By Brazil Stock Guide – Suzano SA (B3: SUZB3; NYSE: SUZ) used its third-quarter call to issue one of the strongest warnings yet about the structural imbalance in the global pulp market, describing current price levels as “completely unsustainable.” Executives said nearly 15% of global hardwood capacity is now operating below cash cost, with European producers hit hardest — and that supply cuts are inevitable after 13 consecutive months of prices below $600 per tonne.
Market can’t live like this
Leonardo Grimaldi, head of Suzano’s pulp business, told investors that the industry “has been bleeding for months” and that as much as a quarter of Europe’s capacity is already unprofitable. He cited a sharp rise in Chinese wood-chip prices — up $25 to $40 per tonne in recent months — as another signal that input costs are tightening and that weaker producers will be forced to shut down.
Although Chinese demand has started to rebound, he noted that any recovery will be gradual, with further price increases of $20 per tonne still to be implemented. Suzano expects “more significant supply-side adjustments” to unfold in coming quarters as mills face pressure from rising wood costs, tighter recycled-fiber rules in China, and lack of profitability in Europe and North America.
Costs under control
Even amid that bleak pricing backdrop, Suzano reported further progress on efficiency. Cash cost fell 4% in the quarter to R$801 per tonne, and the company is already running below R$800/t in the fourth quarter — its lowest level in years.
Suzano explained that lower wood and energy costs, improved logistics, and chemical savings helped drive the reduction. The new wood-supply deal with Eldorado will trim consumption by 4% per tonne from 2026 onward, reinforcing the target to keep costs structurally low through 2027.
Deleveraging through discipline
CEO Beto Abreu kept a conservative tone throughout the call, saying Suzano will rely on cost control and productivity gains rather than waiting for a new price cycle. Leverage rose slightly to 3.3x EBITDA, as lower pulp prices weighed on results, but net debt remained stable.
The company still generated positive free cash flow despite roughly R$1 billion in one-off items — including the Eldorado deal and early bond redemptions. Suzano issued US$1 billion in 10-year bonds at the lowest spread in its history, extending average debt maturity to 80 months at a 5% cost. Its FX hedge portfolio could yield R$2.5 billion in cash gains through 2026.
Packaging and diversification
While pulp dominated the discussion, Suzano also marked a milestone in its diversification push: the first positive EBITDA for Suzano Packaging, at R$542 million, up 11% from the previous quarter. The Pine Bluff mill in the U.S. turned profitable for the first time, signaling a successful turnaround.
Executives said the packaging unit will continue improving margins and output in 2026, supported by stronger domestic demand and operational upgrades at the Mucuri mill. In the U.S., Suzano plans to expand in food-service paperboard, diversifying beyond liquid-packaging board.
Cautious on new ventures
Abreu reiterated that Suzano’s near-term focus is to “extract value from the investments already made” — namely the Aracruz tissue mill, the Kimberly-Clark joint venture, and the U.S. packaging operations. No new large projects are planned. The Lenzing stake will remain at 15%, as dissolving-pulp margins narrow amid Asian oversupply.
Suzano will provide a strategic update at its Investor Day on December 11, expected to detail cost trajectories, deleveraging targets, and integration plans for the KC partnership.