【Wdoodoo Weekly Paper Industry Report】The bottom of the pulp market has gradually been identified, but upward momentum still needs to be accumulated

This week, pulp prices have been fluctuating sideways. The average price of softwood pulp is around 4,927 yuan/ton, up 60 yuan/ton from the previous week; the average price of hardwood pulp is 4,365 yuan/ton, down 3 yuan/ton from the previous week. Pulp supply disruptions have occurred frequently, but paper mills mainly focus on digesting finished paper inventory, and their enthusiasm for replenishing raw material stocks is generally moderate. Market purchases and sales continue to be sluggish.

1. Macro perspective: Geopolitical risks are returning, with focus on the impact of US Treasury bond interest rates on US policies. Domestically, signals are being released to boost domestic demand, the National Development and Reform Commission is advancing major projects for the 14th Five-Year Plan, infrastructure data is showing marginal improvement, and we are eagerly awaiting policy statements from the Politburo meeting.

Overseas risks are escalating, with the US and Iran engaging in talks amidst their ongoing conflict. Geopolitical tensions have once again pushed up oil prices, leading to renewed expectations of global inflation and intensifying recessionary logic. It is anticipated that the primary objective of the US will be to reduce interest rates and deleverage. The probability of the Federal Reserve hiking interest rates within the year is low, and attention should be paid to the impact of changes in US Treasury bond interest rates on US policies.

The United States imposed a 12.5% tariff on China under Section 301, and the implementation intensity did not exceed market expectations. The subsequent core observation is the negotiation and implementation pace of the reciprocal tax reduction framework for $30 billion of goods from both China and the United States.

 2. There are frequent reports of production halts and price increases for softwood lumber, and the price gap between softwood and hardwood continues to widen.

As losses intensify, some softwood brands are experiencing tight cash flow, leading to an increase in pulp mill shutdowns and production cuts to alleviate excess pressure. Lion and Beimu have permanently shut down, and some brands have shifted production. The market speculates that more shutdowns and production cuts may occur. Affected by this, softwood brands such as Silver Star have increased their prices by $10-20/ton in this round.

Hardwood pulp is facing the impact of new capacity additions and low-price domestic integrated forest-pulp-paper operations, with prices continuing to be under pressure. Foreign brands such as Star have generally fallen by $10-20/ton in this round. However, hardwood pulp inventories have not yet accumulated, and Asia-Pacific Senbo announced a price increase of 100 yuan/ton from August 1st.

Due to the continuous impact of reduced production capacity of softwood and expanded production capacity of hardwood, the strength of softwood and hardwood has shifted, and the price difference continues to widen.

3. Paper mills frequently issue price increase notices, but the actual finished paper is mainly shipped out. The off-season atmosphere of the main industry chain persists, and the production of cultural paper has rebounded. Due to insufficient follow-up orders for finished paper, raw paper enterprises mainly focus on shipments, and paper mills purchase raw materials as a rigid demand at low prices, lacking a strong willingness to replenish their inventories. As the peak season approaches, paper mills have successively raised prices, but the implementation of price increases remains to be observed.

By category: White cardboard shipments have slowed down, but inventory pressure is not significant. Large-scale paper mills plan to raise prices by 100 yuan/ton at the beginning of the month, attempting to stimulate downstream purchasing enthusiasm. Cultural paper terminals continue to pick up printing and publishing orders, while social orders are generally following suit, with dealers selling at stable prices. However, there are many downtime issues with double-sided offset paper, and some paper mills plan to raise prices by 100-200 yuan/ton at the beginning of the month to boost the market. The supply and demand of household paper are relatively weak, and downstream processing factories are cautious in purchasing.

4. Pay attention to the progress of destocking finished paper and pulp.

Currently, domestic finished paper and pulp inventories remain relatively high. Last week, pulp ports and warehouse receipts saw another increase in stockpiles, dampening market confidence.

However, as the production of various paper grades gradually decreases, the inventory of finished paper has also declined. In particular, the significant decrease in production of cultural paper has driven a rebound in the market for double-sided offset paper. Only when the inventory of finished paper is effectively reduced can the subsequent replenishment of raw materials be driven, and then the reduction of inventory at ports can be seen.

Overall, news of supply disruptions in overseas pulp mills has increased, prompting domestic paper mills and pulp mills to follow suit with price hikes, stabilizing the prices of low-priced pulp. However, high port inventories and off-season demand have suppressed the market, with paper mills and traders focusing on reducing inventories and being cautious in chasing price increases for spot orders. In terms of operations, the core range of 4700-4900 is expected to fluctuate in the short term, with a focus on short positions due to expectations of peak season and supply disruptions. Close attention should be paid to downstream inventory replenishment, inventory reduction, and pulp mill maintenance dynamics.