Pressure in China's pulp and paper market persists; overseas prices are relatively better but the premium is hard to sustain

Overview

This report tracks prices, inventories, shipments, output, margins, and regional demand in the global pulp and paper industry. The core conclusion is that marginal changes in the China market are negative: ample supply, low paper prices, and seasonally weak demand continue to pressure pulp prices; regions outside China are relatively better, with some support from certain European paper grades and Latin American export mix, but overseas premiums may be difficult to sustain.

Core views

The report remains cautious on China's pulp and paper chain: ample woodchip supply has driven prices lower, paper prices are at historical lows, domestic resale pulp prices are below import prices, and softwood pulp is under particular pressure. Hardwood pulp producers have temporarily maintained prices, but the likelihood of price cuts is rising to stimulate purchasing ahead of summer. Prices and inventories outside China are performing better, especially with some regions showing a premium versus China in pulp prices, though the report considers this spread unsustainable.

Analysis framework

The report mainly uses high-frequency industry data and regional tracking: comparing China's import and domestic resale pulp prices, global shipment volumes and inventory days, China's pulp inventories and paper production utilization, European paper prices and demand, tissue retail data, and pulp export data from Brazil, Chile, and Uruguay. It also incorporates channel feedback to judge the direction of pricing negotiations for European graphic paper and containerboard.

Methodology notes

• Industry supply-demand and price trackingFOEX price, inventory, and shipment data monitoring

  Assess the tightness of the pulp and paper market through import prices, domestic resale prices, inventory days, port inventories, and shipment volumes.

  The report uses indicators such as China FOEX hardwood and softwood pulp prices, domestic resale prices, global April shipment volumes, seller inventory days, and China pulp inventories to assess the impact of oversupply and weak demand on prices.

• Regional market comparisonChina versus ex-China price premium comparison

  Compare price performance between the China market and overseas markets to judge producers' ability to realize prices.

  The report notes that some key regions outside China have at least a US$50/ton premium, which helps producers realize prices, but also argues that this spread is difficult to sustain.

• Goldman Sachs disclosure methodologyGS Factor Profile and M&A Rank

  Goldman Sachs's factor profiling and M&A probability tiering framework for stock coverage.

  The appendix explains that GS Factor Profile compares growth, financial returns, valuation multiples, and composite factors; M&A Rank uses scores from 1 to 3 to indicate acquisition probability, but the main body of this report does not provide a new rating conclusion centered on any single company.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Global pulp producers

  Directly affected by pulp prices, inventories, and regional premiums.

  Strengths

  Some regions outside China still have price premiums, seller hardwood pulp inventories are relatively low year over year, and some supply losses also support prices.

  Weaknesses

  China resale pulp prices are below import prices, softwood pulp faces clear price-cut pressure, and demand lacks buying support.

  Comparison

  The China market is clearly weaker than ex-China markets, and the report believes overseas premiums, while beneficial, are difficult to sustain.

  Risks

  If China demand remains weak or overseas premiums narrow, producers' price realization and margins may decline.

• Chinese paper companies

  Affected jointly by paper prices, pulp costs, utilization rates, and the inventory cycle.

  Strengths

  Lower softwood pulp prices and RMB appreciation can partially offset the impact of falling paper prices on margins.

  Weaknesses

  Paper prices are at historical lows, margins for most paper grades weakened in May, and utilization fell to 61%.

  Comparison

  Compared with overseas markets, the China market has higher inventories, weaker demand, and more concentrated price pressure.

  Risks

  Oversupply and seasonally weak demand may keep paper prices and margins under sustained pressure.

• European paper market

  As one of the regions with better ex-China price performance, it provides marginal support for global pulp and paper prices.

  Strengths

  European containerboard prices rose in May, with Kraftliner and Testliner up 3% and 5% month over month, respectively; port pulp inventories are below historical averages.

  Weaknesses

  Graphic paper prices were flat in May, and demand for printing and writing paper remains weak.

  Comparison

  Some European packaging paper is performing better than graphic and printing-and-writing paper, while adult incontinence products are stronger within tissue.

  Risks

  Holiday effects, subdued commercial activity, and structural demand decline may limit further price increases.

• Latin American pulp exporters

  Export volumes from Brazil, Chile, and Uruguay reflect global pulp trade flows and changes in China demand.

  Strengths

  Brazil's exports to Europe rose 42% month over month, and Uruguay's exports rose 2% month over month in May.

  Weaknesses

  Brazil's total exports fell 23% year over year in May, with exports to China down 31% month over month; Chile's exports fell 13% month over month in May.

  Comparison

  Improvement in Latin American exports to Europe partly offsets weaker China demand, but overall year-to-date performance remains soft.

  Risks

  If China import demand continues to fall, Latin American export volumes and prices may remain under pressure.

Key data

• China hardwood pulp priceImport FOEX price at US$604/ton, domestic resale price around US$560 to US$566/tonImport price was flat, while domestic resale prices fell by RMB0 to RMB10/ton.
• China softwood pulp priceImport FOEX price at US$655/ton, domestic resale price around US$599 to US$630/tonImport price was flat, while domestic resale prices fell RMB6 to RMB24/ton week over week.
• Global April pulp shipmentsDown 12% month over month, up 2% year over yearSoftwood pulp fell 15% month over month, hardwood pulp fell 11% month over month, with the sequential decline mainly due to seasonality.
• Seller inventories40 days for hardwood pulp, 46 days for softwood pulpHardwood pulp inventories increased by 2 days month over month but were 7 days lower year over year; softwood pulp inventories were flat month over month but up 5 days year over year.
• China pulp inventoriesAbout 2.3 million tonsDown 2% month over month and up 6% year over year in May, still above the five-year historical average of 1.9 million tons.
• China paper productionUp 1% month over month and 16% year over year in May, with utilization falling to 61%Total May output was about 3.6 million tons, with year-to-date production up 15% year over year.
• European printing and writing paper demandDown 11% month over month and 5% year over year in AprilYear to date, it was down 4% year over year and 48% below the same period in 2019.
• Brazil pulp exports1.6 million tons in May, down 5% month over month and 23% year over yearExports to China fell 31% month over month, partially offset by a 42% month-over-month increase in exports to Europe; year-to-date exports are down 9%.

Impact & implications

For pulp producers, low prices and high inventories in the China market will weigh on near-term price realization, especially as softwood pulp prices are already near or below the cash cost of a large portion of capacity. Better pricing in overseas markets and price hikes in some European paper grades provide a buffer, but if ex-China premiums narrow, producers' earnings and price expectations may still come under pressure. For downstream paper companies, weaker raw material prices help costs, but low paper prices and weak demand limit margin recovery.

Risks

• China demand is weaker than expected, causing resale pulp prices to remain below import prices and dragging down global benchmark prices.
• Oversupply of softwood pulp and insufficient buying interest may push prices further below the cash cost of more capacity.
• If price premiums in ex-China markets narrow, producers' ability to realize prices will weaken.
• Structural decline in European printing and writing paper demand may offset the effect of localized price hikes.
• High inventories and low utilization rates may prolong the period of low paper prices.

What to watch

• Whether pre-summer purchasing in China recovers due to hardwood pulp price cuts.
• Whether the softwood pulp market sees further follow-on declines after Arauco's price cut.
• Whether China pulp inventories can continue falling from 2.3 million tons toward the five-year average.
• The outcomes of 3Q26 and 2H26 pricing negotiations for graphic paper and containerboard in Europe.
• Changes in export flows from Brazil, Chile, and Uruguay to China and Europe.
• Whether the ex-China price premium of more than US$50/ton versus China narrows.