Suzano cuts pulp output amid US tariff uncertainty, weak Chinese prices

BRAZIL – Suzano SA, the world’s largest producer and exporter of market pulp, will scale back production by about 450,000 metric tonnes over the next year as geopolitical tensions and market volatility weigh on pricing discussions with key buyers.

The decision follows disruptions in negotiations with Chinese clients, the company’s biggest market, after the US administration, under President Donald Trump, announced sweeping 50% import tariffs on Brazilian goods in early July.

Although pulp was later exempted, the period of uncertainty was enough to delay contract agreements and weaken sentiment.

“I wouldn’t say that the geopolitical instability has reduced demand, but it has obviously put the brakes on discussions about pricing,” said CEO João Alberto Abreu.

“Expectations of reduced US supply create pressure to ship more to China, but this is not the ideal environment for price increases.”

The planned 3.5% output cut comes as global pulp markets remain under pressure. In China, a critical buyer of Brazilian pulp used in packaging, tissues, and specialty papers, benchmark prices fell to US$495 per tonne last week, down from US$527 in May, according to BTG Pactual data.

Suzano responded by announcing a US$20 per metric tonne price hike for Asian clients, betting that reduced global supply will support a rebound.

Company executives believe the price outlook will strengthen as rival producers also face mounting cost pressures.

“Cuts to supply by competitors are both likely and imminent,” said Executive Vice-President Leonardo Grimaldi, noting that current prices are below the marginal cost for some mills, particularly in Europe and North America.

In anticipation of the tariff measures, Suzano increased its pulp inventories in US warehouses to ensure supply continuity.

Abreu described the strategy as “adequate for the moment,” allowing the company to meet contractual obligations without ramping up fresh shipments during a volatile trade environment.

Despite the production cut, Suzano’s shares rose as much as 4.3% in São Paulo, hitting a three-week high as investors welcomed the company’s proactive supply management.

Industry analysts say the company’s move underscores the fragile balance in the global pulp market, where trade flows between Latin America, China, and North America heavily influence prices.

The Brazilian pulp sector, which accounts for over 20% of global exports, has already seen margins squeezed in 2024 due to a combination of soft demand in Asia, currency fluctuations, and elevated logistics costs.

With Suzano signaling tighter supply, the coming months could see price stabilization, but much will depend on how quickly trade tensions ease and Chinese demand recovers.

Subscribe to our email newsletters that provide busy executives like you with the latest news insights and trends from Africa and the World. SUBSCRIBE HERE