According to the monitoring of the commodity market analysis system of SunSirs, both softwood pulp and hardwood wood pulp showed a fluctuating downward trend in 2023. As of December 31, 2023, the average market price of softwood pulp in Shandong Province was 5,850 RMB/ton, a decrease of 20.3% compared to the average price of 7,340 RMB/ton on January 1. On December 31st, the average market price of hardwood pulp in Shandong was 5,040 RMB/ton, a decrease of 21.81% compared to the average price of 6,446 RMB/ton on January 1st.
In 2023, the spot market price of imported wood pulp showed a trend of strong decline and weak rise, and the price was mostly affected by the fluctuation of pulp futures contract prices. In addition, the supply continued to increase, and although there was an increase in demand, the overall recovery situation did not meet expectations. The high prices of softwood pulp and hardwood wood pulp for the whole year appeared in January, at 7,420 RMB/ton and 6,446 RMB/ton, respectively. The low points appeared in early May, at 5,224 RMB/ton and 4,000 RMB/ton, with declines of 29.6% and 37.95%, respectively.
The first round of market (January June): The price of wood pulp experienced a cliff like decline, followed by a volatile consolidation. The price of softwood pulp decreased by 28.07%, and the price of hardwood wood pulp decreased by 34.69%.
In the beginning of 2023, the price of wood pulp showed a weak downward trend. In January, the external quotation of wood pulp was lowered, and the import volume increased month on month. However, downstream paper mills were affected by public health events and the Spring Festival holiday, resulting in a relatively low market operating rate. Therefore, in a state of strong supply and weak demand, the price of wood pulp began to decline. The decline in wood pulp prices from February to April continued to expand. Due to the economic recession in overseas markets, most of the pulp flowed into the domestic market, and domestic port inventories continued to accumulate. High inventory affected the price of wood pulp in the market. However, in the downstream market, there is a lack of enthusiasm for purchasing wood pulp raw materials due to the sentiment of buying up instead of buying down. In the current market with insufficient confidence, the market has a more pessimistic sentiment, resulting in prices falling again and again.
From May to June, the spot prices of wood pulp fluctuated and consolidated. Affected by the rise in pulp futures prices, the spot prices of softwood pulp fluctuated and adjusted according to the market, and the external quotation of hardwood wood pulp increased, driving up the spot prices of hardwood wood pulp significantly. The continued strength of the US dollar has provided some support for the cost side. With the arrival of the June E-commerce Festival, the shipment of household paper has improved, and under the supply-demand game, the focus of hardwood wood pulp has shifted upwards. Subsequently, the transportation volume of imported wood pulp increased, leading to increased supply pressure. In addition, the prices of cultural paper and white cardboard in some regions have significantly loosened, which has in turn constrained the price of wood pulp. Downstream markets have shown a decline in production, resulting in a decrease in demand for wood pulp, leading to a further downward adjustment in wood pulp prices.
The second round of market trends (July December): Wood pulp prices first increased and then decreased, softwood pulp prices increased by 10.8%, and hardwood wood pulp prices increased by 19.71%.
Starting from July, the price of wood pulp began to rise, with continuous international market disturbance news. The Canadian market strike has highlighted the tense supply atmosphere. In addition, mainstream domestic port inventories continue to show a trend of destocking, and the external quotation of wood pulp has also continued to rise. Therefore, it provides certain support for the upward trend of wood pulp prices. In the peak season, the price of wood pulp continues to rise, and downstream enters the state of stocking for the Mid Autumn Festival and National Day. Market orders are gradually released, and consumer enthusiasm and procurement enthusiasm are heating up, resulting in a continuous increase in the price of wood pulp. In mid October, the price of wood pulp reached a high point in the second half of the year.
In late October, the price of wood pulp rose and fell, and international wood pulp supply gradually stabilized. Domestic port inventories accumulated, and traders slowed down shipments. It was difficult for wood pulp prices to rise. In addition, the significant decline in pulp futures prices drove the spot price of wood pulp down. After a brief slight increase in November, the price of wood pulp continued to decline, and as downstream demand gradually weakened, it had an impact on the transactions in the wood pulp spot market. The enthusiasm of downstream paper mills to start production has declined, and the market is basically in a state of rigid demand for purchases. There are preferential and profit giving actions in some transactions. Until the end of the year, prices remained in a range of price fluctuations.
What will be the trend of wood pulp in 2024
In terms of production capacity and output: From 2019 to 2023, the overall domestic wood pulp production showed a growth trend, and the increase in production was mostly influenced by the promotion of the integration process of domestic forest pulp and paper. The expected wood pulp production in China in 2023 is 26.9162 million tons, continuing the high level in 2022. Unlike imported wood pulp, domestic wood pulp is more for factory use and has limited circulation in the market. When the price of imported wood pulp circulating in the market deviates from the normal level, a small amount of domestic wood pulp will flow into the market for adjustment. According to incomplete statistics, the new production capacity of domestic wood pulp in 2024 is still expected to expand to over 8 million tons, which will bring significant supply pressure and may not be conducive to the high operation of pulp prices.
In terms of imports, the total supply of pulp in China in 2023 was 56.6774 million tons, an increase of 11.87% year-on-year, with Chinese wood pulp imports being the main source of increase. The domestic pulp import volume from January to December 2023 was approximately 36.66 million tons, a cumulative year-on-year increase of 25.7%. In 2024, incomplete statistics show that international wood pulp production capacity increased by 2.71 million tons, mainly distributed in South America and Europe. The main shipping destinations for pulp factories are the Chinese market. At the same time, the zero tariff policy for Chinese wood pulp imports has not been adjusted, so it is expected that domestic wood pulp imports will continue to grow in 2024. The periodic changes in the import volume of wood pulp, or the continued coordination with changes in the main contract prices of pulp futures, will affect the short-term price fluctuations in the domestic spot market for imported wood pulp.
In terms of demand: The demand increment in the wood pulp market in 2023 is flat, making it difficult to effectively support the high price operation of wood pulp. In 2023, the total demand for pulp in China was 52.065 million tons, an increase of 6.74% year-on-year. Downstream raw paper contributed to the increase in pulp demand, while the increase in demand was mainly concentrated in double adhesive paper and household paper, which was related to factors such as increased production capacity and pulp consumption. In 2024, downstream raw paper plans to increase production capacity by nearly 4 million tons, which is conducive to the growth of pulp consumption. However, due to the lower growth rate of demand than supply, the imbalance between supply and demand in the pulp market remains significant, so the support for pulp prices may weaken.
Overall, there will still be new production capacity released in the global wood pulp supply in 2024, so the market supply remains sufficient. However, the acceleration of domestic pulp and paper integration process is expected to reduce external dependence, which will bring certain pressure on imported wood pulp and weaken the support for spot goods. The fluctuation of pulp futures prices has a more significant impact on the mentality of the spot market, with strong linkage between the futures and spot markets. Short term fluctuations in futures prices affect the mentality of the spot market, and changes in the mentality of the spot market further affect the futures market. If the maintenance of foreign pulp mills and changes in shipping conditions in 2024 lead to changes in shipping costs and supply and demand patterns, it will also be a factor affecting the domestic market mentality. Currently, pulp supply and demand are showing a positive growth trend, and it is expected that the market supply and demand will continue to compete in the first quarter, with prices maintaining a range of fluctuations and consolidation.
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