China's economic development is facing triple pressure of demand contraction, supply shock, and weakening expectation

Supply shock

It is an obvious impact on VSF. The market was not optimistic at the beginning of 2022 when paper pulp was falling and there was huge price gap of around $350/mt between dissolving pulp and paper pulp. Although Stora Enso planned to withdraw from dissolving pulp business, there was 2 million tons/yr new capacity in Brazil to come on stream, so the overall supply was relatively optimistic.

But judging from the actual operation of the first five months, the situation is quite different from expectations. Firstly, the outbreak of the Russia-Ukraine conflict and the reduction in the output of Russian forest resources have caused concerns about the supply of global pulp products. At the same time, the sharp rise in energy prices also pushed up the cost of pulp products. Dissolving pulp prices are pushed up by surging paper pulp.