【Wdoodoo Weekly Pulp Report】At the End of the Trough, Awaiting the Clouds to Rise

Last week, pulp prices experienced a "lower first then higher" trend, oscillating at low levels. The average spot price of softwood pulp stood at around 5,028 yuan/ton, unchanged from the previous period. It once tested the critical 5,000-yuan mark mid-week. The average spot price of hardwood pulp was 4,562 yuan/ton, down 6 yuan/ton week-on-week. Market sentiment was predominantly wait-and-see. Downstream paper mills showed low enthusiasm for inquiring about raw materials, mainly restocking on dips, while high-priced goods faced poor sales.

1. Middle East Tensions Unlikely to See Substantial Resolution Soon

Last week, a framework for U.S.-Iran peace talks was nearly reached. However, due to the intricate web of stakeholders, the Strait of Hormuz, which had been temporarily opened, was blocked again over the weekend. This Wednesday marks the ceasefire deadline set by former U.S. President Trump. Currently, U.S. military forces are accelerating their deployment, carrying the risk of an unexpected escalation in the U.S.-Israel-Iran conflict.

The Middle East is now in a state of "fighting while negotiating," evolving towards prolonged confrontation with periodic escalations in intensity. This continues to disrupt crude oil production and cargo transportation in the Persian Gulf. With war risk insurance repricing and time lags in restoring shipping order, the ripple effects on related commodities are expected to persist.

Hardwood pulp is showing signs of weakness. Star's April external offer remained flat at 620 USD/ton, breaking the consecutive price hikes. Current finished paper sales are under heavy pressure, and paper mills have slowed their inquiry pace. With the upcoming low season for papermaking, demand support for hardwood pulp may weaken; watch for support at the 4,500-yuan level for eucalyptus pulp. However, hardwood pulp inventory pressure is limited, so the impact is expected to be contained. Last week, Asia Symbol announced a 100-yuan/ton increase in hardwood pulp prices starting immediately, citing rising costs and tight supply.

The softwood-hardwood price spread has narrowed to below 500 yuan/ton, a five-year low. Brazilian softwood prices, hammered by previous sell-offs, are starting to stabilize. With hardwood pulp at relatively low absolute levels and limited inventory pressure, the off-season impact is expected to be mild. The narrow price spread may gradually help softwood pulp stop falling.

3. Seasonal Demand Weakness; Patience for Paper Mill Restocking

Paper mills maintained relatively stable operating rates with no apparent supply tightening. However, downstream orders were mediocre, leading to slow shipments and continued price declines for finished paper. Terminal demand remained sluggish. To alleviate operational pressures, downstream paper mills may further suppress raw material purchase prices to control costs.

Monitoring finished paper inventory destocking, demand-side support is not expected until the pre-peak season restocking ahead of the third quarter.

4. Elevated Port Inventory Pressure

As of Friday, total pulp inventories at major national ports stood at 227.1 thousand tons, down 3.5 thousand tons from the previous period but still at historically high levels. Seasonal destocking during the peak season has been limited. Softwood pulp inventories, in particular, require further digestion.