Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the first quarter of 2022. We would like to inform that all participants will be in a listen-only mode during the presentation that will be addressed by the CEO, Mr. Walter Schalka, and the other executive officers. After the company's remarks are completed, there will be a question and answer section when further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.
You should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the floor over to the company's CEO. Please, Mr. Walter Schalka, you may proceed.
Good morning, good afternoon, and good evening to everyone. It's a great pleasure to have you all joining us for the first quarter section of discussions of our results. It's a great pleasure to be with you. I think the main highlight that we have on the first quarter is related with the strong cash generation that we have despite the cost pressures that we have from lower volumes regarding the annual shutdown on several of our facilities in the first quarter of this year. We in the pulp business had lower volumes since our inventory is quite low. We are not able to increase our sales. We have to sell just the amount that we have producing. That was around 2.4 million tons.
In the paper business, we had a very good quarter in terms of production and sales, comparing with the previous quarters. In this scenario, we had BRL 5.1 billion on adjusted EBITDA. Even considering the cost pressures in the cash cost that was over BRL 860 on cash cost, we are able to generate cash on a scenario that we invest almost BRL 1.2 billion on our Cerrado project. With dividends of BRL 1 billion, we kept our net debt almost at the same level than the previous quarter. It's very important as well to mention our developments on the ESG, on the governance.
Now we have more than 50% of our board with independent members and with 3 women out of 9 members that representing more than 30% on gender diversity. Now I'm going to pass to Fabio that is going to tell us a little bit more about our paper and packaging business.
Thanks, Walter, and good morning, everyone. Let's move to page 4. We have had the best Q1 results of our paper and packaging business unit. Strong volumes and prices have led to record Q1 EBITDA and the highest EBITDA per ton for a given quarter. Demand for paper-grade products continued to be strong, both in the domestic and international markets served by Suzano. The return to in-person activities and the rebound in commercial printing have been positive drivers for paper demand in most markets. Additionally, production disruptions in major mills, coupled with logistics bottlenecks and geopolitical tensions, contributed to the tightening of supply. Raw materials, logistics, and notably energy inflation continued to pressure production costs globally, elevating cash costs and pushing for higher price energy surcharges.
According to IBGE, printing and writing demand in Brazil has grown 1% in the first two months of 2022 when compared to the same period of 2021, mainly due to an impact of 27% reduction of imported papers. Sales by domestic players have grown a solid 4.6%. Paperboard demand has shrunk 9% in the first two months of 2022 on a year-over-year basis, given the strong comparison period in 2021. Our Q1 sales volumes were 6% higher than Q1 of 2021. Domestic sales represented 67% of our total sales in the quarter, totaling 187,000 tons, a 6% increase compared to the same quarter of last year.
Our average net price during the quarter was 10% higher than our average price in Q4 and 28% higher than Q1 last year. As a result of strong volume and prices, revenue management and operational stability, our EBITDA has reached BRL 525 million in the first quarter, a 41% increase compared to the first quarter of 2021. Our EBITDA per ton has reached an all-time high. Looking ahead, our major short-term challenge resides in minimizing the pressure of inflation. While overcoming the continuous logistics disruptions of maritime shipments and ports, and bypassing eventual disruptions caused by geopolitical tensions. Our e-commerce platform accounted for 24% of our total revenues, and 54% when considering medium and small-sized customers in last quarter. We're also on track to deliver our sales from our innovation pipeline, as we have shared during our Suzano Day presentation.
Strong demand for our products has led to a reduction of our paper inventories, which are currently running below optimal levels. Now I will turn over to Leo, who will be presenting our pulp business results.
Thank you, Fabio. Good morning, everyone. Let's please move to page five of our presentation so that we can address the results of our pulp business unit for the first quarter of 2022. As you will note on the left graph, our sales performance totaled 2.4 million tons in the first Q-2022. During this quarter, we had a concentration of several planned maintenance downtimes in our pulp mills, as well as some one-off events during the resuming of production on a few of our pulp lines after their planned downtimes. Production rhythm is now fully recovered, and our annual production will be delivered as planned. Since our inventories were and still are below optimum levels, we did not have room to compensate the lower production availability, which posed therefore additional pressure to our global supply chains to serve our customers.
As I have mentioned during our Suzano Day presentation, we have withdrawn from all spot markets and are focusing our maximum efforts to fulfill our customers' needs. This first quarter was marked by increasing tightening of the supply-demand balance, mainly as a consequence of supply disruptions all over the world due to factors such as planned and unplanned downtimes, sanctions on Russian hardwood, European pulp production, as well as the persistent logistics constraints, which consequently resulted in low pulp stocks throughout the chain. Pulp inventories in European ports closed the quarter 2% below the fourth Q-2021, and 26% below historic monthly averages since 2018. In China, March pulp inventories posted a 17% reduction when compared to February, and were equivalent to the low levels of December 2021.
