In April, bearish factors dominated market trends, with the spot price of imported HWP falling ahead of the import prices. In May, anticipated supply-demand pressure will still likely weigh on HWP import offers. However, the joint statement from the China-U.S. trade talks in Geneva exceeded market expectations, and the temporary improvement in market sentiment coupled with the slight recovery in paper production profits may buffer the drop in HWP import offers.
HWP import offers went down in April as bearish factors intensified
Under multiple bearish factors, the HWP import price went down in April. SCI data shows that the offer for April shipments shifted from the previous $20/mt hike to a decline to $560/mt. However, buyers in China still showed limited acceptance of the adjustment, and negotiations ran into a stalemate.
As compared to historical levels, the import price in April 2025 has dropped below the 8-year average level driven by multiple bearish factors. First, the BSK futures market went down constantly after the Spring Festival holiday, creating notable downward pressure on the pulp spot prices. Second, the escalating trade tension between China and the US also accelerated the downtrend in the pulp spot market. Third, with limited supply-demand improvement in the pulp market and low profits in paper production, the HWP spot price lacked upward momentum. Thus, the HWP import offer shifted from bullish to bearish in April.
Import offers for May still expected to drop in May due to higher ending inventory
In May, the pulp market supply and demand are both expected to grow, but the increase in supply may be higher than the demand growth, so with anticipated expansion in ending inventory, the pressure on the spot market may still linger. According to SCI, the total pulp market supply is expected to rise by 4.3% MoM, while as the total demand is likely to edge up by 2.04%. The rise in supply will mainly come from the rebounds in domestic production and imports, as well as high opening inventory. The demand growth may come from production restarts of maintenance paper lines, which may counterbalance the downward pressure. However, as the supply growth still outpaces that of demand, the wood pulp import offer still faces downside adjustments.
The decline in SWP import offers may have bearish influence on HWP prices
In April, the offer for SWP to the Chinese market was the first to drop by $55/mt, and given the strong correlation, the HWP price also softened. Besides, due to constant hikes in wood pulp import offers, the profits of downstream paper production were low, which led to slower import purchases for market pulp after March. Overseas market pulp suppliers started to adjust offers, but the gap between import offers and intentional prices of buyers is still significant. In the meantime, the proactive price adjustments also reflect pressure on overseas pulp suppliers, which may also be a major driver for potential declines in May.
Reversed market sentiment may counterbalance HWP offshore price declines
Since mid-February, the pulp futures dominant contract price at SHFE has declined constantly, and given non-standard arbitrage activities by some players, the bearish futures market weighed on HWP spot price and import offers. As of May 6, the pulp futures closing price was RMB 5,036/mt, down RMB 1,174/mt from the RMB 6,210/mt annual peak so far.
On May 7, new updates suggested that China agreed to engage in contact with the US, and the market sentiment started to improve. After 2-day negotiation in Geneva, a trade agreement was reached swiftly, and both sides agreed to roll back on tariffs significantly, which exceeded market expectations. As a result, the market sentiment starts to recover notably, facilitating a slight rebound in pulp futures and spot prices.
Recovery in paper gross profits may buffer HWP import price drop
The improvement in paper gross profits may incentivize pulp procurement by paper mills. As of May 12, the gross profits rates of downstream virgin paper industries were in the range of -8.02%-10.25%, which changed by -0.05pp to 2.15pp MoM, and the profitability of most downstream sectors improved due to notable drops in pulp prices.
The easing of tariff tensions has boosted market sentiment, which may potentially improve paper mills' outlook on May paper prices and operating rates, and that will likely lead to higher pulp purchasing interest. However, due to long-standing overcapacity in the paper industry, the pulp demand improvement and price development will still depend on the performance of the paper industry.
In conclusion, the HWP import offer for May shipments still experiences downward pressure under multiple bearish factors, but potential sentiment reserve may buffer the price drop.
The ending inventory in May will likely expand, and the loose spot market supply may continuously weigh on import prices.
Also, despite the paper profit recovery due to previous pulp price drops, the lasting oversupply in the paper markets will still restrict recovery in paper prices and operating rates.
The result of the trade agreement between China and the U.S. has exceeded market expectations, and the boost to market sentiment may facilitate stabilizations in the pulp spot market and counterbalance potential declines in import prices.