Pulp buyers push for reductions in Europe as global prices slide

Buyers are set to push for more discounts in Europe this month as global prices continue to fall and paper demand languishes

After plunging prices for bleached eucalyptus kraft (BEK) pulp in March and drops in northern bleached softwood kraft pulp, buyers indicated that they are nowhere near done with their efforts to continue to drive prices down amid moribund demand for paper in Europe and sliding pulp prices in other global regions.

Contacts continued to report poor demand for pulp in the first half of April, and while negotiations for the month have yet to start in earnest, several said that further price reductions were a near certainty, with the only question being the amount.

Pulp price pressure rises on all fronts

Prices for both the pulp benchmark grades came under increasing pressure in March and after moderate downward steps of $50/tonne from December to February, BEK prices plunged by $100/tonne in March to bring pricing to $1,180/tonne. Erosion was less extreme on the softwood side last month, but the downward trend was unmistakable all the same. Prices for the long-fiber benchmark fell by some $20-30/tonne, with the bulk of business closing at $1,350/tonne.

In the paper markets, poor demand in the graphics segment has been apparent for months, but last month contacts increasingly mentioned issues in the tissue segment as well and that has continued into April. “The situation with tissue is worsening, the pressure on pricing there is really strong,” one market player said. Another contact was somewhat more optimistic but acknowledged that signs of weakness were bleeding into this segment as well.

Tissue is okay, but it’s definitely not fantastic, and some producers are very cautious about their pricing. There are efforts to protect prices, and some are not running at full capacity.

Demand weakness continues to plague other paper segments as well. “There is just weakness across the board, for all paper grades. I have to say, the outlook not just for the next couple of months, but the rest of the year is not so good,” another source said.

Many buyers are convinced that further sizable drops, especially for BEK, are achievable. “We got $100 [/tonne] off in March, but that’s not the end – I think we’ll see the same thing [this month] and in May as well,” a buyer said. “Stocks are just too high, and the situation in China is not improving,” he added.

Indeed, PPI Asia reported last week, pulp import prices to China were continuing to plunge, with levels falling by up to $200/tonne for the major grades over the last two months. Arauco on April 12 announced price cuts for China for the second month in a row, lowering its bleached hardwood kraft prices by $70/tonne to $550/tonne for May deliveries, PPI Asia reported. The firm also cut prices for radiata pine by $95/tonne and unbleached softwood kraft pulp prices by $40/tonne.

In Europe, while softwood price drops have not been as dramatic as on the hardwood side, market players agreed that the downward pressure in the softwood segment was continuing this month as well.

“Things are a little better for softwood – the inventory buildup is worse on the hardwood side, and [European] softwood producers have been able to redirect some of their volumes to other markets, at least so far,” one source said.

PPI Europe’s sister publication PPI Pulp & Paper Week noted last week the growing presence of European producers in North America, reporting that they had managed to move more tonnes into the US East, leading to an erosion of spot market price ranges throughout the Eastern Seaboard and Atlantic states.

Nevertheless, several buyers in Europe said that they expected to secure further price reductions for the long-fiber benchmark grade this month, though the drops would once again probably be more moderate than on the hardwood side.

Uninspired outlook as the market looks to China

Few, if any, market players expected to see any substantial change in fundamentals in either the next few weeks, or even months, and most continued to look to China for signals of how things might develop in Europe.

“It’s unlikely we’re going to see any real change this month or in May. Then the summer season starts, so I think Q3 is the next realistic time frame where we could see some new developments,” a source said, echoing the sentiments of several others.

The market will have to hit bottom in Asia before things turn in Europe, several contacts agreed, and when exactly that will happen remains unclear. As PPI Asia noted, some sources believe prices are approaching a bottom in China, but uncertainty continues. A large buyer there said last week that they believed that further drops of some $50/tonne on both the softwood and hardwood sides were in store before the situation levels out.

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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