This scenario placed challenges to pulp, paper, and paperboard producers globally as they were running with low inventories while their production figures and order books were quite strong during the quarter. The tightening of the S&D balance has favored therefore price increases in all markets. Our average price for export markets for the quarter has increased to $639 per ton. Since we had a concentration of sales volumes in the end of the quarter, when FX appreciated significantly, the translation of our effective price in U.S. dollar terms using the average FX for the first quarter does not represent precisely our invoice prices to customers, which was approximately $655 per ton in the first quarter 2021.
This base price still does not reflect the full implementation of our price increases, due mainly to invoicing carryover from past quarters' orders. I can confirm that our order intake and sales during the quarter were done completely in line with our announced price increases. Our EBITDA of BRL 4.6 billion, being 2% over the first Q1 2021, was mainly a result of higher prices despite lower invoice volumes, FX appreciation, and cost pressure. Now, looking forward, I would like to highlight the following points. We have been often calling your attention to unexpected downtimes in the overall pulp market and how it has been increasing during the past years, impacting to a larger extent market dynamics. According to our estimates, just between January and April 2022, over 1.5 million tons of production has been out of the market unexpectedly.
You all remember that the historical number was close to 700,000 tons a year. We are already adding up 1.5 million tons. This figure still does not include recent news about production limitations from a relevant Russian producer for April and May, as reported last week by RISI. When we add up this effect to the planned downtimes, to project delays, and to the challenging logistics globally, we foresee the continuity of a significant restriction in supply of market pulp for the next months. We are also watchful for the magnitude of the effect of the restriction on Russian wood for European pulp producers and the additional risks that this can pose for the reduction of BHKP supply.
Demand has been strong in Europe and North America, and segments like packaging and specialty papers are reporting order books that exceed 90 days. In China, there's lower visibility during the past weeks due to measures to contain COVID. In the tissue business, we didn't identify up to now evidence that show a retraction in downstream demand, but it is important to point out that the paper industry has a low operating rate, and that a possible regional restriction to production due to lockdowns can be compensated by producers located in other regions. This similar trend was observed during the end of 2021, when energy restriction measures were adopted in some regions in China. In packaging, our customers in the ivory board segment, for which as per my Suzano Day presentation, the BHKP represents 35% in their fiber furnish.
They report solid production levels benefited by the recovery of their exports since the beginning of the year, while a greater uncertainty is being posed on the printing and writing segment. We expect that hardwood inventories should remain low, and our sources on the ground in China indicate that the flow of imports of BHKP to China should persist at below historic levels during the next months. In our view, the current main concern of paper producers globally is the guarantee of their raw material supply chains, which we can translate by the fact that our customers in all regions are increasing their order books with us, operating at the highest possible limits of their contracts and agreements.
More specifically in China, the risk of lockdowns being short-lived and coupled with an expected governmental stimulus program, has been incentivizing customers to strongly push for volumes, translating into a healthy order intake. With that said, I would now like to invite Aires to present our cash cost performance for the quarter.
Thank you, Leo. Good morning, everyone. We are in slide number six. Cash costs, excluding downtime in the first quarter 2022, came to BRL 868 per ton. 16% higher than in the fourth quarter 2021, and above our expectation on the last quarter earnings call in the beginning of February, when the Russia and Ukraine war was not foreseen. The main drivers of cash cost pressure were pretty much similar when compared to previous quarters, being commodities in the first quarter stressed by the war. As you can see, high input costs took a main toll, mainly due to higher price of chemicals, especially caustic soda, followed by chlorine dioxide and energy price, especially natural gas and fuel. The increase in the fixed costs was linked to higher schedule downtime season, which in turn also impacted their energy export sales.
Wood costs remained flatish since the negative impact of the higher diesel cost was offset by lower average forest radii and a lower share of third-party wood in the period. Despite the appreciation of the average Brazilian real against U.S. dollars during the quarter, there was no impact from the exchange rate variation on the cash cost due to the effect of inventory turnover of inputs, which results in a delay of about one month between acquisition and consumption. Looking on to year-over-year performance, cash production costs excluding downtime in the first quarter 2022 was 39% higher than in the first quarter 2021, due to the same most relevant inflationary pressures just mentioned when comparing quarter-over-quarter figures. Higher wood costs reflect the increase in diesel price on the harvest and in transportation, with no offset by forest operations.
