Packaging / Advertising & Office

Recently, the two major paper product markets in Europe and the United States have released signals of weak demand. As the tension on the global pulp supply side eases, paper companies are expected to gradually gain control over pulp prices. With the improvement of pulp supply, the high pulp price situation in the first half of the year due to tight supply may be difficult to sustain, and the impact of the macroeconomic downturn on demand may be fully manifested. This year's Q4 pulp price is expected to fall. For domestic paper companies that rely on imported pulp, profit or Welcome to repair opportunity.

Paper demand in Europe and the United States releases weak signals

Recently, stimulated by the natural gas reduction plan, the European paper industry has frequently issued warnings.

The European Paper Confederation (CEPI) publicly stated that the reduction of natural gas supply will affect the supply chain of the European paper industry, especially the waste paper recycling link that relies on natural gas will be directly affected, and food and medicine packaging fabrics will be under greater pressure. Winfried Shaur, head of the German Paper Association, was even more aggressive, pointing out that the shortage of natural gas could seriously affect German paper production and even trigger an outright shutdown.

Stimulated by the natural gas reduction plan, the price of natural gas in Europe has risen sharply, and a number of paper companies have started a new round of price increases. Leipa, a German packaging paper company, said that due to the continuous rise in energy costs and raw material waste paper costs, it will increase the price of its full range of container board corrugated paper from September 1. In addition, the company does not rule out that it will continue to raise prices in the fourth quarter.

With the price hike, a new round of production reductions broke out in the European paper industry. In the first half of this year, the European paper supply chain was greatly impacted, and the shortage of supply led to an unusually strong demand. Not only did the top paper companies such as UPM increase their performance in the first half of the year, but the export of domestic paper companies to Europe also increased.

Coincidentally, U.S. paper mill shipments declined in June. According to the American Forestry and Paper Association (AF&PA), shipments of fine paper and packaging paper in the United States fell by 2% and 4% year-on-year in June, respectively.

Domestic paper companies expect Q4 pulp prices to fall

Since the beginning of this year, affected by high pulp prices and weak downstream demand, the profits of domestic paper companies have continued to be under pressure, and the industry is eager to see pulp prices fall to improve profits.

Wu Xinyang, a pulp researcher at CITIC Construction Investment Co., Ltd., said that the supply of pulp is still tight at this stage, and the external quotations in August are still strong, and the support for contracts in recent months is obvious. In addition to the expected decline in the consumption of pulp and finished paper, the Q4 far-month external quotation is faced with the possibility of a downward adjustment.

Domestic demand for papermaking continued to be sluggish. Since entering Q3, although there has been news of price increases in the domestic paper industry, the overall market is light, and the current pressure on pulp costs is still difficult to transmit. The latest data on July 26 shows that pulp futures continue to fluctuate and rise, but the spot market price is still firm. The spot price of softwood pulp is around 7,000/ton, and the hardwood pulp is also maintained at around 6,500/ton.

For this round of sharp rise in pulp prices, a number of paper companies said that it "doesn't meet the real supply and demand situation". In fact, the global pulp industry has been in a capacity expansion cycle in recent years, which has made the industry have high expectations for the decline in pulp prices.

Although people from paper companies generally disagree with the logic of pulp price increase, they still vigorously stock up on the actual operation level. It is reported that some domestic leading paper companies have swept the hardwood pulp and softwood pulp in the market, which further boosted the bullish sentiment and caused peers to follow suit.

Some people point out that, looking at the three major paper markets in Europe, North America and Asia, the weak demand for paper in Asia, especially in China, has continued for a long time. Due to supply chain problems in Europe and North America, supply and demand have deviated from the fundamentals in the short term, and the pressure on the demand side is not high. Obviously, with the expected improvement of the supply chain in the second half of the year, the pent-up demand pressure may be fully manifested.