Weekly News & Views
Suzano, YPF, Pemex, Cemex
Market Snapshot
The LatAm Corporate Index tightened by 12 basis points (bps) to 306 bps in the week ending on Friday, January 31, 2025. Meanwhile, both the broader Emerging Market (EM) Index widen by 3 bps to 184 bps and the broader US Index expanded 2 bps to 109 bps. We note that the EM CCC Index contracted significantly this week by 81 bps to 657 bps. The region's equity markets showed a positive weekly performance: Argentina's Merval Index improved by 1.3%, Brazil's Ibovespa Index rose by 3.5%, Mexico's Mexbol Index increased by 1.3%. In contrast the S&P 500 Index declined 0.3% this week.
In commodity markets, WTI and Brent crude oil prices traded at US$77.0 per barrel (-2.0% weekly) and US$72.9 per barrel (-2.4%), respectively.
Turning to bond yields, U.S. Treasuries saw decreases, with the 10-year yield down 11 bps to 4.51% and the 5-year yield also down 11 bps to 4.31%. In contrast, the yield on the 10-year Mexican government bond fell by 1 bps to 6.47%, the 10-year Brazilian government bond remained stable at 6.80%, and the 10-year Argentine government bond declined by 21 bps to 10.14% over the week.
Weekly News
1. We Initiated Coverage of SUZANO
On January 30, 2025, we initiated coverage of Suzano with a Market Perform recommendation.
Suzano is the world's largest producer of eucalyptus pulp and a leading integrated pulp and paper company. It leverages scale advantages and a strong market position. With 13 industrial plants across Brazil and an annual pulp capacity of 13.44 million tons, including the recently added Ribas do Rio Pardo mill, Suzano is well-positioned for efficiency gains. The ramp-up of this new facility is expected to enhance operational efficiencies and lower unit costs, reinforcing its cost competitiveness in the global market.
We view Suzano’s notes as fairly valued relative to peers following recent spread tightening. Additionally, uncertainty over Brazil’s economic outlook, including currency weakness and fiscal challenges, along with potential trade policy risks under the new US administration, increases headline risk and limits upside potential. While Brazil’s trade deficit with the U.S. suggests it may not be a primary target for tariffs, any trade restrictions could weigh on its export-driven economy.
Within Suzano’s capital structure, we prefer the 3.750% 2031 and 3.125% 2032 bonds, as they compare favorably to select regional peers, the broader EM BBB Index, and the US BBB Index. Additionally, these notes trade well below par at $88.8 and $83.4, respectively, while the rest of Suzano’s curve remains priced above par.
2. Pemex: Sheinbaum’s Presents Energy Reform
Mexican President Claudia Sheinbaum has proposed a sweeping energy reform aimed at reinforcing state control over the sector, with significant implications for Pemex. The bill, presented on January 29, 2025, seeks to streamline operations at the national oil company while maintaining energy security and affordable prices. The legislation would establish a new government-controlled energy regulator to oversee oil and petrochemical permits, further integrating Pemex into a state-dominated framework.
The reform builds on Sheinbaum’s previous efforts to classify Pemex as a public entity rather than a productive enterprise, removing its commercial status and prioritizing state-run operations. It also follows her predecessor Andrés Manuel López Obrador’s policies, which favored state control and required private companies to collaborate with Pemex in energy projects.
With independent regulators set to be absorbed into the Energy Ministry by 2025, concerns over transparency and regulatory stability have grown among investors. The overhaul could also impact Mexico’s trade relations, particularly with the United States, which has criticized the country’s energy policies for favoring Pemex at the expense of U.S. firms. The reform’s implications are expected to feature in the upcoming 2026 review of the USMCA trade agreement.
See also: Pemex: Lack of Concrete Action Weights on the Outperform Thesis
3. YPF Finalizes $327 Million Acquisition of Mobil Argentina S.A.
On January 29, 2025, YPF completed the acquisition of 100% of Mobil Argentina S.A. (MASA) from ExxonMobil and QatarEnergy for $327 million. The transaction includes the purchase of working capital and price adjustments between the effective and closing dates. Following the acquisition, MASA will operate under the corporate name SC Gas S.A.U., with YPF as its sole shareholder. As of the closing date, there are no outstanding credits or debts between YPF and MASA.
4. Cemex Completes $950M Sale of Dominican Republic and Haiti Operations
Cemex announced on January 30, 2025, that it has finalized the sale of its operations in the Dominican Republic and businesses in Haiti to Cementos Progreso Holdings, S.L., and its strategic partners for an enterprise value of $950 million, subject to standard adjustments. The divested assets include a cement plant in the Dominican Republic with two integrated production lines, as well as related cement, concrete, and aggregates assets. The transaction also covers marine terminals and a commercialization business serving Haiti.
For our analysis on the divestment: Cemex to divest its Dominican Republic Operations for $950 Million
EM Spreads’ Most Recent Publications:
Pemex (January 31, 2025): Lack of Concrete Action Weights on the Outperform Thesis.
Suzano (January 30, 2025) Initiation coverage report.
YPF (January 8, 2025): Recommendation on YPF's new USD 9NC4 unsecured notes.
Vista Energy (December 18, 2024): New issue snapshot.
YPF (December 3, 2024): Initiation coverage report.
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