SunSirs: China Wood Pulp Prices Weakened and Fell in July, Maintaining a Volatile Trend in the Short Term

https://www.chemnet.com   Jul 30,2024 SunSirs

According to the monitoring of the Commodity Market Analysis System of SunSirs, the spot market price of wood pulp maintained a downward trend in July. On July 29th, the average market price of softwood pulp in Shandong Province was 6,130 RMB/ton, a decrease of 2.7% compared to the average price of 6,300 RMB/ton on July 1st. On July 29th, the average market price of hardwood pulp in Shandong Province was 5,150 RMB/ton, a decrease of 7.71% compared to the average price of 5,580 RMB/ton on July 1st.

On the supply side: The market is affected by sudden disturbances and the rebound of demand from the United States and Europe, leading to downward expectations for overseas pulp shipments. Although there has been a slight loosening in external quotations, they are still at a high level, providing support for domestic spot prices. Domestic industry sentiment is mainly wait-and-see. With the gradual centralized production of domestically produced pulp, the market supply of pulp will increase in the short term, which will exert certain pressure on pulp prices.

In addition, the impact of the newly added production capacity of hardwood pulp in the early stage, from the perspective of the shipment volume of hardwood pulp from major producing countries to China, it may be difficult for domestic hardwood pulp imports to significantly reduce in the short term, which also brings supply pressure to the market, and hardwood pulp trading is clearly weak. The pessimistic attitude of broad-leaved trees is still a drag on coniferous trees.

On the demand side: Due to entering the traditional off-season and weak consumer confidence, paper mills face cost pressures, leading to a bearish mentality among operators and increased downtime and maintenance of paper machines to alleviate inventory pressure. Therefore, the market mainly purchases on demand, which has a drag on pulp consumption. However, the production of the four major types of finished paper downstream of pulp continues to decline, dragging down pulp prices due to demand. In addition, the decline in terminal demand has not shown significant improvement, resulting in poor support for upstream pulp prices.

As the expectation of the Federal Reserve's interest rate cuts continues to weaken, the strength of demand recovery in the second half of the year may not be as strong as expected. Downstream raw paper enterprises have reduced their acceptance of high priced wood pulp, resulting in poor spot transactions and a drag on pulp consumption. Under the pressure of the off-season, the price of wood pulp is weak.

In terms of imports: According to data from the General Administration of Customs, the import volume of pulp in June 2024 was 2.61 million tons, with a month on month increase of -8% and a year-on-year increase of -14%. In June, the import of needle pulp was 550,000 tons, a decrease of 21.9% compared to the previous month and a decrease of 35.8% compared to the same period last year. For the future market, there is currently no bullish driver on the supply side, and the downstream market in China is still in the off-season. Poor spot transactions have dragged down pulp prices, and the fundamentals of pulp are weak. However, after all, the high import costs may also limit the downward space.

Domestic port data: As of July 25, 2024, the sample inventory of mainstream pulp ports in China was 1.779 million tons, an increase of 0.6% compared to the previous period. The inventory showed a trend of accumulation this week and has been in a state of accumulation for three consecutive weeks.

In terms of futures, the price of pulp futures in July is basically fluctuating in a downward trend at the beginning of the week and an upward trend over the weekend. As of July 29th, the opening price of the main contract SP2409 for pulp futures on the Shanghai Futures Exchange was 5,670 RMB/ton, the closing price was 5,716 RMB/ton, and the highest price was 5,742 RMB/ton, with 320,300 transactions and 192,780 positions held.

The wood pulp analyst from SunSirs believes that in recent times, upstream pulp mills have successively quoted prices from external markets, and there is an expectation of a downward trend in market prices. In addition, the supply side prices have loosened but import costs remain high, and the demand side sentiment continues to be pessimistic, resulting in a stalemate in the supply and demand relationship. It is expected that the short-term spot price of wood pulp may maintain a volatile trend.

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