Starting from the second half of 2021, after experiencing the COVID epidemic, the strike wave, and the Russian-Ukrainian war in the first half of the year, the pulp market price continued to rise in the summer of 2022, repeatedly breaking new highs. What are the main factors?
Supply chain crisis in Europe and America
Soaring gas prices are a key issue for European paper and cardboard producers after Russia announced a reduction in gas exports to the EU due to EU sanctions on Russia following the Russo-Ukrainian war. The reduction of natural gas supply will affect the supply chain of the European paper industry, especially the waste paper recycling link that relies on natural gas will be directly affected, and food and medicine packaging fabrics will be under greater pressure. Winfried Shaur, head of the German Paper Association, was even more aggressive, pointing out that the shortage of natural gas could seriously affect German paper production and even trigger an outright shutdown. Stimulated by the natural gas reduction plan, the price of natural gas in Europe has risen sharply, and a number of paper companies have started a new round of price increases. Leipa, a German packaging paper company, said that due to the continuous rise in energy costs and raw material waste paper costs, it will increase the price of its full range of container board corrugated paper from September 1. In addition, the company does not rule out that it will continue to raise prices in the fourth quarter.
The continuous wave of strikes has also continued to affect the entire supply chain, and large pulp mills have been forced to shut down.
Overseas supply chain problems have significantly boosted the export of white cardboard. “Originally, the main producing areas of white cardboard were China and Europe, mainly Western Europe and Northern Europe. However, due to various factors, the overall production capacity of these regions has declined, and they can basically only meet the needs of the region. Supply regions need to turn to China for procurement, such as the Middle East, East Asia, South Asia, and even southern Europe orders have flowed in, and China has undertaken most of the current international white cardboard orders.”
Increased shipping costs and congestion
“Since the COVID-19 outbreak, international shipping has been greatly affected, with port closures, container shortages, making costs higher and higher, and ongoing rail worker strikes resulting in insufficient capacity. When the epidemic situation eases, major Concentrated congestion in ports, cargo can’t get out of the port, people can’t pick up the goods in the port, a vicious circle. Most importantly, ship delays and port congestion further exacerbate the flow of pulp in the global market, ultimately leading to reduced supply and buyer inventory decrease, creating an urgency to get more pulp.
It is worth mentioning that the delivery of finished paper and board imported from Europe and the United States has been affected, which has increased the demand for domestic paper mills, which in turn has pushed up the demand for pulp.
holiday shopping season
In the second half of the year, various large-scale festivals flocked to China’s Mid-Autumn Festival, Spring Festival, Halloween, Christmas, Thanksgiving in the West, etc., which made the demand for packaging continue to increase in the second half of the year, and the supply chain and transportation have not completely recovered from the turmoil. Come over, there is an increase in demand and a shortage in supply, which causes prices to rise.
