Global pulp markets were once again upended by new tariffs that went into effect at midnight on Thursday April 3. The announcement came hours after US President Donald Trump held a long-awaited press conference at the White House.
In an event he for weeks had billed as “Liberation Day,” he announced a “final decision” on tariffs applied to imports from countries he feels treat the US unfairly.
Surpassing the uncertainty his prior announcements caused, Trump’s decisions were already impacting US and offshore pulp markets in unexpected ways in a week that saw winners and losers quickly emerge.
Market pulp producers in Canada are winners because their market pulp imports are now exempt from tariffs. The market was, for months, hampered by a belief that tariffs of up to 25% could cripple the industry. Producers from the EU and Latin America, which now face 20% and 10% import tariffs respectively, are the losers.
However, American producers did not make it through the week unscathed. China, bristling under the weight of new broad-based tariffs that could pummel its struggling economy, announced countervailing duties of 34% on US imports that include market pulp. Fluff and dissolving pulp (DP) are broadly exported to China, followed by smaller volumes of southern bleached softwood kraft (SBSK).
Canadian pulp imports: 0%
Canadian market pulp imports received tariff exemptions because they were included in the United States-Mexico-Canada Agreement (USMCA), the trade pact that replaced NAFTA in July 2020 during Trump’s first presidency. As a “USMCA-compliant” product, Canadian exemptions are not automatic, but producers quickly filed exemptions for their products during a brief three-day period in which Canadian imports got hit with 25% tariffs.
Market pulp capacity across Canada totals 8.6 million tonnes per year, with benchmark northern bleached softwood kraft (NBSK) the dominant grade at 5.26 million tpy, according to Fastmarkets data. Other grades include northern bleached hardwood kraft (NBHK) and unbleached softwood kraft (UKP).
Canadian NBSK imports total approximately 2 million tpy, and as the benchmark grade of softwood it has by far the biggest impact on US pulp markets. Producer sources were cautiously relieved by the exemption.
“Canadian pulp will not be subject to any tariffs, while lumber will remain at a 14.5% tariff,” an NBSK producer source said. “Personally, I don’t place much trust in anything Trump says. He could easily change his stance on this issue overnight. While Canadians are somewhat relieved by this announcement, we remain cautious and don’t take it for granted that the situation will stay the same.”
However, American consumers of NBSK appeared pleased to have the anxiety of tariffs on Canadian NBSK ease. Some had sought more imported NBSK from EU countries such as Finland and Sweden, which have ramped up their share of the North American NBSK market to as much as 20% in recent years.
EU pulp imports: 20%
That could change because EU market pulp imports now face 20% tariffs, effective April 3. European NBSK producers tend to price their imports $20-40 per tonne below Canadian NBSK on a net delivered basis. Still, in a sign of how much less competitive pulling European NBSK becomes for US consumers, a 20% immediate tariff implies a $182 per tonne cost increase based on the most recent Fastmarkets US NBSK spot prices, which closed March at $900-920 per tonne.
As Fastmarkets announced on March 7, tariffs are not included in the delivered US pulp price assessments. While these price assessments continue to be published net of tariffs, it is still an inflationary environment. To account for the 20% levies, it is possible European producers could actually lower their spot prices to insulate US buyers from sharply escalating tariff-related costs and causing a stampede to Canadian suppliers.
“My understanding is on the EU everything was 20%. Either way, it’s a hassle,” a market participant said on April 3 hours after the tariffs went into effect. “You have price increases out there people are trying to protect. Then what if the Europeans don’t follow the price increases and there’s a reduction of tariffs? We have shipments that cleared customs before today… so we have non-tariff inventories.”
Pre-tariff inventories will be coveted because they’ll come at much lower prices than tonnes slapped with 20% tariffs. In all cases, the race on shipments will come down to the final hours. The EU exports about 350,000 tpy of market pulp to the US, Fastmarkets reported.
Latin American pulp imports: 10%
In a broadly unexpected development, Latin American market pulp producers got slapped with 10% import tariffs. Brazilian producers of bleached eucalyptus kraft (BEK), which have increasingly dominated US hardwood kraft markets with their large capacity, have enjoyed pockets of fresh demand last month as some buyers tried to insulate themselves from up to 25% tariffs circling Canadian suppliers.
About 940,000 tpy of market NBHK is made in Canada, and sources say about 400,000 tonnes is shipped into US markets. In contrast, upwards of 2 million tonnes of BEK is imported annually from countries such as Brazil, Uruguay and Chile. No market participants said they expected Latin American pulp would get hit with tariffs — until Wednesday.
“I was caught by surprise on the tariffs to Brazil and the exemption to Canadian pulp,” a Latin American producer source said, whose view was typical. “Tariffs are 10% in all products from Brazil. I have my accounting and legal team reviewing what that will mean to us and customers.”
US pulp exports to China: 34%
American market pulp producers have mostly enjoyed a long runway on prices as mills produce fluff and SBSK, as well as smaller volumes of NBHK and southern bleached hardwood kraft (SBHK). In a tariff-free setting, many have been able to ratchet up spot market prices while buyers try to insulate themselves from potential tariffs. In some cases, US SBSK spot market prices in recent months eclipsed NBSK.
This week, as fresh tariffs on Chinese imports went into effect, US producers are set to face a new crisis: 34% tariffs on all pulp exported to China. That will have a considerable impact on fluff pulp, SBSK and DP. In a similar reaction to new duties on EU pulp imports, the race is now on to get pre-tariff shipments to Chinese buyers.
“We’ve got a lot of interest from Chinese customers who want orders before duties. Unshipped orders are being held off to wait until the dust settles. It happened so quickly there’s hope it’ll change,” a US pulp producer contact said. “Americans did not expect a 34% retaliation. If it sailed after April 2, it’s already too late.”
The EU continues to mull over whether to apply counter tariffs on US imports of market pulp, and a decision is not expected until “mid-April,” in line with its guidance weeks ago. The US exports around 900,000 tpy of market pulp to the EU, mostly fluff pulp.
Brazilian BEK pulp producer Eldorado announced new price hikes for April sales, slating a $60 per tonne price increase in North America and Europe and a $20 per tonne rise in Asia, Fastmarkets reported. Eldorado’s move is similar to an earlier global move from Suzano. North American producers Alberta-Pacific and Thunder Bay Pulp and Paper also announced a $50 per tonne price increases on aspen NBHK.
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