NBSK prices in Europe slip in October while BEK prices remain stable

Pressure on European pulp prices continue with softwood succumbing and hardwood holding in October

Pressure continued to creep up on pulp prices in October. Buyers of bleached eucalyptus kraft (BEK) pulp made some of the first concerted moves in many months to win some concessions on pricing but in the end were unable to secure any reductions, and the short-fiber benchmark held steady in October, contacts agreed.

The story was different on the softwood side of the market, which contacts agreed was somewhat softer than the hardwood side. After registering some erosion in September, albeit generally within the existing price range, buyers were successful in pushing overall prices down in October, market players said.

Softwood prices erode

Softwood pulp remained the primary focus of buyers in October. After managing to win some reductions within the existing price range in September, which brought the bulk of business for that month down to the $1,480-1,500/tonne level, buyers pushed further in October and were rewarded. While some sources said buyers were initially seeking reductions of $50/tonne, in the end, those hopes were pared back and most business closed down $20-30/tonne, resulting in a range of around $1,450-1,480/tonne, according to contacts.

“Softwood pulp prices fell by $20-30/tonne in October, with most business in the $1,450-1460/tonne range, with exact closing levels dependent on starting point,” said a trader. “Softwood came under even more pressure [in October], as customers knew there was nothing they could really gain on the hardwood side,” he added.

Normally a turn in the market is accompanied by volume reductions [from buyers], and we’re not really seeing that – so that tells me something.

While contacts generally agreed that the softwood side of the market remained softer than that of hardwood, some sellers suggested that reports of a sagging market were somewhat exaggerated.

“Yes, softwood is generally less tight [than hardwood], but not to the extent I’m hearing from some buyers. Buyers are definitely more optimistic about getting reductions for NBSK [than for BEK], but normally, a turn in the market is accompanied by volume reductions [from buyers], and we’re not really seeing that – we have requests for price reductions, but not for volume reductions, so that tells me something,” he said.

He acknowledged that the softwood market had gone through some “hiccups” on the supply side that had supported rising prices and that these hiccups had now been largely resolved, but he said that the market has simply evened out. “The situation now is more balanced, not weak, and prices don’t generally erode in a balanced market,” he said.

Buyers, however, reported no problems getting NBSK and registered more deterioration in demand for paper. “Our order books are under pressure. Orders for fine paper are particularly lousy,” said one buyer. Other sources noted sliding demand in the specialty paper segment as well, particularly for anything related to construction or home improvement, such as decor paper. Another buyer noted what appeared to be the start of weakening in orders for baking paper.

Steady on for BEK

While some buyers expressed hopes earlier in the month of being able to push hardwood prices down in October, by the end of the month, it had become clear that levels would remain stable yet again, at $1,380/tonne, most contacts agreed.

“We closed all of our deals flat at $1,380/tonne for October. We did see some resistance this time around, especially in Italy, but we ended up closing everything at steady prices,” a seller said. He also noted that some customers had reduced their volumes due to a slowdown on the paper side. “This was mainly with printing and writing [paper] and specialty paper customers, but we had some cancellations from tissue producers as well, so there are some yellow lights flashing,” he added. According to him, however, any volume cancellations at this point were not a problem and, in fact, were actually helpful.

Our inventories have been extremely tight, so [the slowdown on the paper side] will help us build some of the stocks we need for next year. In that sense, it’s something of a relief.

Another seller echoed that sentiment. “Demand is still good, but we did start to lose a bit of volume here and there in October. This is fine, though, as our inventories have been so tight and we’ve been having to play catch-up. Now, we’ll be in a bit better position,” he said.

Buyers admitted they were unsuccessful trying to secure price reductions in October, but remained hopeful that that would change in November. “[Sellers] may have managed to keep prices steady [in October] but we will continue to push. I simply don’t see why there is no room for reductions now, in this market,” one buyer said.

“Pricing remained steady [in October] but we need to remember that Pontevedra was out of commission,” a buyer noted, referring to Ence’s 515,000 tonne/yr BEK mill in Spain, which has been down since July 20 due to low water levels in its primary water source, the Lérez River. Ence said recently that it intended to re-start operations at the mill sometime this week.

Spot activity limited

The spot market was restrained in October, with several contacts saying they had either not engaged in any spot business or had not heard of any significant activity.

“The spot market is just very quiet now,” a trader said. “We are not doing any spot business at the moment,” a seller explained. A couple of market sources noted, however, that price levels for any spot volumes in continental Europe or the Middle East/Africa had continued to soften.

Want to learn more about the pulp market? Look ahead in the pulp market with our senior economist Patrick Cavanagh at supply trends, demand drivers, capacity changes and risk factors in the pulp market with his outlook for global wood pulp here.

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