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CONFIDENTIAL
FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY
BRAZIL – WORLD-LEADING
PRODUCER AND EXPORTER
OF PULP AND PAPER
AN OVERVIEW OF THE BRAZILIAN PULP AND PAPER INDUSTRY
São Paulo, Brazil
February 2016
BUSINESS SWEDEN 27 JUNE, 2016 2
BRAZILIAN INDUSTRY IS THE WORLD’S 4TH
LARGEST IN
PULP PRODUCTION, AND 9TH
IN PAPER PRODUCTION
SOURCE: IBGE, IBÁ
1,1% of Brazil’s GDP
BRL 61bn in 2014
Exports grew 12,6% in 2014
Pulp and paper industrial GDP is growing above
Brazil’s GDP
Brazil has a forest productivity higher than Sweden,
US and China
High forest
productivity
Developed
industry
World-leading
producer and
exporter
BRAZILIAN EUCALYPTUS HAS A SHORT ROTATION PERIOD OF 7 YEARS
BUSINESS SWEDEN 27 JUNE, 2016 3
BRAZIL IS A LEADING PRODUCER OF PULP AND PAPER
WITH A HIGH FOREST PRODUCTIVITY
SOURCE: IBÁ
Rank Country Production (MT*)
1 United States 57,42
2 China 18,88
3 Canada 17,29
4 Brazil 16,46
5 Sweden 11,50
Rank Country Production (MT*)
1 China 106,61
2 United States 72,88
3 Japan 25,12
4 Germany 22,10
5 Sweden 11,49
9 Brazil 10,40
TO SUPPLY A PULP PLANT OF 1,5 MT/YEAR CAPACITY, SWEDEN WOULD NEED A 720 000 HA FOREST WHILE BRAZIL WOULD NEED 140 000 HA
70
35
30
30
41
25
25
22
20
18,8
18
15
6
5,5
0 10 20 30 40 50 60 70
Brazil
Uruguay
Indonesia
Australia
Chile
New Zealand
South Africa
US
Finland
Sweden
Currently
Potential
(m³/ha.year)
FOREST PRODUCTIVITY WORLDWIDE (HARDWOOD) PULP PRODUCTION RANK
PAPER PRODUCTION RANK
* MILLION TONS
BUSINESS SWEDEN 27 JUNE, 2016 4
BRAZILIAN MANUFACTURERS ARE LEADERS WITHIN
THE GLOBAL PULP INDUSTRY
SOURCE: PÖYRY 2014, VALOR, COMPANIES’ WEBSITES
COMPANY PULP PRODUCTION CAPACITY (Million Tons/Year)
0 2 4 6 8
Fibria
RGE/ APRIL
Eldorado
Suzano
Arauco
CMPC
Stora Enso
APP/ Sinar Mas
UPM
Cenibra
ENCE
Klabin
International Paper
Altri
Marubeni
Mitsubishi Braziliancompanies
Other
FIBRIA, SUZANO AND KLABIN ARE THE LARGEST PULP AND PAPER COMPANIES IN BRAZIL CONTROLLING 65% OF THE MARKET
FIBRIA
Net Revenue: 7 084
Forest Base: 969 thousand hectares
Headquarter: São Paulo
Focus: Eucalyptus Pulp
SUZANO
Net Revenue: 7 265 MBRL
Forest Base: 897 thousand hectares
Headquarter: Bahia
Focus: Eucalyptus Pulp
KLABIN
Net Revenue: 4 894 MBRL
Forest Base: 450 thousand hectares
Headquarter: São Paulo
Focus: Paper and Cardboard
LARGEST BRAZILIAN PLAYERS IN REVENUE
17 MILLION TONS OF PULP WERE PRODUCED IN 2014, OF WHICH 86% IS HARDWOOD
BUSINESS SWEDEN 27 JUNE, 2016 5
BRAZILIAN PULP PRODUCTION GREW 37% FROM 2007-14
SOURCE: IBÁ
0
1500
3000
4500
6000
7500
9000
10500
12000
13500
15000
16500
2007 2008 2009 2010 2011 2012 2013 2014
Pulp Paper
EXPORTS ARE STIMULATING THE PRODUCTION OF PULP, WHILE PAPER SUPPLIES MOSTLY THE DOMESTIC MARKET
PULP AND PAPER PRODUCTION (THOUSAND TONS)
86%
11% 3%
Hardwood
