Pulp futures on Londons Pulpex exchange have declined in price, with brokers stating that the market was worried that global demand for pulp and paper products could be starting to weaken.


One broker said: "Prices have come down quite considerably on Pulpex since April where the price was $900, and now it's down to $640 for futures market pulp."


Sucden futures desk manager Peter Dodds, who provides market opinions on the futures exchange, said: "The perception in the market place is that production has tilted into an oversupply, which is why we are seeing the likes of Mead and Bowater starting to take downtime."


Bowater is reducing production by about 10% of capacity, and analysts predict that downtime will be taken in Latin America and the Norscan countries in the fourth quarter.


One independent source said: "It is interesting to see that the Americans have put up their capacity by some 850,000 tonnes. Willamette's Port Wentworth mill, which was closed due to environmental reasons, has just come back on line, bringing 290,000 tpa of hardwood pulp to the market."


The source continued: "There has been an easing of demand, but there is a lot more supply coming on to the market."


Dodds added: "The market is definitely in the buyers' favour at the moment. The big debate is whether producers will tilt their prices to the futures market price. At the moment, futures are at or around the spot market price for pulp, and this tends to be a driver for prices in the industry."


He concluded: "Its a real boom and bust in the pulp business, which is more evident due to its volatility, and because they have not adopted the practice of hedging."


Sources have also indicated that the price for softwood pulp will remain stable, possibly until the end of March 2001, but we could see another $40 per tonne increase in the second quarter.


Story by Andy Scott