Why Have Market Pulp Prices Continued to Remain so High?
The price of pulp is at an all-time high now, with leading manufacturers announcing unprecedented price increases nearly every week. A number of variables are responsible for keeping the prices high.
Some of these factors are:
- Highly competitive market
- Rising worldwide demand
- Supply limitations
- High freight costs.
Other variables also include a rise in the popularity of online shopping and e-commerce, the requirement for more packaging and paper goods, and a decline in the availability of wood pulp because of the epidemic.
The high prices have also been influenced by rising expenses for the raw ingredients, transportation, and energy needed to make market pulp. Prices have stayed high because producers struggle to meet the rising demand of the market.
What are the key factors affecting market prices?
Pulp and paper prices are at an all-time high globally because of unpredictable supply. Not only that but another main cause is the inventory-empty supply networks caused by stress. Some of the key factors that have caused this stress include the following:
Unexpected Supply Downtime
Unexpected supply downtime includes events that require a pulp mill to briefly halt operations. Primarily, unforeseen downtime is a very crucial issue for pulp pricing right now.
Unexpected supply downtime could include anything ranging from labor disputes, mechanical problems, fires, floods, or droughts that prevent a pulp mill from operating to its full capability. However, something that has been prearranged, like a yearly maintenance downtime, is not considered an unexpected supply downtime.
The first quarter of 2022 saw an unprecedented amount of unplanned downtime, which caused a scarcity of pulp to be supplied around the globe.
Even though the frequency of these occurrences has decreased since the start of the year, new cases of unexpected downtime have still been arising and are continuing to have an effect on the market in the third quarter of 2022.
UPM Project Strike
The Paperworkers’ Union began their industrial strike on 01.01.2022, in many of UPM’s Finnish factories. It was difficult to get all UPM’s paper mills back up and running after the strike was over, as a large number of UPM staff resigned in different parts of Finland while the strike was still in effect.
UPM is a big provider of label materials, which means these strikes are exacerbating the already existing paper shortages, caused by increased demand and resource scarcities from last year. This will make it harder to address the supply chain issues that have been afflicting the global economy since the start of the pandemic.
Similarly, US companies that make release liners and face sheets on a large scale have mentioned that they are having increasing difficulty in finding the necessary raw materials, which is causing the cost and demand for market pulp to rise significantly more than it had been.
Transportation & Supply Chain Issues
The P&P industry has struggled greatly in recent times due to unreliable transportation. FourKites, a supply chain company, found that from December 2021 to February 2022, the amount of time cargo ships spent in American ports had increased by 4% from the whole of 2021 and 21% from the start of the pandemic.
This has caused delays in the import of paper, especially from Asia to Europe and North America. The pandemic caused a labor shortage, leading to general congestion and a decrease in the availability and reliability of rail and trucking transportation all over the world.
This also had a negative effect on the supply of pulp, particularly softwood grades that are mostly shipped in containers, due to a lack of shipping containers and high spot container rates, which are still four to five times higher than before the pandemic.
Vessel delays and port congestion further limited the movement of pulp internationally, which created a pressing need for more pulp because of the decreased availability and buyers having lower stocks.
Although the ongoing dispute has not yet had a direct effect on the pulp industry, bans on Russian markets could mean more pulp is available for European countries. Russian unrefined pulp is likely to be redirected to Asian countries due to a lack of chemicals, which is expected to reduce the cost of pulp in that region.
As expected from this dynamic industry, there has been a lot to cover. Keep updated with the latest trends only with Coniferous.