Pulp prices rise again in Europe amid ongoing logistics woes and solid demand

Prices for both the benchmark pulp grades increased further in Europe in May. The hardwood pulp market remained very tight, while the softwood pulp market was taut as well, if somewhat less so than the hardwood side. Alongside continued good demand, market players agreed that continuing problems on the logistics front were a key factor affecting availability and supporting the latest price rises. In addition to the ongoing issues with sea transport and problems in the trucking sector on the continent, several contacts mentioned growing problems with rail transport as well, particularly across Germany.

BEK increase sails through

Market sources on both the buyer and seller sides continued to agree that the bleached eucalyptus kraft (BEK) pulp market remained very tight in May. Following a $50/tonne increase in April, sellers implemented another $50/tonne increase in May, once again with little or no negotiating, contacts said, bringing prices for the short-fiber benchmark in Europe to $1,300/tonne.

“Yes, the increase went through in full, with no negotiations about price at all. The market is extremely tight. We just discussed volumes and logistics when volumes were available,” a seller said. He noted that logistical problems for sea transport continued to pose challenges. “There are still issues with vessels, especially those arriving to Italy,” where ships were delayed or arrivals had to be changed from one port to another, also causing delays, he said. As a result, he said he had been forced to advance some volumes earmarked for coming months to to meet demand. In other cases, he said he had to make some cuts to supplies.

Another seller echoed those comments. “Demand is still very high. There was little discussion [on May pricing]; everyone needs their pulp, buyers need every bit they can get, so this of course puts them in a difficult negotiating position,” he said.

“The market tightness is continuing, or even getting worse. We’ve been hearing from the market that almost all the main BEK suppliers are still delaying or shorting their supply to European customers,” a trader said.

Buyers also acknowledged the difficult spot they remained in. “Yes, we agreed to the plus $50/tonne – there was not much choice [but to do so],” one said. While he noted that demand was good, he said that logistical issues were also playing a major role in the limited availability. In addition to the ongoing problems with sea and road transport, he said that problems with the rail system, especially in Germany, had ramped up considerably in recent weeks. “The German rail system is simply not working. This has been going on for a month now, and it has turned into a real disaster,” he said.

Another buyer shared similar concerns. While the rail problem was obvious, contacts said the cause was not so clear, and several suggested it was likely a combination of factors, including more firms trying to move transport to the rail sector because of the logjams in the trucking segment, unpreparedness on the part of rail operators and staffing issues at the railways. Whatever the case, the crunch on the rail side is coinciding with the ongoing problems with trucking, sources said.

“The truck transport shortage is just continuing. There’s just no availability, even at very high prices,” a contact said.

A wood shortage, especially in central/eastern Europe, was also adding pressure to the market, sources said. A couple of contacts said this was particularly pronounced on the hardwood side, but that it was affecting the softwood side of the market as well.

BEK spot prices also continued to rise. While volumes were extremely limited, one source cited a price of $950/tonne in Europe in May and said he had heard reports of prices for June in Turkey of around $960/tonne and of levels approaching the $1,000/tonne level in the Middle East.

Another source said that while he was unaware of any available spot volumes in Europe, that prices for the North African market had topped $950/tonne, with a similar situation in Turkey.

Given the static situation in terms of market fundamentals, most market participants said they did not expect the upward pricing pressure to abate in June. BEK sellers are seeking another $50/tonne increase this month.

In addition to the ongoing supply side constraints, one element that could weigh on June developments in Europe is how the situation in China progresses. As one contact noted, he would be keeping a close eye on how the general economy develops there and whether there will be some kind of boom following the end of the extreme COVID-19 lockdown measures, and whether paper exports from China to Europe would resume.

NBSK prices move up

Prices for northern bleached softwood kraft (NBSK) pulp also moved up in May, though not with the same ease as on the hardwood side. The increases varied depending on supplier and starting point, contacts said, but the general trend was upward, they agreed. Some contacts also said in the first week of June that they still had May business to close. As a result, in this messier situation, contacts reported a range of $1,430-1,440/tonne for May business, with some sellers still pushing for $1,450/tonne and suggesting that level could be in the market as well. The bulk of May business, however, was around the $1,440/tonne level as of the middle of the first week of June, according to market sources.

If somewhat less taut than the hardwood side of the market, contacts said the situation on the long-fiber side was still in sellers’ favor, with all of the logistical issues affecting hardwood availability impacting softwood as well. “The logistics situation is still a nightmare – a combination of the truck driver shortage, more people trying to move to the rail option, staffing shortages [on the rail side] due to COVID-19 and under-investment in this segment more generally,” a contact said.

The logistics problems were also affecting inputs such as chemicals, several sources noted. While there may not be shortages of chemicals at the moment, it was an additional pressure point, they said. At the same time, the supply disruptions of sodium chlorate from Nouryon and Arkema back in March and April have been resolved, market players said.

Another contact noted that the extremely tight situation on the hardwood side was supporting the NBSK market as well. “The situation on the hardwood side is spinning into the softwood side of the market. Everyone is asking for more softwood as a result,” he said.

Sources reported good demand on the paper side in May across graphics, specialty paper and tissue as well, with solid order books. A couple of buyers, however, said they had started to see the first signs of some softening in certain markets, with one pointing to the cut-size market in particular. “It’s visible that the peak is over. This is the effect of extreme price increases. Expectations are tepid now, and I think there is a change coming,” he said.

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