Tag Archives: Herfindahl-index

Pulp price announcements – Market forces at work?

UPDATE: EUWID Pulp and Paper states that leading pulp producers are hiking prices for softwood pulp, because

Most manufacturers see good chances of success for November price hikes. Low stocks and good order backlog created a good environment for NBSK prices to rise, EUWID respondents explained. It should not be particularly difficult to get the market to accept the price increase, they said. (emphasis mine)

Two price increases in the same week: Södra Cell and Metsä Fibre both announced that the new price of Softwood Pulp will be 820$ per tonne starting November 1, 2012. Coincidence? That is early to say, although METLA has said that demand for pulp from China and Eastern Europe continues to be good.
The Jaakko Pöyry Oy ‘World Paper Markets up to 2025’ features a section on market concentration, and the so-called Herfindahl-index is so, that the paper industry can not be classified as an oligopoly. But the industry does have some characteristics of oligopoly – if we look at those pulp prices that are increased to 820$ per tonne, then it is at least hard to argue that market forces are at work.
One of my next ideas for research is indeed price formation in the paper industry – from an economic sociological perspective, in which prices are determined by internal norms concerning margins and costs, but also externally by observing competitors. If the near future sees more price increases by soft-pulp producers, I know I have a case!


With regard to the quote in the update, it seems that supply and demand indeed work to set prices, but rather before the market than in the market.