The increase in fixed costs and lower energy sales were due to the absence of downtimes in the first quarter 2021. Looking forward to the remaining quarters of 2022, although endogenous factors would guide us to a lower cash protection cost, the commodity scenario still represents a challenge. I would say that our latest forecast shows cash costs flattish going forward. As presented recently at the Suzano Day at the end of March, moving to the next slide. The Cerrado project is progressing precisely as scheduled. Closing the first quarter of 2022 with the inside the fence execution, which corresponds to industrial and infrastructure investments, reaching physical progress of 10%, which is in line with the respective financial disbursements.
The overall progress is also evolving as expected, with no new or major risk identified to deliver the project as promised in the second half 2024. Now I pass the floor to Marcelo Bacci to continue the presentation.
Thank you, Aires. Now moving to page eight, our net debt and our leverage ratio in dollars remains stable during the quarter, despite the acceleration of the Cerrado project disbursements and the business payment made earlier. We have now a sizable liquidity position of $5.3 billion and a very light amortization schedule for the next three years, with an average cost of debt at 4.4% a year and 87 months of average tenor. 90% of our debt is at fixed rate. Important to emphasize that. Moving to page nine, it was a quarter of significant FX volatility and a relevant appreciation of the BRL at the end of the quarter.
We continued to run our hedging portfolio according to our policy, and at the end of Q1, the mark-to-market of our portfolio turned positive, and we started to receive positive cash adjustment on the cash flow hedge portfolio. We have now a cash flow hedge portfolio of $3.7 billion that gives us a significant downside protection at 552 on average and has an elevated call strike. For the Cerrado project hedging portfolio of $600 million, we have even higher average put and call levels because it's longer term, as you can see on the graph. Moving to page 10. We made during Q1, BRL 2.6 billion of CapEx. BRL 1.2 billion was related to the Cerrado project.
That was a bit below what we expected, but we keep the guidance for the year at BRL 13.6 billion, the same number that we discussed before. We are not including yet the disbursement of the Parkia acquisition that we'll talk about in the next slide. On slide 11, we have just announced the agreement to buy the Parkia Participações for a total of $667 million in two installments. The deal depends on the approval of the general shareholders meeting and also CADE. The general shareholders meeting will be called in the coming days. As we don't control the timing, we cannot predict at this point when this disbursement will be made, but we expect it to be in the coming months.
That acquisition will allow us to reduce our annual CapEx by $51 million per year in the next 16 years, and that would be even increased by PPI over time. The acquisition has a very positive effect in terms of net present value, reflecting our lower cost of capital. This will also enhance our land base by 260,000 hectares in the main states where we operate. Finally, moving to page 12, our favorable cycle is enabling Suzano to pay additional dividends of BRL 800 million that was approved in the general shareholder meeting, also to allocate approximately BRL 1 billion in a share buyback program that we just announced. Those initiatives will be implemented in strict respect to our financial policy, maintaining our robust financial discipline.
With that, I turn back to Walter for conclusion.
Thank you very much. I think the takeaways that we have on this quarter is that we have been with a very good and solid strong cash generation. Capital allocation, it's critical for us. We are capital intensive company. We have been investing in Cerrado project. Now we have a very clear program, a dividend policy. We have now this capital allocation on a buyback program that we have right now and many other areas that we are investing. The company is preparing ourselves for the future in many different areas. It's very important now after two years that the cash flow hedge policy, it's very consistent with the choice. We are not here for the speculation on currency.
We are here to prepare our cash flow for our needs in the near future. In terms of the price environment that we have, we are going to see prices going up in the next month since we have not yet reflected all of them in the results. Very pleased that our Cerrado project is on time, on budget, and very pleased that our ESG agenda continued on the right track, on the right speed for the future. With that, I would like to invite all of you to our second ESG call on June twenty-third here in São Paulo. Thank you very much. Now, let's go for the Q&A session.
Thank you. The floor is now open for questions. If you have a question, please press star one. Mr. Leonardo Correa with BTG Pactual would like to make a question. Please, you may proceed.
Hello. Good morning, everyone. Yeah. Thanks for taking the question. My first question is for Leo. Leo, we were waiting for Suzano to announce this $30 price increase into China, right? Maybe some days. Some would consider this maybe a bit more atypical, right, for the industry leader to wait a bit more. I just wanted to hear you, Leo, on what you're seeing on the ground in China and whether some of the recent issues like lockdowns and, as you mentioned, some pressures on the paper segment in China.
