Source: Today's paper price
Pulp price is the most important factor in the profit of household paper. At present, pulp prices are at historically high levels. Experts believe that the future price of pulp will be stable for some time, or even fall back.
Pulp price is high for a long time
Since the end of 2016, the price of European commercial pulp has been rising. In the third quarter of 2018, the price of long-staple pulp in Europe still rose slightly, but it has begun to show signs of stabilization. Many analysts predict a slight decline. In 2017, the actual transaction price of commercial pulp by the United States has reached the highest level in nearly 20 years.
Commodity pulp prices are affected by economic conditions, global supply and trade disputes. During the economic upswing, paper consumption increased dramatically. The increase in paper and board production has driven up the demand for pulp, and the increase in pulp supply will take some time to reach a new balance between supply and demand. However, the growth of pulp supply is usually large, resulting in oversupply, especially during the economic downturn, which will put pressure on the price of pulp.
Commodity pulp is a commodity that is circulated globally, and its price in various regional markets is affected by China's demand for pulp, as China is the world's largest and fastest-growing pulp consumer. In 2016, China's economic growth was slow, and international pulp prices were also at a low level. In 2017, China's economic growth momentum was strengthened, and demand for long and short slurries increased. At the same time, some large pulp mills were suddenly closed and small pulp mills were eliminated, resulting in insufficient supply in the pulp market. In addition, the implementation of the Chinese government's waste paper import restrictions has also led to an increase in demand for commercial pulp and an increase in pulp prices.
Trade frictions have made the market situation more complicated. In the Sino-US trade war, the goods that increase tariffs on both sides include pulp and paper. If the trade war continues, the global pulp price will be more affected.
The uncertain policy of the United States is worrying about the possibility of provoke a large-scale trade war. If the Trump administration’s actions trigger a new round of global economic recession, the price of pulp will be difficult to predict.
For example, the political situation and low oil prices have affected the consumer paper market in the Middle East, where imported pulp prices are high, and the local economic situation makes it difficult for producers to shift the increased pulp costs to the final product price.
Pulp price factor
The price of commercial pulp is predictable to some extent, but the exact time and magnitude of the change in pulp price is difficult to predict. Long-term commercial pulp price forecasts focus on analyzing changes in supply and demand in the pulp market, as well as the cost of producers. The price of bleached kraft pulp may continue to fall due to increased production efficiency, shut down of high-cost production equipment, and the commissioning of new production lines in low-cost areas. More than 1 million tons of pulp production capacity using plantation forests and using the most advanced production technology has replaced the original high-cost production capacity, which has continuously reduced the cost of producers.
For short-term pulp price forecasts, factors such as economic conditions, currency exchange rates, inventory levels and short-term changes should also be considered, especially on the supply side. The current high price of bleached softwood kraft pulp will gradually decline in early 2019 due to increased supply, predictable closure capacity reductions, and temporary reductions in demand due to destocking.
Canfor's Northwood pulp mill was shut down, the California pulp mill was largely shut down after the tornado, and the pulp supplier announced price increases during the Sino-US trade war, which was the factor driving the price increase of bleached fluff pulp in the fourth quarter of 2018. Other factors may cause prices to fall.
Analysts generally believe that the price of bleached fluff pulp will begin to fall. Due to the slowdown in demand in China and some new capacity, the balance between supply and demand will change in early 2019.
The current low operating rate in the fluff pulp market is mainly due to weather, Brazilian truck worker strikes, boiler problems in certain pulp mills, and other temporary factors.
At present, the price gap between long and short fiber pulp in the European market is large. With the acceleration of the replacement of fluff pulp with fluff pulp, the price difference between them is also shrinking. If the price of fluff pulp does not drop too much, the price of fluff pulp will continue at the current level for a longer period of time.
Household paper profit is affected by pulp price
Commercial pulp is the main raw material for household paper, and only about 15% of the world's household paper production capacity can be achieved through the integration of pulp and paper. However, the trend toward the integration of pulp and paper is accelerating, especially in the recent high commodity pulp prices, which makes it possible for self-supplied producers to profit from low cost. In Asia and Latin America, the increase in the proportion of pulp and paper integration is particularly evident, and the process in the European market, although not so fast, is growing.
The relationship between the profit of the tissue paper company and the price of pulp
At present, the cost of commercial pulp accounts for 70% of the cost of raw paper for raw pulp, and accounts for 50% of the cost of finished paper. It is clear that pulp prices are the most important factor affecting the profit of tissue paper. Starting in 2017, the advantages of producers who can supply pellets are highlighted. This has also accelerated the trend of pulp and paper integration.
In the long run, the supply of high-quality recycled waste paper is gradually decreasing, and the proportion of recycled pulp in household paper raw materials is also decreasing. However, producers with recycled pulp production have little dependence on the raw commodity pulp market, which is a relatively favorable condition in the near term.
The relationship between the price of household paper and commercial pulp
The price of tissue paper will generally follow the change of pulp price. The price change of the base paper will lag 1 to 2 quarters. The change of the price of finished paper will lag behind for a longer period of time, which may be 4-5 quarters.
The relationship between the price of tissue paper and the price of pulp
Since the price difference between the original paper price and the pulp price has a certain time difference, the price difference has historically been quite stable, but in recent years, the price difference has slightly decreased.
The price of finished tissue paper is more resistant to the fluctuation of the pulp price, but it also fluctuates with the change of the pulp price, but the amplitude is smaller and the time difference is longer than the base paper. This is the formation mechanism of the pricing environment for the tissue industry.
The current situation is particularly difficult for processors because the price of raw paper has risen, but it is difficult for small processors to increase the price of their products.
Starting in mid-2017, increasing product prices to reflect rising raw material cost pressures has become a key goal for many tissue paper manufacturers. The situation of different manufacturers is not the same. For some important brand manufacturers, retailers have to accept the price increase of their products. These brands have established price protection umbrellas for the entire market. Large private label or retailer brand manufacturers will not be easily replaced, so there is a strong bargaining power. But even these producers have no way to increase the price of their products in accordance with the increase in the price of pulp. Even for the best products, a price increase of more than 10% will result in lower sales. In general, the price of products has been successfully raised by 6% to 8%.
Annual or multi-year commercial pulp supply contracts generally indicate supply, discount, payment and delivery methods, but the actual prices are negotiated monthly. The price agreement for tissue paper products is long-term, and may be 4-6 months, so the price of the product cannot be kept close to the price change.
Price changes will also be affected by factors such as retailer competition and mergers. Tissue paper is an important commodity for retailers to profit. The competition between retail channels is very fierce. If you don't want sales to drop, you can't easily increase the price of the product. Therefore, the rising cost of tissue paper producers may not be reflected in the retail market. In areas where the retail market is particularly competitive, price increases are very difficult, especially for participants with low bargaining power.
What should I do if the price of pulp is high?
If you make the worst plan, the price of pulp will remain high for a long time, and the paper industry must find a way to adjust it. Through a series of methods such as high-end products, higher bulk, smaller packaging, and advanced embossing technology. To increase the price of products per ton of paper and reduce the direct impact of pulp prices. In the market, there is likely to be a polarization between price competition and high-end product competition. In the high-end product field, competition is not limited to price, and the price increase will be relatively simple.
(This article was compiled from Tissue World)
Editor in charge: Ge Hongyan
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