Growing demand for cellulose should be covered by greater supply, say analysts

According to market analysts, demand for pulp from China should grow by up to 1.2 million tons during 2023, due to the easing of restrictions imposed by the Covid Zero policy and the resumption of growth. However, there is also a forecast for the entry of new offers to the market.

Thus, the growing demand can be covered by an increase of 3.2 million tons on the supply side, with relevant new projects – such as MAPA, by Arauco, and Paso de los Toros, by UPM –, pulp dissolution capacities from wood to paper pulp, as prices were significantly corrected and reversal of production interruptions.

In this sense, specialists and investors maintain a certain caution with the sector. “We remain cautious with pulp and paper stocks in 2023, amid greater market oversupply and unattractive valuations for this point in the cycle”, say analysts at Bradesco BBI, led by Thiago Lofiego, in a report.

 

“Long fiber prices in China rose in January, but we expect pulp prices to continue falling”, points out the team led by Jens Spiess, in a Morgan Stanley publication. “The movement raised questions about whether pulp prices will reverse their downward trajectory and whether there is a positive reading for hardwood. We think the answer in both cases is no.”

With that, specialists believe that paper manufacturers will use their stocks, which are high, before returning to the market looking for the commodity, due to the high prices.

“Quiet seasonal demand and improved logistics could trigger a short-term destocking cycle,” analysts debate. “Our view is that net BHKP [hardwood] prices in China peaked in December and will continue to decline throughout 2023.”