Market fundaments for pulp producers are expected to be weak in 2015 and prices should remain low, according to Fitch Ratings 2015 outlook for Latin American pulp, paper and forest products. Pulp prices will continue to follow supply and demand imbalance and remain pressured by oversupply. In contrast, the underlying fundamentals remain favorable for Latin America paper and forest products companies. Demand should be strong in the region for boards, lumber, tissue and paper products, despite projected GDP growth of 2% for 2015.

 

Pulp prices should remain depressed in 2015, despite the recent positive adjustments. Fitch expects more than 2 million tonnes per year (mty) of new hardwood pulp capacity to enter the markets during 2015, while demand growth for market pulp should be around 1.5 mty. Plant closures will be key to returning the market to balance and improving profitability, said Fernanda Rezende, Director in Fitch＇s Latin America Corporate Group.

 

FCF should benefit from high sales volumes, as a result of new pulp mills, and reduced capex. Weaker currencies are positive for almost all of the companies due to the high level of exports.

 

Fitch projects the aggregate investments of Fibria, Suzano, Arauco and Empresas CMPC to be USD2.7 billion in 2015, a 27% reduction from USD3.7 billion expected in 2014, said Monica Coeymans, Director in Fitch＇s Latin America Corporate Group.