Bradesco BBI sees no signs of continued rally and remains cautious with the sector, while Morgan Stanley sees potential increase in outlook
Suzano’s facade in Tres Lagoas (Image: Disclosure)
Suzano (SUZB3) announced on Monday that it will raise the price of hardwood pulp by $30 per tonne for all Asian markets from June.
The pulp and paper producer stated that the readjustment is due to the process of inventory build-up by traditional customers in the Chinese market, as well as demand from combined pulp and paper producers, who aim to reduce manufacturing rates. Susanoo added that resale prices for lumber are on the rise in China.
Bradesco BBI notes that Suzano has not released its latest net price for the Chinese market, even though the latest news reported prices around $450 per ton (which means Suzano raised prices to $480 per ton).
“We don’t expect a steady upward trend in pulp prices going forward, as we still believe that oversupply in the market will make new initiatives more difficult. We note that Arauco recently stated that he expects prices to stay lower for longer (prices are under $500 a ton), While RISI reported that most suppliers intended to keep prices stable for a few months because they were concerned about problems with pulp oversupply and overcapacity as we entered a seasonally weaker demand period,” the analysts note.
BBI analysts continue to recommend Poor performance (Below Market Average, Equivalent to Sell) of SUZB3 stock, price target of R$54 (or potential upside of 20% compared to the previous day’s close). For Klabin (KLBN11), the recommendation is neutral.
Morgan Stanley is more bullish and has a recommendation overweight (above average exposure, equivalent to buy) for Susanoo stock.
For analysts, if the announced price increase is maintained, BEKP (Bleached Short Camphor Fiber Pulp) prices in China could reach around US$500 per ton in June. This implies a slight increase in the forecast of $500/tonne of BEKP China forecast for Q2 2023 (2Q23), where they were assuming a price of $460/tonne for May and June.
“The announcement, in our view, indicates that the company sees an improvement in market conditions in China. We expect BEKP and BSKP to be [celulose branqueada de fibra longa] from China will average $575/tonne and $629/tonne in 2023, respectively, they noted.
It should be noted that in the midst of the recent decline in the shares of the sector and the scenario in which the core may reach the price floor, analysts showed more optimism with Susanoo and Clapin.
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