(Bloomberg) -- Suzano SA, the world’s largest pulp supplier, said the “most challenging scenario ever” in top importer China is showing some signs of stabilization after further eroding in the third quarter.
“We may be reaching an inflexion point,” Chief Executive Officer Joao Alberto Abreu said in an interview, citing fairly stable prices over the past few weeks and resilient demand levels.
A pulp glut in China — fueled by the startup of new producing plants including Suzano’s — has weighed on prices for the paper-making ingredient, eroding profit margins across the industry. That’s a major setback for the Sao Paulo-based company, which relies on China for about 40% of its sales. Earlier this month, Suzano said it would trim production as current prices failed to provide “adequate returns.”
Abreu said no further production cuts are expected for this year as prices stabilize.
The pulp producer reported third-quarter earnings before items such as interest and taxes that beat the average of analyst estimates compiled by Bloomberg. The company benefited from increased volumes and a weaker currency, which means the company gets more Brazilian reais in revenue for each dollar worth of exports.
Suzano controls about one third of global supplies of hardwood pulp.
--With assistance from Dayanne Sousa.
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