【Wdoodoo Weekly Paper Industry Report】Supply side disturbance supports pulp prices, and there is downward pressure space for finished paper

Last week, pulp fluctuated and rebounded, with a slight rebound in transactions. The average spot price of needle pulp is around 4892 yuan/ton, an increase of 10 yuan/ton compared to the previous period; The average spot price of broad-leaved pulp is 4592/ton, up 6 yuan/ton month on month. Traders are reluctant to sell at low prices, but the production and sales of finished paper are weak, and paper mills are cautious in replenishing raw materials.

1. Macro uncertainty has temporarily decreased.

Last week's US midterm elections came to an end, and the conflict in the Middle East has cooled down, resulting in a significant drop in crude oil prices. It is expected that the international atmosphere will be relatively calm before the APEC meeting, and commodities may stabilize. However, the expectation of a rate hike in December remains, and doubts about AI spending are suppressing macro performance;

2. Port inventory rises again, supply disturbance boosts market

Domestic port inventory has significantly increased for two consecutive weeks. As of November 5th, the inventory of mainstream ports in China was 2.295 million tons, with a cumulative inventory of 75000 tons, an increase of 3.4% month on month. With a large amount of low-priced pulp arriving at the port, pulp inventory has once again rebounded to historical highs, suppressing market performance.

However, the trend of long-term production capacity clearing of coniferous trees remains unchanged. With the recent drop in the market to needle cash costs, traders are reluctant to sell at low prices. The needle base has turned positive, and the paper mill has hit a low price. In the past month, 40000 tons of old warehouse receipts have been cancelled, and in November, the old warehouse receipts decreased to around 80000 tons.

The inventory of broad-leaved ports has rebounded, but overall it is still relatively low. External prices continue to rise, and there are significant differences among traders, with some lowering prices for shipments. However, there were reports of losses from the OKI cooling tower fire in Indonesia during the week, and later broad-leaved transactions improved. The current historical low level of needle wide price difference requires the market to stabilize in order to restart the upward trend.

3. Weak production and sales of finished paper, with accumulated inventory

Downstream orders have weakened, and paper mills are under greater pressure to ship, resulting in a new low in finished paper prices. With the rebound of pulp, the gross profit of paper mills continues to deteriorate, putting pressure on downstream raw paper processing enterprises. It is expected that the operating rate will be difficult to increase in the near future, and the demand side's support for pulp is average. Pay attention to the inventory turnover of finished paper products.

Overall, the production and sales of finished paper are weak, the willingness of paper mills to replenish raw materials is poor, and the pulp port continues to accumulate inventory. However, the current market valuation is low, with ample bearish trading. The losses from the OKI cooling tower fire in Indonesia are yet to be verified, and the impact of old warehouse receipts has weakened. Sellers' reluctance to sell at low prices has increased. The main force is expected to fluctuate between 4500 and 4800, with a focus on wait-and-see or interval trading. Follow up on the inventory of finished paper and port pulp.