China's Wood Pulp Market Caught Between Supply Hopes and Demand Weakness

China's wood pulp market spent July caught between two competing forces: the promise of tighter supplies ahead and the stubborn reality of slack demand right now. The result was a market that couldn't quite decide which way to go. Softwood pulp prices edged up 1.39% over the month to close at 4,866.67 RMB per ton in Shandong, buoyed by news of production cuts overseas. Hardwood pulp, by contrast, drifted lower—down 1.13% to 4,383.33 RMB per ton—as new mills came online and Chinese producers increasingly replaced imported material with domestic supply.

The supply side offered genuine reasons for optimism. An overseas producer announced it would permanently shut down a softwood pulp mill by year's end, a move that signaled real contraction in the global market. Arauco, a major player, raised its offshore quotes for softwood pulp in response, and the broader industry sentiment shifted toward defending prices. Timber harvesting restrictions in British Columbia, compounded by wildfire disruptions, added another layer of concern about future North American shipments. For hardwood pulp, though, the picture was reversed. Overseas producers actively cut prices to clear inventory, and with no major maintenance shutdowns planned globally and new capacity still ramping up, the downward pressure persisted. Domestic integrated forestry-pulp operations were also increasingly stepping in to replace imports, which only accelerated the decline.

Back home, Chinese ports told a different story. As of July 30, major pulp import terminals held 2.279 million tons of inventory—a slight decrease of 6,000 tons from the previous period, but still stubbornly high. The pace of destocking had slowed to a crawl. This mattered because it meant the market was swimming in supply even as overseas producers were talking about cutting back.

Demand, the real culprit, remained anemic. July is always slow for papermakers—it's the industry's traditional off-season—and this year was no exception. Cultural paper orders were thin, with only scattered fulfillment of autumn publishing tenders. Paper mills found themselves holding excess finished inventory and running at reduced capacity, buying pulp only for immediate needs. White paperboard showed more resilience, supported by steady packaging demand and higher mill utilization rates, but even there, weak downstream orders meant mills couldn't pass price increases along to customers or justify building up raw material stocks. Across the sector, most mills were operating at break-even or at a loss on their finished paper, which left them with no cushion to absorb higher pulp costs.

Futures markets reflected this tension vividly. Early July saw prices languishing at low levels as traders waited to see what would happen. Mid-July brought the overseas mill closure news, and bullish investors piled in, driving prices toward 4,900 RMB per ton as the market priced in the expectation of future supply tightness. But by late July, those same investors took profits. The reality of high inventories and weak demand reasserted itself, and prices retreated. The main contract on the Shanghai Futures Exchange closed July 30 at 4,740 RMB per ton, having opened at 4,802 and peaked at 4,816, with trading volume at 302,900 lots.

Analysts at SunSirs saw the month as a tug-of-war between long-term bullish supply expectations and the immediate bearish reality of oversupply during the off-season. The supply-side optimism had come too late to move the needle on spot prices, while demand remained trapped in its seasonal slump. Softwood pulp prices oscillated within a narrow band, unable to break decisively higher. Hardwood pulp simply trended down. The real inflection point, analysts suggested, would come when mills began preparing for the September peak season—that's when purchasing patterns might shift and supply-demand dynamics could reset. Until then, the market was likely to drift without a clear direction.