Starting 2025, concerns about potential tariffs left North American pulp market participants on edge. As they closed January prices and negotiated new orders for February, the landscape could starkly change.
In the European pulp market, pulp producers have announced price increases for both bleached eucalyptus kraft (BEK) pulp and northern bleached softwood kraft (NBSK) pulp. However, buyers were mounting varying degrees of resistance.
As we look ahead to the rest of this year, market-related downtime will play an essential role in the industry. Downtime will continue into the first half of 2025, especially for hardwood, as new assets ramp up their output. Demand growth is expected to catch up to supply growth by 2026, which will tighten market conditions.
Pulp prices firm at the start of 2025
Since the start of the year, pulp prices in the Chinese market continued to show signs of firming. Domestic resale, futures and net import prices all registered increases prior to the Lunar New Year holiday. Since the end of the holiday, prices have retained their recent gains, and we predict that buyers will soon need to increase purchases.
The ongoing absence of the majority of Chenming’s paper and board capacity continues help stabilize downstream markets, especially during the seasonally weak holiday period. Without a firm restart schedule for Chenming’s idled paper machines, we see increased upside risk for pulp prices as the industry enters a strong maintenance downtime season. This should help pulp producers reduce the existing inventory surplus.
In the US and Europe, higher pulp discounts have helped reduce prices on a net basis. A rising tide in China would likely quickly translate to higher prices in Europe and North America.
Labor strikes remain a threat to the pulp outlook in 2025
Labor strikes played a pivotal role in 2024, as the threat of strikes had wide-reaching consequences for the global pulp market. In March and April, over 400,000 tonnes of pulp production was lost due to transportation worker’s strikes in Finland. Additionally, 100,000 tonnes of shipments in Chile were impacted by strike action in April and May.
Although summer strikes by Canada’s two major railroads, Canadian National (CN) and Canadian Pacific Kansas City Ltd (CPKC) were ended after just 24 hours, the planned action halted all Canadian market pulp shipments.
Preparations for the strikes began months before, with market pulp producers implementing contingency plans developed since May 2024. For buyers, that included shoring up their pulp inventories in advance.
In February, a strike called by one of Finland’s largest trade unions, Teollisuusliitto (the Industrial Union) began at midnight on Sunday February 2, hitting operations at four plywood units and a pulp mill of one of the country’s largest forest industry groups, UPM. It was then called off one week later.
Although the industrial action by the trade union did not directly target the pulp mill, the pulp supply chain was still impacted. A spokesperson from UPM told Fastmarkets that the pulp mill’s operations depend on the supply of chemicals from Finnish chemicals major Kemira, which was affected by the strike. This meant supplies of inputs to the Kymi pulp facility had stopped.
Imported pulp prices would be impacted by potential tariffs under the Trump administration
On Saturday, February 1, President Trump signed an order to impose 25% across-the-board tariffs on Mexican and Canadian imports, as well as a 10% tariff on Canadian energy.
In response, Prime Minister Justin Trudeau announced that Canada would introduce retaliatory tariffs against the US. This signalled the potential start of a trade war.
Canada is the major supplier of softwood pulp into the US market, followed by Sweden and Finland. On the hardwood side of the market, Brazil is the largest supplier, followed by Uruguay and Canada.
In 2024, exports from North America rose by 155,000 tonnes, whereas in Europe exports dropped significantly. This was primarily due to the strikes and disputes in the region throughout the year. Should the announced tariffs be enacted, the ripple effect on the global supply chain would lead to extreme volatility.
Rising demand in China will play a key role in the pulp market
Market sentiment in China was weighing on pulp and paper consumption in 2024, with consumer confidence at a record low. Employment confidence declined over the course of 2024 alongside a slump in the Chinese property sector. These two factors weighed heavily on consumer confidence.
China is the largest consumer of market pulp. It accounts for more of the global market pulp demand than Europe, North America and Latin America combined. As a result, consumer confidence in the region is a major factor in the global landscape.
This lower demand has led to a 7% year-on-year decrease in imports into the market, in part due to the industry’s shift to wood chip production. The cost to produce hardwood pulp in China is now above imported BHK prices, reducing demand for market pulp and benefiting integrated producers.
In 2025, the market could begin to recover as the benefits from the government’s stimulus package take shape. The policies are aimed at improving domestic consumption, which could further fuel a restocking rally for pulp and paper consumption.
Want to learn more? Access our data story to understand the numbers behind our forecast for the global pulp market in 2025.
