Summary of Global Pulp Industry Conference Call Industry Overview - The global pulp market is undergoing a structural transformation, primarily influenced by China's integrated capacity addition, which lowers cost support and leads to an oversupply of paper domestically, limiting pulp price gains during up cycles [1][4] - The expectation is for lower lows and lower highs in pulp price cycles, resulting in weaker overall profitability, a trend anticipated to continue into 2026 [1] Key Themes for 2026 1. **Structural Changes in the Market**: The pulp market is expected to face ongoing challenges due to China's capacity expansion and domestic oversupply [1] 2. **Investment in Efficiency**: Global producers are investing in lower-cost and more efficient capacities, focusing on cost improvements and lobbying for import tariffs [2] 3. **Regional Competitiveness**: Brazilian producers are well-positioned due to scale, cost advantages, and operational stability, while Chilean producers are expected to catch up as investments mature [3] 4. **China's Capacity Growth**: An additional 2.6 million tons per annum (mtpa) of pulp capacity is expected to enter the market in 2026-27, driven by industrial investments and competitive funding costs [24][25] 5. **Deflationary Trends in Europe**: Early signs of deflationary pulp costs in Europe are emerging, with wood costs declining significantly [50] 6. **North American Challenges**: North American pulp production faces competitiveness issues, with a 30% decline over the last decade and ongoing capacity cuts due to negative EBITDA margins [53][55] Company-Specific Insights - **Suzano**: Maintained as a Buy due to relative valuation and the end of the capital expenditure cycle [5] - **Klabin**: Rated Neutral due to rich valuation and slow deleveraging [5] - **CMPC**: Neutral rating due to a leveraged balance sheet and rising capex [5] - **COPEC**: Rated Sell due to multi-year free cash flow pressure [5] Project Updates - **Arauco's Sucuriu Project**: Board-approved and ongoing, expected to contribute significantly to capacity [16] - **CMPC's Natureza Project**: Expected board approval by 2Q26, with attractive economics [19] - **Bracell's Bataguassu Project**: Anticipated to obtain installation license by March 2026 [19] - **APP's OKI Expansion**: Expected to add 2.8 mtpa of pulp capacity by 2027, with significant progress on capex [39][40] Risks and Considerations - **Wood Supply Disruptions**: Potential challenges in accessing competitive woodchips globally could balance the market and impact profitability [4][41] - **Geopolitical Risks**: Macro uncertainties and geopolitical tensions are expected to influence price dynamics [4] - **North American Production Cuts**: The region faces the highest risk of production cuts globally, with significant capacity reductions already observed [56] Conclusion The global pulp industry is navigating a complex landscape characterized by structural changes, regional competitiveness, and significant project developments. Investors should closely monitor these dynamics, particularly in relation to capacity expansions in China and Brazil, as well as the evolving cost structures in Europe and North America.

Investment Rating - The report does not explicitly state an investment rating for the pulp and paper industry [1]. Core Insights - Chinese pulp prices for May decreased by 13% month-over-month (m/m) for hardwood and 11% m/m for softwood, with hardwood resale prices declining by 5% and softwood resale prices decreasing by 2% m/m [5]. - In Europe, pulp prices remained stable, with hardwood prices flat m/m and softwood prices increasing by 1% m/m [5]. - China's paper prices showed mixed results, with most grades experiencing flat to low single-digit declines m/m, while containerboard prices slightly increased [5]. - Compared to their 5-year historical averages, paper margins are 38% below for ivoryboard and 15% below for tissue, while 5% above for uncoated woodfree (UWF) and 13% above for coated woodfree (CWF) [5]. - China’s pulp port inventories increased by 3% m/m to 2.2 million tons (Mt), exceeding the historical average of 1.8 Mt [5]. - European port inventories declined by 13% m/m in April, reaching 1.3 Mt, aligning with the historical average [5]. Summary by Region Global - The report includes a comprehensive overview of global pulp and paper prices, production, and consumption trends [6]. China - Pulp prices in China for hardwood are at $517 per ton, down 13% m/m, while softwood prices are at $712 per ton, down 11% m/m [7]. - Paper prices in China show a range of changes, with coated woodfree at 5,475 CNY per ton, down 4% m/m [7]. Europe - Hardwood pulp prices in Europe are stable at $1,194 per ton, while softwood prices increased to $1,597 per ton, up 1% m/m [7]. - Containerboard prices in Europe have risen by 1% to 3% m/m [5]. USA - In the US, coated woodfree prices are at $1,515 per ton, stable m/m, while uncoated woodfree prices are at $1,610 per ton, also stable m/m [7]. Latin America - The report highlights trends in containerboard shipments in Brazil, indicating a year-over-year growth [70].