Heat wave exacerbates logistical problems in world pulp trade
In Europe, a severe drought led factories to suspend or reduce operations due to difficulties in capturing water, as well as receiving and transporting products
The Northern Hemisphere has been suffering from a severe heat wave during the summer. In Europe, a drought led pulp mills to suspend or reduce operations due to difficulties in capturing water, as well as receiving and transporting products. In China, paper mills are likely to be hit by energy rationing.
This scenario has further hampered congestion in ports around the world, aggravating the already challenging conditions of the global pulp trade. Global pulp stock levels for 30 days are considerably below historical levels and what the industry considers adequate.
Brazilian producers believe that the delays in deliveries should not be corrected this year, and that supply and transport problems may sustain prices at a high level for longer. The risk of a reduction in demand includes a scenario in which paper mills reduce production, which consequently requires less raw material.
This week, a renowned market intelligence firm pointed out that adverse weather conditions in the region continue to affect supply and demand. As an example, Ence, in Pontevedra, Spain, stopped its operation due to the low level of the Lérez River.
An important route for the outflow of paper and cellulose in Europe, the River Rhine is also experiencing a period of drought, which forced the reduction of barge operations. “With energy, chemical and logistics costs on the rise and inflation affecting demand, paper mills in Europe may announce production stops in the coming months”, points out the consultancy.
In a report, Bank of America (BofA) indicated that pulp supply cycles are on average 10 days longer, due to logistical bottlenecks and the lockdowns that occurred in China. For this reason, global stocks are not within the 40 to 42 days considered adequate.
In this context, workers went on strike at the port in Felixstowe, the largest container terminal in the UK. Other stoppages had already been recorded in other parts of Europe, the United States and Asia.
“The international logistics chain is still very stressed”, says the director of Suzano’s forestry, logistics and supply areas, Carlos Aníbal de Almeida. For the executive, the company’s service level is less compromised since it operates from three ports in Brazil and has a fleet of ten dedicated ships.
“Conditions are expected to improve next year. An economic recession can contribute to reducing congestion, but there are still many uncertainties”, says Aníbal.
For Klabin, the expectation is to notice an improvement both in the level of service and in freight costs over the next year. “There are some signs of improvement, but it depends a lot on the route. It’s not widespread”, says the company’s director of operational planning, logistics, supplies and IT, Roberto Bisogni.
According to the executive, shipowners have indicated that there will be an entry of vessel capacity next year. Another important factor is the withdrawal of restrictions against Covid-19 in China, in addition to the fact that, for certain routes, the level of refusal of reservations on ships (booking) is lower.
Eldorado Brasil’s commercial and logistics director, Rodrigo Libabar, had already commented that there is no prospect of normalizing logistical problems in the short or medium term.
The executive recalled that the logistics cycles in the pulp industry are very long and, also because of this, the solutions will take time to take effect. “There will hardly be a reversal this year and things will happen gradually until equilibrium is reached again,” he added.
