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The outlook for market pulp
¡ª¡ªOliver Lansdell from Hawkins Wright

2019-05-23 11:04:03
Oliver Lansdell from Hawkins Wright delivers his report of The outlook for market pulp 

Mr. Oliver Lansdell made analysis and outlook over the global market pulp. Judging from the growth of supply and demand of all varieties of pulp in 2010-2018, a huge oversupply has formed in the fourth quarter of 2018. In terms of inventory of bleached chemical fiber pulp manufacturers, inventories of some manufacturers reached a record high due to slowing demand. However, the higher liquidity level of Suzano has raised the threshold for bleaching hardwood pulp, and there is still room for development in the long run. Then, Mr. Lansdell explained and predicted supply and demand situation of market pulp in 2018-2023. 

At the same time, Mr. Oliver Lansdell pointed out that the existing supply will be affected by the low production efficiency, mainly reflected in the unpredictable mechanical failure of the older equipment at full rate; climate change affects supply; wood chip shortage (Southeast Asia) may cause shutdown. At present, the short-term risks of wood chip supply in Southeast Asia are in Australia and Indonesia. The tightening of supply and demand coupled with rising costs, or higher than trend line pricing since 2020, the shortage of pulp has prompted buying waves from China. On the one hand, manufacturers seek to lock in costs, on the other hand, strong demand has raised asset prices. 

In 2018, the global demand for bleached chemical pulp is 59 million tons. Above trend prices may test the pulp paying capability of the different end-use sectors. Higher prices may accelerate the secular decline in graphic paper demand. Market pulp consumed by this sector may be reallocated to growth markets. Significant cyclical and secular downwards pressure through 2019. Demand contractions most acute in Europe. 

Above trend prices will also stimulate supply, including factory restarts, increasing supply of producers, new factory startups, etc. The supply gap will not last long and will end with oversupply. In recent years, when supply has increased significantly, pulp prices have also risen, and vice versa. For pulp, macro factors are more dominant than micro environment. 
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