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Suppliers have pushed for price hikes of $10-20 per tonne for imports of two key pulp grades, bleached softwood kraft (BSK) pulp and bleached hardwood kraft (BHK) pulp, into China over the past two weeks.
Sellers told Fastmarkets that the pulp price gains in the domestic resale pulp market motivated traders to stock up on BSK and BHK imports, but end-users were cautious, due to growing concerns about the ongoing depreciation of the renminbi against the US dollar and weak downstream paper and board (P&B) fundamentals around the Lunar New Year on January 29.
Following Arauco’s move to increase imported radiata pine prices by $10 per tonne on December 30, other suppliers followed suit and sought a rise of $10 per tonne for northern BSK (NBSK) imports.
A major merchant reported that domestic P&B mills snatched up traders’ pulp stocks, leading to resale NBSK prices increasing by RMB 132 ($18) per tonne in the past two weeks to RMB 6,562 per tonne this week, which was equivalent to $774 per tonne, excluding 13% value-added tax (VAT) and RMB 150 per tonne in logistics costs for resale pulp.
Resale radiata pine rose by RMB 270 per tonne to RMB 6,600 per tonne, which is unusually higher than resale NBSK, most of it coming from Canada, and commanding higher prices previously than radiata pine imports.
An end-user contact indicated that the quality of Canadian NBSK they bought deteriorated in terms of the product’s brightness, moisture and dirt counts, and they filed complaints to the suppliers asking for compensation.
“We are not surprised that radiata pine has ended up more expensive than Canadian NBSK,” the source said.
A BSK supplier source said that some Canadian producers have held back on offering NBSK in China, adding they have been eager to ship the grade to the US before the new Trump Administration imposes an additional 25% duty on Canadian goods.
In the meantime, despite volatility, BSK futures prices on the Shanghai Futures Exchange (SHFE) have fluctuated below a level that could attract investors to arbitrage on radiata pine and NBSK.
But a trader said they were able to make a profit from arbitrage on Russian BSK on the bourse.
Prices for the most-traded BSK March contract had fluctuated in the range of RMB 5,800-6,000 per tonne over the preceding two weeks on the SHFE, settling at RMB 5,900 per tonne on Thursday January 9. That level was equivalent to $698 per tonne, minus VAT and RMB 120 per tonne in logistics costs.
“We paid below RMB 5,850 per tonne most of the time in the past month for Russian BSK provided either by Russian suppliers or other Chinese investors or merchants and benefited from arbitraging the product on the SHFE,” the trader source said, adding prices for Russian BSK imports have been flatlining in the past month.
“Russian suppliers plan to make offers for the grade for February shipments after January 7, the Christmas in Russia,” the source said.
Fastmarkets assessed prices for Russian BSK imports at $700-720 per tonne on Thursday, steady over the past two months.
Resale Russian BSK has gone up by RMB 163 per tonne to RMB 5,950 per tonne over the past two weeks, though.
Following the implementation of the $10 per tonne rise, prices for NBSK imports had risen by $10 per tonne over the past two weeks, with the product from Canada selling at $780-790 per tonne and at $770-780 per tonne for the grade from the Nordic region. The midpoint for NBSK has ticked up by $10 per tonne to $780 per tonne.
Radiata pine imports had also climbed by $10 per tonne to $770-790 per tonne.
P&B mills have apparently taken a retroactive approach toward suppliers’ push for a hike of $20 per tonne for South American BHK, but traders have responded proactively following an uptick in resale BHK.
Resale South American BHK has surged by RMB 290 per tonne from a fortnight earlier to RMB 4,692 per tonne this week, equivalent to $548 per tonne, excluding VAT and RMB 150 per tonne in logistics costs.
A Brazilian supplier noted that traders, small and medium-sized mills have bought monthly contract volumes or less for January orders, while other buyers, mainly large mills, adopted a wait-and-see attitude, saying they had kept sufficient BHK stocks for the Lunar New Year lull.
“Some big buyers were seeking if we could cut the planned hike to $10 per tonne, but we didn’t agree. We have no stock pressure, and those customers have their own concerns, worrying about P&B prices may stall soon. But they didn’t seek price drops,” the supplier source said.
A trader told Fastmarkets that customers accepted the price rise in the belief that sellers would continue to seek hikes going forward.
“We heard that mills have fulfilled January BHK orders with no intention of building stocks,” the trader added.
South American BHK was assessed at $550-570 per tonne on Thursday, up by $20 per tonne from a fortnight ago. Sellers said that smaller buyers paid up to $580 per tonne for the grade.
A second trader said the resale pulp uptick has been driven by Shandong Chenming Paper Holdings idling 7.03 million tonnes per year of pulp and paper capacity in November — 71.7% of its total output capacity — but the effect has worn off.
Shandong Chenming has reiterated it is planning to restart its major pulp and paper facilities soon. So far, the company announced on December 24 that it resumed production at its mill in Nanchang city, Jianxi province.
The Nanchang mill has a 350,000 tpy uncoated printing and writing paper machine, a 350,000 tpy coated ivory board machine and a 200,000 tpy bleached chemi-thermomechanical pulp line.
Sources said the company has had large stockpiles of pulp and finished products idling in the warehouses at its various mills, but no buyers purchased them due to the company’s complex debt issues in addition to ongoing lawsuits.
The price increases for fine paper and ivory board seem to have stopped short of around RMB 200 per tonne.
“The pulp price run has been driven largely by the Shandong Chenming incident, not by demand growth. Customers are concerned about its sustainability, given that China’s economy is still in slump,” a vendor said.
The source stressed that most of P&B mills had a tough 2024, between high pulp costs and stagnant P&B prices.
“I heard a major P&B manufacturer planning to lay off 30-50% of its employees due to huge loss recorded last year. In China, such a retrenchment usually takes place after Lunar New Year. I believe many other P&B companies are likely to do so to cut losses,” the vendor said.
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