2025 proved a year of intense turbulence for the global pulp industry. As the core barometer of the global short-fiber pulp market, China's performance resembled a breathtaking rollercoaster ride. Early in the year, the market demonstrated unexpected resilience. However, it soon faced a series of macroeconomic policy shifts and supply-demand imbalances, sending prices plummeting. Only by year-end did a slow recovery begin amid lingering pain.

Looking back at 2025's market trajectory, the steep plunge in China's short-fiber pulp prices cast the industry's deepest shadow. Caught between a new wave of capacity expansion and fluctuating international trade policies, benchmark pulp prices declined steadily throughout the year, hitting a suffocating low of $495 per ton in July. Although prices began to rebound after August due to inventory drawdowns and localized supply tightening, barely recovering to around $540 per ton by late December, the year's volatility severely eroded producers' profit margins.

Analysts from authoritative institutions like BTG Pactual note that while the recovery trend may extend into 2026, the average annual forecast price for that year has been revised downward due to uncertainties in supply-demand balance. Projections have shifted from over $600 in the first half of 2025 to around $570 currently. This downward revision reflects deep market concerns that excess capacity pressures will persist long-term.

The core driver behind this severe situation lies in the massive influx of new global capacity, particularly from Brazil and China. Daniel Sasson, Chief Analyst at Itaú Bank, astutely observes that while the U.S. tariff policy announced in 2025 triggered significant turbulence in global trade flows and caused prices to plummet in April, the fundamental suppression of pulp prices stems from the imbalance in the underlying supply-demand dynamics.

Notably, the full-scale advancement of the Cerrado project by Brazil's Suzano has added a massive annual capacity of 2.55 million tons to the market. Even when an unexpected shutdown at Shandong Chenming Pulp Mill—a major Chinese paper producer—in early 2025 created a monthly supply gap of approximately 200,000 tons, briefly pushing pulp prices to a high of $600 per ton, this localized “black swan” event was swiftly offset by the Cerrado project's output.

Notably, structural changes in the Chinese market are emerging as a key variable reshaping global pulp market dynamics. Since China's real estate market entered a correction phase in 2021, timber originally destined for construction has faced massive oversupply. This backdrop has accelerated Chinese paper companies' upstream integration efforts, enabling them to build integrated pulp production lines using low-cost wood.

This “pulp-to-paper” strategy not only enhances Chinese firms' risk resilience but also grants Chinese buyers unprecedented bargaining power in pricing negotiations with international pulp giants. Although the pace of new integrated capacity additions in China is expected to slow by 2026 as timber costs rebound, this profound industrial restructuring is irreversible. Consequently, international pulp mills must reevaluate their pricing mechanisms when dealing with China, the world's largest buyer.

In the international trade landscape, the tariff hikes initiated by the United States in April 2025 undoubtedly poured cold water on the fragile recovery of the pulp market. Brazilian pulp faced punitive tariffs of up to 10%, causing a temporary disruption in trade flows between the U.S. and Brazil and stalling negotiations. Although multiple rounds of diplomatic and commercial talks led to the removal of these measures in September, limiting further damage to Brazil's export volume, the lingering psychological impact and market disruption continue to unsettle global traders.

Rudolf Schmock, Director at Fitch Ratings, remarked that the prolonged period of depressed prices has exceeded market expectations. This extreme low-price environment has not only eroded profits but also pushed many high-cost producers in the Northern Hemisphere to the brink, forcing them to resort to drastic measures like unplanned shutdowns or even permanent plant closures.

Data vividly illustrates the frustration of “increased production without increased income.” Take the southern region of Mato Grosso do Sul, Brazil, for example. As a global hub for pulp production, its pulp exports surged by 48.7% in 2025 compared to the same period last year, soaring from 4.63 million tons to 6.89 million tons. However, this quantitative leap failed to translate into qualitative gains. Affected by a 21.14% decline in the average international pulp price per ton, the province's pulp industry saw its dollar revenue increase by only 17%.

This price inversion has exacted a heavy toll on industry giants like Suzano and Eldorado, resulting in cumulative revenue losses exceeding $830 million. In multiple public warnings, Suzano has stated that slowing global consumption—particularly weak demand from the Chinese market—coupled with mounting supply pressures, is forcing companies to consider adjusting their global production footprint. They do not rule out deep optimization of high-cost units in Europe and elsewhere to preserve the competitiveness of low-cost core assets like those in Mato Grosso state.

