April prices for bleached eucalyptus kraft (BEK) pulp in Europe have fallen by about $40 per tonne due to uncertainties created by US import tariffs and weakening pulp prices in China, sources told Fastmarkets.
Negotiations for northern bleached softwood kraft (NBSK) pulp prices are meanwhile still ongoing.
US tariffs and their impact
The US tariffs currently stand at 10% for imports from EU and Latin American countries and at 145% for China. The pulp and paper sectors with the most US export exposure in the EU are pulp, cartonboard and graphic paper.
Contacts among European NBSK producers reported no problems so far in passing the 10% tariff on to US customers. However, they also said they expected that some US buyers might soon start looking for more pulp without tariff pressure.
Contacts were often more worried about the indirect effects of the US tariffs on the global economy and trade flows.
“What stresses me out the most is the impact of a trade war globally. A typical consumer, you and me, hates insecurity and instability, those moments when we don’t know what will happen tomorrow. Then we postpone big spending decisions,” a buyer said.
“In Europe, we know that, in principle, all segments except tissue are in a tough spot right now. Given that the US put such high tariffs on Chinese products, a lot of people worry that Chinese paper deliveries that were supposed to go to the US will instead end up in Europe, increasing the competition for paper producers here,” a seller said.
Some Chinese tissue, for example, has arrived in Europe recently, contacts said. But, others worried more about printing and writing paper.
Optimistic perspectives on tariffs
But a few market participants took a more optimistic view. Pulp buyers pointed out that the tariffs might increase supply to Europe, resulting in lower pulp prices. A second seller considered this a chance for European companies to place themselves ahead of the Chinese.
“The US imports tissue jumbo rolls and converted products, and someone needs to fill this if not China,” the second seller said, adding, “European [market participants] can go to the US and Asians [can go] to Europe, but do they have certification to enter the EU? Will they be compliant with the EUDR [European Union Deforestation Regulation]?”
Woodpulp inventories in Europe
After several stable months, woodpulp inventories at European ports rose by 7.6%, or almost 110,000 tonnes, month on month to 1,550,423 tonnes in March, according to Europulp. But most contacts did not read too much into it.
“That’s, like, three vessels. It’s really nothing; it could be delayed or speeded up in one month,” a second buyer said. “But what is most important is that pulp is available; there is no shortage.”
BEK pulp prices drop
Despite earlier plans for price hikes of $60 per tonne for April, some contacts on the sell side reported closing deals with decreases of $40 per tonne. The drop takes BEK gross prices down to $1,180 per tonne.
Some discussions had not been finalized by May 7. Some buyers said they were still aiming for larger price drops.
On the European spot market, where BEK prices had been reported in quite a wide range above $600 per tonne in March, some sources now said they had come back down to the $600-per-tonne level or below.
Prices for BEK pulp heading to nearby markets, such as the Middle East, North Africa, and Turkey, had descended to around $600 per tonne as well, one contact said.
Production issues in Chile
In Chile, a fire on a conveyor belt carrying wood chips halted BEK production at the 4,400-tonne-per-day line 3 at Arauco’s mill at the Horcones Industrial Complex on April 26. Operations have reportedly restarted, but it remains unclear exactly how much production was lost.
Trends in NBSK pulp prices
In NBSK, there were also some price hike announcements on the table for April. These are currently under discussion, but most contacts said they did not expect prices to move much this month.
Negotiations were still ongoing on Wednesday, and multiple contacts expected talks to continue during Milan Pulp Week next week. Fastmarkets kept its assessment at $1,590-1,600 per tonne.
NBSK prices have risen at about half the pace of BEK prices this year, lessening the pressure on them to go down. Due to the weakening of the US dollar, the increase in euro terms has also been smaller.
This is illustrated by the PIX indices. While the PIX Pulp BHKP index in dollar terms was up by almost 22% year-to-date on April 29, its converted euro equivalent had only risen by about 11%. The PIX Pulp NBSK index rose by almost 8% in the same period, while its euro equivalent was down by almost 2%.
“I was surprised that we got as much of an increase as we did this year, but then I realized that the increase we got just compensated the dollar movement,” an NBSK seller said.
Higher fiber costs
Higher fiber costs, particularly in northern Europe, have been another argument supporting increased NBSK prices, though a couple of contacts said that costs could only do so much.
“We have heard about their costs for a long time already. That’s talk. If costs are too high, they have to take downtime. As long as mills are running, pulp will arrive on the market, and the price will be low,” a third buyer said. “Words don’t help. You need action.”
Almost as if on cue, Metsä Fibre announced on Tuesday May 6 that it would start negotiations about potential temporary layoffs at its 690,000-tonne-per-year Joutseno and 650,000-tpy Rauma NBSK mills in Finland. The company will also carry out planned repairs at its 1.5-million-tpy Kemi mill, where it makes bleached and unbleached softwood and hardwood kraft pulp, during five weeks starting in late May.
Pulp prices drop in China
In China, prices for NBSK from North America and the Nordic countries dropped by $55 per tonne week on week to $742.50 per tonne net on May 2, according to Fastmarkets’ assessments. Chinese BEK import prices were flat at $580-600 per tonne net on April 25.
But domestic resale prices have been declining since early-to-mid February, decreasing by 534 yuan ($74) per tonne to 6,173 yuan per tonne on May 2 for NBSK and by 740 yuan per tonne to 4,200 yuan per tonne for BEK.
These prices are equivalent to some $739 per tonne for NBSK and $497 per tonne for BEK, excluding the 13% value-added tax (VAT) and 150 yuan per tonne in logistics costs.
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