South American BHK pulp imports into China see price hikes of $10-20 per tonne

Pulp suppliers are cautiously optimistic but weak demand and a volatile futures market continue to bring challenges

Suppliers are upbeat about the implementation of price increases for bleached hardwood kraft (BHK) pulp imports in China, saying that is an indication of market stability in the lead-up to the traditional peak season in the fourth quarter there.

Arauco was the first producer to push for a hike of $10 per tonne for South American BHK’s August orders in late July. The proposed rise proved later that it was too cautious and modest. Shortly after that, led by Suzano, other suppliers aimed for an increase of $20 per tonne for the grade.

Contacts reported that large mills had snatched up available BHK volumes despite the price rises and were seeking extra tonnages.

“Those big paper producers missed the opportunity when BHK prices hit the bottom in late April. They are now coming to replenish their depleted stocks,” said a major Brazilian supplier source.

The contact indicated that the tissue paper segment is one of the most positive areas in the Chinese market, with tissue mills ramping up production to meet improving demand and pricing domestically.

Small- and medium-sized plants gobbled up volumes when BHK sold as little as $450 per tonne in late April. Big paper producers, having concerns over influx of pulp imports from Europe and North America into the country and over the struggle of Chinese economy, were reluctant to stock up on large tonnages at that time. That gave suppliers an opportunity to gain the upper hand in the Chinese BHK market via allocation at a measured pace.

That strategy appears to be working. After the implementation of a $30 per tonne hike for June orders, most sellers have managed to push through a combined increase of another $30 per tonne rise for July and August business.

The increase has taken the South American BHK prices up $20 per tonne over the past three weeks.

Tough road ahead for pulp prices in China

The uptick in sales has inspired sellers to look at the possibility that South American BHK will continue to gain traction and prices will climb to $600 per tonne this year.

Other sources are less sanguine, pointing to weak fundamental demand for paper and board in the Chinese market, largely due to the country’s slumping exports of general goods.

A major trader refuted a popular statement made by pulp sellers that given the Chinese paper and board (P&B) industry is plagued by overcapacity, it would be difficult to see P&B demand improve and prices climb; but rising pulp prices would drive up P&B prices.

“Pulp suppliers claimed that demand for uncoated fine paper (UFP) is expected to grow as the new school semester begins and the Zhanjiang mill operated by Shandong Chenming Paper remains offline. And the price rise in BHK over the past three months has therefore led to UFP prices being driven up,” said the trader contact.

But he indicated that rather than seeing a rise, UFP prices have in fact been in decline because a major UFP mill has halted its exports of the grade after its parent company shut its paper facilities in Europe.

Contacts indicated that many European producers closed their paper machines permanently but continued to run the pulp lines integrated with them. The surplus of pulp ended up being shipped to China, particularly bleached softwood kraft (BSK) pulp.

The Brazilian producer contact has also been cautious, saying going forward his company will evaluate the market situation every two months to decide whether to push for a pulp hike, and that the planned increase will be modest.

Sources said that pulp is readily available in the Chinese market, and once sellers push for hikes deemed by buyers as too aggressive, they will stop buying.

BSK prices are driven by a volatile pulp futures market

Arauco also sought a hike of $10 per tonne for radiata pine for August orders and the available volume was snapped up.

The quick sales of the BSK grade were fueled by an uptick in BSK futures on the Shanghai bourse between late July and early August. Prices for BSK futures of the most popular September contract climbed around RMB 200-300 per tonne during that period.

Although the September contract level has declined since then, prices for other BSK grades have been nudged up, not falling in line with futures proportionally.

The September contract settled at RMB 5,344 per tonne on Thursday, August 10, which is equivalent to $641 per tonne after deducting 13% VAT and RMB 120 per tonne in logistics costs.

Prices for northern BSK (NBSK) imported from Canada have edged up $10-20 per tonne over the past three weeks, while Nordic NBSK has climbed by $10 per tonne. The mid-point price for NBSK has thus had an increase of $13 per tonne. Radiata pine is up by $10 per tonne.

This article was taken from PPI Asia, our newsletter for pulp, paper and packaging market news and prices for Asia. Speak to our team to learn more about our news and market analysis, prices, forecast and more.

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