I just wanted to hear you on exactly what made you guys pause, perhaps and wait a bit more, to announce, the price hike in China and whether you see conditions ripe for implementation, right, given all the risks and all the uncertainties surrounding the supply chains and the lockdowns. We're still in an environment of pressured paper margins in China and now we're seeing the reselling price in China also drop a bit, right? It's a tricky market. I understand a lot of volatility, but perhaps we were a bit confused on why you paused, to announce, this price increase in Asia. The second question for Walter.
I mean, Suzano has been compared with a group of companies, and I know the comparison is not valid and perhaps not ideal. But at many times, Suzano is compared with several other basic resources companies which have very strong cash return policies. And at times, the impression we have speaking to investors is that perhaps Suzano has been criticized for embarking in full out growth, and perhaps lower cash returns and lower dividends. And the sensation is that the company, the stock price is penalized for that issue, right? I mean, the stock has been underperforming pulp prices, and perhaps investors have been looking to other names that have higher cash return potential in the short term, right, Walter?
I know that this is a difficult balance, and we've been advocates of Suzano on the project side, given that these are high return projects and accretive projects. But I understand that maybe the company is suffering some pressure from shareholders to strike a balance, right, between cash returns and growth. Given the buyback, and I know that nothing is completely out of the blue, right? These things are all connected. I just wanted to understand what exactly is behind the move and a bit more of the thought process behind this, again, unexpected buyback, which no one was really indicating right inside the company for the markets, at least over the past months.
I just wanted to hear you more on how you're viewing this balance between buybacks and growth. That's it, guys. Thanks.
Okay. Leo, good morning, and thank you for your question. The first part of it regarding the timing of our announcement. Obviously, we had already decided the price increase prior to yesterday night. It was just a question of timing of the announcement. The profile of our customers, the large paper producers in China, we didn't expect that any of them would make any decisions regarding the ordering date during Labor Day holiday. We thought it was unreasonable to announce price increase before that. That's how we put together our strategy and our decision making regarding timing of the announcement. Regarding conditions to implementation, we see market as supportive, as it has been up to now from Jan to April. S&D fundamentals are very strong.
There's a big supply constraint, citing the two main factors, which are all these unexpected downtimes, which I mentioned just in four months, already exceed 1.5 million tons. This is absolutely impressive. Also the logistics constraints, it only seems to be getting worse and worse as we speak. Additional to that, in China, our market sources on the ground report that the risks that the lockdown are short-lived, as I mentioned in my speech, together with a plan from the government to stimulus or to reach out for a stimulus program, has been making our customers be very bullish in a sense that they want to guarantee they're gonna have raw material, which is once again challenging supply chain for their third quarter production and sales.
Just remembering what we sell in April and May will arrive in China in the third quarter, so they're getting prepared from that. Recent news right after the end of the Labor Day, our office and our market sources again report a much better sentiment than before the holidays. Weifang region, which had a little bit of issues with lockdowns on the previous week, is now fully operational. The lockdowns are completely over in that region, as well as the internal logistics scenario has been improving and we see a spike in exports of printing, writing and also of paperboard from Chinese producers, mainly to the Southeast Asian markets. These conditions are making the sentiment from the streets be much better than what it's been for a while.
Leo, thank you very much. It's a very important question. Thank you to give us the opportunity to tackle one thing that is very sensitive to our shareholders, how we create value to them. We believe that we are in the industry that is growing at a much faster pace than any other materials company in the stock market. Our industry is growing through different dimensions. We are gaining market share on the hardwood. We are expanding our addressable market and gaining market share, what we call fiber to fiber, to gain market share over long fiber. We are gaining market share comparing with other materials, what we call fossil to fiber, expanding our addressable markets to replace plastics and other materials.
As we are in a growth industry, we are able to have a very good project to present to the market that is delivering extremely good returns. Just remembering what we present several times to our investors in the different moments, is that this project is going to be the lowest cost, cash cost on our system. That is the lowest in the world. That we are going to be extremely competitive, even more competitive in the near future on a very good project that we are going to deliver to the market in a little bit more than two years from now. On the other side, we will understand how important is the cash returns to our shareholders. We have been improving the cash returns.
Now, with a higher dividends this year, there's BRL 1.8 billion on dividends. On the other hand, we have announced this buyback program.
We have financial discipline as well. We are very aware that we cannot increase our net debt in the next coming years. We have to balance everything. I think our track record in terms of delivering value to our shareholders is very critical. We have the merger with Fibria. We have the Imperatriz project. We have the Três Lagoas project. We are delivering value to our shareholders. We expect that this is going to be more clear in the near future when we are going to show the results after the Cerrado project. Thank you for the question.
