Will pulp prices continue to rise in 2021?

On January 18, Bloomberg published an article signed by Fabiana Batista. The article pointed out that the world’s largest wood pulp producer Brazil SuzanoSA predicted that as demand in the Chinese market rebounded and the new crown triggered a drop in pulp prices, high-cost producers had to cut production. Pulp supply is becoming tight, which will benefit low-cost production companies like Suzano, which has begun to gradually increase prices.

Prices in Europe are also rising, and Europe is the region with the worst decline in demand in 2020. In January 2021, Suzano increased the European price from an average of US$680/ton in 2020 to US$750/ton. Although the company is still considering whether to raise prices again in Europe, Almeida said that analysts predict that the price in the European market will reach US$850/ton this year.

Almeida said that the tight market supply has led to an increase in buyers' monthly purchases, exceeding the amount stipulated in the contract, in order to reduce the impact of the increase in pulp prices. He declined to comment on Suzano's customers.
JPMorgan Chase & Co. recently stated that some new orders have been cancelled due to insufficient inventory. Almeida said that Suzano customers request a limited range of increases in monthly purchases. He said: "I can only say that Suzano is fulfilling all the contracts." The company plans to increase production capacity this year, but he declined to say whether these plans can actually be implemented.

Almeida said that due to long-term low prices, rising logistics costs and a weak dollar, the profit margins of North American producers whose production costs are higher than Brazil have been in a tight or negative state. This will cause some factories to close, reduce maintenance expenditures for some businesses, and lead to unplanned reductions in pulp production.