Norexeco to launch China-bound pulp contracts

Oslo, Norway-based pulp and paper trading exchange Norexeco ASA is going to launch new China pulp futures contracts June 1. According to Norexeco, one contract will be based on Fastmarkets RISI northern bleached softwood kraft (NBSK) CIF (cost, insurance and freight) China assessment and the other on Fastmarkets FOEX (Finland Options Exchange) PIX China bleached hardwood kraft pulp (BHKP) net index price.

Pulp futures are designed to help market participants manage their exposure to price risk, says Norexeco. The exchange already lists contracts for old corrugated containers (OCC) and hardwood and softwood pulp delivered to Europe, all of which are settled against Fastmarkets FOEX indices.

In addition, Norexeco has listed a Shanghai Futures Exchange (SHFE) “mirror” contract on NBSK. “With the rapid rise of the importance of the SHFE pulp futures contract and its influence on global market pulp prices, these new contracts will provide international producers and global buyers the opportunity to hedge their exposure to future price swings for imported pulp into China,” says Matt Graves, senior vice president of indices at Fastmarkets.

The market will set daily closing prices and “make visible a transparent forward curve available for all market participants,” says Norexeco. “This will be the first time that stakeholders in China will have access to a futures contract for hardwood,” says Haidong Weng, head of strategic business at Xiamen C&D Paper & Pulp, based in that Chinese city. “The new contracts will provide opportunities for cross-market hedging and arbitrage against SHFE and the hardwood/softwood spread.”

Norexeco says it is ensuring Chinese companies can participate in trade via brokers (United States-based FIS Brokerage & Securities Services LLC) and clearing houses by providing an easy access route. “The two new China pulp contracts increase the opportunity to manage price risk for everyone exposed to price movements on pulp,” says Stein O. Larsen, CEO of Norexeco. “They are a great addition to the Norexeco product portfolio and open opportunities for both existing and new market participants at Norexeco. Anyone seeking to reduce risks and/or exploit opportunities should contact us to get access to the market.”

The government of China has severely restricted scrap paper imports, with many containerboard producers and papermakers there responding by bringing in pulp. The U.S.-based ND Paper subsidiary of Nine Dragons, perhaps China’s largest containerboard producer, has recently invested in recycled-content pulp capacity in Maine.