Supply Disruptions in Pulp Raw Materials Drive Demand Increase
Major Paper Manufacturers Have No Price Hike Plans but Cannot Guarantee
The price of pulp, the raw material for paper, is rising sharply. After reaching an all-time high two years ago and then declining, pulp prices have started to rise again, causing concern in the paper industry. Major companies have not yet planned to raise product prices immediately, but if the price increase continues, the burden of production costs is expected to grow.
According to raw material price information from the Ministry of Trade, Industry and Energy on the 4th, the price of mixed hardwood pulp (SBHK) from the southern United States rose 8.5% month-on-month to $765 per ton last month. This is a 25% increase compared to $605 per ton in June last year.
The paper industry is in a difficult position as pulp prices, which had been declining, are rising again. Pulp prices soared to an all-time high of $1,030 per ton from June to December 2022 due to logistics disruptions caused by the Ukraine-Russia war. After stabilizing, the price fell to $565 per ton in June last year, about half the previous peak.
Paper is produced using pulp, the main raw material, at a paper mill. (Photo by Korea Paper Association)
However, since July last year, pulp prices have been rising about 5% monthly. This is due to consecutive wildfires in major forest areas, including a massive wildfire in Quebec, Canada, disrupting the supply of pulp raw materials.
The paper industry expects the upward trend in pulp prices to continue this year. As the economies of China and the United States recover, demand has increased beyond what supply can meet. If this trend continues, pulp prices are expected to reach an all-time high again within the year.
The paper industry is on alert. Increases in raw material prices directly affect operating profit margins. For example, Hansol Paper, the industry leader, saw its operating profit decrease by about 70% year-on-year in the third quarter of last year. However, Murim Paper may face less pressure to raise prices because it can procure pulp at relatively stable prices from Murim P&P, which produces pulp.
Industry insiders consider a stable pulp price to be around $500 to $600 per ton. If pulp prices exceed $1,000 per ton, companies actually lose money the more they sell. While major companies like Hansol Paper currently have no plans to raise product prices, they cannot guarantee this if the pulp price increase continues. Prices of paper raw material products such as tissue paper and books may also rise.
A paper industry official explained, "We are exploring eco-friendly products and new businesses, but these are not direct solutions to the rise in raw material prices," adding, "For the time being, we have no choice but to monitor the trend of pulp price increases."
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