'Takeout Container and Napkin Demand Expected' Pulp Prices Surge... Up 48% in One Month

[Asia Economy Reporter Park Byung-hee] International wood pulp prices are soaring.

According to the Wall Street Journal on the 2nd (local time), the futures price of Bleached Softwood Kraft Pulp (BSKP) on the Shanghai Futures Exchange in China rose 48% since the 1st of last month, trading at $1,037 per ton.

The reason for the rise in pulp prices appears to be the impact of COVID-19. As coffee takeout increases, demand for pulp containers is rising, and demand for napkins and paper towels for home use instead of offices is also expected to increase.

Brian McClay, founder of Trade Tree Online, which provides pulp price information, said, "I have been watching the pulp market since 1978, and I have never seen such a sharp rise in pulp prices as now."

The Shanghai Futures Exchange has been trading pulp futures products since 2018. China consumes more than one-third of the world's pulp production. Therefore, the WSJ explained that the pulp prices on the Shanghai Futures Exchange serve as a benchmark for global pulp prices. As pulp prices rise, pulp producers in North America and Europe are increasing their export volumes to China.

However, McClay noted that it is uncertain how long Chinese companies' demand for pulp will be maintained and how much speculative buying is behind the current surge in futures prices. He said that if there is a large amount of speculative buying, there is a risk of a sharp price drop. McClay added that it takes about three days for futures market prices to be reflected in the actual market and affect China's import volumes, making it difficult to distinguish between real demand and speculative demand.

Mark Wild, an analyst at BMO Capital Markets, also said, "It is unclear whether the current price surge is a short-term bubble or the beginning of a trend reversal."

Last year's weak pulp prices are also cited as a background for the current rebound. BSKP futures prices traded around $800 per ton in early 2019 but began to decline from mid-2019, falling to around $610 per ton in May last year.

A weak dollar may also be a factor behind the rise in pulp prices. The WSJ Dollar Index, which reflects the relative value of the dollar against 16 major currencies including the euro and yuan, has fallen 5% over the past year. There is also analysis that demand from Environmental, Social, and Governance (ESG) funds, which emphasize social values such as environmental friendliness, could be a factor in the rise in pulp prices.

The WSJ reported that if the strong pulp prices continue, the increased raw material costs will hurt the profitability of Kimberly-Clark and Procter & Gamble (P&G), which could lead to higher consumer product prices.

This content was produced with the assistance of AI translation services.