Softwood
High yield pulp*
52%
25%
11%
7%
1% 4%
Packaging and Wrapping
Printing and Writing
Tissue
Cardboard
Newsprint
Others
PULP PRODUCTION BY TYPE, 2014
PAPER PRODUCTION BY TYPE, 2014
* VERY HIGH YIELD (>95%). USED IN PRINTING PAPER
THIS ACCOUNTS FOR 10 MILLION TONS OF PULP
BUSINESS SWEDEN 27 JUNE, 2016 6
BRAZIL EXPORTS 64% OF ALL PULP PRODUCTION
SOURCE: IBÁ
BRAZILIAN CURRENCY DEVALUATION WILL CONTINUE TO BOOST PULP EXPORTS IN 2016
0
2000
4000
6000
8000
10000
12000
2007 2008 2009 2010 2011 2012 2013 2014
Exports
Imports
Balance
0
500
1000
1500
2000
2500
2007 2008 2009 2010 2011 2012 2013 2014
Exports
Imports*
Balance
31%
22% 19%
5%
23%
Europe
China
United States
Argentina
Others
Pulp
Pulp
Pulp, paper, wood panels
Paper
Pulp, paper, wood panels
EXPORTS DESTINATION AND MAIN PRODUCT,
2014
PULP BALANCE OF TRADE (THOUSAND TONS)
PAPER BALANCE OF TRADE (THOUSAND TONS)
* PAPER IMPORTS INCLUDE MAINLY: COATED PAPER OR PAPERBOARD
(PRINTED, COLORED, DECORATED), NEWSPRINT AND PRINTING PAPERS.
PINUS REPRESENTS 22%
BUSINESS SWEDEN 27 JUNE, 2016 7
EUCALYPTUS REPRESENTS 72% OF PLANTED AREA
SOURCE: ABRACELPA, IBÁ
FORESTRY INDUSTRY IS LOCATED IN SOUTHERN STATES SUCH AS SÃO PAULO, PARANÁ AND SANTA CATARINA
Pará
Santa Catarina
Tocantins
Bahia
Rio Grande
do Sul
Paraná
Mato Grosso
do Sul São
Paulo
Espírito
Santo
Rio de
Janeiro
Minas
Gerais
Mato Grosso
Rondônia
Acre
Amazonas
Roraima Amapá
Maranhão
Piauí
Sergipe
Ceará
Alagoas
Pernambuco
Goiás
Paraíba
Rio Grande
do Norte
Brasília
Pinus planted area
Eucalyptus planted area
Forestry industrial area
LEGEND
State Eucalyptus Pinus Others Total
Minas Gerais 1 400 232 39 674 5 313 1 445 219
São Paulo 976 186 123 996 90 147 1 190 329
Paraná 224 089 673 769 16 255 914 113
Mato Grosso 803 699 7 135 23 000 833 834
Bahia 630 808 6 499 34 000 671 307
Santa Catarina 112 944 541 162 6 645 660 751
Rio Grande do Sul 309 125 184 585 103 592 597 302
Others 1 101 570 12 177 309 569 1 423 316
Total 5 558 653 1 588 997 588 521 7 736 171
PLANTED AREA (ha) AND DESTINATION SEGMENT
34%
27%
15%
10%
7%
4% 3% Pulp and paper
Wood in natura (small producers)
Steel industry and charcoal
Timber Investment Management Organizations(TIMO's)*Wood panels and laminate floor
Furniture and other sawn products
Other
* MANAGEMENT GROUP THAT AIDS INSTITUTIONAL
INVESTORS IN MANAGING THEIR TIMBERLAND INVESTMENTS
MAIN CHALLENGES FOR THE PULP AND PAPER INDUSTRY
BUSINESS SWEDEN 27 JUNE, 2016 8
YET, BRAZILIAN PULP AND PAPER INDUSTRY FACES
CHALLENGES REGARDING COST-EFFICIENCY
SOURCE: IBÁ
Key take-
away 2
Key take-
away 3
Key take-
away 1
* LAND ACQUISITION IS RESTRICTED ACCORDING TO LAW 6.634/79
EXPENSIVE ENERGY, POOR INFRASTRUCTURE AND CONFUSING REGULATION ARE PROBLEMS SHARED BY MOST INDUSTRIES IN BRAZIL
Resources
Infrastructure
Costs
Key take-
away 3 Regulation
