Kraft Pulp Prices Explained

Kraft pulp prices show a positive trend as demand surged from Chinese buyers as they are actively restocking relatively inexpensive pulp. Also, the European association of graphic paper producers posted an increased demand for CWF (coated woodfree, 18%) and UWF (uncoated woodfree, 15%), making paper mills even busier due to Germany and Belgium’s mills closure.

On the supply side, permanent and indefinite capacity closures in North America due to labor strikes, aging mill processors, and gas explosions will trim down 1.6 million tons in the northern pulp market. 

Why are kraft pulp prices fluctuating?

1. Pulp Market and China

Kraft pulp prices’ bankability heavily relies on Chinese demand. The country is the number one importer of pulp commodities, averaging around 100 million tons of imports. However, the country’s current economic situation affected its buying capacity.

As a result, Chinese buyers (including paper and board producers) turned to domestic pulp selling which pegged international bleached softwood and kraft pulp prices.

2. Inflation in Production Costs

Another significant element contributing to the fluctuation in kraft pulp prices is the rising production costs for every ton of pulp produced. The pulping process consumes up to 20 GJ (gigajoule) per ton of pulp in heat energy and up to 1,000 kW-hr (kilo-watt per hour) per ton of pulp in electricity.

Thus, this high energy intensity presents a challenge for kraft manufacturing industries as they need to increase their product prices to make up for the production costs.

3. Mill Closures

Permanent and indefinite capacity closures created shockwaves in the pulp supply chain.

Fastmarkets documented that six market pulp lines in North America and a mill in Finland trimmed a combined 1.6 million tonnes of market pulp capacity across the northern bleached softwood kraft (NBSK), southern bleached softwood kraft (SBSK), unbleached softwood kraft (UKP) and softwood fluff pulp markets.

The closure stems from the 5-year pulp and paper market loss and the aging milling equipment. Thus, this significant cut will highly influence the fluctuating kraft pulp prices.

4. High Inventory Volumes

Chemical market pulp producer inventory volumes reached a record high, with more capacity expansions to come. The imbalance for BSK (bleached softwood kraft), including paper grade and fluff pulp, is more noticeable than for BHK (bleached hardwood kraft).

The ballooning inventory threatens to overhang the market for an extended period as demand remains cold and new supply enters the market occasionally. Overall, the contrast between pulp-based products and its plenty of supply influences kraft pulp prices.

Which variables impact the price of kraft pulp?

• Pulp Market and China
• Inflation in Production Costs
• Mill Closures
• High Inventory Volumes
• Global Economy

Where does kraft pulp come from?

Kraft pulp is a type of wood pulp produced through the kraft process, known as kraft pulping. This step involves the conversion of wood into wood pulp which consists of almost pure fibers, the main component of paper.

Kraft pulp is darker than other wood pulps, however, it can be bleached to make white pulp. Fully bleached kraft pulp is essential in making high-quality paper where strength, whiteness, and resistance to yellowing are important.

The kraft pulp production process involves several steps, both mechanical and chemical.

1. Wood Chips Preparation – The first step includes preparing the wood chips. These chips are typically 12–25 millimeters long and 2–10 millimeters thick.

2. Prestreaming – The wood chips enter the prestreaming stage, where they are wetted and preheated with steam. This method expands the air inside the chips removing 25% of air from the chips.

3. Impregnation – The chips are saturated with a hot mixture of water, sodium hydroxide (NaOH), and sodium sulfide (Na2S).

4. Cooking – The wood chips are cooked in pressurized digesters. This process separates the fibers from the lignin, a natural glue-like substance that binds them together.

5. Separation of Fibers – The cooking liquors penetrate the structure of the chips, starting the low-temperature chemical reactions. This results in a good soaking mixture that leads to even cooking.

6. Recovery and Reuse – The kraft process enables the recovery and reuse of inorganic pulping chemicals. This makes the production closed-process and sustainable.

What are the uses of kraft pulp?

1. Kraft Paper Bags – The production of kraft paper bags mainly uses kraft pulp. These bags are used for packaging various items such as cement, food, chemicals, and consumer goods.

2. Electrical Insulation – In large oil-filled transformers, kraft pulp serves as an electrical insulator.

3. Base Paper for Sandpaper – Kraft pulp is used as the base paper in the production of sandpaper.

4. Tissue Paper – Paper products such as tissue paper and table napkins rely on kraft pulp for their production.

5. Printing Paper – Due to its high strength and durability, kraft pulp is an ideal choice for printing paper and magazines.

6. Waste Bamboo Powder Utilization –  A study showed that waste bamboo powder can be pulped using the kraft process to obtain high value from waste bamboo powder.

What is the future price of kraft pulp?

Mill closures and uneven trends in regional markets shaped the kraft pulp industry. However, experts are hopeful of its recovery as inflation is expected to ease gradually and cost pressures will moderate.  Additionally, top importing countries like the United States and China showed signs of easing economic inflation which sparked hope of a transitioning global economy.

More importantly, the rise of bio-economy initiatives will further drive its prices in the coming years. These signs prove that it will dwell in the south permanently as present factors and emerging practices will balance its profitability. Here are the top present and future price movers of kraft pulp:

Wood Chips and Electricity – The price of wood chips and electricity are major input costs for kraft pulp producers. If any of these items’ value fluctuates, it will eventually affect kraft pulp prices. Additionally, the massive wildfire across the North American region will have a ripple effect on lumber and wood chip prices in the coming years.

Transition to a Circular Economy – As the world moves towards a sustainable economy, there’s an increased demand for recycled kraft pulp. This leads to lower prices for virgin kraft pulp.

The Development of New Bio-Based Materials – New bio-based materials such as bamboo pulp and hemp pulp are good alternatives to kraft pulp. Another diminishing factor for kraft pulp marketability.

Overall, the outlook for the kraft pulp market remains positive as market analysts expect a $750 per metric ton kraft pulp value in 2030.