Chinese demand for pulp revives

Carter Holt Harvey is enjoying a revival in demand from China for pulp as Beijing eases its credit clampdown.

However, the fresh demand has not translated into price rises.

Carter Holt, New Zealand's largest exporter of pulp, paper and wood, has seen the price of bleached pulp to Asia fall to US$580 ($908) a tonne from US$610 tonne, though analysts said it was still about US$100 a tonne up from the start of the year.

Brice Landman, chief executive of Carter Holt's Kinleith mill, said the credit crunch, designed to cool the Chinese economy, had reduced demand for imports but was starting to ease.

Demand had started to return from Chinese buyers in the last couple of weeks.

"Customers of all commodity products found some difficultly in opening letters of credit and that flowed on to us," he said.

Traders started using up inventories.

Landman said it looked like the central bank had relaxed its position a little and customers were opening letters of credit again.

Last month, the situation returned to normal but big suppliers from Chile dropped prices from US$610 a tonne to US$580 a tonne. This was still the current price.

Chile is the biggest supplier of pulp to China.

Landman said he did not try to predict the future but that overall global pulp demand was pretty good.

Analysts said July and August were low seasons for demand for pulp in China and this was another reason the price had weakened.

The outlook was that demand for pulp in China would increase. China was a spot buyer that had manipulated prices in Asia in recent years when global demand was weak.

Demand for pulp from soft woods was firming in in North America and Europe and this had to eventually flow into Asia.

However, pulp markets were notoriously volatile and difficult to predict.

China takes about 14 per cent of the world's pulp output, while Europe takes 40 per cent.

"This is just a short-term situation. No-one knows what will happen to pulp prices but at the moment global demand for softwood pulp looks firm," an analyst said.