Goldman Sachs Previews Global Pulp & Paper Week: China's Cost Advantage Stands Out, Specialty Pulp Trends Diverge

Overview

This report serves as a preview guide for Goldman Sachs' upcoming Fourth Annual Global Pulp & Paper Virtual Week (June 23-25). It outlines the key debates and trends in the global pulp and paper industry, focusing on global wood cost changes, price trends and supply-demand dynamics for major pulp grades (softwood, hardwood, dissolving, fluff), and China's export performance and competitiveness changes. The report argues that China's structural cost advantage is widening, while different pulp grades and regional markets are showing significant divergence.

Core views

Global wood costs and supply patterns are diverging regionally. Wood is the main cost component in pulp production; recently, European wood costs have fallen 30% from their peak, signaling some easing of inflationary pressure. However, wood costs in Canada and Brazil (notably Mato Grosso) have shown no signs of improvement. In contrast, as China's real estate activity has weakened, some wood resources have shifted to the pulp and paper market, increasing wood availability and lowering costs. The report believes that, structurally, China's pulp industry competitiveness will continue to strengthen. The softwood pulp market remains weak, with loose supply-demand hard to change. Over the past five years, softwood pulp has performed poorly in both price and demand. Despite significant capacity cuts, the market remains loose, with no signs of improvement yet. Investors should pay attention to the long-term structural pressure in this segment. Specialty pulp grades are performing strongly, with prices rising. Dissolving wood pulp (DWP) prices rose USD 21/ton month-over-month in May; sellers attempted further price increases in June but have not yet succeeded. The current spread between dissolving pulp and bleached hardwood kraft pulp (BHKP) exceeds USD 250/ton, an attractive spread incentivizing producers to switch capacity toward dissolving pulp grades. Although downstream Asian textile markets have weakened marginally, limiting further price upside, the marginal decline in cotton pulp and polyester fiber prices also limits substitution effects. Fluff pulp prices rose sharply by USD 34/ton month-over-month in May, becoming an exception in a weak market. The price increase was mainly driven by planned and unplanned maintenance outages in the first half of the year (such as the May shutdown of Domtar's Coosa Pine mill), while demand-side stocking ahead of freight and supply availability concerns also supported prices. Prices are expected to continue rising next month, though the pace may narrow as the spread between fluff pulp and other pulp grades widens, and as producers such as Suzano and Ence seek to gain market share; Stora Enso also plans to increase fluff pulp capacity at its Skutskar mill by 10%. China's exports are strong and the paperboard market shows signs of stabilization. China's net paper exports rose 12% month-over-month and 27% year-over-year in April; March net exports reached 654,000 tons, with year-to-date cumulative volume up 14%. In finished paper, the paperboard market as a whole remains weak, but containerboard grades have shown signs of strength.

Analysis framework

The report adopts a top-down industry analysis framework, starting with global regional differences in the upstream core cost factor (wood) to assess cost competitiveness shifts among regional capacities (China vs. Europe, North America, and Latin America). It then conducts independent supply-demand balance analyses for different pulp grades (softwood, hardwood, dissolving, fluff) using volume-price decomposition, incorporating capacity changes (such as maintenance outages and new capacity additions) and downstream demand (such as textiles and packaging) to explain price movements. Finally, it validates actual end-demand conditions using trade data (China net exports), leading to a conclusion of structural divergence.

Methodology notes

• Industry/Industrial Analysis FrameworkCost curve analysis

  Analyzing wood cost changes across regions (China, Europe, Latin America) to determine shifts in the global cost competitiveness of pulp capacity.

  The pulp industry is characterized by high fixed costs and high raw material intensity; regional differences in wood costs directly determine corporate profit floors and the global competitive landscape. By comparing wood cost trends across regions, the report reveals the logic behind the expansion of China's cost advantage.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Analyzing different pulp grades (such as softwood pulp and dissolving pulp) separately by supply side (capacity cuts, outages, grade switching) and demand side (textiles, packaging) to explain price trends.

  Although different pulp grades share a common raw material source, their downstream applications and supply-demand cycles are independent. Rather than treating 'pulp' generically, the report breaks it down into specific grades, accurately capturing the supply switch of dissolving pulp driven by price spreads and the short-term shortage of fluff pulp driven by maintenance outages.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Suzano SA (SUZB3.SA)

  Beneficiary

  Strengths

  The report notes that Suzano is seeking to gain share in the fluff pulp market and has strong hardwood pulp cost advantages; its valuation is low (2026 EV/EBITDA 6.1x), with a high free cash flow yield (8.4%).

  Comparison

  Compared with Klabin, Suzano is more focused on pulp operations and more sensitive to pulp price volatility; compared with Chilean peers, its cost structure is pressured in Brazil but benefits from significant scale effects.

  Risks

  No improvement in Brazilian wood costs; persistent global softwood pulp market weakness may indirectly weigh on sentiment.

• Empresas COPEC SA (COPEC.SN)

  Negatively Impacted/Cautious

  Weaknesses

  The report assigns a 'Sell' rating with a target price below the current price; valuation is high (2026 EV/EBITDA 7.9x), and free cash flow yield is negative.

  Comparison

  Most negative rating among covered Latin American companies.

  Risks

  Chilean operating cost pressures; paperboard demand recovery falls short of expectations.

Key data

• China Hardwood Pulp Import PriceUSD 605/tonUp USD 1/ton month-over-month
• China Hardwood Pulp Domestic Resale PriceApproximately USD 560/tonDown CNY 0-40/ton month-over-month
• China Softwood Pulp Import PriceUSD 654/tonDown USD 1/ton month-over-month
• China Softwood Pulp Domestic Resale PriceUSD 601-638/tonUp CNY 24-50/ton month-over-month
• China Net Paper Export GrowthMoM +12%, YoY +27%April data
• Dissolving Pulp Price IncreaseUSD 21/tonMonth-over-month in May
• Dissolving Pulp vs. BHKP Spread>USD 250/tonElevated spread incentivizing grade switching
• Fluff Pulp Price IncreaseUSD 34/tonMonth-over-month in May

Impact & implications

For Latin American pulp companies, persistently high wood costs (especially in Brazil) may continue to squeeze margins unless offset through product mix optimization (such as switching to higher-priced dissolving or fluff pulp). For Chinese pulp companies, the structural improvement on the cost side implies stronger long-term competitiveness and potential to gain global market share. For investors, caution is warranted on the long-term return risk of softwood pulp assets, while attention should be paid to companies with dissolving and fluff pulp capacity for near-term earnings leverage.

Risks

• Further weakening of Asian downstream textile markets, limiting dissolving pulp price upside
• Persistently high wood costs in Canada and Brazil, eroding producer profits
• Long-term loose softwood pulp market with weak price rebound momentum
• New capacity additions (such as Stora Enso) ramping up faster than expected, intensifying competition

What to watch

• Whether dissolving pulp sellers can successfully implement another round of price increases in June
• Ongoing impact of China's real estate activity on wood flows into the pulp market
• Whether European wood costs can maintain a downward trend
• Whether containerboard market strength translates into a broad recovery