Mr. Rafael Barcellos with Santander would like to ask a question.
Hey, good morning, and thanks for taking my question. My first question is about costs. I mean, could you please comment a little bit more about your expectations in terms of pulp cash costs in the coming quarters? I mean, would it make sense to believe that the worst in terms of cost pressure is already behind us? My second question is related to pulp production. Could you please elaborate further on your production run rate in the second Q? Also, do you believe that, you know, the ongoing logistical bottlenecks can significantly affect your pulp sales volumes in the second Q? Thank you.
Thank you, Rafael. It's Aires speaking. Regarding cash production cost, our last quarter was probably the most challenging quarter ever in terms of cost. We had five important planned shutdowns in our most competitive mills in terms of cash costs. In a normal scenario, we could expect dilution of fixed costs, and the increase in wood costs could be in the same line. How the commodity scenario is so uncertain for the future, we are considering delivering a flattish level of cash cost to the next quarters. In terms of production, as I mentioned, we have five important shutdowns in this last quarter. That's not simple to have this stoppage in our mills.
Normally we'll have a learning curve to restart the pace and the operation stability to have before the stoppage. We had some occurrence that you have to stop it again, adjust the maintenance and restart it. When you consider that the second half, we have only two planned shutdowns in our Mucuri lines A and D, we believe that we have enough room to recover any considerable loss that we have in the first quarter and deliver the same level of volumes that we had last year.
Let me tag along to Aires explanation on production and get into your question, Rafael, regarding how logistics can or will affect Suzano in the second quarter. We don't see that for some reasons.
First of all, we own our terminals in Brazil. We have dedicated vessels to Suzano. All our production value, or volume, is already planned for in terms of how it's gonna be delivered to our customers globally. We do not see any risks of not delivering our volumes, our increased production volumes, as Aires said, to our customers in the second quarter.
Okay. Thank you.
Our next question comes from Caio Ribeiro with Bank of America.
Yes, good morning. Thank you for the opportunity. My first question is on fluff markets. I just wanted to see if you could talk a little bit about, you know, current supply and demand conditions in this market, which seems very tight, with prices continuing to move up, and whether you would consider an expansion in capacity here. My second question is more specific to some of the risks in pulp markets right now. You know, with resale prices dropping in China, you know, a seasonally weaker demand in the coming months, you know, the impact of the lockdowns. I know you already talked a little bit about this, but you know, the impact of the war in Europe as well.
I just wanted to hear from you know, whether you believe that, you know, these current prices, which are migrating to $810 per ton, whether you see them as sustainable and if you expect, you know, a drop in prices, at some point, in the coming months or not. Thank you.
Okay, Caio. This is Leo here. I'm gonna take both of your questions. First of all, regarding fluff, our Eucafluff is going extremely well. We have actually been oversold for more than 18 months in a row and been therefore repositioning our pricing in international markets and in Brazil, much in line with the news that you have been reading globally.
We are very happy with how the product is being received and the quality is being perceived by our customer bases. Global brand owners are already using our product, and that makes us and brings the opportunity to discuss what's next. In this stage, our executive committee is discussing the next steps for future investments or conversions so that we can later on present to our board. We are extremely happy how this business has developed, how this innovation has developed itself. Regarding your second question on the sustainability of current prices, we believe, yes, there is fundamentals for that. Huge supply constraints, which we don't think will be solved in the short term.
Obviously there are some factors to be watched looking forward maybe towards the second half of the year, which is how effectively the Chinese producers will be able to implement price increases on their products and how COVID, if short-lived or not, will impact demand. Regarding pricing or paper pricing in China, we have seen movements. We have seen movements including during the Labor Day holidays, new announcements coming out for tissue prices. Maybe tissue prices at the moment is a way that has been more accelerating in terms of price increases. We have been seeing a positive trend in most grades or in all grades.
When we analyze the margin of our customers, obviously we do that very frequently, we come to a conclusion that's a bit different than the one that's usually published by investors that there is no margin in China. Since our customers, the big customers, place orders far in advance and there is a delay in the system, as I mentioned inclusively for the reasons why our prices were not as we hoped it will be in the first quarter, our customers are still receiving low cost pulp. This means that they still have space and time to be able to implement price increases downstream, and they use this moment to gain market share over smaller customers who obviously don't have this benefit. We believe that they will be successful and the implementation is therefore expected to be successful as well.
Super clear. Thank you very much.
The next question comes from Daniel Sasson with Itaú BBA.
