Supply contraction is difficult to change downstream downturn pulp strength is difficult to continue

First, pulp price historical trend and 2021 market review

In the long run, the operating trend of pulp prices is highly correlated with the global economy, and the cyclical demand for household paper and cultural paper in the terminal demand is weaker than that of other industrial products, whether it is the sharp fall in 2008, or the sharp rise in 2010 or 2017, behind the supply interference, and the price "outlier" duration is relatively short. The period from 2008 to 2021 is mainly divided into the following stages:

The first stage: 2008-2009, the global economic crisis, the sharp decline in demand, the price of industrial products fell, pulp was not spared, the price of China's drift needle pulp fell to around 4000 yuan.

The second stage: In 2010, Chile, the main supplier of wood pulp, suffered an 8.3-magnitude earthquake, and the Arauco pulp plant stopped production, directly affecting 8% of the global commodity pulp supply and 14% of China's wood pulp imports, while Finland appeared large-scale strikes, and the price of needle pulp rose rapidly from 4000 yuan/ton in 2009 to 8000 yuan/ton.

The third stage: after 2011, the impact of the phased supply contraction gradually eased, the global commodity pulp production capacity steadily increased, the downstream paper demand growth slowed down, the supply and demand gradually returned to the equilibrium state, the price of bleaching needle pulp fell from a high level, stabilized at 4400-5000 yuan/ton in 2012-2016, and broke through to 5200 yuan/ton in some time, the fluctuation was small.

The fourth stage: In the first half of 2017-2018, China's paper industry has undergone major changes, the clearance of small and medium-sized production capacity coupled with sudden environmental protection restrictions, with the recovery of demand, driving the price of finished paper to rise, including the main paper types, including cultural paper, wrapping paper and household paper, from 2016 to 2017, the highest increase of more than 50%, the profit of paper mills has rebounded significantly. And directly led to the upstream demand for wood pulp, and supply, due to low prices, Indonesia OKI production line production is lower than expected, CMPC's Brazilian pulp plant announced to stop production for 4 months due to boiler damage, domestic environmental protection due to the removal of a large number of non-wood pulp capacity, wood pulp alternative demand increased. To this end, the price of wood pulp rose by 60% in a year.

The fifth stage: in the second half of 2018 -2019, after the high price of wood pulp for nearly a year, the supply of foreign pulp mills was rapidly put into operation, while the demand for finished paper declined, the terminal demand weakened, and the stock of wood pulp accumulated in large quantities. The global commodity pulp market entered the destocking stage from the replenishment stage, and the pulp price accelerated its decline, and by the end of November 2019, it had returned to the starting point before the rise in 2016, falling by 40%.

The sixth stage: In 2020-2021, affected by the global epidemic, pulp continued to fall in the first half of 2020, rebounded sharply after August, and then gradually moved up the bottom, entering the first quarter of 2021, the price of spot finished paper began to rise sharply, the price of white cardboard exceeded 10,000, and pulp continued to rise by this drive, and the outer dollar offer was close to $1,000. Domestic also broke through the previous high. However, beginning in the second quarter, paper prices began to weaken, and drove pulp prices down in the third quarter, and domestic pulp prices fell again to near historic lows.

2. Availability

(1) Global shipments of wood pulp to China have decreased significantly

In the first 11 months of 2021, China's pulp imports totaled 27.78 million tons, a decrease of 1.3% year-on-year, and an increase of 12.5% in the same period of 2020. Imports in the first half of the year were higher, an increase of 7.9%, and imports gradually fell after July, and from July to September, China's pulp imports decreased by 12.7%. In the first 10 months, the import volume of bleached needle pulp was 7.13 million tons, down 1.9% year-on-year, accounting for 28% of imports, and the import volume of bleached needle pulp was 20.53 million tons, down 6.7% year-on-year, accounting for 42% of imports.

In terms of global shipments, according to PPPC statistics, the total shipment of W-20 commercial pulp from January to October 2021 decreased by 4% year-on-year, of which shipments to China decreased by 10.1%, Western Europe increased by 3%, and North America decreased by 1.8%, by varieties, coniferous pulp and broadleaf pulp decreased by 4% and 5% respectively, and this color paste increased by 18.8%. The sharp decline in Chinese demand has led to a reduction in global commodity pulp shipments, which has also led to a low recovery in producer inventories.

From the shipments of major countries, from January to October, Russia exported a total of 873,000 tons of coniferous pulp to China, a decrease of 16%, and Chile exported a total of 1.095 million tons of coniferous pulp to China, a decrease of 2.7%. In terms of broadleaf pulp, Brazil's exports to China totaled 5.7 million tons, down 13.7% year-on-year.