【Wdoodoo Weekly Pulp Report】Ample Supply Weighs on Market; Pulp & Paper Oscillate Near Bottom

Pulp experienced an oversold rebound last week. The average spot price of softwood pulp stood at around 5,146 yuan per ton, up 18 yuan per ton from the previous period. The average spot price of hardwood pulp was 4,574 yuan per ton, an increase of 43 yuan per ton from the previous period. Order follow-through from the end-use market remained insufficient, mainstream base paper prices weakened and declined, and paper mills showed limited enthusiasm for pulp procurement.

1.Middle East situation spirals out of control, pushing up overall commodity costs for an extended period

The Middle East is stuck in a cycle of fighting while negotiating, with the situation evolving into long-term confrontation and phased escalation of tensions, which continues to impact crude oil production and transportation in the Persian Gulf region. Given the repricing of war risk insurance and time lags in restoring shipping order, commodity costs are expected to remain elevated for a longer period.

2.Pulp mills face high de-stocking difficulties, diverging quotations between softwood and hardwood pulp

Affected by structural declines in demand, softwood pulp de-stocking has proven challenging. Global softwood pulp producers’ inventory days rebounded to around 50 days in January, a historical high, putting heavy de-stocking pressure on pulp mills and prompting them to cut prices to reduce inventories again.

Chile’s Arauco announced its March external pulp quotations: softwood pulp Silver Star was adjusted to 680 US dollars per ton; unbleached pulp and hardwood pulp maintained previous offers, with supply volumes lower than normal contractual volumes. Among them, unbleached pulp Golden Star was priced at 620 US dollars per ton.

Currently, port softwood pulp liquidity is ample, with traders actively selling goods; focus remains on the consumption of low-priced supply. Any rebound in softwood pulp prices may require more significant production cuts and de-stocking measures from pulp mills.

Hardwood pulp external quotations continued to rise. In March, external offers for eucalyptus hardwood pulp such as Star were raised by 20 US dollars per ton to 620 US dollars per ton, translating to an landed import cost of around 4,900 yuan per ton, with an import loss of over 350 yuan per ton. The current price spread between softwood and hardwood pulp has narrowed to around 500 yuan, placing high pressure on traders to take delivery, while downstream paper mills hold a cautious stance.

3.Finished paper prices weaken, paper enterprises show limited pulp purchasing enthusiasm

Base paper manufacturers maintained relatively stable operating rates, resulting in loose market supply. However, end-market orders were flat with limited actual order follow-through, pushing base paper market prices lower again. Paper mills are concerned about pressure from seasonal weakening demand after April and hold cautious expectations for the market outlook. They are mainly consuming early-stage raw material inventories and conducting rigid demand procurement on dips.

4.High inventory pressure at ports

As of Friday, total inventories at major national ports reached 2.4 million tons, up 100,000 tons from the previous period and at a historical high, breaking the seasonal de-stocking pattern at ports in March.

Overall, the pulp and paper market is dominated by oversupply, with limited improvement in paper enterprises’ profitability, leading to procurement mainly on dips. That said, current disk prices have fallen sharply below the production costs of softwood pulp in Northern Europe and North America, forcing pulp mills to cut production. Coupled with the Middle East conflict, pulp production and transportation costs have risen. Pulp valuations are at a low level, and the previous heavy-volume downward breakout failed. Short selling risks should be avoided at current levels. Pulp is expected to gradually consolidate a bottom, with short-term range-bound fluctuations between 5,000 and 5,300 yuan, and investors may consider holding long positions selectively at low levels.