TIMBER MARKET INFORMATION

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International pulp and paper market

 

General

  • As a result of the COVID-19 pandemic, some fundamental forces are changing the landscape:

    • Heightened hygiene and personal protection.

    • Rise of remote work, school and more.

    • Expansion of e-Commerce.

  • Geo-political influences are negatively influencing global trade:

    • Brexit.

    • USA vs China trade war.

 

The demand for personal hygiene products such as tissue, paper towels, face masks and protective wear has increased significantly, requiring increased levels of pulp consumption for this sector.

The demand for printing and writing papers has been in gradual decline for some years due to digitalization. The COVID-19 pandemic has caused a sudden and dramatic drop in demand as office workers, schools and universities around the world, which closed doors and turned to work-from-home and online education - dramatically reducing consumption. There has been slight mitigation on pulp consumption as availability of recycled paper has also decreased significantly.

The graph below indicates the gradual decline in demand and the dramatic fall resulting from the COVID-19 pandemic in need of printing and writing paper in the US.

Figure 1: The change in demand for printing and writing paper in the US.

Source: Fastmarkets RISI. For information, please visit www.risiinfo.com/papertrader.

The demand for specific packaging grades has increased as e-commerce, which has seen significant growth, is more “box intensive” than brick-and-mortar channels. Using seven times more corrugated packaging material per US dollar spent than traditional storefront retail sales in the USA.

Pulp supply and demand

Overall, demand has weakened, and at the same time, supply has increased due to new pulp capacity expansions coming online, leading to significant inventory increases at Chinese and European ports.

Figure 2.1

Figure 2.2

The market is oversupplying about 1.6 million tons.

 

HW pulp price

Pulp prices for sale to China have continued dropping as per the graph below.

Figure 3: Variations in pulp prices

Price is forecast to remain under pressure for the rest of this year and could fall to as low as $400/ton.

 

International Woodchip Markets

 

Japan

  • YTD through to June, Japan HW chip imports were down by 20% compared to the same period in 2019.

  • Monthly import volume dropped by 42% from April to June.

  • Significant volume reductions from a further distance and higher-cost sources.

Figure 4.1: Japan HW Chip imports in 2020

Figure 4.2: Japan HW Chip imports 2020 vs 2019

Figure 4.3: Japan YTD May change in HW chip sources 2020 vs 2019

International Woodchip Markets

 

China

  • YTD through to June, China HW chip imports were only down by 2% compared to the same period in 2019.

  • Monthly import volume dropped by 46% from March to May but picked up again in June.

  • There has been a significant swing in sources from further distance higher cost.

 

Domestic markets

 

Eucalyptus Pulpwood

  • Demand has reduced significantly during the first half of the year as a result of:

    • Reduction in the order of Eucalyptus woodchips for export.

    • A decline in purchasing from Sappi as they cut back production of dissolving pulp due to the unfavourable international market conditions. Reduced purchasing from the board mills.

 

There are, however, some positive signs on the horizon that the demand will start picking up during Q3.

Board factories are consuming 80-90% of average volumes, and market conditions for this sector look festive for the next couple of months.

 

Mining Timber

 

After a significant reduction in demand as a result of the mine closures during the COVID-19 lockdown period, demand has picked up nicely as the gold and platinum mines resumed production and are likely to be maintained as gold has been hitting record prices in the market recently.

Dunnage (6 – 10cm) market at this point is a very sort after product and supplied in E. Grandis, E. Dunnii, GxN and GxU specie.

E. Grandis and Grandis-related species are higher in demand than CTE’s, although some platinum mines prefer higher density fibre.

 

Domestic markets

 

Pine sawlogs

  • Sawmills are not operating at standard capacities due to a suppressed market for sawn timber products.

 

Poles

  • The building and fencing markets are showing signs of recovery with demand slowly increasing.

  • Transmission poles are in high demand as Eskom has placed a four-year tender for the supply of transmission poles in the market.

 

Charcoal

  • Bulk supply to Silicon smelters has been volatile for the past three years, primarily as a result of Eskom load shedding significantly impacting on their production at their various smelting plants.

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