enhancing the correlation. In August-September, the rise in pulp prices failed to effectively drive tissue prices up, the transmission mechanism was hindered, and the correlation slightly weakened.
Loose HWP supply to weigh on spot prices, but the cost factor may provide buffers
HWP supply is expected to remain ample. From late October to December, 400kt/a of HWP capacity is set to be released, overlapping with the gradual ramp-up of previously added new capacity. Market supply remains ample, weighing on pulp price trends. The steady arrival of imported HWP further increases market supply, raising the possibility of downward pressure on pulp prices. Cost-side support hedges the extent of pulp price decline. Import prices have been rising continuously since August, increasing future cost pressure. Domestic hardwood chip prices continued to rise in October. There is still an intention to support prices in the trade and production sectors. Cost-side support may limit the extent of pulp price declines, and the price fluctuation range might narrow.
Changes in tissue supply-demand dynamics to affect price trends from Oct to Dec
The release of newly added capacity to weigh on tissue price stability. In late October, 40kt/a of new tissue capacity will be released, keeping supply ample and weighing on the stability of the tissue market price. Demand-side boosts are expected to slow the pace of tissue price decline. Driven by "Double 11” related promotional activities, consumption growth is expected to support the stable consolidation of tissue prices in October. However, future supply-demand pressure will persist, dragging down paper prices in November and December. Another 160kt/a of new capacity is expected to come online in November and December. After the promotional activities end, consumption growth momentum weakens, and supply-demand imbalance pressure may increase, potentially leading to fluctuating declines in tissue prices.
Pulp-tissue correlation may weaken temporarily, but likely to strengthen in the long term
As HWP prices may fluctuate downward in late October while tissue prices remain stable or consolidate with demand support during promotions, their price trends diverge in the short term, leading to a weakened correlation in late October. In November and December, both pulp and paper prices enter a downward trend, and the correlation is expected to rebound.
Cyclical fluctuations in the pulp and tissue markets may cause correlation volatility from late October to December. However, looking to next year, supply-demand fundamentals and the cost transmission mechanism are the core factors determining the correlation. Particularly under supply surplus and demand pressure, the linkage between pulp and tissue price trends may further strengthen.
Furthermore, the furnish proportion of HWP in tissue production may further increase due to its price advantage. As the tissue industry's reliance on HWP grows, the transmission effect of pulp price fluctuations on paper prices may further strengthen. In the long term, the correlation between the two is expected to continue increasing.
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