[Industry News] Weak Demand In The International Pulp Market

The international pulp market has shown a flat or small rebound after a big drop this year. Market participants have observed that the market may be flat in the short term, given that the market demand in mainland China has not increased significantly. The follow-up effect of the Sino-US trade war, whether the demand in mainland China will recover significantly, and exchange rate changes will continue to be the key factors affecting the future trend of pulp prices.


Since 2016, the international pulp price has experienced a period of high growth and rapid growth. During the period, international pulp prices hit record highs in major global markets. Before July 2018, the international pulp price in the Asian and European markets showed a sharp rise, and the pattern was flat, but it still maintained its upward trend. In August, the international pulp price finally fell sharply in the Asian market, mainly due to the downward adjustment of the NBSK pulp price. It rose immediately in September and remained basically flat in October. As for the European market, it was roughly flat during this period, and the North American market did not change.


In November and December, international pulp prices have seen major changes in major markets. In the Asian market, the price of long and short fiber pulp fell sharply in the same period of the month; in the European market, it showed a slight decline; in the North American market, it changed from small to small, and it seems that there are signs of rising power. In fact, in addition to the decline in the futures market, the Asian spot market is also very obvious; the North American spot market also fell. Obviously, the upward trend of international pulp prices in the past two years began to reverse in the fourth quarter of last year.


From the data in Table 2, it can be seen that the international commercial pulp stocks at the end of 2018 have increased significantly, far exceeding the average stock level of long and short fluff pulp, which also seems to indicate that market demand is weak.


In January of this year, in the Asian market dominated by mainland China, the price of pulp continued to decline at the end of last year, and the decline of NBSK pulp was 40-80 US dollars/t. There are differences in the price of fluff pulp. Among them, Arauco fell by $30/t, and the new price was $650-655/t, but CMPC rose by $20/t to $715/t, which is almost the same as the price of fluff pulp. It is worth mentioning that after the merger of Brazilian goldfish and Fibria into the world's largest pulp mill (the total commercial pulp production capacity will reach 11 million t/a, and the paper production capacity will be 1.4 million t/a), it has the dominant position in pulp price. The monthly fluff pulp is priced at $720/t, which is higher than the CMPC.


According to industry analysis, the differences in the price of fluff pulp in January were mainly due to the inconsistency of pulp mills on the trend of the pulp market. For those who are pessimistic in the market, they think that the market demand in mainland China is weak, it is better to sell at a lower price, and clear the inventory as soon as possible, which can reduce the pressure. However, some pulp mills believe that the price has been lowered sharply in the fourth quarter of last year. Although the demand in the mainland China market is sluggish at this stage and the inventory is still high, the Brazilian pulp mill has been preparing to halve the output slurry for mainland China since this year. It is expected that the supply of pulp in the Asian market, especially in the mainland China market, will be significantly reduced in the future. Under the shrinking supply, it is likely to drive up prices.


In addition, in the European and American markets, the price of pulp in January was also lowered, and the price per ton was reduced by about 30 US dollars. Among them, the new price of NBSK in North America is about 1,400~1,410 USD/t, LBKP is about 1,160~1,170 USD/t, and LBKP is about 950~960 USD/t.


In February, due to the Chinese New Year holiday, the demand in the pulp market was still weak. Therefore, some pulp mills announced that the price of long and short fiber pulp was basically the same, but there were still suppliers who raised the price of the Chinese mainland market by US$20/t. The price of pulp in the European and American markets maintained a small decline, mainly due to the sluggish demand in the Chinese mainland market.


Market participants have observed that the demand for commercial pulp in the Chinese mainland market is still in a downturn, and pulp stocks are still at a high level. Under this circumstance, it is expected that there will be no ups and downs in the price of pulp in the next two or three months. In contrast, in the case that the aforementioned Brazilian pulp mill decided to halve the supply in mainland China this year, there has been an expectation that the supply in the market will decrease, and the pulp mill may try to support the market price. It is generally believed that pulp mills may adopt a quantitative pricing strategy in the coming months.


For the market outlook, the industry believes that the Sino-US trade war, exchange rate changes and whether China's mainland demand is warming up are all key factors.


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