What will happen to the global pulp market in 2024?

Chinese pulp prices rise

Key players in the pulp and paper industry met in London last week on the back of a rally in Chinese pulp prices, with the market facing upside risks for the first time in more than a year. Strong seasonal growth in demand in China in the second half of the year, coupled with replenishment-related purchases, has pushed net prices for pulp in China higher than in Europe or North America. While few participants doubt that upward momentum is building in the Western Hemisphere in the short term, there are questions about whether China's rally can be sustained as seasonal demand intensity is likely to subside by the end of the year.https://www.risedongsheng.com/

Here is a summary of three key discussion points and their implications for the pulp market in 2024:

Pulp Market, Chinese Demand Surges: Pulp producers' inventories have risen sharply over the past year, with stocks of bleached softwood kraft paper (BSK) producers hitting record highs, then falling in the second and third quarters, returning to balance by September. Producers have achieved this feat in just 6 months by relying on two market components.

On the demand side, as domestic consumption picked up, buyers began to replenish inventories, while pulp was relatively cheap, and shipments to China surged. On the supply side, pulp producers stopped production for market reasons for more than 1.40 million tons throughout the year. The increase in shipments, combined with supply, caused producer inventories to decline relatively quickly and essentially eliminated excess inventories in the market.

Capacity closures impacting pulp markets: Permanent and indefinite capacity closures also impacted the supply side of the softwood pulp market throughout the year, including six commercial pulp production lines in North America and a factory in Finland, which collectively cut 1.60 million tonnes of commercial pulp capacity in the northern region. Bleached softwood kraft paper (NBSK), Southern bleached softwood kraft paper (SBSK), unbleached softwood kraft paper (UKP) and softwood fluff pulp markets.

The main reasons for the plant closures were the result of long- and short-term pressures on wood fiber supplies and the advanced technology era of North American pulp assets conflicting with a potent combination of high interest rates and five-quarter cyclical downturns in the North. Most participants agreed that the risk of further closures remained high as long as these factors persisted; however, the consequence of the closures was that the start-up of the new Finlin cardboard Kemi plant (which started production in Finland in September) had been effectively offset.

The BHK pulp market remains stable: In contrast, the bleached hardwood kraft paper (BHK) pulp market has seen relatively little disruption so far in 2023. Although the capacity base of the BHK market is more than 50% larger than that of the BSK market, the number of unexpected shutdowns is smaller, and so far, BHK has not announced a permanent capacity shutdown in 2023. With global BHK shipments on the rise, BSK shipments are on a downward trend, and alternative patterns continue to play out, indicating that paper and paperboard producers are increasingly looking for more ways to use cheaper and lower cost BHK.https://www.risedongsheng.com/

Global pulp market outlook

Looking ahead to 2024, the global pulp market looks set to enter the new year on a healthier footing. Excess stocks in the market in 2023 have been cleared and the supply side may face unexpected disruptions caused by worker strikes, natural disasters and/or mechanical failures. The current investment cycle in new commodity pulp capacity is also winding down, with a major project planned to start next year and another in 2025.

While high interest rates pose the risk of further closure of non-performing assets, they also remain an obstacle to the development of new projects. Despite successful supply management in 2023 and tighter supply conditions in 2024, there is an upside risk that pulp producers will not be able to produce the important missing component - demand.https://www.risedongsheng.com/

Due to the recent seasonal weakening of demand in China, while indicators in Europe and North America remain subdued, the industry now expects late 2024 to see something not seen since the outbreak of the epidemic - demand growth in Europe, North America, Eastern Europe and Asia in sync.