CEO of Suzano, Moody's See Industry Consolidation amid Low Pulp Prices
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According to a report this past week by Reuters (London, U.K.), the pulp and paper industry will face more consolidation, given that excess capacity reduced prices to their lowest in 20 years, said Walter Schalka in the report, CEO of Brazil's Suzano Papel e Celulose SA, which ranks fifth in the sector worldwide.
Schalka also said on August 16 that he expected companies to cut production capacity because low pulp and paper prices are reducing profitability across the board.
"Clearly there is an excess capacity that the market is unable to absorb," Schalka said at an industry event in São Paulo, Brazil.
China's growing paper and tissue consumption will continue to drive pulp demand, but supplies are also expected to grow, keeping downward pressure on prices over the next two years, Barbara Mattos, senior credit officer at Moody's Investors Service (New York, N.Y., USA), said during the same event.
Moody's expects global pulp production to reach 70 million metric tons in 2018, up from an estimated 63 million metric tons in 2016.
Pulp prices will be particularly hit next year as Brazil's Klabin SA and Fibria Celulose SA, as well as international competitors outside of South America such as with APP (Indonesia) and Metsa Group (Finland), companies also with plans to expand production, Moody's added.
