Overview
Jefferies told attendees at the 2026 European Fastmarkets Pulp and Paper conference that the recent upswing in pulp prices - most visibly in China - faces headwinds that could halt further rallies. The firm highlighted a mix of demand-side softness following inventory restocking and Lunar New Year effects, alongside supply-side additions and regional cost pressures that complicate the outlook.
Pulp market dynamics
Hardwood pulp in China climbed by $100 per ton, equivalent to about a 20% increase, during the past six months. Jefferies cited RISI analysis indicating additional price increases will be difficult because many consumers already restocked in the second half of 2025 and demand has moderated after the Lunar New Year.
On the supply side, China integrated capacity additions present a headwind to demand for imported market pulp. Imported market pulp represents 42% of a 73 million ton market, and increasing local integrated production competes directly with those imports.
For 2026, hardwood pulp is described as tighter, with producer inventories running below balanced levels. New capacity starts expected from APP have been pushed back and are now slated for the fourth quarter of 2026, totaling 1.4 million tons. Separately, Indonesia's harvesting restrictions are being felt in Southeast Asia through higher woodchip costs and have driven roughly 0.4 million tons of economic downtime.
Softwood pulp shows a different picture, with excess producer inventories of about 645,000 tons. Jefferies and RISI view closures as necessary to remove surplus capacity. European Union mills are already taking downtime, and while Nordic wood costs have eased 30% to 40% from their peaks, Canadian mills are identified as more vulnerable given the current cost structure.
Containerboard and packaging
In Europe, recycled containerboard producers have announced cost-driven price increases of €100 per ton, about a 15% rise. The announced hikes came from Smurfit, WestRock and SAICA, and Jefferies expects further similar moves to follow.
Energy costs are a major determinant of where recycled containerboard mills sit on the cost curve. Every €10 per megawatt hour increase in gas is estimated to raise cash costs by €15 to €20 per ton. Jefferies estimates roughly half of recycled mills would be cash negative without hedges in place, underlining the pressure companies face as energy costs fluctuate.
The European containerboard market is described as oversupplied. Operating rates sit around 84% to 85% within a 43 million ton capacity market, excluding Russia. RISI judges that between 2 million and 3 million tons, or roughly 5% to 7% of capacity, would need to be closed to bring operating rates back above 90% and restore balance. Market structure is fragmented: 168 companies operate in the region, and the five largest firms hold about 35% market share versus 73% among the top five in the United States.
Demand considerations and structural pressures
Packaging demand has underperformed expectations. Weak consumer confidence has been noted as a factor, and higher-than-normal household savings in the European Union - about 15% versus a typical 12% - are weighing on consumption. Inflation has eroded purchasing power and encouraged down-trading toward private label products, which tend to incorporate a higher plastic mix. Other forces cited include demand displacement from Asia and the larger share of household spending going to services compared with pre-COVID patterns, all of which have diminished packaging volumes.
Implications
Taken together, Jefferies and RISI view the current configuration of restocking, softer post-holiday demand, regional capacity shifts and cost pressures as a check on further pulp price upside, while European recycled containerboard faces margin-driven price moves amid an oversupplied market and notable structural demand weakness.