【Wdoodoo Weekly Paper Industry Report】Pay attention to the situation of needle leaf destocking under low valuation

The trend of pulp after the holiday is relatively weak. The average price of needle pulp is around 4864 yuan/ton, a decrease of 50 yuan/ton compared to the previous period; The average price of broad-leaved pulp is 4602 yuan/ton, a decrease of 13 yuan/ton compared to the previous period. The production and sales of finished paper have further weakened, and paper mills urgently need to replenish their inventory of raw materials at low prices. The clearance of pulp port inventory is slow.

1. Macro performance is neutral.

September US inflation data exceeded expectations and rose, with expectations of a rate hike in October heating up. Mid week pressure on commodities. However, as the United States enters the sprint stage of the midterm elections, the Trump administration has a strong demand for improving the liquidity environment. Federal Reserve officials tend to be hawkish in their words and dovish in their actions, with most leaning towards raising interest rates once at the end of the year. The probability of the weekend market remaining unchanged in October is 83.9%, with a 25bp interest rate hike of only 16.1%. The downward pressure on bulk commodities has eased.

2. The external market continues to reduce production and raise prices, paying attention to the situation of needle leaf destocking.

Arauco announces October quote: Needle Pulp Silver Star up $10 to $680; The price of broadleaf pulp stars has risen by $20 to $610. Many foreign companies have continued to reduce production and raise prices, while several pulp mills in Europe have stopped production for maintenance.

However, the clearance of needle pulp port inventory is not smooth, and it continues to be at a historical high, causing importers to hedge against high prices. In recent market reactions, with the market falling to a low range, a large number of paper mills have made transactions at low prices. We will pay attention to the digestion of old warehouse receipts and low-priced needles in the future.

The inventory of broad-leaved ports is still at a low level, and the overall trend continues to be bullish and volatile. However, with the increase in shipments from South America, it is expected that liquidity will gradually improve in the future. The current historical low level of needle width price difference and the sustained downturn of needle pulp have led to a weakening of broad-leaved prices this week.

3. Downstream demand is expected to weaken

The performance during the peak season of Golden September and Silver October is limited. The production and sales of various mainstream paper types have further weakened, and the price of finished paper continues to decline. The pressure of white cards and double glue is relatively high, and only the peak season factor of household paper has slightly pushed up. Downstream raw paper enterprises are generally experiencing losses in processing, with paper mills mainly reducing prices and increasing production volume, resulting in a low short-term gross profit. It is expected that with the arrival of the off-season, it will be difficult to increase the short-term operating rate, and the support for pulp from the demand side may weaken.

Overall, the production and sales of finished paper products will further weaken after the holiday, and the digestion of port pulp inventory will be slow. It is expected that there will be no significant upward drive from both the supply and demand sides in the near future. However, the price difference between needle and wide needles is low, and some low-priced delivery products have fallen to near cash costs. With the marginal contraction of needle pulp supply, the advantage of low valuation is becoming increasingly apparent. It is expected that the main core fluctuation range will still be between 4600-4900, and we will pay attention to the digestion of coniferous inventory in the future.