Market conditions (tight supplies) favour pulp price hikes especially in 1H 2017
(April 26, 2017) On a whole, market conditions favour pulp price hikes (especially hardwood). Demand conditions (particularly in China) remain solid. BTG Pactual analysts in their report dated April 02, 2017 state that they “remain optimistic on pricing momentum” although they “expect prices to correct from July onwards (summer seasonality/imminent H2 start-up).”
Corporates continue to observe strong demand trends across all regions, with
inventories low at the consumer level and ongoing global paper price hikes have also
helped. In addition, other factors such as high dissolving wood pulp prices in China
(reducing hardwood [HW] supply) and expectations of further Yuan depreciation have also led to a boost to HW pulp prices.
Supply bottleneck
A major factor favouring price hikes is that the incoming pulp supply from APP’s Oki plant may not materialize this year, as predicted earlier. As per recent RISI reports, APP has indicated that Oki will not ship market pulp in 2017 (plus Oki appears to be having trouble with the quality of its pulp). This should help lower price volatility in 2017. As per another RISI report, several plants in Asia will be undergoing maintenance shutdown including APP’s Hainan complex and its Perawang facility (100kt curtailment), Asia Symbol’s Rizhao plant (65kt curtailment) and Oji Holdings’ plant in China will also be shut down for 3 weeks in May. All this should boost pass-through of April price hikes.
Feedback from the Shanghai Pulp Week held in March this year reaffirms that this strong momentum should likely be sustained as far as June with several factors contributing: (1) healthy paper demand in China coupled with ongoing price hikes, (2) capacity closures for both paper and pulp (non-wood sources and recycled fiber); (3) higher-than-expected demand for dissolving wood pulp (leading to less output of papergrade HW/SW); (4) slower ramp-up of APP’s Oki; (5) temporary shutdown of CMPC’s Guaiba in Chile. As per several industry analysts, current market conditions remain supportive for price hikes throughout 1H17.
Price Hikes
The months of March and April have seen both NBSK and BEK producers coming out with price hikes.
In Europe, Swedish pulp major Sodra announced last month that it was raising NBSK pulp in Europe to $860/t effective April 01. The company cited a tight global market as the reason behind the hike.
Spanish producer ENCE to increase BEK prices to $810/tonne, up $40/tonne, effective May 1.
Canadian pulp major Mercer International has begun informing customers that it will increase its price for northern bleached softwood kraft (NBSK) pulp by $30/tonne to $890/tonne, effective May 1.
Brazilian pulp major Suzano has announced May 1 plans, raising eucalyptus pulp list prices US$40/tonne in North America, to US$1,000/tonne; US$40/tonne in Europe, to US$820/tonne; and US$20/tonne in China, to US$680/tonne.
Domtar and Fibria have also set $40 May 1 hikes on BSK, BEK, in what could be 5th straight month for pulp increases.
Chilean pulp major Arauco has hiked BKP / UKP prices by $10/tonne in China, effective with May.
US NBSK in April roses $20 on lower supply, BHK markets up $20-40; and in fluff International Paper has set a $40 May 1 hike.
Chinese paper prices on a rebound
The South China Morning Post in an article dated March 06, 2017 reported on what it described as Paper Price Rally. Beginning of this year, as per the news report, Indonesia-based Asia Pulp and Paper Group raised its prices of art paper by 300-400 yuan (US$75-58) per tonne on February 17; Shanghai-listed Yueyang Forest and Paper increased its prices for offset paper by 500 yuan per tonne on February 18; Sun Paper hiked its costs on all its copy paper by 300 yuan per tonne on February 22; and Asia Symbol lifted its prices of electrostatic copy paper by 300 yuan per tone. Additionally, Nine Dragons Paper, China’s largest packaging paper manufacturers, will raise the price of its line-board products at least one more time in the first half of 2017, after in February lifting the unit price, by 100-200 yuan per tonne. “China’s pulp prices hit rock bottom in October, 2016 but have rebounded significantly since and the soaring pulp prices are likely to further boost printing and writing paper price in the first quarter of 2017,” the news report said.
India
As per a March 26 Business Standard report, prices of kraft paper have risen by 23 per cent over the past three months due to short supply, following intermittent closure of production units. The news report quotes trade sources as saying that that kraft paper prices are likely to have surged the highest in any quarter. Trading currently at Rs 31 a kg, kraft paper prices have risen by Rs 7 a kg across all varieties since January and Rs 2-3 a kg in March alone.
Since January (till March), most paper companies have raised prices at least twice. Prices of most varieties have gone up by three to four per cent; over a year, by eight per cent, on average. A higher price for wood pulp globally has had a big role in making imported paper costlier. (Source: EUWID, RISI, BTG Pactual, PPPC, SCMP & other industry reports)
