Canfor officially announced on July 15 the permanent closure of its Northwood softwood pulp mill, with the shutdown expected to be completed by the end of 2026. The closure stems from persistent losses caused by a global pulp supply glut combined with a long-term shortage of domestic wood fiber in Canada. Catalyzed by this event, Arauco has leveraged the situation to raise the long-term contract price for its "Silver Star" (Arauco) brand by $20 per ton.

The scale is limited and does not alter the loose supply-demand landscape. Northwood has an annual capacity of 300,000 tons, representing only about 1.1% of global softwood market pulp capacity and approximately 2% of China's total softwood pulp imports. While this marks the first major mill capacity exit scheduled for 2026, it is insufficient to reverse the prevailing weak trend characterized by loose global pulp supply and demand.

The contraction in Canadian softwood pulp supply is persistent; wood fiber supply in British Columbia, Canada, has dropped by approximately 40% since 2018. Factors such as pest infestations, wildfires, and reductions in Allowable Annual Cut (AAC) quotas—compounded by US tariffs on Canadian lumber rising to 45% and suppressing lumber demand—have turned the wood fiber shortage into a long-term structural issue. Canfor has cut over 800,000 tons of capacity in recent years; this latest closure is not an isolated incident.

Valuation for the rebound is anchored to the import arbitrage window. Current market prices are at a low level; while the event-driven recovery in sentiment provides upward momentum, the upside is capped by potential import arbitrage activity.

Additionally, Canfor's announcement regarding the permanent closure of the Northwood mill—which produces approximately 300,000 tons/year of NBSK (Northern Bleached Softwood Kraft) pulp, accounting for about 1.5% of global market softwood pulp capacity—reinforces expectations of ongoing exits by high-cost overseas capacity. Although the capacity exit represents a small share and does not alter the short-term oversupply situation, it reduces the volume of tradable supply in the medium to long term.

The combination of low absolute market prices and sentiment surrounding the exit of high-cost capacity is driving pulp futures to fluctuate with a bullish bias. There has been no substantial reduction in NBSK shipments from overseas to China in the medium term, and domestic port inventories remain high. Weak end-user consumption of finished paper and high inventories of finished goods are capping upside potential, resulting in continued wide-range price fluctuations.

The market is currently caught between "weak reality" and "strong expectations." On one hand, a recovery in macro sentiment and firm overseas quotes provide a floor for prices, alongside accelerating inventory destocking within the industry; on the other hand, the fundamentals of sluggish end-user demand and overall oversupply remain unchanged. In the short term, SP and OP benchmark contracts are expected to continue their wide-range oscillation; attention should be paid to the sustainability of destocking and guidance from macroeconomic policies.

In the spot market, quotes for coniferous pulp have generally been lowered. Shandong Silver Star (Yinxing) dropped by 60 RMB /ton to 4,800–4,820 RMB/ton, while Russian/Brazilian coniferous pulp fell by 30 RMB /ton to 4,620–4,650 RMB /ton; basis spreads remained stable, and trading activity showed a slight month-on-month improvement.

Regarding import costs, Arauco announced a new round of offers: coniferous pulp rose by $20 to $690/ton, unbleached pulp rose by $10 to $650/ton, and hardwood pulp fell by $20 to $570/ton. Import margins remained stable, while the valuation baseline shifted slightly upward.

On the supply side, the comprehensive operating rate of downstream paper mills saw a slight decline, with the operating rate for white cardboard dropping significantly by 4.76 percentage points. The operating rate for uncoated wood-free paper (offset paper) fell by 0.25 percentage points month-on-month to 47.01%; supply was constrained by maintenance shutdowns and weather disruptions, limiting the release of existing production capacity.

On the demand side, demand for uncoated wood-free paper remained steady (driven by essential needs), primarily consisting of shipments for publishing orders, with no significant overall increase in volume.

As of July 17, pulp inventories at domestic ports fell by 28,000 tons to 2.257 million tons. Inventories at uncoated wood-free paper manufacturers dropped by 39,100 tons to 1.4951 million tons; the rate of decline accelerated month-on-month, reflecting the initial success of paper mills' strategies to "halt production to support prices" and indicating a marginal improvement in supply-demand dynamics. Although port inventories have declined for five consecutive weeks to 2.257 million tons, the absolute volume remains at a medium-to-high level for the year, and the pace of inventory depletion is sluggish. Market trends diverge significantly across pulp grades: softwood pulp strengthened slightly on expectations of tightening overseas supply, while hardwood pulp continued a slow decline, weighed down by off-season demand. The underlying market dynamic remains characterized by loose supply-demand conditions, and short-term price rebounds lack sustained support from the demand side.

Sampled production of domestic hardwood pulp stood at 262,000 tons (up 2,000 tons month-on-month), while sampled production of chemi-thermomechanical pulp (CTMP) was 248,000 tons (up 1,000 tons month-on-month); non-wood pulp production dipped slightly, resulting in a marginal overall increase in domestic pulp output. Domestic pulp mill operations remain stable with no plans for major maintenance shutdowns in the near term; domestic wood pulp supply has risen slightly, and combined with steady import volumes, market supply remains ample.

Market quotes for domestic hardwood pulp remain flat month-on-month, though there is room for negotiation on actual transaction prices. Downstream paper mills are purchasing only to meet immediate needs rather than engaging in large-scale restocking; weak supply-demand dynamics are limiting profit margins for pulp mills. With hardwood pulp production costs relatively rigid and spot prices lacking upward momentum, gross production margins remain low and stable; market trading is quiet, and producers are scheduling output based on demand with no intention to actively raise prices.

As of July 16, 2026, pulp inventories at five major domestic ports totaled 2.257 million tons, a month-on-month decrease of 28,000 tons. While this marks the fifth consecutive week of inventory reduction, total stock levels remain at the higher end of the year's range. By port, Qingdao saw a slight accumulation of stock, whereas Changshu, Gaolan, Tianjin, and Rizhao ports all recorded reductions. Shipments driven by downstream essential demand are facilitating a slow drawdown of port inventories, but the absence of large-scale downstream restocking means the pace of inventory depletion remains sluggish.

Downstream Pulp Demand

Sampled production of household paper for the period was 281,400 tons, down 2.12% month-on-month, with a capacity utilization rate of 63.38%, a decrease of 1.36 percentage points month-on-month. Production at major manufacturers remains stable, while some small and medium-sized paper enterprises have cut output due to inventory pressure during the off-season. Additionally, two production lines have entered scheduled maintenance, leading to a slight contraction in overall industry supply; the volume of newly added capacity is limited and insufficient to offset the reduction in output.

Regarding inventory, the sampled household paper enterprises held 650,600 tons of stock, a month-on-month decrease of 0.20%, with a corresponding slight decline in inventory days. While small and medium-sized enterprises have proactively cut production to mitigate off-season sales pressure—thereby slowing the pace of inventory accumulation—demand from supermarkets and the food service sector remains sluggish. Distributors are limiting restocking to minimal levels; consequently, absolute inventory volumes remain high, and the pace of destocking is expected to be limited in the short term.

For white paperboard, production during this period totaled 355,000 tons, a month-on-month decrease of 1,000 tons (0.28%), with capacity utilization edging down to 75.53%. Leading manufacturers are maintaining full production, whereas small and medium-sized mills are aligning production with sales demand, implementing slight output controls amidst shrinking off-season orders. Overall supply remains manageable, supported by a buffer from export orders, resulting in less domestic supply pressure compared to the cultural paper sector, according to Sina Finance. 

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