Hi, everyone. Good morning. Thanks for taking my questions. My first question is on price realization, the pulp business. I know that you mentioned that the recent improvements in pulp prices are not yet reflected in your results, but if you could give us more color on the most important factors that impacted your price realization in the first quarter. I mean, if it's purely related to the fact that you maybe had more pulp sales concentrated in a period in which the BRL was stronger, or if there are some lagging volumes from previous periods in which the prices were not as high as they are right now, that would be pretty interesting.
My second question, in regards to the expected impact on supply from the Russia-Ukraine tension, if you could elaborate a bit more on what you expect even if the war is over, I mean, probably sanctions on Russia will not be lifted in the very short term. So if you could give us more color, more numbers in regards to how dependent on Russian wood is European supply or European pulp production today, that would also be helpful from our end. Thanks a lot, guys.
Okay, Daniel, good morning. This is Leo here. I'm gonna answer both of your questions. The first one regarding pulp price realization in the first quarter. There are two main reasons. We usually obviously we invoice our customers in US dollar terms, and at the end of the quarter, we calculate the price back to US dollars for reporting purposes using the average FX of the quarter. This quarter, we had a particular situation that due to our maintenance downtimes and production schedule and the programmed times of vessels to arrive and to be shipped out of Brazil, we had a bigger concentration or a very big concentration of our invoicing in the third month or in March when FX played a different role, right? Where FX was appreciated at the time.
Therefore, our price of 639 has differentiated itself from our actual price of $655 when we add all our invoices in US dollars. Second issue is related to the timing of the invoicing. We are facing a situation for our obviously direct sales, mainly our sales to Asian markets, that today we have a carryover invoicing of over or a little bit over 30 days. So we are running with this late invoicing, and with our planned productions, we were not able to recoup that. So when we add those two effects, we come to the price that I have just stated before.
Now in terms of Russia-Ukraine war and impact in supply, we see two main factors playing out. Possible factors playing out. First is this related to the sanctions on Russian wood. There are two optics to look at it. First of all, it's related to certifications. You all know that FSC has canceled certification of Russian wood, so this is an important factor to consider. Second is the fact that 30% of the wood necessary for the Finnish pulp production was coming from Russia. That's a bit over 4 million cubic meters, or maybe approximately 1.2-1.5 million tons of pulp production a year.
That was birch wood crossing the border, and now the Finnish producers have a challenge to find alternative wood supply to be able to run their operations. We still haven't seen a solution playing out on what they're gonna do for the upcoming months. The second issue on Russia that will also affect supply is due to the fact that Russian producers at this moment, or at least in the beginning, in the short term, are facing, from what our market sources report, difficulties in getting supplies into their mills. The issue or the item that we see the greatest restriction are chemicals or bleaching chemicals.
For example, Fastmarkets research just reported last week that this relevant or the most relevant Russian producer, who was a big exporter to China, ran April only with 50% offerings of their volume of bleached market pulp, and will be not offering at all volumes in May due to a 30-day maintenance downtimes. We do not know exactly the reasons. We know the reasons are in the news are the ones that you all read as well. This obviously will create a big impact to the market.
Perfect. Thank you. Just to clarify, in regards to your the carryover of invoicing that you mentioned a bit over 30 days, this is something that is continuing to take place, right? Should therefore have an impact on your Q2 realized prices as well.
Sorry, had problem here with the microphone. Yes. We continue to see that taking place. It's important to state that, as I mentioned, all our price announcements have been fully reflected on our ordering page. It's a question of just delay in terms of price realization.
Perfect. Thank you. Thanks a lot.
Mr. Thiago Lofiego would also like to make a question. Please, you may proceed.
Thank you. Good morning, everyone. First question, Bacci, I believe you mentioned the Cerrado project CapEx was lower than expected this quarter. Can you comment a bit more on that? Are there any issues regarding suppliers? Any bottlenecks at all? The second question about the domestic paper market in Brazil. So what's the outlook for the remainder of the year, especially regarding cardboard and premium writing grades? Thank you.
Thank you, Thiago. No, there's no issues of delays related to Cerrado. It's just the work that we continuously do with the suppliers to postpone payments and to, you know, improve our working capital. No effects coming from the physical side of the project.
Thiago, it's Fabio here. Thanks for your question. Regarding the paper markets, we continue to see demand strong in the Q2 and moving forward into the second half of the year. As you know, we have seasonality in the paper business, which is stronger. Demand is usually stronger in the second half of the year. This year we have election, which is usually also a driver for paper, printing and writing demand. As for board, as you know, last year first quarter was very strong. So the comparison basis with first quarter last year, it's not good. The market has shrunk in the first quarter of this year, but it's still 20% above what we had in 2019 before the pandemic.
