Weak bleached softwood kraft (BSK) pulp futures in China prompted suppliers to ease their focus on futures investors and traders there in favor of end-user customers, and to lure them back to the table with price cuts for the grade.
Following Arauco’s cut of $40/tonne for radiata pine for September orders, Canadian producers reduced the prices for northern bleached softwood kraft (NBSK) offered to regular clients by $50/tonne, bringing it from $1,010/tonne to $960/tonne. Nordic suppliers have also revised their NBSK levels accordingly.
The move paid off. A source from a major Canadian seller said its monthly allotment was sold out, mainly to end-users, after the cut was implemented and the shipment is expected to take place at the end of September.
The erosion has taken both Canadian and Nordic NBSK prices to $940-960/tonne, with the mid-point for the grade coming to $950/tonne, down $39/tonne from a fortnight ago. Radiata pine levels have slipped $40/tonne to $940-970/tonne.
Meanwhile, Russian BSK pricing has become less transparent, as most of the tonnage is sold resale to domestic Chinese buyers in renminbi through a handful of traders. The grade’s major manufacturer, the Ilim Group, and the vendors have decided not to announce import prices in US dollars.
Consequently, Fastmarkets assessed prices for Russian softwood pulp based on its resale levels and got $880-900/tonne. Contacts indicated that the prices that traders settle with Ilim are basically pegged to futures.
High fluff pulp prices drive Chinese manufacturers to convert pulp into fluff pulp
The fluff pulp sector in China has been dominated by the grade’s imports from the USA.
With US fluff pulp prices staying high, at as much as $1,350-1,390/tonne (equivalent to RMB 10,600-10,909/tonne including 13% VAT and RMB 150/tonne logistics costs), Chinese manufacturers are keen to convert market pulp into fluff pulp products.
Sources said mills use a mixture of whatever low-cost pulp they could find, including softwood, hardwood, non-wood and even pulp processed from recovered paper as furnish, and convert it into low-quality fluff pulp products used chiefly in adult diapers and pet pee pads.
The cost of converting the pulp is reportedly around RMB 1,000/tonne but the fluff pulp products are being sold north of RMB 9,000/tonne. One of the main grades utilized for conversion is US southern pine, which is fetching $900-915/tonne.
Apart from fluff pulp products, manufacturers have been turning to cheaper pulp grades produced in China for the production of paper and board (P&B). With the P&B market plagued by overcapacity and poor demand, integrated producers have opted to reduce P&B production and sell their pulp made in-house.
In the meantime, sales of nonwood pulp (such as bamboo, bagasse, and reed pulp) manufactured domestically have seen an increase and prices have firmed up.
Resale BSK futures
The most tradable BSK futures contract has shifted from the September one (sp 2209) to the January 2023 one (sp 2301), for which prices were settled at RMB 6,608/tonne on Thursday, August 21 on the Shanghai Futures Exchange (SHFE). That level is equivalent to $838/tonne after removing 13% VAT and RMB 120/tonne logistics costs.
However, futures prices for the September contract are much higher than the January 2023 one. The former was settled at RMB 7,158/tonne on Thursday, August 21 and had an open interest of 21,917 hands, or 219,170 tonnes.
The September contract is due for delivery around mid-September. Contacts reckoned its open interest is expected to drop to around 70,000-80,000 tonnes when the delivery date is due, with prices lingering above RMB 7,000/tonne.
Meanwhile, the backwardation in the forward curve in BSK futures foretells weakening prices for the grade in the future but no crash in the near term, shored up with the indication of the September contract.
Resale NBSK is fetching RMB 7,302/tonne, equivalent to $924/tonne minus VAT and RMB 150/tonne logistics costs.
Sources pointed out that, despite the price drops, the availability of resale BSK remains restricted and that will prevent prices for the grade’s imports from tumbling.
BHK levels intact
Suppliers have held firm on South American bleached hardwood kraft (BHK) pulp prices for September orders, keeping them intact at $850-860/tonne.
A major supplier indicated that big-volume sellers are likely to ship the cargoes ordered this month and next out of Brazil in October with arrival in China likely in January next year.
The Lunar New Year next year falls in late January. Customers have requested the cargoes to be delivered by early January at the latest, said the contact. As a result, sellers believe the September allotment is expected to be snatched up without too much trouble.
But going forward, the tide is expected to change.
Arauco has announced that the 1.56 million tonne/yr BHK line of its MAPA project in Chile is now due to be commissioned in late October. A big portion of the new capacity is expected to come to China and buyers there anticipate price drops coming soon.
This news story was first published in our PPI Asia newsletter, the industry’s most trusted pulp and paper price reporting. Subscribe to our news service to access the latest Asian pulp & paper market intelligence directly from your inbox.
