Brazil’s Election Result Hits Its Pulp Exporters Where It Hurts

Pulp producers were among the few Brazilian companies to lose ground after Sunday’s presidential election, with the country’s main share index jumping 7.7 per cent to a record close. That is according to Bruno Perri, chief economist at Forum Investimentos, who said on Monday that Suzano, the world’s largest pulp producer, fell because much of its revenue is earned in US dollars.

Nearly 159 million Brazilians were eligible to vote in Sunday’s general election, which also included races for Congress and state governors. Senator Flávio Bolsonaro, the eldest son of former president Jair Bolsonaro, topped the presidential vote with 47.03 per cent, ahead of President Luiz Inácio Lula da Silva on 45.16 per cent.

With no candidate winning more than half the valid vote, the two will meet in a runoff on the last Sunday of the month. Brazil’s currency, the real, strengthened sharply on Monday, with the US dollar falling 4.1 per cent to five reais in its biggest one-day fall since 2018.

Marcelo Bassani, economist and founder of Boa Brasil Capital, said investors were putting money into Brazil because they expect a change of president could bring tighter public finances. By contrast, Suzano’s shares closed 5.4 per cent lower, the steepest fall among the index’s seven stocks to drop.

Exports made up 78 per cent of Suzano’s revenue in late 2024, while most of its costs were in reais, according to Larissa Quaresma, an analyst at Empiricus Research. Pulp and paper group Klabin also closed lower, down 0.9 per cent, as did planemaker Embraer, which lost 3.3 per cent.

Eucalyptus, a hardwood grown in plantations across Brazil, is the raw material for the 13.44 million tonnes of market pulp Suzano says its mills can make each year. The company’s newest line, at Ribas do Rio Pardo in Mato Grosso do Sul state, can produce 2.55 million tonnes a year and started up two years ago.

“This performance reflects the strength of the sector’s investments,” Paulo Hartung, president of Ibá, the Brazilian Tree Industry Association, said of last year’s record pulp exports of 20.7 million tonnes. Those exports were worth US$10.2 billion, with China the largest buyer at US$ 4.9 billion.

Europe was the second-largest market at $2.5 billion, although its purchases fell 13 per cent on the year before. As it stands, pulp shipped into the European Union from the end of the year will need a due diligence statement under the EU Deforestation Regulation (EUDR).

National authorities must check at least 3 per cent of companies sourcing from Brazil, which the EU rates as standard risk under the regulation. The European Commission has said it plans to review that rating, along with every other country’s, this year using new United Nations forest data.

Source: Wood Central

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