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Prices for pulp imports look set to creep up in China across the board, driven by supply disruptions and shortages with customers.
Canadian suppliers led the way with hikes, in part responding to lingering high futures levels on the Shanghai bourse.
The Ilim Group followed earlier this week, announcing rises of $50 per tonne for bleached softwood kraft (BSK) pulp and $60 per tonne for bleached hardwood kraft (BHK) for March shipments. Other sellers are expected to raise prices, but are likely to be less aggressive, particularly for BHK.
BSK futures prices for the most traded May contract (sp 2205) settled at ¥6,370 per tonne on Thursday, a surge of ¥386 per tonne over the past three weeks.
That is equivalent to $874 per tonne after deducting 13% VAT and ¥120 per tonne logistics costs.
Canadian northern BSK (NBSK) has clocked in this week at $860-890 per tonne, climbing $30 per tonne. Suppliers have not yet announced prices for Nordic NBSK, but they are expected to follow Canadian levels up. For the moment Nordic NBSK prices remain unchanged at $810-850 per tonne.
The Canadian and Nordic situation has taken the mid-point for the grade to $852.5 per tonne, up $14.5 per tonne.
Resale NBSK is fetching ¥6,508 per tonne, up ¥168 per tonne. The level is equivalent to $889 per tonne after removing VAT and ¥150 per tonne logistics costs, and is more costly than NBSK imports and BSK futures as of February 17.
Prices for other import grades have been steady, with radiata pine and Russian BSK at $800-840 per tonne and South American BHK at $630-650 per tonne.
Supplier contacts said that, with Ilim setting the precedent, other sellers are likely to seek hikes of around $50 per tonne for BSK when announcing prices for March shipments.
However, views are divided over planned BHK hikes.
“The $60 per tonne rise at Ilim is too aggressive for buyers. We are considering a modest hike which can give customers room to implement P&B price increases. That is more sustainable,” said a major producer.
The supply trouble stems from ongoing shipping delays and from downtime at pulp mills in Canada and South America. The stoppage at Canadian plants is due to logistics issues and was mostly unplanned. It impacts NBSK and bleached chemi-thermomechanical pulp (BCTMP).
Most of the downtime at South American mills was arranged previously for maintenance, running over the first half of this year. Producers there aimed to avoid excess on the market from the startup of massive new capacities in the region.
Fastmarket’s publication PPI Latin America reported that more than 250,000 tonnes per yr of BHK could be removed from the market in Q1, as Suzano, Klabin, Arauco and Montes Del Plata plan stoppages on nine pulp lines at several facilities in Brazil, Chile, and Uruguay.
In addition, Bracell, which now runs two swing lines capable of producing BHK and dissolving pulp (DP) at its Lençois Paulista mill in Brazil with a combined capacity of 2.8 million tonnes per year, has planned downtime in April and May.
A contact at Asia Pacific Resources International (APRIL), which markets Bracell’s products in China and elsewhere in Asia, said the stoppage in April is for the start of DP trial runs on one of the two lines at the plant.
The downtime in May will see equipment suppliers go to the site to check the lines in a contracted performance guarantee service.
“Altogether, we estimate that the downtime will result in curtailments totaling 150,000 tonnes,” the source indicated.
“Given the current shipping crunch, we reckon any BHK we give to Chinese buyers at present is only likely to be shipped out from April, when the DP trial runs take place.
“That could lead to a situation we’d like to avoid, as shipment delays could spin out to June, with cargoes arriving in China in August.”
In the end, the source said, Bracell decided to skip its BHK offers to Chinese customers this month.
Facing climbing prices, large mills have been forced to accept hikes. But they have cut requested tonnages since last November, when levels began to go up. Their pulp inventories have been depleted due to ongoing shipping delays.
Small and medium-sized plants can not afford expensive pulp and have either bought costly resale fiber or gone out of action. Traders face a similar plight. After selling on their stocks for several months with little opportunity to replenish them in full, their inventories have dwindled.
“Previously, merchants could easily sell up to 1,000 tonnes in a single deal to clients. That has dropped to 100-200 tonnes due to the low availability of resale pulp,” said a major trader.
“The core problem is stagnant paper and board (P&B) prices in the Chinese market.
“In the USA and Europe, rising pulp prices have been shored up by high P&B levels. Whereas in China, P&B has stayed low for a year because of the domestic economy being in a downturn induced by the Covid-19 pandemic.”
Sources indicated that big P&B producers are pinning their hope of price hikes for their products to lofty fiber costs.
A dominant BHK seller pointed out that prices for tissue jumbo rolls have edged up ¥200-300 per tonne ($32-47 per tonne) in the domestic market due to protracted downtime on tissue machines since before the Lunar New Year holiday.
“After the Beijing Winter Olympics ends, tissue mills in Baoding are expected to restart their machines. They need to get volumes to cover production needs but will face a pulp supply shortage and high prices,” he added.
A major trader said merchants are torn about continuing to get import tonnage, believing prices are approaching a peak and that large volumes will arrive in China when logistics problems ease.
“My company has continued to get some import volumes while seeking hedging and arbitrage opportunities on the Shanghai Futures Exchange to lower the risks in stocking up on costly pulp,” he pointed out.