Increased pulp production generates uncertainties in the global market

Global hardwood pulp prices dropped sharply in the first three months of the year and bottomed out at around US$450 per ton in China. However, commodity prices rose again in May, when Suzano, the world’s largest pulp producer, followed by other manufacturers, announced the first readjustment of 2023 in Asian markets.

Until last week, hardwood pulp sold in China was sold for US$ 507.70 a ton, rising to US$ 1.70 in a week and US$ 32.70 in a month, which confirms the implementation of the previously announced increase of US$ 30 per ton. The negotiated price for imported hardwood pulp showed an appreciation of US$ US$ 494.34 per ton, while Chinese resale prices dropped US$ 12.34 per ton.

Recently, a new readjustment of US$ 30 per ton of hardwood pulp in Asia was announced for orders placed as of July. However, pulp industry analysts are cautious about the short term, due to the increased supply of the product and low demand in the main markets.

Within this context, in the interval between one increase and another, Suzano also informed that it should reduce the production volume of market pulp by 4% throughout 2023, in relation to the nominal capacity and historical volumes registered by the company.

“This decision is based on the fact that such volume would not bring adequate return to the company at a time of more complex pulp market”, said the company in a statement.

According to analysts, in addition to prices at low levels, the expectation of an increase in the volume of pulp supply that should occur in the second half may have motivated the company to make this decision.

With the construction projects of the new UPM pulp mill and the expansion of Arauco alone, more than 3.5 million tons of hardwood pulp per year will be added to the global pulp market.

Arauco concluded the first pulp production of Projeto Mapa (Brazil), in January this year, and should increase production capacity by more than 1.56 million tons per year. At the beginning of June, UPM inaugurated its Paso de los Toros pulp mill, in Uruguay. The new plant has an annual production capacity of 2.1 million tons of eucalyptus pulp. Global demand, in turn, should grow between 1 million and 1.5 million tons per year.

For the second half of 2023, a significant impact on the pulp market is expected due to the progressive occupation of new production lines, as this could cause a much greater supply than demand. In Europe, hardwood pulp prices continue to correct in the market and reached US$ 960.72 per ton last week.