Starting in 2025, players in the North American pulp market are getting jittery about potential tariffs. The market situation could change dramatically as they finalize January prices and negotiate new orders for February.
In the European pulp market, pulp producers have announced price increases for bleached Eucalyptus Kraft pulp (BEK) and Northern bleached coniferous kraft pulp (NBSK). Buyers, however, have had varying degrees of acceptance.
Looking ahead to the rest of the year, market-related plant shutdowns will play a significant role in the industry. With new capacity coming on line, especially in hardwood, the shutdown is expected to last until the first half of 2025. Demand growth is expected to keep pace with supply growth through 2026, resulting in a tighter market environment.
Strong pulp prices in early 2025
Since the beginning of this year, the price of pulp in the Chinese market has continued to show a strong trend. Domestic resale prices, futures prices and net import prices all rose ahead of the Lunar New Year holiday. After the holiday season, prices maintained recent gains and buyers are expected to need to step up purchases soon.
Continued shutdowns of most of Chenming Paper's paper and paperboard capacity continued to help stabilize downstream markets, especially during the seasonally weak holiday season. In view of the fact that Chenming Paper idle paper machines have not yet had a clear restart plan, it is expected that as the industry enters the peak season of maintenance downtime, the upside risk of pulp prices will increase. This will help pulp producers work through existing inventory overhang.
In the US and Europe, higher pulp discounts have reduced net prices to some extent. However, higher pulp prices in China are likely to quickly feed through to European and North American markets, leading to higher prices in those regions as well.
Labor strikes remain a threat to the 2025 pulp outlook
Worker strikes played a key role in 2024, with the threat of strikes having a profound impact on the global pulp market. In March and April, strikes by transport workers in Finland resulted in the loss of more than 400,000 tonnes of pulp production. In addition, strike action in Chile in April and May affected 100,000 tons of pulp shipments.
Although the summer strike at Canada's two major rail companies, Canadian National Railway (CN) and Canadian Pacific Kansas City Limited (CPKC), ended after 24 hours, the previously planned action has brought pulp shipments to a standstill in all Canadian markets.
In preparation for a possible strike, market pulp producers began preparing contingency plans several months ago and have been in place since May 2024. For buyers, this includes boosting pulp stocks ahead of schedule.
In February, a strike called by the Confederation of Industries, one of Finland's largest trade unions, began at midnight on Sunday, February 2, affecting operations at four plywood divisions and a pulp mill at UPM, one of Finland's largest forestry groups. A week later, the strike was called off.
Although the union's strike action is not directly aimed at pulp mills, the pulp supply chain is still affected. A spokesman for UPM said the pulp mill's operations depended on chemical supplies from Finnish chemical giant Kemira, which was affected by the strike. This means that the supply of raw materials to the Kemi pulp mill has been interrupted.
Potential tariffs imposed by the Trump administration will affect the price of imported pulp
Later, President Trump signed an executive order that plans to impose a 25 percent tariff on all imports from Mexico and Canada and a 10 percent tariff on Canadian energy. In response, Canadian Prime Minister Justin Trudeau announced that Canada would impose retaliatory tariffs on the United States. That could herald the start of a potential trade war.
Canada is the leading supplier of softwood pulp to the US market, followed by Sweden and Finland. In terms of the hardwood market, Brazil is the largest supplier, followed by Uruguay and Canada.
In 2024, North American exports increased by 155,000 tons, while European exports declined significantly, mainly due to strikes and labor disputes in the region throughout the year. If the announced tariffs are implemented, the ripple effect on the global supply chain will cause dramatic market volatility.
China's growing demand will play a key role in the pulp market
Overall sentiment in the Chinese market weighed on pulp and paper consumption in 2024, with consumer confidence falling to an all-time low. Employment confidence declined in 2024 due to the downturn in the housing sector, two factors that weighed heavily on consumer confidence.
China is the world's largest consumer of market pulp, and its market pulp demand exceeds that of Europe, North America and Latin America combined. Therefore, consumer confidence in the region is a major factor influencing the global market landscape.
The drop in demand led to a 7 percent year-on-year decline in market imports, partly due to the industry's shift to wood chip production. At present, the cost of producing hardwood pulp in China is higher than the price of importing bleached hardwood kraft pulp (BHK), which reduces the demand for pulp in the market and benefits integrated producers.
Looking ahead to 2025, the market may begin to recover as the effects of government stimulus programs are gradually felt. These policies are aimed at boosting domestic consumption, which could further fuel a restocking rebound in pulp and paper consumption.
