BEK pulp prices continue to climb in Latin America amid low availability for spot deals

Soaring global pulp prices and tight supply are pricing out spot deals and smaller mills

Clients wanting to ensure deliveries are just one of many factors pressuring pulp prices higher in May, sources told Fastmarkets, citing logistical problems, strong demand across the board, low inventories, unplanned stoppages and delays in new capacities coming online.

No spares for spot offers

Latin American bleached eucalyptus kraft (BEK) pulp producers reported that sales continued at a strong pace amid low availability for spot deals.

Buyers that do not have contracts and are now facing problems obtaining fiber.

“We don’t have spot volumes for markets that are far away, such as the Middle East, and also not for regional sales in Latin America,” a source said.

Several suppliers confirmed that they reduced sales for Latin American clients without contracts, while a few also reported zero spot transactions for the region. “We don’t have spare volumes to be offered. We are working to keep serving our regular contracts well,” a contact said.

Fresh round of global price hikes

Fastmarkets’ price survey found BEK traded at $920-950 per tonne CIF in Latin America in May, up by $30-50 per tonne compared with April and 14.7% higher than a year ago.

In Brazil, prices that follow the European index moved to $880-1,200 per tonne, 27.2% higher than a year ago, although some reported that discounts had increased slightly, with local buyers struggling to pass on high fiber costs.

But the price uptrend is not over yet, sources said, noting that another round of global price hikes is expected to take effect shortly.

Mainly due to supply market fundamentals, Latin American BEK suppliers announced new price increases for June, raising prices by $30 per tonne in China, $50 per tonne in Europe and $60 per tonne in North America.

Those increases put the new target list prices for BEK pulp in Europe and North America at $1,350 per tonne and $1,580 per tonne respectively.

A source said that buyers continue to fear a lack of supply and are already planning purchases that will not arrive until September in some markets.

“Demand in Asia is good and inventories are low, with resale prices moving up because of that. The lockdowns are easing down there and recovery can take place quickly,” that source said.

There is nothing we can do; there is no pulp, and spot prices exploded

“In some markets, spot prices are higher than $1,100 per tonne. In Latin America, there are volumes by trucks that are still costing much lower than that, but the problem is that no one has volumes to offer,” a source said.

A market participant commented that despite difficulties in sourcing white recovered paper in Brazil, tissue producers are desperately trying to find alternatives for pulp that can ease costs.

“I’ve heard of tissue mills that are even trying to use white #4 to produce recycled paper, which is the worse category in terms of contaminants and not usual for tissue. They are trying to survive with that,” that source said.

Tissue producers in Brazil have been pushing higher prices on supermarkets since the beginning of 2022 and are preparing to set new increases, a contact said.

“Costs are mounting up, but demand is not good yet, so at the end of the day some players accept lower prices in order to keep machines running, which makes the process of passing on price increases so hard here,” a source said.

A contact noted that several tissue producers in Latin America do not have enough working capital to plan ahead when building their inventories and lost the opportunity to buy pulp at lower prices.

“In Brazil, almost all pulp negotiations follow the European PIX index of the previous month with the average exchange rate of that month, so we all knew that prices would be higher in June after the dollar started to appreciate back and global prices move up. Only a few, however, could increase their inventories a little bit, as many don’t have cash,” a contact said.

Higher domestic prices to come despite currency exchange rate softening the hike

Indeed, the currency exchange rate helped local buyers in the past months, as the BEK pulp price in Real terms dropped from 4,800 Reais per tonne in January to 4,186 Reais per tonne in May. In June, however, the combination of currency volatility and higher prices in dollars will move prices to 5,570 Reais per tonne, Fastmarkets’ estimates show.

A source indicated that the inflation of costs for non-integrated producers has been paving the way for further consolidation in the tissue market this year, with large producers such as Suzano and CMPC gaining market share.

Pulp producer Bracell is also planning to add tissue capacity to its operations in order to take advantage of tax return benefits and to maximize its profitability in Brazil.

“All pulp mills in Brazil need paper production to take full advantage of tax returns, so I believe we will see more acquisitions taking place in the tissue market, making the life of small mills even harder,” a contact said.

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