Chinese demand surprises, driving new round of pulp price increases

In Asia, Suzano said, demand for pulp and paper is strong, resulting in a double-digit increase in production compared to the same period last year. Higher paper exports and a resumption of consumption after the pandemic explain this behavior.

This time the increase will be $50 in China, bringing the total announced since the end of May to $160 per tonne. Considering that the net price of hardwood pulp (BHKP), as measured by the Fastmarkets PIX index, was around $578 per tonne last week, the value of the raw material would reach $630 per tonne in November.

The intensity of the correction came as a surprise, said Mr. Sasson. The expectation was for announcements of $20 a tonne for November and then December. “This $50 all at once, in November, shows that, in the company’s perception, the market is tighter in the short term than we imagined.”

A general movement to rebuild inventories of the raw material and the success of Chinese paper companies in applying adjustments, with a recovery in margins, explain the recent stronger demand, said the analyst.

In a report last week, Bank of America (BofA) raised its hardwood pulp price expectation for the year to $603 per tonne from $588 per tonne. “Despite the likely increase in pulp supply, we see little chance of price pressure as current levels are very close to supporting production costs,” wrote analysts led by Caio Ribeiro.

Mr. Sasson of Itaú BBA said there is room for much of the new adjustment, especially in China, and the trend is for this movement to be accompanied by Europe and North America, so that the price difference between the regions doesn’t become so pronounced. However, in 2024, with the additional capacity from Arauco’s Mapa project and UPM’s new mill at full capacity, and the start-up of Suzano’s Cerrado project, the trend is for more pressure on prices.