London Pulp Week 2024 takes place from 10 to 14 November, bringing together key players in the pulp and paper industry. As is so often the case these weeks, the nature of the discussions has changed as meetings between suppliers, traders and buyers have unfolded.
On November 14, as participants prepared to return home after the formal meeting, the market's views and expectations were different from those discussed when everyone arrived in London on November 10. The mood and the main topics of this week's debate have changed. The central theme is the market conditions of short and long fibers and how the two exhibit different behaviors, which is unusual in the industry. In London, as in previous years, contract negotiations for 2025 have begun, and it is clear that the needs and expectations of the negotiating parties are different.
Despite recent production cuts announced by Latin American plants, the staple fiber market remained oversupplied at the end of the year. Suzano, for example, recently announced a 4 percent production cut, but at the same time started production at its new plant in Ribas do Rio Pardo, which will bring about 900,000 tons of production to the country's market. Record exports of eucalyptus pulp (BEK) from South America (Brazil, Uruguay and Chile) in the second half of 2024 further boosted this growth. Although demand from China has improved, it is not enough and port inventories are expected to increase by the end of the year. It is expected that after the Lunar New Year in early February next year, the staple fiber market will not change significantly.
In contrast, the coniferous wood (pine pulp) market is in tight supply. Price differences between China and other major markets such as Europe and North America are affecting year-end negotiations. Buyers, especially in Europe, are aware of the low prices in China and expect further price cuts before the end of the year, while manufacturers are aiming to at least keep prices stable given the limited supply of pulp.
It is worth emphasizing that the dynamic trend of the short fiber and long fiber markets is beginning to diverge. There are differences in the fundamentals of supply and demand in every market. Staple fiber capacity, especially eucalyptus capacity, is expected to expand in the coming years, while cork capacity will continue to contract, with more plants expected to close permanently in 2025. International Paper recently announced the permanent closure of its Georgetown plant from January 2025, which will put pressure on the supply of coniferous pulp, although the plant mainly produces fuzz pulp.
As in previous years, negotiations for the 2025 contract have begun in London and are expected to be completed before the end of the year. Buyers seek discounts of 2% above the historical average, while suppliers tend to adopt a cautious "listen and wait" strategy, watching market developments before making a counter-offer.
Staple fiber manufacturers are aware that supply will increase due to new capacity starting up in 2023 and 2024, so they need to secure production for next year. With limited supply, the ongoing risk of more plant closures and higher prices in the second half putting pressure on financial results, long fibre producers must prioritise profitability. Depending on the outcome of the negotiations, the price may change significantly in the first quarter of 2025.
Every Pulp Week brings important news to the industry, and this year is no exception. Chenming Paper, a major integrated paper producer in China with a paper capacity of nearly 7 million tons, announced a surprise leadership change and later confirmed rumors of serious financial problems. The company is believed to have stopped at least 70 percent of its paper production capacity and does not rule out that it will be forced to completely stop pulp and paper production in the coming weeks. China's paper glut may be becoming its first victim.
The changing market dynamics of hardwood and softwood pulp, coupled with changing supply and demand fundamentals, mark a period of transformation for the industry. It is important to keep a close eye on market developments later in the year and prepare for possible volatility in early 2025.
