2Q/16 Global HW Pulp Market Review: improved market; widening HW – SW gap supported hardwood price hikes
(Sao Paulo, Brazil, July 25, 2016) Following a challenging beginning of year, demand for hardwood pulp in China began to pick up, confirmed by the pulp sales figures presented by Global 100 Report of PPPC (+7% year-on-year in the first five months). Unscheduled maintenance downtimes and the widening gap between hardwood and softwood pulp prices also contributed to the more balanced market fundamentals. Thanks to the improved scenario, Fibria announced a price increase in all regions (Europe: US$710/t, North America: US$870/t, and Asia: US$550/t) as of June. The quarter was also marked by a decline in the production cash cost (especially in May and June) and a reduction in projected 2016 capex.
The Pulp Market
The second quarter was marked by the resumption of Chinese demand for hardwood pulp following the beginning-of-year decline in sales volume and price slide.
Throughout the quarter, the fundamentals of the hardwood pulp market improved substantially, fueled by good global demand and the increase in the gap between hardwood and softwood pulp prices. As a result, price increase was announced as of June 1. Also, it is estimated that around 300,000 tons of hardwood pulp were removed from the market in 2Q16 due to scheduled maintenance downtimes and unscheduled stoppages worldwide. The price difference between the two types of pulp exceeded US$100/t in China and reached US$124/t in Europe (according to PIX/FOEX) in the last week of June, versus US$14/t at the close of 2015.
The data from Global-100 report of PPPC show acceleration of hardwood sales starting in March. While global hardwood pulp sales remained stable in the first two months of the year when compared to the same period of 2015, by the end of 1Q16 there was an acceleration of growth, especially in China. Considering the accumulated of the first five months of the year, there was a 1.9% increase in global sales of hardwood pulp. As a main highlight, the hardwood pulp sales to the Chinese market grew 7.4% during the period.
BHKP and BEKP Sales Growth (%)
(Source: PPC Global 100)
The full version of Fibria’s second quarter 2016 results, along with tables, is available on the following link: www.fibria.com.br (Source: Fibria 2Q/16 Financial Report)
Featured Image: Fibria’s bleached eucalyptus pulp production process (courtesy Fibria)