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Pulp prices are facing a stunning freefall in China after global suppliers and Chinese customers met each other to kick off talks at Shanghai Pulp Week.
During conference, each supplier organized meetings with their clients separately, with the intention to break the logjam that had led to buyers putting a pause on buying and sellers holding back on offers over the past few months.
However, customers drove discussions about the aggressive price drops during the talks, which spread fast and fierce and threw a wrench into the ongoing negotiations. This resulted in the week ending mostly with unconcluded business and unsettled prices.
Most suppliers were shocked at the magnitude of the price declines customers were seeking. They would need time to process the situation.
Talks continued this week. Some progress has been made and prices for major grades have settled, despite just a few preliminary conclusions, reported several suppliers.
Arauco has been one of the few producers announcing pulp prices in China, while most of other sellers have held back. The Chilean producer revised prices twice for March orders, illustrating market volatility.
Arauco announced at the end of February their offer prices for radiata pine, unbleached softwood kraft (USK) pulp and bleached hardwood kraft (BHK) pulp at $920 per tonne, $770 per tonne and $730 per tonne, respectively.
With clients giving the cold shoulder to initial prices, Arauco have had to revise prices twice, dropping to $815 per tonne for radiata pine, $670 per tonne for USK and $620 per tonne for BHK.
Arauco’s pricing of radiata pine and USK is usually regarded as a benchmark and its final offer prices for them motivated other sellers to immediately price their own softwood products, including northern bleached softwood kraft (NBSK) pulp.
With Arauco cutting radiata pine by $105 per tonne, sellers followed the lead and dropped Nordic NBSK levels drastically. Meanwhile, the influx of spot NBSK tonnage from Europe has continued unabated, with prices offered at $800 per tonne.
Nordic NBSK eventually experienced a drop of $10-80 per tonne over the past two weeks, clocking in at $800-820 per tonne.
Canadian producers have nonetheless continued to hold back from giving offers, leaving assessed Canadian NBSK levels intact at $910-930 per tonne.
The mid-point for NBSK has thus come to $865 per tonne, falling by $23 per tonne.
Prices for the currently most popular BSK May futures contract saw a dive of RMB 276 per tonne, settling at RMB 5,704 per tonne on Thursday, which is equivalent to $718 per tonne excluding 13% VAT and RMB 120 per tonne in logistics costs.
Resale NBSK has plunged RMB 330 per tonne to RMB 6,550 per tonne, equivalent to $823 per tonne, excluding VAT and RMB 150 per tonne in logistics costs.
Radiata pine has closed in at $795-815 per tonne, falling by $45-75 per tonne. Russian BSK has plummeted by $150 per tonne to $700-750 per tonne, according to buyer contacts.
Major Brazilian producers priced South American BHK at $680-700 per tonne in their initial offers to clients. But buyers brushed these offers aside in view of massive BHK tonnage from new capacity coming to China.
Arauco has begun to offer prime BHK grade from its 1.56 million tonne per year MAPA project with deliveries in May.
In the meantime, customers were told that UPM has postponed its 2.1 million tpy Toros BHK mill in Uruguay from end March to end April. The delay has dampened the market, which is clouded by the uncertainty stemming from several changes in startup schedules with those two new BHK plants.
Major Chinese customers who own in-house BHK production were thought to be reluctant to see South American BHK prices tumbling and were lured by sellers with extra discounts for the imported BHK.
Other big-volume clients, mainly tissue makers, are mostly not integrated and pushing for big cuts most aggressively.
South American BHK has ended up settled at $600-630 per tonne, down $100-110 per tonne.
Big-volume buyers, including integrated customers, have reportedly continued to hold back on buying.
I believe this is just the beginning of the price collapse.
“There will be more drops coming until the dust is settled, meaning until the uncertainty about upcoming new capacity is clear and additional volumes get allocated,” said a buyer source.
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