Global fluff price erosion expected; 2% demand growth seen through 2028

Annual demand growth is forecast to come in at 2% from 2024-2028

Global fluff pulp prices have posted little change since producers lifted effective list prices $50/tonne in North America and Europe back in April.

Steady demand in mature markets helped to offset plummeting Chinese consumption this summer, but with global bleached softwood kraft (BSK) producer inventories recently surging and a major fluff producer quietly announcing a $40/tonne drop to Chinese customers, erosion is expected to spread globally.

If so, it will buck recent trends. Fluff prices in the US and Europe sailed through the seasonally weaker summer with only a $10/tonne decline to close August, which brought effective list prices to $1,880/tonne, according to Fastmarkets’ PPI Pulp & Paper Week surveying.

Producers reported no change, while some US buyers clawed back on prices that were unexpectedly resilient, with some landing tonnes at lower net delivered prices in August than the prior month. That trend is sure to continue because Chinese prices are now in a tailspin, export demand is sparse, and American contract volumes are more coveted than they were during the stronger demand period of spring, according to those sources.

Sept. China fluff slated down $40

Export prices on China’s international market are down to $860-900/tonne net CIF after tumbling $15/tonne in August, according to P&PW. Many sources reported $20 declines month-over-month, however, soft erosion had occurred previously, and P&PW showed $5/tonne declines in each of the prior two months. With August’s drop, prices are down a combined $25 from a May high of $885-925/tonne net CIF.

“China’s price action was not a surprise” because a major producer “from what we heard was down $20 in August and for September is going down another $40 net,” said one of several market participants who confirmed the $40/tonne price drop, effective with September business. “I would be surprised if (any other producers) announced their price is down.”

That price decrease from a major fluff producer is already forcing others to adjust down their own export prices for September, the contact said. However, while sellers may blame one majors’ announcement as a catalyst for downwards pressure, levels were already eroding. Chinese contacts named two different major producers – not just one, as some had suggested – that dropped Chinese prices $20/tonne on August business.

China’s price erosion comes months after producers showed continued aversion to lowering prices in response to weak demand and collapsing paper grade BSK prices. With international fluff prices to China at around $150-170/tonne above benchmark northern bleached softwood kraft (NBSK), Chinese buyers have broadly sought substitution-grade fluff in China since April’s high.

“It’s quiet, more and more customers have to use local made roll pulp to replace real fluff now,” said a Chinese contact regarding demand for imported prime fluff from American producers.

The substitution involves Chinese papermakers buying BSK and bleached hardwood kraft (BHK) bales, repulping and blending the product and converting them into nominal fluff rolls that diaper makers and hygiene products companies make end products with. Chinese sources have named several major papermakers doing this.

Another Chinese contact said that the new $40/tonne decrease on September business mirrors a similar decline at the end of August on China’s local market, where the source noted local RMB spot market prices dropped over RMB300 ($40) in August.

Outlook 2% demand growth

Looking forward, demand growth to China may not prove as robust as producers hoped for due to substitution grade fluff and changing demographics in China, the world’s biggest and fastest growing fluff market.

“Fluff has changed a lot since the pandemic because there’s been a paradigm shift,” said Fastmarkets RISI senior economist Patrick Cavanagh. “Two reasons: The Economic situation in China is not good. The other is demographic. Baby diaper demand decreased 10% year-over-year for three years straight. And the overall population shrank China that’s bad news in general for demand.”

Annual demand growth is forecast to come in at 2% from 2024-2028, according to Fastmarkets RISI. Global fluff’s average demand growth rate at 2% annually will bring demand to approximately 7.1 million tonnes in 2028. Mature markets make up 41% and emerging markets 59%.

Capacity growth 5%? 

In a sign that capacity could outpace demand, the operating capacity growth is expected to be faster than demand growth from 2024-2028, said Fastmarket RISI specialty pulp economist Hema Kalathingal, who sees nearly 5% average annual capacity growth for 2024-28. Global fluff capacity will rise from an estimated 7.8 million tonnes this year to 9.2 million tonnes per year in 2028, she said, noting that there are qualifiers to the capacity growth.

Fluff expansions include hardwood-based fluff, which prices lower than American fluff from southern pine. Those include Ence and Suzano’s hardwood fluff expansions starting up in 2025 in Spain and Brazil respectively, Fiber Excellence adding capacity at Provence, France (volume not announced) and Klabin’s new project, both coming in 2027. Also adding to this Yunnan Yunjing’s expansion rumors in China, where it’s making “real fluff” as opposed to substitution grade.

“Please note that our current estimate assumes a fair bit of fluff coming from Alabama River’s new line from this year onward and the plant producing mostly fluff toward 2028. If they stick to SBSK instead, that will lower this estimate,” Kalathingal said, referring to a recently completed project at Georgia-Pacific’s (GP) sprawling 938,000 tonnes per year mill at Perdue Hill, AL.

GP’s Alabama River Cellulose Mill completed an $80 million modernization project to significantly improve the mill’s capabilities by boosting fluff pulp production, allowing for more diversified product offerings in both bales and rolls. Its current split is estimated at 52% fluff and 48% baled southern bleached softwood kraft (SBSK), according to Fastmarkets RISI’s Mill Asset Database.

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