The commodity sector once again occupied the center of attention among investors, with renewed interest – albeit cautious – by big names in the Brazilian scholarship.
Amid uncertainty about the direction of the global economy, the XP Investments and Itaú BBA observed a growing focus on Suzano (Suzb3), Klabin (KLBN11), OK (Vale3) and Gerdau (GGBR4), though with different readings on each.
The backdrop includes concerns about Chinese demand, currency fluctuations and the effects of possible new commercial barriers, such as the reciprocal tariffs proposed by US President Donald Trump, who, although paused for 90 days from Wednesday (9), have added concerns to investors and, consequently, volatility to global markets.
In a report, BBA analysts point out that the paper and pulp segment offers better conditions compared to mining and steel. Suzano and Klabin were the bank’s preferences, based on factors such as the competitiveness of Brazilian exports, exchange depreciation and the possibility of recovery of Asian demand. The view is that these companies combine efficient cost structure and greater operational predictability.
In the case of Suzano, the BBA notes that current prices of shares do not yet follow the new phase of the company, after the operation of the Ribas Pardo Plan in Mato Grosso do Sul. According to the report, the papers negotiate conservative premises for both the dollar and the international cellulose price, which makes room for reevaluation.
XP, in turn, reveals that Suzano appears as the most consensual name in the meetings promoted by the broker. Cash generation follows as a central attraction, with a free cash flow (FCF Yield) estimated 11% and 15% for the next two years. Even so, XP states that investors’ conversations, as POINTED BBA, reflected doubts about the sustainability of cellulose prices and the effects of currency volatility.
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Broker’s strategists say investors are aware of the resumption of productive capacity in China and the normalization of global supply, which could press commodity prices. Still, the 16% drop in Suzano’s shares throughout the year can make room for appreciation if the dollar remains over R $ 5.90 and the market continues to face supply restrictions.
Klabin, in turn, follows a more flexible business model, both in terms of products and markets served, according to Itaú BBA. The bank sees the company with multiples below the fair level and sees consistent advances in reducing debt as a favorable point for the next quarters.
The metal sector is treated with more caution. Although it is worth and Aura (Aura33) are among the favorite names, the BBA report warns of the strong correlation of these companies with China’s economic activity and the behavior of global, steel and aluminum prices. Aura gains space in the recommended BBA wallet by its focus on gold, considered more stable in periods of uncertainty.
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Vale, on the other hand, stands out for negotiating its actions to multiple attractive and good cash generation potential, according to experts. With the average price of $ 100 iron ore per ton this year, the bank estimates a 13% FCF Yield and a 12% Dividend Yield, excluding Mariana and Brumadinho -related payments. Even in a drop -down scenario to $ 90, it is estimated that the company still maintain a competitive return, with FCF Yield around 8%, comparable to its peers in the sector.
Gerdau, according to XP Investimentos, was the one that lost the most support in recent conversations. The broker notes that investors assessment worsened, driven by signs of weakness in domestic consumption and uncertainties about the American economy.
The possibility of a US recession weighs negatively on expectations for the company’s performance, especially for its exposure to the non -residential construction sector in that country. This change of perception, says XP, marks an inflection in relation to previous meetings, with part of investors reconsider their exposure to role and pondering the possibility of new reviews down in result estimates.
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BBA, on the other hand, says that Gerdau stands out among the steelmakers due to its wider presence outside Brazil and maintaining a more balanced capital structure, which may favor its margins in the short term.
Regarding other companies in the sector, Itaú BBA adopts a more conservative stance. THE Brazilian Aluminum Company (CBAV3) faces cost pressures in aluminum production and may be impaired by Chinese economic slowdown that would affect metal prices.
Already the CSN Mining (Cmin3) is more exposed to iron ore volatility, with more sensitive operational structure changes in commodity price and lower cash generation due to the pace of investments. Itaú BBA stresses that, in a moment of caution in international trade, names with less exposure to external fluctuations and more efficient operation tend to attract greater interest from investors.
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Possible scenarios
In Itaú BBA’s most optimistic view, tax stimuli in China can benefit the local infrastructure sector, which tends to raise domestic steel consumption and, consequently, reduce Chinese exports. This would help alleviate part of the pressure in the Brazilian market, which has suffered from the competition of Asian products, according to analysts.
In the United States, federal investment packages such as IIJA, Ira and Chips, added to measures to encourage national industry, contribute to boosting the demand for steel in infrastructure and non -residential construction works. This movement directly favors Gerdau’s operations whose American unit is responsible for almost half of its profit before interest, taxes, depreciation and amortization (EBITDA).
On the other hand, the bank also draws a more cautious scenario, considering the possibility of intensifying Chinese exports to Brazil if China’s economy loses breath and other countries expand commercial barriers. This increase in international supply, according to analysts, can aggravate excess steel in the local market, forcing Brazilian producers to operate with tighter margins.
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The bank also points out that a growth below expected in Brazil can compromise families’ income and reduce the consumption of durable goods, pressing steel consumer sectors such as cars and appliances. In this context, companies more dependent on the Brazilian economy, such as CSN and Usiminas (USIM5), tend to face greater difficulties.