Forest Products Latin America 2024: industry trends, pulp market shifts, and China’s expanding capacity
Conference highlights revealed the growing price gap between long and short fiber pulp, the competitive edge of Latin America’s forestry sector, and China’s investments in domestic production capacity
The Forest Products Latin America 2024 conference, organized by Fastmarkets, was held last week in São Paulo, Brazil, focusing on the current dynamics of the pulp industry. The event provided a platform for company economists to discuss the sector’s outlook, particularly in light of the new production capacities introduced this year.
According to the conference insights, the price gap between long and short fiber pulp continues to widen, largely due to increasing production cost differentials. This trend is making short fiber more favorable, especially as Latin America expands its production capacities, driven by comparatively lower wood costs, particularly in South America.
Despite the rising wood costs domestically, these increases are being balanced by favorable exchange rates in the international market. As a result, countries like Chile and Brazil are seeing their forestry sectors become more competitive compared to those in Europe and North America.
Fastmarkets data revealed that for Brazilian eucalyptus fiber producers, wood and transportation constitute two-thirds of the total variable costs. The rising demand for land and its limited availability have further escalated prices. Paulo Hartung, president of Ibá, emphasized the growth potential within Brazil’s forestry sector, stating: “There is significant growth potential for Brazil’s forestry base — converting degraded lands into productive areas”.
PULP MARKET OVERVIEW IN 2023
In 2023, the pulp market was dominated by short fiber (BHK) with a 50% market share, followed by long fiber (BSK) at 31%, with other fiber types comprising the remaining portion. The total production reached 70.1 million tons. The primary application of this production was in the tissue paper market, accounting for 41%, followed by graphic papers (28%), board and specialty papers (27%), and corrugated products (7%).
Short fiber production reached 38.5 million tons last year, with a significant portion directed towards China (47%), followed by Western Europe (17%), the Asia-Pacific region (12%), North America (8%), Latin America (7%), Eastern Europe (6%), and the Middle East and Africa region (3%).
CHINA’S INVESTMENT IN PRODUCTION CAPACITY
China, the largest importer of pulp from Latin America, is actively investing in expanding its short fiber production capacity and integrated production within its domestic market. Currently, a significant portion of the country’s tissue producers, who are the main consumers of this raw material, operate without integrated production facilities.
Moreover, the import volumes of wood chips are increasing, although prices remain relatively low. Experts have pointed out that China’s expanding integrated capacity presents both challenges and opportunities for eucalyptus fiber (BEK) pulp producers, potentially leading to greater price volatility but also improved average margins.
