Suzano sees “tight” global pulp market

Pulp prices continue to rise on the international market, with all the adjustments announced for April already implemented, amid the worsening imbalance between supply and demand. And there are no signs of any change in the short term, said Leonardo Grimaldi, head of commercial pulp, people and management at Suzano. “The fundamentals are still quite solid, especially on the supply side,” the executive said.

Last week, according to Fastmarkets Foex, the net price of hardwood pulp rose $1.90 in the Chinese market, to $783.61 per tonne, close to historical levels. Since the beginning of the year, the appreciation exceeds 35%. At resale, eucalyptus pulp prices remain above import prices, at $807.04 per tonne, according to BTG Pactual.

Softwood pulp was traded at $976.69 per tonne in China, with a slight decrease of $0.50, Foex reported. With this, the spread between the two types of fiber was at $193 per tonne, above normalized levels, around $120 per tonne. “Challenging logistics is one of the main factors. There were already challenges in 2021 and the [recent] Covid-19 outbreak in China has worsened the situation,” Mr. Grimaldi said.

Difficulties in global supply chains, concentrated maintenance stoppages at South American mills in the first quarter, the delayed start-up of Arauco’s and UPM’s projects, and non-recurring events, including strikes, have limited the global supply of the raw material in 2022, fueling the recent rally. If, historically, unscheduled downtime in production lines has taken 700,000 tonnes of fiber per year out of the market, in 2022 the volume could exceed the 2 million tonnes per year that were not produced in 2020 and 2021.

Suzano, the world’s largest producer of eucalyptus pulp, adjusted prices by $50 to $100 per tonne as from this month in all markets – North America, Europe and Asia. According to Mr. Grimaldi, the company still does not have available volumes to offer in the spot market and saw the negotiations for April being accelerated due to the clients’ fear of not having the desired quantities of fiber. “We are focused on serving long-time customers,” he said. Despite this environment, there is still no discussion about new adjustments in May.

While supply remains limited, demand for pulp in North America and Europe remains strong. In the European market, with the prolonged strike that closed UPM’s pulp and paper mills in Finland, paper mills from other countries raised the operating rate in an attempt to occupy the market that was served by the Finns. The war in Ukraine and sanctions on Russia, in turn, affected Ilim’s supply of bleached pulp.

In China, the executive said, local contacts suggest that stocks of eucalyptus fiber at customers and traders are at “extremely low” levels. The focal point, however, is on the potential impact of Covid-19 on the Chinese economy further down the road and the war in Ukraine on the global economy.

In a recent report, Santander analysts Rafael Barcellos and Arthur Biscuola wrote that pulp markets are expected to remain tight in 2022, with an estimated shortfall of 400,000 tonnes of short fiber. The average price projected for this year was revised by the bank, to $630 per tonne from $570 per tonne.

“Demand remains strong in Europe and in China the feeling has improved since October, with paper prices following the recent pulp rally,” the analysts wrote. Bottlenecks in global logistics chains also contribute to keeping fiber prices at high levels and there is no expectation of normalization in the short term.

“We believe a prolonged cycle of rising prices for pulp as a likely outcome as we expect the market to remain firm into 2022,” they added.

Source: Valor International

https://valorinternational.globo.com