European BEK pulp prices drop again, NBSK prices under pressure

“Demand is weaker than expected. If they are taking unplanned downtime, they face a new situation, customers are not taking as much volume [as estimated],” one buyer said.

Bleached eucalyptus kraft (BEK) pulp prices took another substantial tumble in Europe in August, falling by some $100/tonne, as buyers eyed the large price gap with the Chinese market. The drop marks the second consecutive month of price decreases in a hardwood pulp market that has seen new capacity come online over the summer.

Buyers are also applying downward pressure to prices for northern bleached softwood kraft (NBSK) pulp, though the price cuts sought are not as large as on the hardwood side. Here, however, unchanged prices for NBSK imports into China and plans for downtime in Europe are complicating the picture and prolonging negotiations.

Before pulp prices started sliding in July, they had seen total increases of some $640/tonne on the hardwood side and $470-490/tonne on the softwood side over the last year. Now, buyers are keen for a reversal.

“Prices are too high. That’s a valid reason, right? Too high in absolute terms, too high compared to China, too high compared to paper demand. They just have to come down. They went up too [much], especially on the hardwood side. In the end, it’s supply and demand, but also affordability,” one buyer said.

As for demand, contacts noted that the tissue segment continues to do well, and some also gave positive feedback on packaging. The picture was more mixed in the specialty paper sector. Demand in the printing and writing paper segment was said to remain the weakest.

BEK prices plummet 

Some sources said they were expecting August prices to drop by the same $70-80/tonne seen in July. Once talks started, a triple-digit decline was applied in discussions that progressed quite quickly afterwards. Prices for BEK pulp fell by $100/tonne in August, down to $1,260-1,270/tonne.

“There are many suppliers that are quick to close deals to secure volumes. It’s a game of [musical] chairs right now. You cannot wait too long, then you might be a bit in trouble,” a BEK seller said.

The main reasons for the decrease are the price drops seen in other regions, most notably China, but also in markets closer to Europe, such as North Africa, the Middle East and Turkey, as well as a swing in the global supply and demand balance in favor of buyers.

At the beginning of August, prices for South American bleached hardwood kraft (BHK) pulp plunged by $110-120/tonne to $620-640/tonne in China, slipping by a further $20-40/tonne to $580-620/tonne in the second half of the month, according to PPI Europe’s sister publication PPI Asia.

Several European buyers argued that the gap between net prices in China and Europe had grown far too large.

“How would you explain that China buys at $600/tonne and in Europe you buy at [almost] $800/tonne? It’s not sustainable or acceptable,” one buyer remarked.

Slower talks for NBSK

After declines of $20-40/tonne in July, buyers are again demanding price reductions for NBSK pulp. In August, they pushed for price cuts of up to $50/tonne, sometimes more, while some sellers have responded that prices should not change at all.

By the end of Wednesday, September 4, some contacts reported settling prices with decreases of up to $40/tonne, but there were also cases of unchanged prices. Our price range ended up at $1,560-1,600/tonne. However, negotiations remained ongoing in many cases.

One reason for the lower pressure on softwood is the development in China. There, prices for NBSK from Canada and the Nordic region have remained stable after falling by $60/tonne to $740-760/tonne at the start of August as Chinese buyers have increased their imports, PPI Europe’s sister publication PPI Asia reported.

Chinese prices for resale NBSK have instead climbed from RMB 6,168/tonne ($866/tonne) in early August to RMB 6,280/tonne at the end of the month. Excluding the 13% value-added tax and a logistics fee of RMB 150/tonne, this is equivalent to roughly $762/tonne.

Furthermore, market observers are expecting a reduction in supply in Europe both due to the regular maintenance downtime period approaching and plans for market-related downtime at three pulp mills in Finland.

Late last month, UPM announced that it would take three weeks of downtime at its 870,000 tonne/yr Kymi NBSK and birch pulp mill and its 700,000 tonne/yr Kaukas NBSK pulp facility due to weak demand. At the Kaukas mill, the shutdown will start on September 9, while production at the Kymi plant will be wound down on September 23.

Metsä Fibre has also said it will implement temporary layoffs at its 690,000 tonne/yr Joutseno NBSK mill, as required by market conditions, for up to 90 days between this September and January next year. It will specify allocation, amounts and dates of layoffs by the end of the year.

Contacts interpreted these announcements as signs of lower demand for pulp, particularly in China, and high fiber costs in Finland. But while NBSK sellers often said the Finnish downtime could help halt or limit the NBSK price reduction, many buyers considered it a sign the market had weakened.

“Demand is weaker than expected. If they are taking unplanned downtime, they face a new situation, customers are not taking as much volume [as estimated],” one buyer said.

In Canada, Canfor Pulp said it would close a 300,000 tonne/yr line at its Northwood NBSK mill in British Columbia in August. While very little Canadian NBSK is sold to Europe, contacts expect the shutdown to have an indirect impact, as North American and Asian buyers might become increasingly interested in European NBSK pulp.

“Canada has its troubles with fires, the bark beetle, logistics and a relatively old mill base,” an NBSK producer said. “I think we will see more European NBSK going to North America. And given that there are no announcements of NBSK startups in Europe, if we move more volumes to North America, there will be less left in Europe.”

In late August, Canada also faced a long-expected but ultimately short-lived strike and lockout at its two major railroads. While the strike was described as important for North American pulp buyers, with an impact also on the Chinese market, one contact called it “a blip” for Europe.

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