Wood pulp market mixed: softwood tightens on Canadian closures, hardwood remains weak

China's pulp market is telling two different stories right now, and they depend entirely on which grade you are buying. For Northern Bleached Softwood Kraft (NBSK), the supply picture is tightening. For Bleached Hardwood Kraft Pulp (BHKP), the opposite is true: ample supply, limited curtailments, and tepid downstream demand.

The Shanghai Futures Exchange (SHFE) pulp futures contract, which tracks softwood pulp, closed at 4,728 RMB/tonne on July 17 after opening the week at 4,808 RMB/tonne. This followed a rebound from the July 10 close of 4,840 RMB/tonne. SunSirs characterizes the recent price action as a technical rebound off oversold levels, with limited upside given the weak end-user paper demand environment. Trading volume on July 17 was 312,800 lots with open interest at 275,300 lots, suggesting moderate conviction.

Supply is where the softwood story gets interesting. SunSirs reports that market sentiment in July has been shaped by the permanent closure of Canfor's coniferous pulp mill in British Columbia, which has removed a meaningful source of NBSK supply to China. Rumors of maintenance-related production cuts at South American mills have added to the tightness. Fastmarkets notes that announced permanent capacity closures will trim 380,000 tonnes of NBSK capacity in 2026, plus approximately 165,000 tonnes of fluff pulp capacity.

Low-priced Russian coniferous pulp stocks have been gradually cleared from the market, and the volume of spot goods in circulation has tightened. Traders are holding firm on coniferous prices, sensing that the supply-demand balance is shifting in their favor after months of oversupply.

Hardwood pulp is a different world. Overseas hardwood mills have not implemented concentrated production cuts, and low-priced imported hardwood pulp continues to arrive at Chinese ports. SunSirs reports that import pressure for hardwood pulp intensified in July. No major coordinated production cuts among South American hardwood producers means BHKP remains in ample supply, keeping spot prices subdued.

The demand side is not helping either grade. Chinese paper and packaging markets are in their seasonal off-season. White paperboard operating rates have risen only marginally. Domestic packaging demand is weak, with only a small number of export orders providing support. Paper mills are strictly controlling raw material inventories, buying only what they need to maintain safety stocks. This cautious procurement behavior caps any sustained rebound in pulp prices, regardless of the supply story.

Port inventories are slowly declining but remain a drag. Chinese port pulp stocks fell for the fifth consecutive week, reaching 2.257 million tonnes as of July 16, down 28,000 tonnes (1.2%) from the prior week. At 2.285 million tonnes on July 9, the destocking trend is visible but slow. The drawdown is not fast enough to signal a genuine tightening. Mills prioritizing domestic pulp purchases over imported spot volumes further slows the turnover.

ProcurementResource's Q1 2026 data shows NBSK China spot prices slipped from about 5.55 RMB/kg in January to 5.27 RMB/kg in March, a 3.86% decline. European NBSK remained more stable at about 1.14-1.15 EUR/kg DAP. The Q1 2026 NBSK futures on NOREXECO trade at approximately $678/tonne, while BHKP China Net futures indicate a stabilized benchmark of about $550/tonne, confirming the significant spread between the two grades.

Fastmarkets senior economist Patrick Cavanagh, speaking at the North American Forest Products and International Containerboard Conference in Miami, noted that integrated pulp capacity has doubled in just four years, expanding by 15 million tonnes to over 32 million tonnes annually. The trend is not waning in 2026-2027, with new Chinese integrated pulp capacity expected to eat into imported pulp demand in coming years. Chenming's idling of 7 million tonnes of paper and board capacity in early 2025 drove a brief pulp price rally, but Cavanagh called it unsustainable. Capacity curtailments will be the key driver if market conditions are to improve in 2026.

Thunder Bay Pulp & Paper's decision to exit the Northern Bleached Hardwood Kraft (NBHK) market in 2026 and become an NBSK-only mill at 300,000-310,000 tonnes per year adds another twist: it slightly tightens hardwood supply while adding softwood tonnes. But broader curtailments across the industry would be needed to meaningfully shift the balance.