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North American market pulp supplies are abundant, spot market availability remains widespread, and this year’s oversupply has now driven down prices in softwood and hardwood kraft every month so far in 2023. As the year reached its halfway point, June preliminary effective list prices fell $60-120/tonne, market participants told Fastmarkets’ PPI Pulp & Paper Week.
While pricing momentum has continued eroding in the mature markets of North America and Europe, hardwood has some upwards momentum in Asia, where producers successfully lifted prices on June allotments and Suzano, the world’s biggest producer of bleached eucalyptus kraft (BEK), announced a $30/tonne increase, effective with July business. If successfully implemented, it would mark a second straight monthly hike.
The Asian hardwood bounce left North American buyers unconcerned because US markets are flush with excess supply across key grades of bleached hardwood kraft (BHK). Also, benchmark northern bleached softwood kraft (NBSK) might’ve recently seen less erosion in offshore markets such as China, but levels domestically remain under pressure.
Preliminary June US NBSK effective list prices was down $60-100/tonne, according to P&PW’s mid-month survey. Southern bleached softwood kraft (SBSK) also dropped $60-100/tonne.
“The market is still pretty depressed. There’s not a lot of business to be had,” said a market participant regarding NBSK and SBSK markets.
Southern softwood customers can use NBSK and they are clearly using SBSK because of the price delta. In markets like this, you’ll see NBSK guys chasing down after the SBSK prices.
This month, Canadian NBSK producers have moved spot tonnes in bigger lots than in the spring, and some decided to ship more output to domestic buyers as a way to reduce net prices with contract customers. That resulted in contract and spot markets getting blended so that paring out the differences became murky. As a result, some producer sources reported declines as small as $50/tonne and buyers reported drops of more than $100/tonne vs last month.
In US NBSK spot markets, prices tumbled $30/tonne for net delivered to the US East and Midwest, according to P&PW surveying through June 16. Spot NBSK prices are now down a combined $230/tonne year-to-date. Fresh erosion occurred as some Canadian mills redirected output away from China and into US markets.
“West Coast NBSK mills pivoted more to North America. Prices are down and producers say they believe it’ll bottom in the mid $600s. I believe it won’t bottom until the low $600s,” said a buyer contact regarding spot prices. As for contract business, the source added: “The list will drop more than spot.”
North American buyers have become increasingly hawkish about the differences in net prices on contracts vs spot markets. Some, who’ve become frustrated at how quickly net prices in spot markets tumbled while contracts edged down more gradually, have sought to redo their annual contracts that went into effect in January.
As a comparison, the US NBSK list is down $270-310/tonne year to date while US NBSK spot prices dropped the $230/tonne. Since a $1,720/tonne list was recorded in December 2022, the list might’ve dropped more than spot but because discounts this year average 40-47% depending on grade, the net price decreases pale compared to what spot buyers have been able to land.
In fluff pulp markets, preliminary US and European effective list prices slid by $70-90/tonne, according to P&PW surveying. Prices slumped on a major supply bulge at American pulp mills in the US South during a time of ongoing erosion in China, Middle East/North Africa (MENA), and other emerging markets.
Global fluff market erosion has continued on excess supplies. While American and European fluff consumers don’t tend to substitute with other grades, a surge in substitution in China has reduced offshore demand growth, resulting in more supplies domestically. That’s in part why International Paper is set to take market-related downtime at its Pensacola, FL, fluff pulp mill, market contacts said.
US bleached hardwood kraft (BHK) markets are more depressed than BSK because there’s little demand from printing and writing papermakers as well as specialty papermakers. In fact, as North America’s paper industry continues to trudge along amid weak demand, sources say there’s a lot more market-related downtime than people think. That in turn slashed buying of northern bleached hardwood kraft (NBHK) and southern bleached hardwood kraft (SBHK).
In the tissue/toweling sector, the biggest consumer of imported BEK, buyers are taking on considerable volumes of spot tonnes but only at low prices. Similar to NBSK, many consumers are taking spot tonnes on the condition that producers sharply pare down their contract prices as well. That has resulted in some of the widest spreads in surveyed price inputs from market participants.
“The producers are doing things like reducing contract tonnes and augmenting (monthly volumes) with spot tonnes to bring down that average price. I’m seeing my eucalyptus pricing down,” said a BEK buyer whose experience was typical.
Imported BEK is spilling over in US ports as an overflow of supplies at mills coincided with increased number of Latin American producers competing for business. In some cases, producers sent new shipments to the US on the presumption that either contract or spot buyers would quickly snap up the tonnes, but when tonnage arrived American buyers declined to take the tonnage.
Before a new shipment arrived, port authorities expected producers to clear out their currently bulging inventories, pressuring suppliers to move tonnes in what’s essentially become a firesale. As a result, some of the latest spot BEK prices are below North American-produced BHK, according to P&PW data.
While US BHK markets are sluggish and prices continue to drop, in China and other Asian markets, Brazilian producer Suzano is going for back-to-back price hikes. Sources confirmed to P&PW that the firm told Asian customers it’ll raise BEK prices $30/tonne, effective with July orders. That’s the same amount it hiked BEK on June allotments. While Suzano was the only producer to officially announce a June hike, various producers in the BEK sector implemented $30/tonne hikes, sources said.
Chinese market participants aren’t so sure that a July hike will go as smoothly for producers. Tailwinds include an apparent bottom in the net CIF range a month ago that sparked many Chinese to switch from net sellers to net buyers, and the Chinese government’s recent switch into a stimulation pose, with interest rates reportedly down from 2% to 1.9%. But headwinds include a weak paper and board market, oversupply, and volatility in China’s local prices.
“I have heard Suzano’s new announcement but have no concerns about it since the price of (BHK) in domestic markets is dropping back to RMB200,” said a Chinese market participant, referring to an RMB price decline that’s equal to $30/tonne. “The real demand is very weak.”
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