Rising hardwood pulp supply, with price pressure potentially lasting through mid-2027

Overview

This report focuses on the global pulp and paper market. Its core view is that hardwood pulp supply will increase significantly in 2H26. Key drivers include the end of Brazil’s maintenance season, the normalization of China’s wood supply, and the ramp-up of new pulp mills. At the same time, European printing and writing paper demand continues to decline, creating pressure on hardwood pulp prices through the supply-demand balance.

Core views

For hardwood pulp, supply growth is the main theme: China’s 2H production is expected to increase 16% sequentially, while Brazil is expected to add approximately 1mt of supply in 2H. Indonesia’s OKI II may begin adding supply from October, weighing on market sentiment. For softwood pulp, production cuts by Metsa, UPM, Domtar, and Mercer, together with summer downtime, may constrain supply. On pricing, the report believes that additional supply and weak downstream demand may push prices to or below marginal cost, followed by a potential recovery around mid-2027.

Analysis framework

The report combines supply-demand balances, regional inventories, export flows, downstream paper-product demand, and comparable-company valuation tables. It first assesses new supply from China, Brazil, and Indonesia, then examines European demand and port inventories, and finally uses ratings, target prices, and valuation metrics for Latin American pulp and paper companies to map the implications at the asset level.

Methodology notes

• Supply-demand analysisPulp supply-demand balance

  New capacity, maintenance downtime, and downstream demand jointly determine price pressure

  The report places China’s new-capacity ramp-up, the end of Brazil’s maintenance season, expectations for supply from Indonesia’s OKI II, and weak European paper-product demand within one framework to assess near-term pressure on hardwood pulp prices.

• Inventory and flow analysisRegional inventory and export tracking

  European port inventories and exports from Brazil, Chile, and Uruguay reflect regional supply-demand changes

  The report tracks inventories at major European ports, Brazilian exports to China and Europe, and monthly exports from Chile and Uruguay to assess supply normalization and trade flows.

• Equity research frameworkGS Factor Profile

  Stocks are compared across four attributes: Growth, Financial Returns, Multiple, and Integrated

  Goldman Sachs discloses that its factor profile compares individual stocks with the market and industry peers based on growth, financial returns, valuation multiples, and integrated percentiles.

• M&A probability frameworkM&A Rank

  The probability of being acquired is measured on a scale of 1 to 3

  Goldman Sachs discloses that an M&A Rank of 1 represents a 30%-50% high probability, 2 represents a 15%-30% medium probability, and 3 represents a 0%-15% low probability; when the rating is 1 or 2, M&A factors may be incorporated into the target price.

Asset mapping & comparison

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

• hardwood pulp

  Core research subject

  Strengths

  Supply visibility is relatively high, and regional export and inventory data can be tracked.

  Weaknesses

  New supply is concentrated in 2H26, and prices may fall to or below marginal cost.

  Comparison

  Compared with softwood pulp, the supply increase for hardwood pulp is more clearly defined in this report.

  Risks

  Faster-than-expected ramp-up of China’s new capacity and Indonesia’s OKI II would increase price pressure.

• softwood pulp

  Comparison grade

  Strengths

  Production cuts and summer downtime at Metsa, UPM, Domtar, and Mercer may constrain supply.

  Weaknesses

  Import and domestic resale prices are still declining modestly.

  Comparison

  Compared with hardwood pulp, softwood pulp has more supply-side contraction factors.

  Risks

  If demand continues to weaken, supply reductions may be insufficient to support prices.

• Suzano SA

  Latin American pulp and paper coverage company

  Strengths

  Rated Buy in the appendix, with a target price of 52.00, implying 26.7% upside from the closing price of 41.03.

  Weaknesses

  2026 NetDebt/EBITDA is 3.1x, so leverage pressure during a cyclical downturn remains a concern.

  Comparison

  Its implied upside is among the highest of the companies in the appendix.

  Risks

  Hardwood pulp prices falling below marginal cost would compress earnings and cash flow.

• Klabin SA

  Latin American pulp and paper coverage company

  Strengths

  High dividend yield, with a 2026 dividend yield of 6.3%.