Both foreign companies and Brazilian companies with a majority share of foreign capital are limited on
the land area they may acquire*
Companies need special approval from INCRA, a public entity responsible for acquisition of land
Brazilian forestry sector experienced a higher increase of costs (7,9%) compared to rest of Brazilian
economy (6,4%) in 2014. Reasons involve energy and infrastructure high costs, besides a gap between
labor productivity and salary increase
Increase of energy cost and lack of water. Companies want to invest in efficient technology and reuse
67% of the energy used by industrial plants is produced within the sector. Main source is black liquor (70%)
Brazil presents low investments on infrastructure when compared to average global spending on
infrastructure, which generates increase in the production cost
BUSINESS SWEDEN 27 JUNE, 2016 9
IN 2014 INVESTMENTS HAVE FOCUSED ON EFFICIENCY
AND CAPACITY EXPANSION
SOURCE: IBÁ, DESK RESEARCH AND INTERVIEWS
3,64
0,21 0,12 0,12 0,04
Planting
Machines &equipment
Land aquisition
Roadways
R&D
3,77
0,42 0,04
Expansion ofproduction capacity
Machines &equipment
R&D
THERE ARE OPPORTUNITIES FOR SWEDISH COMPANIES SUPPLYING COST-EFFICIENT TECHNOLOGY FOR THE PULP & PAPER INDUSTRY
FOREST INVESTMENTS,
2014 (BBRL)
4,11
4,27
Forestproduction
Industry
Investments 2012-2020
Double the forestry base
Increase the size of
industrial facilities
Construction of new plants
= 23 Billion USD
BUSINESS SWEDEN 27 JUNE, 2016 10
THE PULP AND PAPER INDUSTRY OFFERS GREAT
OPPORTUNITIES FOR SWEDISH COMPANIES IN BRAZIL
Which
opportunities
make Brazil
interesting?
What
challenges
should companies
be ready to face?
Difficult and excessively bureaucratic regulations
Complex tax system
High import tariffs, besides other taxes
Economic slowdown may
affect investments
Poor infrastructure for roads,
energy, ports and airports,
and high energy cost
Increase of costs (inflation)
High investments focused on capacity expansion
Investments grew 8% in 2013, against other sectors
Investments in energy efficiency and reuse
Large production of pulp and paper, and large market
Advantages: climate and land availability
Recent growth of exports, mainly of pulp
Devaluated currency is stimulating exports
Investments
Players
Market
Demand
Business in Brazil
Market
Recent economic slowdown
Lower commodities price on international market
LARGE AND GROWING PULP AND PAPER COMPANIES IN BRAZIL HAVE AN INCREASING DEMAND FOR TECHNOLOGY
Large producers,
capable of investing
Brazilian players among
the most productive in
the world
OVERVIEW OF BUSINESS SWEDEN SERVICES
* BSO SERVICES INCLUDE: OFFICE PLACE & SERVICE, ADMINISTRATION, COMPANY ESTABLISHMENT (INCL
LEGAL ADRESS) , DELEGATE MANAGER AND FINANCIAL ANALYSIS
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