Suzano SA

The hardwood pulp market experienced different dynamics in each quarter of 2023. The first quarter continued to see the high prices that began in 2022, while the second quarter was marked by a cyclical downturn in demand and a challenging period for prices. Several factors contributed to the decline in prices, including the normalization of the logistics scenario, an increase in inventories along the supply chain, and the subsequent movement to destock finished products, as well as the start-up of two new short-fiber market pulp plants. Additionally, pulp prices fell below producers' marginal cash costs, leading to several unscheduled shutdowns. The recovery in prices, more pronounced in the fourth quarter, was driven by improved market fundamentals throughout the year, such as high demand for pulp in the Chinese market, positive signs of improvement in Europe and North America, and a reduction in supply due to both market and unscheduled stoppages.

In China, several factors influenced pulp demand in 2023: (1) the fall in pulp prices below the marginal cost of integrated producers, encouraging them to purchase market pulp; (2) higher prices for wood chips from Southeast Asia, particularly in the first half of the year, which favored the consumption of imported fiber; (3) high production rates for sanitary paper, cardboard, and printing and writing paper; (4) continued high paper export rates; (5) a process of pulp restocking by paper producers; and (6) a reduction in stocks of finished products, especially printing and writing paper and cardboard, at the end of the year.

In the European market, the destocking process lasted for more than half the year and naturally impacted pulp demand during that period. Despite the slowdown in demand and challenging macroeconomic forces, the European market began to see an uptick in paper production rates and pulp demand in the last two quarters of the year. Additionally, a high differential between long and short fiber prices, as well as closures of long fiber capacity in the region, favored short fiber demand. In both the European and North American markets, the resilience and stability of sanitary papers during this period were notable.

On the supply side, 2023 saw the entry of three significant projects in Chile, Uruguay, and Finland. However, unscheduled stoppages, mostly market related, and the announcement of definitive closures at less competitive mills helped to mitigate the impact of these new capacity entries on the market.

Pulp net sales totaled R$30,677.3 million in 2023 (a decrease of 25.9% compared to 2022). The share of pulp sales from exports was 93.0%, while the domestic market accounted for 7.0%. With regard to distribution for end use, the sanitary paper segment accounted for 63.6% of total sales in 2023, followed by Specialty Papers with 15.4%, Printing & Writing with 12.3%, packaging with 6.0% and other with 2.8%. APAC accounted for 44.3% of the net sales, followed by EMEA with 28.4%, North and South American countries (including Brazil) with 28.4%.

Our average pulp net price in USD sold by Suzano in 2023 was US$601.2/t, 20.5% lower than in 2022. In the export market, our average net price was US$600.3/t, down 21.1% from 2022.