It will take some time for pulp prices to reverse

Since August, the pulp futures contract market has shown a "low-key" performance, with price fluctuations significantly narrowing. As the main contracts of pulp futures enter the period of shifting positions and months, whether the market will experience a resurgence of volatility has become a focus of market attention.
In terms of supply, the current output of broadleaf pulp sample enterprises has slightly increased, and enterprises undergoing initial maintenance have gradually resumed production, leading to an increase in market supply. Considering that there are currently sufficient orders from pulp companies and the supply pressure is not high, the price of domestic broadleaf pulp is expected to show a strong trend in the short term. In terms of chemical pulp, there has been no significant change in sample production compared to the previous period, and pulp enterprises have maintained normal production. However, with the implementation of the increase in downstream paper prices, the acceptance of orders by pulp enterprises is still acceptable, so there is currently no large-scale maintenance plan.
In terms of demand, the operating rate of paper mills nationwide in the first half of the year has decreased compared to the same period last year. However, due to the overall increase in production capacity, the total output of finished paper has recorded an increase, supporting the demand for raw materials. However, the pace of speculative and restocking demand recovery has not been as expected. In late August, the demand for finished paper will start a rhythm of turning from weak to strong. With the gradual implementation of favorable domestic policies and the strong resilience of the US economy, the pulp inventory cycle between China and the United States is expected to start again, which will benefit the consumption and prices of finished paper. However, from a time perspective, it is unlikely that there will be a significant increase in demand for finished paper in the third quarter, while the registration volume of pulp futures warehouse receipts has increased, putting delivery pressure on September pulp futures contracts.
In terms of inventory, the main domestic ports represented by Qingdao Port continue to slow down the trend of destocking, and due to the impact of typhoon weather in the early stage, the arrival volume of ships has decreased, and the inventory shows a narrow range of destocking. The overall trend of inventory at Changshu Port in East China has converged, with shipments accelerating compared to the previous period. In the past week, the cumulative shipment volume has exceeded 117000 tons, and inventory has fallen back to the mid high level of the year.
In the first half of this year, the year-on-year growth rate of domestic bleach needle pulp supply reached 24%, and the continuous arrival of imported goods at ports has put pressure on the market mentality. In the context of high interest rates, it is difficult for overseas markets to digest pulp demand. In addition, the rising domestic pulp futures market has given Russia a certain increase in the supply of coniferous pulp, causing downstream industries to increase imports while locking in the supply through short selling and hedging. However, as the September pulp futures contract gradually moves out of the delivery logic of cash return, it is expected that more warehouse receipts and sources of goods will flow into the market in the future and urgently need to be digested. At present, it is difficult to maintain the current market price increase pattern for a long time, and the subsequent expansion period is still in the process of adding new broadleaf pulp and bleached needle pulp production capacity. By the end of the third quarter, Finland's Fenbao's 880000 tons of production capacity is expected to be put into operation as scheduled, so it is temporarily difficult for bleached needle pulp prices to form a reverse upward trend.
Overall, the fading of Canadian strike factors and the expected rebound in domestic imports to Hong Kong have temporarily brought an end to the impact of previous overseas supply. Although downstream finished paper prices have stabilized, the degree of seasonal improvement in demand still needs to be verified by the market. We believe that the current lack of supply in pulp prices has boosted the momentum, weakening the previous high momentum and benefiting from the marginal support of spot stability below. At the same time, we need to see a staged rebound in the pulp market in July, mainly driven by a rebound in macro expectations rather than actual demand. Therefore, in the context of a bearish industrial outlook and a bullish macro outlook, it is recommended that investors closely monitor the changes in physical delivery volume and look for short-term short selling opportunities brought about by the departure of long profits.