Pulp & Paper The Good and the Bad

Equity Research 31 July 2026 | 7:08PM BRT

Pulp & Paper: The Good and the Bad; OKI 2Q26 Update

After a weak June order book, July buying intentions have increased as sellers cut Marcio Farid | hardwood prices to $560/t and as buyers had to replenish some inventories. But with Goldman Sachs do Brasil CTVM S.A. deals being concluded only in late July and with excess availability from June books Henrique Marques still to be sold, incremental volumes are being sold at $550/t, based on our channel | checks. RISI also commented about a Latam hardwood producer who have offered Goldman Sachs do Brasil CTVM S.A.

fixed prices at $550/t for the next 3 months. That strategy has been seen in past Emerson Vieira | cycles and it rarely works, as its usually includes a downside clause in which sellers Goldman Sachs do Brasil CTVM S.A. revisit pricing if benchmark prices decline during that period. So buyers sees it as a free option but also as weak market signal. The ramp up of new Chinese integrated pulp mills and weak paper pricing continues to limit buying appetite.

On the softwood side, market has been driven by the arbitrage between imported pulp and SHFE futures but with downward pressure as weak demand and excess port inventories continue to weigh on pricing.

The positives: The key bull sign to watch is related to rising domestic wood chips. We do not think it is a structural trend but is instead a seasonal pattern related to temporary supply disruptions (heavy rain in Southern China). Hardwood chips in China are up by $6/t from the recent lows, according to TTO BMA (in 2025 a chips rally from Jun to October was supportive to hardwood prices, but the starting point was a lot lower at below $500/t).

OKI mill update: APP Oki mill reported 2Q26 financial figures with assets under construction at around $3.5B, which we estimate implies pulp mill expansion capex (2.8mtpa hardwood pulp mill) is close to being fully executed (capex disbursement remain elevated at >$1B for 1H26 (vs. $1.1B in 2025). On the cost side, the mill remains competitive with EBITDA break even below Brazil average.

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Exhibit 1: APP’s OKI investing and operating cash flow Exhibit 2: APP’s Assets under Construction ($mn) ($mn)

Investing cash flow Operating cash flow $mn Assets under construction

Source: Company data In 6M26 the company reported $3.5B of Assets under Construction on its balance sheet (+$0.2B vs YE25).

Exhibit 3: APP’s OKI EBITDA breakeven vs. Brazil avg. Exhibit 4: China hardwood re-sale prices and woodchip EBITDA breakeven ($/t) prices ($/t)

Nov-23 Jan-24 Mar-24 May-24 Jul-24 Sep-24 Nov-24 Jan-25 Mar-25 May-25 Jul-25 Sep-25 Nov-25 Jan-26 Mar-26 May-26 Jul-

APP's OKI EBITDA breakeven Brazil avg. EBITDA breakeven China hardwood re-sale $/t China hardwood chips ($/t) - RHS

Source: Company data, Goldman Sachs Global Investment Research Source: RISI, TTOBMA

China FOEX hardwood imported pulp prices declined by $2/t to $567/t, while domestic resale prices were down by RMB 0-80/t to $541-551/t. On the softwood side, imported FOEX prices declined by $5/t to $641/t, while domestic resale prices were down by RMB 13-22/t, to the equivalent of $591-633/t.