【Wdoodoo Weekly Pulp Report】Off-season expectations weigh on pulp, keeping it range-bound at the bottom.

Pulp fluctuated at low levels last week. The spot average price of softwood pulp stood at about 5,030 yuan per ton, down 20 yuan per ton from the previous period. The spot average price of hardwood pulp was 4,552 yuan per ton, dropping 13 yuan per ton month-on-month. Expectations of the off-season remain intact, and paper mills lack enthusiasm for raw material restocking. After the center of gravity of early low-priced supplies moved higher, downstream players returned to a wait-and-see stance.

1. Bullish Macroeconomic Support

The U.S. advances the "Freedom Plan" to reopen the strait and restore navigation in the Strait of Hormuz via multilateral coordination mechanisms, aiming to maintain deterrence while preventing a major escalation of conflicts. Frequent high-level interactions between China and the U.S. have recently paved the way for a leaders’ meeting. The overall macro environment delivers bullish implications for cotton.

2. Ample Pulp Liquidity, Slow Inventory Destocking

After the absorption of early low-priced supplies, market transactions turned sluggish again, with no restocking moves by paper mills ahead of holidays. At present, softwood pulp at ports enjoys overall ample liquidity. A substantive rally in softwood pulp will likely require more substantial production cuts and inventory destocking by pulp mills.

Hardwood pulp showed a weakening trend, with high-price transactions hampered. Market participants offered price concessions to boost sales yet trading activity remained muted. As the papermaking off-season approaches, finished paper faces heavy shipment pressure. Paper mills only make rigid low-price purchases of raw materials, and the price of low-cost chemi-mechanical pulp also declined accordingly. Demand support for hardwood pulp has weakened, with attention on the 4,500 yuan support level for eucalyptus pulp.

Hardwood pulp is at a relatively low absolute price level with limited inventory pressure, and is expected to withstand limited impact from the off-season. The current price spread between softwood and hardwood pulp has narrowed to below 500 yuan, a five-year low. The narrow spread may help softwood pulp gradually stabilize.

3. Seasonal Weakening in Demand

The papermaking off-season has arrived, with finished paper prices and operating rates of various paper grades continuing to decline. Terminal demand remains sluggish, putting huge shipment pressure on paper mills, and base paper prices are mostly on a downward track. To ease operational pressure and control costs, downstream paper mills only conduct rigid purchases at dips.

Manufacturers of cultural printing paper and white cardboard issued price hike notices to prop up prices, yet actual price increases were limited due to weak follow-up terminal orders. Lacking substantial positive support on the demand side, base paper prices remain weak, leaving limited room for the recovery of weekly processing profits in the industry.

4. Persistently High Port Inventory Pressure

As of Friday, inventory at major national ports stood at 2.35 million tons, unchanged from the previous period and remaining at a historical high for the same period. Seasonal inventory destocking was limited in the peak season, while inventory has rebuilt in the off-season. Softwood pulp inventory, in particular, requires further digestion.

Overall, with the arrival of the off-season, demand support has further weakened, and high port inventory continues to suppress pulp futures prices. However, the market failed to break down with expanded volume twice recently, making short chasing less cost-effective. Tradable bullish factors are scarce at present, with heavy hedging selling pressure expected around 5,300 yuan. The pulp index is projected to fluctuate in the range of 5,000–5,300 yuan in the short term. Investors are advised to wait patiently for changes in supply and demand expectations or conduct moderate range trading.