Looking ahead to 2026, the pulp market's dynamics will enter a more brutal phase of “capacity reduction.” According to Fernanda Resende, Senior Director at Fitch Ratings, approximately 15 million tons of global short-fiber and long-fiber pulp capacity currently operates at a loss. The survival status of this capacity over the next year will directly determine the extent of supply contraction.

Although the market generally expects the wave of large-scale plant closures to slow in 2026, easing supply pressures remains a protracted process. On the demand side, the global market's recovery remains slow and uneven. While economic activity has picked up in China, Europe, and the United States, translating this into actual purchasing power capable of driving a significant rebound in pulp prices will take time.

Despite the crushing price pressures weighing heavily on existing enterprises, long-term capital deployment within the industry has not halted. The strategic importance of pulp as a foundational commodity continues to underpin substantial infrastructure investments. For instance, Arauco's plan to construct a 3.5 million metric ton per year mill in Inocencia remains in full swing, while Bunge also plans to install new equipment in Brazil by February 2026. These multi-year, large-scale investments signal that future supply potential remains substantial.

In summary, the growing pains of 2025 are an inevitable outcome of the global pulp industry navigating a period of explosive capacity expansion amid geopolitical turbulence. Entering 2026, China's market will continue to strengthen its bargaining power, while global pulp prices will seek a new equilibrium between cost support levels and supply-demand ceilings. For Chinese paper enterprises and related investors, closely monitoring developments in Brazil's new production zones, understanding how China's integrated capacity reshapes cost structures, and anticipating potential shifts in international tariff policies will be key to navigating future market uncertainties. The industry is undergoing a profound transition from scale competition to cost-driven competition and the battle for pricing power.

Data vividly illustrates this paradox of “increased production without increased revenue.” Take Mato Grosso do Sul, Brazil, as an example. As a global pulp production hub, the region saw its pulp exports surge by 48.7% year-on-year in 2025, jumping from 4.63 million tons to 6.89 million tons. Yet this quantitative leap failed to translate into qualitative gains. Affected by a 21.14% decline in the average international pulp price per ton, the province's pulp industry saw its dollar revenue increase by only 17%.

This price inversion has exacted a heavy toll on industry giants like Suzano and Eldorado, resulting in cumulative revenue losses exceeding $830 million. In multiple public warnings, Suzano has stated that slowing global consumption—particularly weak demand from the Chinese market—coupled with mounting supply pressures, is forcing companies to consider adjusting their global production footprint. They do not rule out deep optimization of high-cost units in Europe and elsewhere to preserve the competitiveness of low-cost core assets like those in Mato Grosso state.

Looking ahead to 2026, the pulp market's dynamics will enter a more brutal phase of “capacity reduction.” According to Fernanda Resende, Senior Director at Fitch Ratings, approximately 15 million tons of global short-fiber and long-fiber pulp capacity currently operates at a loss. The survival status of this capacity over the next year will directly determine the extent of supply contraction.

Although the market generally expects the wave of large-scale plant closures to slow in 2026, easing supply pressure remains a protracted process. On the demand side, the global market's recovery remains slow and uneven. While economic activity has picked up in China, Europe, and the United States, translating this into actual purchasing power capable of driving a significant rebound in pulp prices will take time.

Despite the crushing price pressures weighing heavily on existing companies, long-term capital deployment within the industry has not halted. The strategic importance of pulp as a fundamental commodity continues to underpin massive infrastructure investments. For instance, Arauco's plan to build a 3.5 million metric ton per year mill in Inocencia is still proceeding at full speed, while Bunge also plans to install new equipment in Brazil by February 2026. These multi-year, large-scale investments signal that future supply potential remains substantial.

In summary, the growing pains of 2025 are an inevitable outcome of the global pulp industry navigating a period of explosive capacity expansion amid geopolitical turbulence. Entering 2026, China's market will see its autonomous pricing power continue to strengthen, while global pulp prices will seek a new equilibrium point between cost support lines and supply-demand ceilings. For Chinese paper enterprises and related investors, closely monitoring developments in Brazil's new production areas, understanding how China's integrated capacity reshapes cost structures, and anticipating potential shifts in international tariff policies will be key to navigating future market uncertainties. The industry is undergoing a profound transition from scale competition to a contest of cost efficiency and pricing power.

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