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Over the two weeks to Thursday May 23, sellers have raised pulp price offers for northern bleached softwood kraft (NBSK) pulp imported from Canada and the Nordic region to $850-870 per tonne in the Chinese market.
Traders, futures investors and both small and medium-sized mills brushed the rises aside, citing static paper and board demand and pricing in the domestic market and a lack of arbitrage opportunity on the Shanghai Futures Exchange.
The most-traded September BSK contract had traded sideways in the past two weeks on the bourse, with prices fluctuating in the range of RMB 6,200-6,500 per tonne, equivalent to $758-795 per tonne, excluding 13% VAT and RMB 120 per tonne in logistics costs. The contract settled at RMB 6,386 per tonne on May 23, equivalent to $766 per tonne minus VAT and logistics costs.
Traders and futures investors were keen on buying resale NBSK for futures trading and the grade’s prices crept up to RMB 6,598 per tonne this week from RMB 6,495 per tonne last week, a rise of RMB 103 per tonne.
That price was equivalent to $788 per tonne, after deducting VAT and RMB 150 per tonne in logistics costs. It is lower than the price of NBSK imports, not attractive to traders who stock up the grade for selling-on to domestic buyers.
NBSK supply is relatively tighter than BHK due to supply disruptions and a shipping crunch.
But speciality paper mills were reported to have paid around $850 per tonne to get some premium Canadian NBSK tonnage, although prices for such deals are not included in Fastmarkets’ assessments.
Large mills that signed long-term contracts have accepted sellers’ proposed rises and acquired volumes consistently.
“NBSK supply is relatively tighter than that of bleached hardwood kraft (BHK) pulp due to supply disruptions and a shipping crunch. We are paying $830-840 per tonne for the grade,” a big-volume end-user buyer said.
The availability of NBSK was restricted in the aftermath of a strike in Finland in March-April, an explosion at Metsa Group’s Kemi mill in the country and Canfor Pulp’s announcement on May 9 that it would indefinitely close a 300,000 tonnes per year NBSK line at its Northwood mill in Canada.
Meanwhile, costs of shipping pulp cargoes in containers were said to be rising and shipment delays have increased on routes from the Americas and Europe to Asia because of the Red Sea diversion and drought in the Panama Canal, according to both seller and buyer contacts.
Customers in China and South Korea complained that they have not yet received BSK and BHK cargoes they ordered in February.
In the end, prices for NBSK imports from Canada and the Nordic region were assessed at $810-840 per tonne on Thursday, with the mid-point for the grade at $825 per tonne, rising by $15 per tonne from a fortnight earlier.
Most producers, including Suzano, Bracell and Eldorado, announced a rise of $30 per tonne for South American BHK June orders in China and other Asian markets.
Chinese buyers stepped up their resistance when sellers were pushing for increases of $30 per tonne for the grade’s May orders and slashed purchase volumes significantly.
They were taken aback by suppliers’ relentless push for another $30 per-tonne rise in the face of growing refusals by Chinese customers. The implementation of May’s $30 per tonne rise has taken prices for South American BHK to $740-750 per tonne.
In the meantime, Bracell’s two Asian affiliates, Asia Pacific Resources International (APRIL) and Asia Symbol, have followed suit, seeking rises of $30 per tonne for BHK in China and other Asian countries.
The APRIL group ascribed the continuing rise in part to Bracell’s decision to switch one of the two BHK lines at its mill in Sao Paulo to produce dissolving pulp in August for 30 days. The plant has total BHK capacity for 2.1 million tpy. The production switch was expected to remove 140,000 tonnes of BHK from the market, Singapore-based APRIL said.
Asia Pulp & Paper (APP) has also announced an increase of $30 per tonne for BHK exported from Indonesia to other Asian markets, citing rising logistics costs and production constraints stemming from an incident at the Jambi mill in Indonesia.
An explosion at the site’s back-up boiler on April 28 forced a shutdown of its 1.1 million tpy BHK line and tissue machines for more than two weeks.
An APP spokesperson said that all Jambi’s pulp and paper production lines have resumed operations and the pulp production loss has amounted to around 40,000 tonnes.
A major Brazilian producer acknowledged that Chinese customers were suffering, being squeezed by rising pulp costs and static, low paper and board prices stemming from overcapacity.
“At the end of last year, everyone projected that BHK prices would fall this year, because of new capacity coming online in South America last year and this year. Not only Chinese mills and traders, but also South American producers, including us, were destocking,” he said.
“However, pulp demand in North America and Europe began to recover in January and much bigger rises than [those in] China were implemented in the regions,” he added.
“The upward momentum is continuing, resulting in net South American BHK prices at least $100 per tonne higher than in China. Meanwhile, producers’ pulp inventories have been low because of the strong demand from those two regions,” he said.
Another Brazilian supplier concurred, saying that the shipping delays and the tight BHK supply situation were coming from producers’ high backlogs.
“We use break bulk vessels to ship BHK to China and delivery has not been affected by the Red Sea crisis,” the second Brazilian producer contact said. “But we have a lot of backlog to clear, [and] production at our mill in Brazil couldn’t keep pace with orders and this caused shipment delays.
“There were a few times,” he added, “when bulk vessels arrived at the loading port [and] we didn’t have cargoes ready and had to let the empty vessel sit at the dock for more than 10 days.”
This article was taken from PPI Asia, Fastmarkets’ paper, packaging and fiber market news and prices for Asia. Speak to our team to learn more about our news and market analysis, prices, forecast and more.