Capacity curtailments needed to improve global pulp market conditions in 2026

After extended downtime at a major pulp and paper producer in China helped drive up global pulp prices early this year, the rally proved unsustainable, with cyclically low prices and a weaker US dollar compressing producer margins.

If market conditions are to improve in 2026, capacity curtailments will have to drive it, according to Fastmarkets senior economist Patrick Cavanagh.

“Chenming idled 7 million tonnes of paper and board capacity to help drive up prices in early 2025 but the pulp price rally proved unsustainable,” Cavanagh said at the recent Fastmarkets North American Forest Products and International Containerboard Conference in Miami.

China’s 75% US BSK import decline

As China’s pulp market cooled off in the spring and a trade war between it the US led to import tariffs, bleached softwood kraft (BSK) markets became oversupplied, he noted. A 10% tariff on US pulp imports decimated the export market to China.

In July, BSK imports from the US totaled just 22,000 tonnes, which marked the lowest monthly total since May 2026. The 75% year-over-year decrease corresponded to 720,000 tonnes on an annualized basis.

For US producers, the circumstances have shifted drastically in 2025, Cavanagh noted. During a time when US exports to China toppled, American producers faced aggressive competition from global competitors. Canadian producers avoided China’s weak pulp market by shipping more spot tonnes to the US market. Nordic producers rushed pulp into the US to avoid the ebb and flow of tariffs. And higher US prices combined with excess bleached hardwood kraft (BHK) supply led to renewed focus from Latin American producers.

“Net prices in the US are higher than elsewhere, which draws Brazilian and Uruguayan producers. Canada is pushing into US spot markets to avoid softness in China. And the trade war, somewhat ironically, hurt the US industry,” Cavanagh said.

675,000 tonnes of excess BSK supply

In September, the US waived 10% import tariffs on Latin American pulp imports and 20% duties on pulp from the European Union. That might have reduced a trend in which offshore producers undercut domestic ones on price to compensate customers for paying import tariffs, but it also opened the flood gates for additional supply.

Citing the latest Pulp and Paper Products Council (PPPC) statistics from August, Cavanagh described the market as “a tale of two grades.” BSK shows far more oversupply than BHK, which he showed as slightly above balanced at a seasonally adjusted 43 days of supply. In contrast, BSK at a seasonally adjusted 45 days represents 12 days’ worth of oversupply — or in excess of 675,000 tonnes.

Integrated pulp capacity surge

When international BHK prices to China bottomed at $490 per tonne net CIF, it led to a surge in Chinese domestic producers to buy instead of making pulp with imported chips. That trend may not last long, however, because when prices eclipse the cash cost of Chinese producers, they tend to swing back to producing and selling, going from a net buyer to net seller.

Integrated wood pulp capacity has surged dramatically higher in China. According to slides Cavanagh shared with delegates at the conference, integrated pulp capacity has doubled in just four years, expanding by 15 million tonnes to over 32 million tonnes annually. The trend is not waning in 2026-2027, slides showed, which indicates that China’s new pulp capacity will eat into imported pulp demand in the coming years.

The supply/demand picture could change in 2026, with less new capacity globally ramping up than recent years to pressure demand. BHK capacity increases overall are easing from 2025-2027, while significant BSK capacity is at risk of closure, according to Cavanagh. With current BSK prices remaining under pressure, capacity curtailments will likely occur in the coming months. If so, that will correct the current oversupply and lead to improved market conditions in 2026.

• Thunder Bay Pulp & Paper will exit the northern bleached hardwood kraft (NBHK) market in 2026 and become a benchmark northern bleached softwood kraft (NBSK) pure play, industry contacts told Fastmarkets. The market pulp mill, which has a listed capacity of 330,000 tonnes per year according to Fastmarkets Mill Asset Database, has declined any requests for product (RFP) queries from North American buyers of NBHK, according to several industry sources. An industry contact estimated the mill would produce 300,000-310,000 tonnes of exclusively NBSK market pulp in 2026. Back in 2023, Atlas Holdings established Thunder Bay Pulp & Paper as an independent pulp and paper operation, joining Atlas’ global family of manufacturing and distribution businesses. The mill is a local landmark in Ontario, operating since 1919.
• Bracell, which has been reducing bleached eucalyptus kraft (BEK) output while running dissolving pulp (DP) recently, will make a substantial pivot in 2026. The company announced on November 6 that it would dedicate one full production line to make DP. That same production line can produce up to 1.5 million tonnes per year of BEK. The switch to cease BEK production at the line means that it will remove an additional 600,000 tonnes of BEK production in 2026, the company said in a statement. The strategic decision underscores its “commitment to meeting growing demand in the viscose and lyocell fiber market.”
• The September 2025 and third-quarter World-20 pulp statistics report is being postponed with a new tentative publishing date of November 13, the PPPC announced. Originally scheduled for this week, ahead of London Pulp Week, the PPPC said in a statement that “the delay is related to the late reporting of the Brazilian hardwood data by IBA, the Brazilian Association.”

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