Pulp & Paper: Pulp prices hit a bump in the road
We update our views on the Iberian pulp players: we keep both on Neutrals with Altri’s FV down from Eur8.2 to Eur7.6 & Ence’s FV down from Eur7.9 to Eur7 as we cut our pulp prices. During 4Q18 the sector suffered as demand in China slowed and local prices dropped by more than 17% from the peak. This weakness in local prices led to Brazilian producers sending more production to Europe, which contributed to a correction in price that is still ongoing. The momentum is now quite uncertain - will demand recover post the Chinese new year or will the slower demand continue and will prices see further pressure? We believe prices in China will not have much downside from current levels as there is no additional supply coming in the next 2 years and with the merger of Fibria and Suzano this company controls c. 30% of the BHKP pulp market and it could reduce production if needed to to support prices. However, we highlight that to see prices recovering, demand needs to start growing again as inventory levels throughout the distribution chain seem to be at high levels.Altri SGPS is a holding company based in Portugal. Co. is engaged in management of investments mainly in the industrial sector. Through its subsidiary companies, Co. is engaged in the production of pulp and paper through the Celbi, Celtejo and Caima Groups. Pulp is the core business of Co. and the focus is on bleached eucalyptus pulp. Co.'s three pulp mills, Celbi, Caima and Celtejo, produce over 550,000 tonnes per year. The paper mill, CPK, produces 60,000 tonnes of sack kraft paper per year. Co. manages over 78,000 ha of forest in Portugal certified by the Forest Stweardship Council.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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