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After some six months of absolute inertia, prices for bleached eucalyptus kraft (BEK) pulp declined in January amid ongoing capacity curtailments in the paper segment and subsequent flagging demand for pulp, according to market players. Price erosion continued on the softwood side of the market as well, contacts confirmed, with northern bleached softwood kraft (NBSK) pulp levels dipping further, though the declines were reportedly smaller than on the hardwood side.
Multiple sources said that they would be looking to developments in China in the coming weeks as signals for how the situation in Europe will develop. For the moment, however, most contacts said the downward pressure on European pulp prices was likely to continue into February, especially on the hardwood side, given the weak state of many paper segments.
After months of hopes and efforts to apply pressure, BEK buyers finally had a breakthrough in January, managing to push prices for the short-fiber benchmark grade down. Sources reported uniform drops of $50/tonne, bringing the January price for BEK to $1,330/tonne.
While a sizable decline, the $50/tonne reduction was less than some buyers had initially hoped for. “We started with an offer of a $30/tonne reduction, but some customers were looking for $100/tonne. The pressure increased when it became clear that others in the market were offering reductions of more than $30/tonne, and once that happened, we agreed relatively quickly on the minus $50/tonne,” one seller explained.
“It was simply the time for [a reduction]. We delayed it as much as possible, but when it came, it was done rather quickly,” said another seller who confirmed the $50/tonne reduction for all of his business.
We had been pushing to lower prices for several months, but things felt different this time, like a tipping point had been reached.
Sources ascribed the development primarily to the weak paper markets, especially the specialty and printing and writing (P&W) segments. “[Paper] production curtailments are substantial. Many of our customers in specialty and P&W stopped production in December, and this trend continued in January as well,” a seller said.
Another pulp seller confirmed the overall trend on the paper side, but said that while still slow, some customers had reported a slight improvement in the specialty paper segment more recently. “Things are slow, and the supply chain is full of paper, so it will take some time,” he explained. He also noted that some customers in the P&W segment had reported taking two weeks of downtime per month recently.
Several contacts noted that the tissue segment was holding up fairly well, and some suggested this had helped limit price declines in January. “Tissue sellers were reluctant to push for too much [in terms of price reductions] as they’re doing okay and don’t want to have to renegotiate their own contracts with customers, which could be the case if there are huge drops in pulp prices,” a seller said, with several others echoing that point.
Spot prices continued to decline, contacts said. Some cited price levels in the Middle East and North Africa in the mid $700s/tonne range up to $780/tonne.
On the capacity front, Arauco had to shutter its Nueva Aldea mill in Chile on February 2 in the face of extensive forest fires in the area. The mill, which can produce 1 million tonnes/yr of hardwood and softwood kraft pulp, and its surrounding area were not damaged, and the plant was restarted on February 7.
Elsewhere, Spain’s Supreme Court this week ruled in favor of Ence, confirming the extension of the company’s concession to continue running its Pontevedra BEK pulp mill until 2073.
While prices for NBSK fell again in January, the pace of erosion slowed, contacts said, with levels falling by some $10-20/tonne. As a result, pricing for the long-fiber benchmark slipped to $1,390-1,410/tonne, with the bulk of business reported in the mid- to upper-level of that range.
“Buyers were pushing for reductions, but the requests were quite scattered,” said a seller who concluded his business with $20/tonne reductions.
Several sources on both the buy and sell sides said that the softwood market is now somewhat firmer than that for hardwood, and that they expected this general trend to continue in the shorter term.
“The softwood side of the market may be starting to stabilize, with downtime at some Canadian mills and the planned closure of [Canfor’s 280,000 tonne/yr] Prince George NBSK line as well as price increase announcements in China,” a buyer noted.
As PPI Europe’s sister publication PPI Asia reported, several Canadian pulp producers, including Catalyst Paper, Canfor and Harmac Pacific last week announced price hikes of $20-30/tonne for NBSK pulp in China. The increase announcements were ascribed to the decreasing availability of NBSK due to a woodchip shortage and expectations of an improvement in the Chinese economy as the country eases off its zero Covid-19 policy and reopens.
Looking ahead, most contacts said that BEK prices would likely drop further in February. Several contacts said that NBSK would remain under pressure as well, though to a lesser extent than BEK.
It’s a mixed picture on the paper side, but we believe that the price decreases on the softwood side are coming to an end.
More declines similar in extent to January are commonly expected on the hardwood side for February. “The pressure is continuing, P&W producers are still taking downtime, even some tissue producers. I just don’t see much momentum in the next two to three months,” another seller said.
On the statistical front, the most recent figures from the Pulp and Paper Products Council (PPPC) showed global producer inventories growing by one day of supply to 44 days of supply in December, with bleached softwood kraft (BSK) pulp inventories rising by two days of supply to 43 days of supply.
The PPPC said the figures were preliminary due to a delay in receiving figures from Brazil. The Brazilian Tree Industry Association (IBA) will not report Q4 2022 statistics until early March, so the PPPC released a preliminary report this week, with a revised report to be issued once the IBA figures are released.
Global market pulp shipments stood at 4.621 million tonnes in December, an increase of 7.2% from November but a decline of 5.7% in year-on-year terms. BSK shipments amounted to 1.873 million tonnes in December, a drop of 1.2% from November and 9.2% lower than a year earlier. Bleached hardwood kraft (BHK) pulp shipments totaled an estimated 2.578 million tonnes, or 14.1% more than November and a 3.6% decline from December 2021, according to the PPPC. The shipment-to-capacity ratio improved by 3% to reach 90% in December, which was 6% below the year-earlier level.
This article was first published in our PPI Europe newsletter. Find out how you can access the latest price, news and market developments in Europe directly from your inbox by speaking to our team.