Demand remains steady for quality pulp in China to meet the needs of office, home and a growing segment of speciality paper products, with all three of these being driven by higher living standards and consumer purchasing power.
“With the improvement of people's living standards, the requirements for the quality of daily necessities are getting higher, so the specific distribution of paper types is becoming more and more refined,” says Joanna Qu, a paper and pulp analyst at Imore Paper, a leading provider of information solutions focused on the Chinese paper industry chain for the past decade.
The company has recently launched new Chinese and English versions of pulp and downstream reports and waste paper and downstream market reports, providing up to date paper market information to paper customers around the world.
In Qu’s view, many of the companies producing this pulp have advantages on quality, and there will certainly be demand for this in the future. Currently the largest demand is for office paper, followed by tissue paper, and a small but growing segment of speciality paper.
“Each of these uses fresh pulp, so Metsä Fibre's customer needs are consistent with these three categories,” Qu said. “Although the production capacity of specialty papers is small currently, it will have a steady growth in the future. At present, China's domestic specialty paper production capacity is about 3 million tonnes,” she adds.
Current oversupply issues
Import volumes for bleached softwood kraft pulp have mostly mirrored 2017 figures throughout 2018, with most months seeing imports of between 600,000 and 800,000 metric tonnes per month throughout the year, Imore figures show.
Currently, however, there is a glut of pulp at major ports in China leading to oversupply, and this is expected to last into early 2019, according to Qu.
“From the end of 2017 through the first half of 2018, import volumes were considerable, but downstream demand has not been particularly good,” Qu said. “As a result, stocks at some major ports are high, even twice the amount compared to the corresponding period last year. There is currently an imbalance between supply and demand, so the market is oversupplied.”
Since the Chinese bleached softwood kraft pulp market relies on overseas supplies, current inventory needs some time to be moved, with Qu expecting that supply and demand structures will recover by the second quarter of 2019.
Qu says that the listing of pulp on futures markets since November 27, 2018, was an important step, since before this, futures for pulp as a commodity were not available in China.
“After pulp futures are listed, pulp will take on more financial attributes as a commodity, and have more supply and demand fundamentals,” Qu said. “I believe China will have a stronger voice regarding pulp prices in the future.”
As for the government ban on the import of waste paper, which is recycled and used in certain paper streams in China, the overall impact on prices and demand has not been that significant with regards to fresh wood pulp, since there are only small overlapping areas in the downstream markets.
“The ban on waste paper imports has had an effect of promoting the pulp market,” Qu concludes. “Overall, I believe Metsä Fibre will compete for more market share in the future as one of the leading bleached softwood kraft pulp suppliers here in China.”