Jefferies: Pulp Price Rally Expected to Stall, Containerboard Needs Price Increase

Investing.com – Jefferies analysts say that based on insights from the 2026 European Fastmarkets Pulp and Paper Conference, after a significant rise in Chinese pulp prices over the past six months, the upward trend is expected to stall.

Chinese hardwood pulp prices have increased by $100, a 20% rise over the past six months. However, RISI believes further increases face challenges as consumers have replenished inventories in the second half of 2025, and demand has softened after the Spring Festival. The increase in integrated capacity in China poses a barrier to growth in imported pulp demand, with imports accounting for 42% of the total 73 million tons.

Supply of hardwood pulp in 2026 is expected to tighten, with producer inventories below equilibrium levels. New capacity launches have been delayed until Q4 2026, with APP adding 1.4 million tons. Logging restrictions in Indonesia are affecting Southeast Asian woodchip costs and causing 400,000 tons of economic shutdowns. Softwood pulp has a surplus of 645,000 tons, requiring capacity closures. EU mills are shutting down, but since Nordic timber costs have fallen 30% to 40% from their peak, Canadian mills are seen as a higher risk.

Containerboard producers have announced price hikes driven by costs, with increases of €100 per ton, a 15% rise. Energy is a key factor in determining the position of recycled containerboard plants on the cost curve; a €10 per MWh increase in natural gas prices raises cash costs by €15 to €20 per ton. Jefferies estimates that without hedging, about 50% of recycled paper mills have negative cash flow. Smurfit WestRock and SAICA have announced price increases, and more companies are expected to follow.

EU market supply is oversupplied, with a capacity of 43 million tons (excluding Russia) operating at 84% to 85% utilization. RISI believes that closing 2 to 3 million tons of capacity, or 5% to 7%, is necessary to restore a balance above 90%. The EU market is fragmented, with 168 companies, and the top five hold a 35% market share, compared to 73% in the US.

Packaging demand has been disappointing, negatively affected by weak consumer confidence. The EU savings rate is 15%, above the normal level of 12%. Inflation is eroding purchasing power and pushing consumers toward private label products, which have a higher proportion of plastic packaging. Demand shifts from Asia and the higher share of services in household spending compared to pre-pandemic levels are also contributing factors.

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