The China Securities Regulatory Commission has recently approved the Shanghai Futures Exchange to conduct pulp futures trading. The contract is officially listed on November 26, 2018. The development of pulp futures trading can provide the industry with price discovery and hedging tools to support the steady and healthy development of the paper industry.
Pulp spot historical price fluctuations
At the end of 2008, affected by the financial crisis, the price of bleaching needle pulp (pulp futures benchmark) fell below RMB 4,100/ton.
In February 2010, a 8.8-magnitude earthquake struck Chile, one of the major producers of pulp, and the price rose to nearly 8,000 yuan/ton high. Subsequently, supply and demand gradually balanced, and the price stabilized at around 5,000 yuan / ton.
In 2017, due to the low inventory in July and August and the impact of domestic environmental protection policies, the price of pulp rose rapidly from July to December, and the price of bleaching needle rose from 5,100 yuan / ton to 7,575 yuan / ton.
In 2018, with the gradual arrival of cargo in the previous period, the port inventory increased significantly, and the market supply situation was greatly eased. Overlapping the 2017 Environmental Protection Inspector's action to shut down some areas of production capacity led to limited demand for pulp, the market gradually digested the impact of waste paper policy and other factors, the pulp and paper market speculative mentality gradually flattened, prices steadily declined.
In 2017, China's papermaking and paper products enterprises above designated size totaled 6,681, and the income from the main business of the whole industry was 1.52 trillion yuan. In 2017, China's total pulp production (including wood pulp, non-wood pulp and waste paper pulp) was 79.49 million tons, and apparent consumption was 105.1 million tons, of which wood pulp production was 10.5 million tons and consumption was 31.52 million tons. The apparent consumption of bleaching needle pulp in wood pulp was 8.15 million tons. According to the distribution of paper and paperboard production using wood pulp in 2016, Shandong Jiangsu and Huguang regions may be affected to some extent.
Will futures listing stabilize the price of raw materials?
As early as last year, some people in the industry suggested that the current domestic paper industry is very low in transparency, the market price discovery ability is very weak, the pricing power is excessively concentrated, the paper price skyrocketing is inevitable, and the industry urgently needs hedging tools.
Now, after the pulp futures are listed, using its price discovery function will stabilize the supply and price of pulp to a certain extent. This may indirectly benefit the stability of raw material prices, and thus promote the rapid entry of paper prices into a stable and reasonable range.
If so, then paper companies will have a stable market for transformation and upgrading, and most of the packing stations are also very easy. However, the listing of pulp futures also allows all capitals to participate in the paper industry, which may cause new changes in the paper industry.
Off topic
Chenming Paper became the first papermaking company to hold futures companies
Chenming Paper disclosed on the 22nd that Shouguang Meilun, a wholly-owned subsidiary, acquired a 45% stake in Jinxin Futures at a listed price of RMB180 million and signed a “Property Transaction Contractâ€. The second and third largest shareholders of Jinxin Futures held The proportion of shares is 23% and 18% respectively, which is a big gap with Shouguang Meilun.
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