Analyst Roundup on Latin America: Pulp capacity utilization to remain steady at 90% in 2022, 88% and 87% in 2023-2024, respectively; pulp markets will remain tight due to supply-chain disruptions from continued logistical bottlenecks, delays in projects

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LOS ANGELES , May 13, 2022 () –

Santander predicts a balanced market in Latin America in terms of supply and demand into the rest of 2022 (Santander, Apr. 8). Demand for pulp tends to be resilient due to its wide exposure to end-use markets, with over 50% related to tissue/fluff (Santander, Apr. 10). Hence, pulp capacity utilization rates are forecast to remain steady at 90% for the rest of the year but are expected to decline slightly below that level to 88% and 87% in 2023 and 2024, respectively (Santander, Apr. 10). 

Moreover, Santander is forecasting fundamentals that will support pulp prices into 2022. These include emerging supply-chain disruptions resulting from continued logistical bottlenecks and delays in projects (Santander, Apr. 22). One such delay is taking place in Arauco’s MAPA project. The new expansion project has a capacity of 1.27mtpy of net hardwood pulp and has been delayed for a third time to late April from March, after it was postponed twice before from the second quarter of 2021 and the fourth quarter of 2021 (Bradesco BBI, Mar. 3). In addition, maintenance downtimes at Klabin’s Puma I mill and at Suzano further strained supplies (Morgan Stanley, Apr. 13). As a result, Santander estimates a potential supply deficit of 400kt of hardwood pulp and 200kt of softwood pulp, which is expected to lower the probability of a material imbalance between supply and demand for the remainder of the year (Santander, Apr. 22 and Santander, Apr. 10).

Pulp markets are therefore expected to remain tight for the foreseeable future, which in turn increases the potential for additional price hikes in the short-term (Santander, Apr. 8). Major pulp producers already announced price hikes for April orders (Santander, Apr. 1). Suzano announced a US$100/t increase in Asia and a US$50/t increase in Europe for hardwood pulp, while Klabin also announced a US$100/t hike for hardwood pulp in China (Bradesco BBI, Mar. 21 and Bradesco BBI, Mar.21)

Average 2022 hardwood pulp price is estimated at US$630/t with a positive skew into 2022 (Santander, Apr. 8). Also, hardwood pulp supply is expected to increase 21% between 2021-2025, while demand is expected to grow 12% during the same period (Santander, Apr. 10).

 

Primary Sources:

  • LatAm Pulp & Paper Monitor – Pulp Prices Above US$800/t in China? Santander, April 8, 2022 
  • LatAm Pulp & Paper: Thematic Report – The Constitutional Reform in Chile: Implications for Pulp Markets & CMPC. Santander, April 10, 2022 
  • LatAm Pulp & Paper Monitor – Fundamentals Remain Supportive of Pulp Prices. Santander, April 22, 2022 
  • LatAm Pulp & Paper: MAPA pulp project delayed again, Supply continues to surprise on the downside – Bradesco BBI, March 3, 2022 
  • LatAm Pulp & Paper – 1Q22 Preview. Morgan Stanley, April 13, 2022 
  • LatAm Pulp & Paper Monitor – Supply-Side Challenges Continue to Add Upward Pressure on Pulp Prices. Santander, April 1, 2022 
  • Flash Note: Suzano – Pulp prices trending up, Suzano announces US$100/t price hike for Asia. Bradesco BBI, March 21, 2022 
  • LatAm Pulp & Paper - Klabin hikes hardwood pulp prices by US$100/t in China. Bradesco BBI, March 21, 2022 

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