Dissolving pulp is a special chemical pulp composed of high-purity cellulose, which does not require high fiber morphology and pulp strength. But it is made of high purity for α-fiber dissolving pulp. It has the characteristics of high cellulose content and very low content of hemicellulose and inorganic impurities. It does not require high fiber morphology and pulp strength, but it does not require high content of α-cellulose and cellulose. Indexes such as the degree of polymerization distribution have strict requirements.
At the beginning of 2020, the domestic dissolving pulp market continued its declining trend last year, Sino-US trade frictions are in the ascendant, global public health incidents are ensuing, and the downstream sticky market has poor production and sales. The domestic pulp market operating rate has repeatedly returned to zero in the first half of the year, and prices are under pressure. Exploring, the market continues to be not optimistic. Until October 2020, the market improves. Domestic demand and export orders for downstream textiles and apparel have both rebounded. Under the situation of continued tight supply on the supply side, prices have started to rise from the historical bottom range.
Global Production Capacity Distribution
In 2019, the global dissolving pulp output was about 7.5 million tons, of which China's dissolving pulp output was about 1.58 million tons and the foreign dissolving pulp output was about 5.92 million tons. The global dissolving pulp production areas are mainly concentrated in the Americas and Asia, and the two places together account for 76% of the global dissolving pulp production capacity. After subdividing the four main producing areas, their distribution proportions are 19% in the United States, 9% in Canada, 9% in Brazil, 10% in South Africa, and 25% in China.
Dissolving Pulp Is Highly Dependent on Imports, And the Supply Side Is Obviously Insufficient
The dissolving pulp uses wood chips as the raw material, 86% of the downstream market is used to produce viscose staple fiber, which is used in clothing, and home textiles. Due to the lack of forest resources in China and the high cost of raw materials for wood chips, about two-thirds of China's dissolving pulp supply side is dependent on imports, and the overall degree of dependence on imports is relatively high.
Imported dissolving pulp accounts for more than two-thirds of the supply. The top five import sources are Indonesia, Brazil, the United States, South Africa, and Laos, accounting for 68% of total imports. Among them, the epidemic is still spreading in other countries except Laos and South Africa. U.S. pulp mills also hold plans to switch to pulp production, and the market supply may decrease. Under the situation that the efficiency of global container transportation is significantly reduced and the capacity is tight, there is a possibility that the import restriction of dissolving pulp will increase the short-term supply tension. It is expected that China's dissolving pulp supply will be tight in 2021. On the whole, China's dissolving pulp supply side will be tight in 2021. Before the end of 2021, the global dissolving pulp supply side will have relatively little pressure on new capacity.
On the supply side, the domestic operating rate continues to be at a low level, and the global consolidation turnover has been blocked, which has caused import restrictions. The tight supply of dissolving pulp may be difficult to alleviate in the short term. From January to November 2020, the domestic dissolving pulp operating rate is only 22%, and most pulp lines are currently in a state of suspension or conversion to pulp production.
The Demand Side Maintains A Steady Recovery
The domestic sales and export orders of the textile and apparel industry chain have increased steadily, and the demand for dissolving pulp has bottomed out since October 2020. Since July, the export of viscose staple fiber industry has shown a positive momentum. Since the National Day, enterprises have held orders and goods are tight. Since October 2020, the month-on-year growth rate of viscose staple fiber production has returned to positive, reaching 4% and 5% in October and November, respectively. With the strong support of upstream and downstream prices, the growth rate has increased rapidly.
From January to November 2020, the peak value of viscose staple fiber prices appeared in early November, about 10,700 yuan/ton. Driven by the trend of rising market prices since July, the gap between market prices and cost prices has narrowed. The industry operating rate has increased from a historical low of 60% to the current 75%. Therefore, after the short-term industry in the first half of the year under the background of the tightening of terminal market demand, its own supply and demand structure was combed, and the domestic and export market demand was gradually restored to boost the industry's production, sales and price trends in the second half of the year. It constitutes an important driving force for the growth of demand for dissolving pulp.
The demand for substitution of viscose staple fiber is further enhanced. There is a strong substitution relationship between viscose staple fiber and cotton, and the historical prices of the two show a relatively obvious linkage. As a regenerated fiber of natural cellulose, viscose staple fiber has a similar product performance to cotton, and there is a strong substitute relationship between the two in downstream applications. Public data shows that the latest forecast released in December 2020, with the steady recovery of terminal demand, it is estimated that China's cotton consumption in 2020 and 2021 is expected to rebound to more than 8 million tons, a year-on-year growth rate of 9%.
Dissolving Pulp Prices Are Expected to Bottom Out and Rebound
In the first half of 2020, the downstream sticky market for dissolving pulp continued to be sluggish. In February, due to the expected resumption of terminal work and the payment of pre-holiday orders, the short-term price rebounded in a short time. The short price began to bottom out. With the increase of factory inventory pressure, the sticky short price hit a record low in April, the acceptance price was 8700-8900/ton. Although the price was repaired later, the demand side was weak, and the price continued from May to June. The current demand side is steadily picking up, and the superimposed supply side is tight or even shrinking. At the same time, benefiting from the rising demand for cotton prices, the substitute demand for viscose staple fiber may further increase, thus constituting a boost to the demand for dissolving pulp Another important factor. In summary, demand is steadily picking up and the supply side is shrinking. It is expected that the price of dissolving pulp is expected to rebound from the current bottom position in 2021.
In general, the dissolving pulp industry has passed the darkest moment, and the later boost has been affected in many ways. Due to the influence of foreign production, more orders will flow to China. Whether domestic enterprises can get rid of the darkness depends on whether they can seize this opportunity.
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