  Weaknesses

  Rated Neutral, with implied upside of 3.4% and limited upside potential.

  Comparison

  Its implied target-price return is lower than those of Suzano and CMPC.

  Risks

  Valuation recovery requires stronger price or demand catalysts.

• Empresas COPEC SA

  Latin American pulp and paper coverage company

  Strengths

  Large market capitalization and regional representation in its business.

  Weaknesses

  Rated Sell in the appendix, with a target price of 5,743, implying -4.6% from the closing price of 6,020.

  Comparison

  The only company in the appendix with a Sell rating.

  Risks

  Valuation and earnings expectations are sensitive to the pulp cycle and changes in regional demand.

• Empresas CMPC SA

  Latin American pulp and paper coverage company

  Strengths

  Target price of 1,389, implying 26.9% upside from the closing price of 1,095.

  Weaknesses

  Still rated Neutral, with 2026 NetDebt/EBITDA of 4.6x.

  Comparison

  High implied upside, but the rating is less favorable than Suzano’s.

  Risks

  High leverage and declining pulp prices could limit re-rating.

Key data

• China 2H26 expected pulp production+16% H/HSCI estimates that normalized wood supply and the ramp-up of three new pulp mills will add 2.2mtpa of capacity.
• Brazil 2H supply increaseapproximately 1mtThe report estimates that 85% of maintenance downtime was completed in 1H, with supply increasing in 2H as maintenance declines and production normalizes.
• China FOEX imported hardwood pulp price$582/tDown $8/t; domestic resale prices were equivalent to approximately $550-551/t.
• China FOEX imported softwood pulp price$645/tDown $1/t; domestic resale prices were equivalent to approximately $581-614/t.
• European pulp port inventories1.2mtUp 1% month-on-month in May, but still approximately 9% below the historical average of 1.3mt.
• European printing and writing paper demand-8% m/m, -6% y/yMay demand was among the lowest levels of the past six years and was 48% below 2019 levels year-to-date.
• Brazil June pulp exports1.8mtUp 11% month-on-month and down 8% year-on-year; exports to China increased 30% month-on-month, while exports to Europe declined 31%.
• Chile June pulp exports499ktUp 23% month-on-month and 27% year-on-year, representing the strongest June performance in the series.
• Uruguay June pulp exports408ktUp 13% month-on-month and flat year-on-year; 2Q exports were 1.1mt, up 4% from 1Q26.
• Average potential return of Latin American coverage13.5%The appendix is based on closing prices on July 9, 2026, and covers Suzano, Klabin, COPEC, Dexco, and CMPC.

Impact & implications

For commodity prices, the recovery of hardwood pulp supply and the deployment of new capacity increase downside risk. For pulp producers, companies with low costs, stronger asset quality, and valuation upside are relatively more resilient, while highly leveraged companies or those with weaker demand exposure or limited valuation support face pressure. If downstream demand fails to recover, the price recovery may be delayed.

Risks

• The ramp-up speed of China’s new pulp mills, normalization of wood supply, and the deployment schedule of Indonesia’s OKI II may alter supply pressure.
• Continued declines in European printing and writing paper demand may weigh on pulp consumption.
• Monthly fluctuations in exports from Brazil, Chile, and Uruguay may affect regional price and inventory assessments.
• If softwood pulp production cuts are smaller than expected, softwood pulp prices may also face further pressure.
• Changes in exchange rates, freight costs, energy costs, and the marginal-cost curve will affect the assessment of the price floor.

What to watch

• Whether China’s pulp production delivers the expected 16% sequential growth in 2H26.
• The ramp-up progress of the 2.2mtpa capacity at China’s three new pulp mills.
• Whether Brazil’s 2H supply increases by approximately 1mt after the end of maintenance.
• The actual pace of incremental supply deployment from OKI II beginning in October.
• Whether China FOEX hardwood pulp prices and domestic resale prices continue to converge toward marginal cost.
• Whether European printing and writing paper demand recovers from its six-year low.
• Whether Brazil’s export flows to China and Europe continue to diverge.