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New capacity slows pulp price increases in the short term

Although additional bids are pushing to cool adjustments, producers say there is room to implement the increases announced for earlier this year

New pulp capacity additions in the global market, such as UPM’s new mill in Uruguay, Arauco’s Mapa project in Chile, in addition to the imminent start-up of the Cerrado de Suzano project, are already being reflected in China, the destination of most of the raw material exported from Brazil and responsible for setting the price trend in the sector. The commodity has been tight for approximately eight consecutive months and is currently losing strength in the Chinese market, although it is still holding up in Europe and the United States.

Despite this context, producers claim that there is room to implement the increases announced for the first months of the year. Among them, Suzano recently announced a pulp price adjustment for February, although only for the European and North American markets. The company’s new mill, located in Ribas do Rio Pardo (MS), will have an installed capacity of 2.55 million tons and is expected to start operations at the end of the first half of the year.

The company will add a significant volume to the supply, which generates an expectation of price volatility, even with a gradual entry into the market. By 2024, Suzano expects to sell around 700 thousand tons of the new mill’s production.

According to analyst Daniel Sasson, from Itaú BBA, short fiber prices should retreat before the start of the Closed Project. “The Xangai Pulp Week, in March, will be an important event, where producers and paper companies will meet to define the price for the second quarter,” he said. The analyst also pointed out that producers failed to implement an increase announced for China in January and had difficulties in applying the new reference prices, on which discounts will be applied, in Europe and the United States.

According to producers, the price drop expected for this year should not be as steep as the one recorded in early 2023, and there is no consensus on whether it will be stronger in the second quarter or during the second half of the year.

However, in the medium and long term, analysts point to an upward trend, with new projects and, consequently, new capacity slowing down. “After the Cerrado, the industry will be two and a half years without the entry of relevant capacities, at least in what is mapped for now,” Sasson concluded.

Valor Economico
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