European pulp prices erode further in February on slack demand and plentiful stocks

Both NBSK and BEK pulp prices drop in Europe with market sources mostly reporting soft demand due to quiet paper markets

After declines in January, prices for both the benchmark pulp grades slid further in February as demand remained soft while stock levels increased. Paper markets continued to struggle last month, sources said, with some reporting a worse situation than January in terms of order books, while others said they had seen signs of mild improvement. Either way, contacts reported a fragile market, with papermakers taking continued commercial downtime, further weighing on pulp demand.

While last month’s Finnish port strike initially raised some concerns about pulp supplies, contacts said that the relatively short duration of the industrial action, which was resolved within two weeks, meant there was no real effect on market dynamics.

NBSK price dips

Prices for northern bleached softwood kraft (NBSK) pulp dipped further in February, falling another $20-30/tonne, depending on starting point, market sources said. The latest declines left pricing for the long-fiber benchmark in a range of $1,370-1,390/tonne in February. Contacts said that little had changed from January in terms of market fundamentals, and several noted that the haggling for February business continued well into March.

“Sellers were initially going for unchanged prices based on claims about fiber availability problems in British Columbia and the idea that China would be buying up everything, but that’s not the case [in China] – there’s been no bonanza there,” a buyer said.

A seller who had closed most of his business in the $1,370-1,380/tonne range said that demand from customers really varied depending on their market segment. “Tissue, especially jumbo rolls, is running good to very good, while graphics are weak and specialty paper performance differs significantly by segment,” he said, reflecting the views of several other sources.

“The weak demand we saw in January continued in February, with no real improvement in any of the paper sectors, and March, at least so far, seems to be following the same pattern,” another seller said.

The situation in the printing and writing sector is pretty dramatic. We’re hearing of mills that are running at 30-40% capacity.

Most everyone agreed that the port strike in Finland that began on February 15, when stevedores walked off the job due to the lack of a new collective agreement, and which continued until March 1, ultimately had little or no impact on the market situation.

“The strike caused some resistance [on the part of sellers to drop prices] initially, but in the end it was resolved pretty quickly. There were some bottlenecks at ports, but nothing long-lasting that really impacted pricing developments,” a trader said.

Buyers indicated they would be pushing for further price decreases this month, and sellers agreed that they would be facing continued downward pressure. “Demand for pulp is down – you can see it in the statistics. The question is for how long? Many are banking on a quick recovery in China, but it’s not clear how that will play out,” a seller said.

The latest figures from Europulp showed pulp stocks at European ports jumping by nearly 14% month on month in January to 1,514,280 tonnes.

Meanwhile, Fastmarkets’ PPI Asia reported in early March that pulp prices in China were under continued downward pressure in part from cheap spot offers available “across the board for market pulp grades,” mainly from Europe and North America. At the same time, PPI Asia noted that “almost all the pulp manufactured in Russia for export is being sold to China due to sanctions imposed on Russia for its war on Ukraine […].”

Ilim alone reportedly increased deliveries of its products to China after a restructuring of its global marketing operations to a record 1.7 million tonnes last year, with pulp accounting for some 1.36 million tonnes of that.

At the same time, however, PPI Asia noted that pulp demand is expected to pick up in China following the country’s reopening. According to contacts, tissue and uncoated fine paper mills in the north of China have ramped up production to meet rising consumption as retailers restart operations and people return to restaurants, as well as the onset of the traditional peak March-April period for uncoated fine paper.

Another step down for BEK

The picture on the hardwood side of the market was clearer and the price drop bigger than on the softwood side. Here, bleached eucalyptus kraft (BEK) pulp prices fell by another $50/tonne in February, making for a $100/tonne drop since the start of the year and bringing prices to $1,280/tonne.

Many buyers started off February price talks looking for an even bigger reduction. “Negotiations were even tougher than [January], with some buyers asking for reductions of $80-100/tonne, but in the end, things settled at minus $50/tonne,” one buyer explained.

“We got $50/tonne [off] but it really should have been more. The pressure on paper pricing now is quite substantial. But falling paper prices are unlikely to improve sales,” another buyer noted.

The big question remains China. That’s where any real demand push will come from that could change the current dynamics.

“Printing and writing business is low, specialty paper is low, tissue has been doing well, but we’ve started hearing some concerns there, so there’s real downward pressure,” a seller said, adding that with continued volume reductions on the paper side, the situation this month was not looking any better.

Another source noted that there was “a lot of spot” volumes on the market at the moment and that with paper activity “not exactly booming,” this was only piling on the pressure on BEK prices.

With no sign of a turn in fundamentals this month, multiple contacts said that they expected another round of difficult negotiations and that another step down in pricing was likely for March.

This article was first published in our PPI Europe newsletter. Find out how you can access the latest price, news and market developments in Europe directly from your inbox by speaking to our team.

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