North American supplies of bleached hardwood kraft (BHK) tightened on a dearth of spot market availability and hefty production backlogs despite a slight improvement in shipment delays. This year’s supply tightness shifted away from softwood and into two key hardwood grades, helping BHK producers lift preliminary June effective list prices up $60-100/tonne, market participants told Fastmarkets’ PPI Pulp & Paper Week.
While BHK pricing momentum ticked sharply up, questions arose on whether bleached softwood kraft (BSK) prices will reach a cyclical peak this month. Producers continue navigating through railcar and trucking deficits that have forced mills into production slowbacks, but cracks that emerged in China a week ago broadened this week.
The offshore uncertainty had domestic buyers attempting to pare back the announced $80/tonne price increases on benchmark northern bleached softwood kraft (NBSK). Major producers Domtar and Resolute Forest Products (Resolute) had separately announced June $80 increases on NBSK and fluff pulp, while Domtar also slated an $80 hike on southern bleached softwood kraft (SBSK).
Preliminary June US NBSK effective list prices increased $40-80/tonne, bringing levels to $1,785-1,825/tonne and posting new all-time highs, according to P&PW’s mid-month survey. SBSK increased to $1,755-1,795, also up $40.
“Buyers don’t like where pulp prices are but they are doing well on paper prices. That’s not true in some cases in China, but papermakers here are making good money but wish they could do it with pulp that was cheap,” said a contact at a North American BSK producer. “Given our tightness, we’d be at the high end if we offered anything, but we aren’t doing any spot.”
The source was referring to recent spot market transactions that moved above $1,000/tonne net delivered. This month, Canadian NBSK producers have moved non-contract tonnes mostly in small lots, and none reversed course from the record-high levels despite an increasingly nervous export market to China, the world’s biggest spot market.
US NBSK spot market prices increased to $1,010-1,050/tonne net delivered to the US East and Midwest, up $20/tonne, according to P&PW surveying through June 17. Weighted-average spot NBSK prices furthered the all-time highs recorded since P&PW began publishing US spot market prices in 2001, but transactions varied, sources said.
Buyers ‘battle daily’ with supply chains
US buyers, stunned at today’s expensive prices in spot markets, are holding out for their full contract allotments in hopes that a reversal could come when the industry enters a typically slower summer season.
“We are holding our own and continue to do battle daily with all of the supply chain issues,” said a buyer contact, whose view was typical. “As for pulp pricing I am starting to see some significant cracks in the NBSK market and feel that those prices have peaked and some relief should follow shortly.”
However, sources this week named four major NBSK producers with maintenance downtime during June that is curbing supply, and, if there’s any pricing relief, it’ll almost certainly originate in China – where no Canadian NBSK producers buckled on price through June 17, according to producer, agent, and trader sources in both countries.
In fluff ‘bull market,’ prices rise $80
In fluff pulp markets, preliminary US and European effective list prices increased $80/tonne to $2,150/tonne, according to P&PW surveying. Prices rose in line with the broadly-announced $80/tonne North American and European price increases from International Paper (IP), Domtar, Rayonier Advanced Materials (RYAM), and Resolute. The firms also slated $50/tonne hikes in China and other emerging markets. That price survey closes on June 29.
Global fluff markets’ pricing momentum has continued on tight supplies, extended shipment backlogs, and a lack of leverage for buyers to push back at what’s become a steady half-year rise both domestically and offshore. US buyers weren’t able to mount a fight against this month’s $80 increases because foreign buyers would snap up any extra volumes at significantly higher net prices, seller contacts said.
“We are still are not making the full allocations available that Chinese customers want. This is a classic bull market dilemma. Buyers will buy until they think prices will not go up anymore but I can’t see it reversing (because) there are significant delays in the supply chain,” said a fluff sell-side market participant.
“There could be a disconnect from paper pulp until new capacity is added. People are speculating when the fluff capacity expansion will be announced. Who will it be?” the fluff pulp contact said.
Fluff capacity expansion on tap?
According to several sources, the next fluff expansion project could come in Latin America. This week in Vancouver, where global pulp buyers, sellers, and analysts convened for the first time in three years for International Pulp Week, word began spreading that a Latin American producer is considering building a 1 million tonnes/yr market pulp line whose capacity would include a significant amount of fluff pulp.
The firm, whose executives floated the proposal to customers in private sideline meetings according to several sources, has not announced the project nor received board of directors’ approval to proceed. A company official did not reply to inquiries from P&PW.
If new capacity does come, it would make sense because the price premium to fluff vs NBSK has jumped significantly. For example, in China, the spread in net prices has grown substantially this year. In past years, Chinese buyers would often balk whenever fluff prices became $40-50/tonne more expensive than NBSK. This year, the difference has expanded to $242-272/tonne, according to P&PW final May Price Watch figures.
US hardwood soars $60-100
In US BHK markets, a lack of northern bleached hardwood kraft (NBHK) supply has led to a $40/tonne surge in domestically-produced BHK spot markets in the wake of maintenance shutdowns at Alberta-Pacific, Mercer International, and Woodland Pulp.
The scheduled downtime occurred after producers had already fallen behind on shipments due to railcar delays. Various North American producers of BHK reported more demand than they could fulfill, and skyrocketing spot prices. In Vancouver, sources reported that talk centered more on supply chains and less on prices.
“The word on the streets is logistics this time: Supply issues, and when it might go forward on that side. For us, it’s been a challenging year,” said a producer source who reported a slight improvement in railcar availability but still less output than buyers want. “Those incremental tonnes are very valuable because those are spot (tonnes), and those are at nice, high prices.”
Meantime, imported bleached eucalyptus kraft (BEK) supplies are slow in arriving from Brazil, and the $60/tonne increase announcements from Eldorado, Klabin, and Suzano have easily gone through, market participants said.
