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Investing.com - Berenberg has initiated coverage on UPM-Kymmene OYJ (HEL:UPM) (OTC:UPMKY) with a Sell rating and a price target of EUR21.00, citing structural concerns in the market pulp sector.
The research firm attributes the current slump in market pulp pricing to a structural shift driven by decelerating Chinese demand, as new Chinese pulp and paper mills increase the country’s self-sufficiency in the sector.
Berenberg notes that new paper mills in China now have options to use woodchips from Vietnam or from China’s rapidly expanding eucalyptus plantations, which limits pulp import prices at approximately USD500 per tonne, aligning with Chinese domestic production costs.
The firm expects UPM to underperform consensus estimates in 2025 and 2026 before pulp prices recover in 2027, despite acknowledging UPM as a strong capital allocator with favorable exposure to niches such as adhesive labeling and plywood.
Berenberg also cautions that UPM’s exposure to graphic paper could face threats from aggressive Chinese capacity increases in the sector.
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