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TISSUE MARKET ANALYSIS 2018

By Knut Omholt, Södra’s market research manager

There are now several events within the pulp and paper business that are influencing the softwood pulp market globally and in Europe specifically. Firstly, we have the situation in China where political decisions have greatly influenced the market balance for all pulps both in China and Europe.

Secondly, a rather unusual tight supply situation for softwood pulps in Europe, and thirdly there is a lot of announced new capacity, expansions and conversions within the pulp and paper industry in Europe that are all offering jigsaw pieces to the bigger European picture for softwood market pulp.

China’s 2017 decision to ban all imports of recycled paper graded “waste paper” is making itself felt. So far this year imports of recovered paper to China have been reduced by the equivalent of a yearly fibre volume of 10-15m tonnes.

There has also been a clear reduction in the number of licenses issued permitting the importation of all types of recovered paper and many of China’s smaller paper and board mills have been locked out from these allocations.

At the same time, the government is  enforcing much more stringent rules on the quality and purity of imported paper. China is setting a new quality standard for the worldwide trade of recovered paper, and other countries may well follow China’s example further on.

Then in recent weeks the ongoing trade conflict between the USA and China escalated further to also include pulp and paper products: The USA announced tariffs of 25% on all Chinese pulp and paper products. Subsequently, China retaliated with duties of its own, including 25% on recovered paper, while duties of U.S. softwood and hardwood pulps were set at a mere 5%.

While most mills for both technical and economic reasons cannot simply switch from recovered paper to bleached virgin fibre, Omholt adds that there has been a light degree of substitution nonetheless and the latest figures show an increase in imports of bleached virgin pulp to China.

Overall, there are indications that some 100,000 tonnes of softwood kraft pulp has been redirected from European markets to China last twelve months. That may not sound a lot in a European softwood pulp market of 6.5mt, but  at a time when Europe’s markets are exceptionally tight, it has an impact.

Another possible scenario that has emerged during the last weeks is the possible effects of the Chinese 5% import tariff on US market pulp. Whether  this will encourage US producers to redirect their market pulps to Europe or not remains to be seen.

But if so the volumes of US pulps going to China are so large that is has the potential to totally change the market situation in Europe if they were to be redirected there.

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