It is growing above historical trends, and we believe that the market for board is gonna pick up pace now in the second quarter, moving on with the seasonality as well.
Very clear. Thank you, Fabio. Thank you, Bacci.
The next question comes from Carlos de Alba with Morgan Stanley.
Thank you very much. Good morning, everyone. First question, maybe continue on the paper side. Clearly very strong pricing power you have experienced. Could you comment what is the outlook for paper price hikes potentially in the different markets and/or products? Then on pulp, something that makes it quite difficult for us to forecast sometimes the pulp price is the discounts that are embedded in different markets. We have seen the nominal price increases at a very rapid pace. Can you comment a little bit about any trend? I understand that you need to be vague on these, but if you can give us a little bit of color on any trends that we should be aware of regarding the discounts in the different markets.
Carlos de Alba, thanks for your question. It's Fabio Oliveira here. On the paper side, regarding prices, we have implemented the prices that we have announced during the last Q4 that was supposed to be implemented in Q1. In Q1, we have announced the new price increases that we start implementing now in Q2 here in Brazil for uncoated and also for cut size. We have recently announced a price increase for board, 13% price increase for board, which is also 13% for uncoated and cut size. For board, we start to implement that as of June.
We have announced price increases in all the markets that we serve, internationally, in order of $100 per ton, starting to be implemented, as of May. we continue to see the markets unbalanced, which is in favor, due to supply shortage, which is supporting these price increases. as I mentioned in my presentation, we have the impact of inflation, which is impacting the cash cost of paper producers, also leading to the need for more price increases. we see the market supportive of these price announcements that we have just made.
Thanks, Fabio. Just one clarification, the Uncoated and Cut Size increases are also 13% and also to be implemented in June, starting in June?
No. The Uncoated and Cut Size implementation started in April, and for paperboard it's June.
Thank you.
Okay, Carlos, this is Leo here. Jumping into your question on pulp, regarding discounts so that there's a better clarity in terms of net prices. First of all, starting with Asia and China, our view is that the discounts on the index is anywhere from 3%-5%, but on average 3%. That's what we consider to be a good indication of net prices in the market. In the rest of the world, meaning excluding Asian markets, we see a consolidated discount of roughly 33%. This is our view on how to better translate to net prices globally.
Thank you very much, Leo.
I'm talking about hardwood, obviously, right?
Right. Yeah, correct. Okay, thank you. Have they been increasing a little bit or relatively stable?
We saw last year an increase of roughly 1%, mainly on the Western world, but stable in the Asian markets.
Great. Thank you, Leo.
The next question comes from Marcio Farid with Goldman Sachs.
Thank you. Good morning, everyone. Thanks for the opportunity. I have a couple of questions, and sorry to go back on the cost discussion again. Aires, just wanted to understand from you, what would be the driver of the flattish cost? Because we see diesel prices in Brazil increased by about 25% in March. Our analysts at least are saying that, Petrobras diesel prices in Brazil are still 20%, below what it should be if the company decides to increase prices again. It's obviously a major cost inflation driver. We saw wood costs being flat in the quarter, probably because you produced less, so you had to use less, further away, wood as well. I would expect that, you know, wood cost could go up as well.
You're guiding for flattish costs, so which is quite good. Just trying to understand what are the offsetting factors. And my second question, maybe, to Walter. Walter, from time to time, we see commodities companies being very flexible in terms of capital allocation, right? Being able to do dividends, buybacks, growth projects, acquisitions. It sounds like Suzano is doing all of that, obviously in different magnitudes for the different strategies, right? Just, you know, wondering how you're seeing the current cycle we are at. I mean, are we in that cycle that you know, commodities companies can do everything? Is it just can we expect the company to continue to do this?
Is it just a punctual and, you know, opportunities that you didn't wanna miss, like the acquisition of fiber, for example, or the buybacks? Is it punctual or is it a new trend, in terms of capital allocation strategy? Thanks, everyone.
Thank you, Marcio. Let's try to explain. For our following quarters, we will increase our volume of production in our best performance mills. In the first quarter we stopped Três Lagoas line one, Três Lagoas line two, Imperatriz. That's our mills that we have our best performance in terms of cash cost. When we increase the volumes in these mills, the mix of costs will be better in the next quarters. That's the first reason. The second reason, with bigger volumes in the following quarters, we'll dilute better the fixed costs, and we'll produce more energy surplus to sell in the open market. That will affect in other line, the cash flow.
