Suzano SA Q4 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Cadu Schmidt - UBS Investment Bank, Research Division - Analyst : I have a question to Leo. Leo, can you please comment on the overall level of pulp inventories at the end of the year? You said that inventories declined on a quarterly basis and according to our calculations, inventories are down to the lowest level since 2018. So I just wanted to check if you could see this may be leading to a weaker sales performance in the coming quarters, especially with the amount of maintenance downtimes happening at the moment? Leonardo Barretto De Araujo Grimaldi - Suzano S.A. - Executive Officer of Commercial Pulp, People & Management and Member of Management Board Thanks, Cadu. Thanks for the one and only question to me. So just to revise what I said in my speech, we have obviously seen and this is public information that European stocks were down at the end of the year according to Europe Pulp Association at 1.1 million tonnes. We think this is below optimum, especially in this challenging supply chain situation that we see in Europe with slower discharge and then also internal logistics situation in the market, while all producers are running at very high operating rates. So and just an additional information, which is -- I think we'll add further color to my answer. Our market sources just a couple -- just 1 day ago, anticipated that there will be -- there should be further inventory reductions in January. We are tracking -- or they are tracking and have been REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2022 / 1:00PM, SUZB3.SA - Q4 2021 Suzano SA Earnings Call reporting to us what's going on in Italian ports, which has a good presentation of what's going on in Europe. And the expectation is of a new 6% reduction of stocks by the end of January when the January numbers are public. So even more and even further reduction in January. When we look at China, we saw the 1.6 million tonne stock for the closing of the year, and the reports are now already official, and there is even a new reduction for January, a new 5% reduction. So stocks are coming down another 100,000 tonnes and will reach 1.5 or have reached 1.5 million tonnes. We are tracking what's going on in the ports and the level of activity on Chinese ports and it doesn't seem to be a lot of vessels coming in at this time, which is related to what I mentioned in terms of the (inaudible) numbers and the reduction of the exports from South America into China. So our forecast -- our expectations is that all this supply scenario will be so tight that the stocks will be low or lower coming forward and not recovering at least on the couple next months. And with all the additional paper and board and tissue capacity, which was added into China, our view is that a healthy level of stock to support all this production is much closer to 2 million tonnes, then to 1.5 million tonnes. So we think that this brings the market to a very tight S&D situation.