Global UKP (unbleached kraft pulp) production has fluctuated within a range of 33Mt-35Mt over the past thirty years. However, last year output surged by an estimated 1.7Mt, to 37Mt, a record high. The increase was attributable to strong growth in global kraft paper and board production, which consumed approximately 91% of the UKP as integrated pulp.
The remaining volume was sold as market pulp, sales of which reached a record high of 3.25Mt during 2021, +20% over 2020. Around 18% was used to manufacture fibre cement, 10% for electrical/filtration paper and 72% for paper and board.
Chinese UKP demand increased by 24%, equal to +280Kt. The growth was supported by demand from the containerboard sector which continues to suffer from a fibre deficit since the implementation of Operation National Sword in 2017. This policy directive gradually phased out China’s imports of waste paper, removing around 28Mt of feedstock over the period 2017-2020.
This fibre deficit has obliged the Chinese to use more domestically sourced waste paper, but collection rates are already relatively high and the quality of local waste is inferior to most imported grades. As a result board manufacturers have increased purchases of UKP which they blend with local waste paper to improve strength.
The Chinese fibre deficit is also stimulating demand for URP (unbleached recycled pulp). URP imports rose to 2.4Mt last year, from just 300Kt in 2018. All of the growth in demand during this period is attributable to recycled content board manufacturers and more than three quarters of the imported volume is sourced from affiliated recycled pulp lines in Southeast Asia and the US. Most of these lines are furnished with waste paper that was previously destined for the China market.
With significant new investment in containerboard capacity planned for China, import demand for UKP and URP is expected to remain strong through 20206. At the same time, niche grades of UKP (i.e. fibre cement, electrical and filtration grades) continue to show positive trends globally, albeit from a low base.
This report explores the global demand trends for UKP and URP and illustrates how supply may mobilise, concluding with an appraisal of the cost base of the industries and a price forecast for each grade, CIF China.