The third important impact that we had, the shutdowns in these mills in the first quarter, that will reduce our expense in maintenance for the next quarters. Normally, when you have general shutdowns, we take the opportunity to do a lot of small maintenance that will have program to the next quarters. You are correct. The wood costs have benefited from our reduction in the average distance from forests to the mills, that offsets the impact of diesel. Our current forecast is in the range that we have until now. We could see that our cash costs have a possibility of reduction. But we must be prepared for the worst scenario and hoping for the best.
That's the reason that I say that to remain the lowest in terms of cash costs.
Marcio, thank you very much for your question. Just remembering that, when we merged Suzano and Fibria, at that time, our net debt was $13.7 billion. We announced the market that our target would be to have $800 per ton as a, as a net debt as our target. That at that time was roughly, $10 billion. We are aiming to reach a debt. We are getting close right now. Our net debt, it's at $10.5 billion, very close to the previous quarter. That was $10.4 billion. We believe that now, if after we are getting development on our Cerrado project, our target, as we announced during our Suzano Day, would be a little bit more.
We're a little bit close to $12 billion as net debt since we are going to get close to 15 million tons of total capacity. We believe that with that we open possibilities on capital allocation. We have the capital allocation regarding buybacks or higher dividends in the future. We have the possibility as well to reinvest on projects that we have in the company that could deliver a very good return to our shareholders. I think our track records on investments, on retrofitting our facilities or our forests, as we are doing right now, with our Parkia project, is showing that we can create value to our shareholders. We are bringing more than 200,000 hectares of land to our system.
In addition to that, we are going to avoid the payment of more than $50 million on biological assets every year. I think it's a very positive combination of value creation to our shareholders. Our possibilities in terms of avenues to invest in the near future on capital allocation are much higher since we reach our net target on debt that we announced to the market. With this, I think we can create the possibility of combining higher cash returns to our shareholders in a combination of capital allocation on projects that can create value as well in terms of growth.
That is all clear. Thank you very much, Walter Schalka and Aires Galhardo.
The next question comes from Carlos De Luca with UBS.
Good morning, everyone, and thanks for the opportunity. Two questions on my side. Leo, can you please share some views on Suzano's inventory position? Can we expect production to surpass sales this year considering low inventories at the moment and another massive concentration of downtimes in the second quarter of next year? My second question to Walter. Walter, can you please comment on the law proposal that would allow private companies the right to have the concession of public forests in Brazil and explore carbon credits from these assets? Is Suzano interested in acquiring any of these concessions, assuming that the law is approved? Do you have any initial estimates on the benefits and costs for a transaction like this? Thank you.
Carlos De Luca, good morning. Regarding inventory, for obvious reasons, we cannot disclose our forward strategy as it is very linked to our commercial strategy. What I can tell you is, that we have been running for several quarters in a row with suboptimal stock levels, inventory levels, which is putting a lot of pressure on all our operations team to be able to maintain the excellence and the reference of service levels that we have to keep customers growing.
Thank you, Carlos De Luca, for your question. We believe that we need to impact all the stakeholders, and one of the stakeholders that we need to impact is the society. We believe that regeneration, it's part of the solution for the future in our society. We need to address the climate change issue. To do it, we need to reduce our emissions, and we are working on our area to do it at Suzano. We would like to invite all of the other companies and consumers in the world. To do it, we need to do it immediately. We cannot postpone that. We cannot procrastinate the situation of higher emissions on CO2. On the other hand, we need to address the increase our carbon sequestration, and we believe that regeneration is part of the solution.
We are engaging our team on these discussions, and we believe that these concessions on the public areas, the degraded public areas to be regenerated, will be part of the solution. We are welcoming the fact that the government is thinking about this situation, and we are incentivizing the government to keep. Brazil could be a major player in the world on regeneration of forests. I think would be very good for the Brazilian economy. It is going to address the social problems that we have in different biomes. In addition to that, I think it would be very positive as well for the climate change crisis that we are living right now. I think with that answers your question. Thank you.
Thanks, Walter, Leo.
If there are no more questions, I would like to turn the floor over to the company CEO for final considerations. Please, Mr. Walter Schalka, you may proceed.
Thank you very much for joining us for this session. I think, it's very clear that the Suzano is in the right track to create value and share value with all the stakeholders. This is part of our culture, part of our aiming. We believe that we have a very good track record on delivering value to our shareholders. We would like to show to the society that we can deliver even better value to all the remaining stakeholders. We believe we are in the right track and the right speed to do it, and we are committed to do it even better. Thank you very much, and let's keep in touch.
Thank you. Suzano first quarter results conference call is finished. Have a nice day.