Containerboard prices up in Mexico for first time in 11 months amid low availability of US imports, higher costs

Key takeaways:

• Mexico’s containerboard market is shifting rapidly after a prolonged period of weak demand and stable prices.
• US suppliers unexpectedly reduced containerboard exports to Mexico, forcing local buyers to turn to domestic mills.
• Domestic containerboard prices in Mexico increased by 300 Pesos per tonne in June due to this shift.
• US containerboard export prices to Mexico also moved up by $10 per tonne compared with the previous month.
• Conversely, the boxboard market remains stable as fierce competition from imports prevents mills from raising their prices.

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The Mexican containerboard market is going through a rapid shift in June after months of low expectations for price increase implementations and continuous weak demand from buyers.
According to sources, with a quick change in the dynamics of US paper sales to the country, as suppliers suddenly trimmed tonnages for June and July deliveries, buyers had to refocus on domestic supply, prompting Mexican mills to set and implement higher prices.

“The change came very fast. There were price announcements in the market due to costs for several months that were never implemented as we had plenty of supply from the US and other regions, while demand has been weak. But suddenly US paper suppliers reduced their exports while also working on their own domestic price hikes and this affected Mexico,” a source said.

A second source said that some buyers in Mexico were at first in denial of potential impacts, but market dynamics evolved fast. “Some suppliers said they could not sell in June and pushed for July volumes. We have to take into consideration that US containerboard reduced a lot in recent months, and finally we have seen some reaction connected to it, as prices have been very low despite all increasing costs in the chain,” they said.

With that, containerboard, testliner, recycled linerboard 130-180 g (domestic), delivered Mexico increased by 300 Pesos per tonne in June, trading now at 12,600-13,000 Pesos ($726-749) per tonne. The price, however, is still 3% lower than a year ago.

US containerboard, kraftliner, unbleached kraft linerboard, 42 lb, export, fob Laredo for Mexico also moved up by $10 per tonne compared with May, assessed at $680-730 per tonne, up by 7.6% year on year.

As Fastmarkets reported earlier this month, prices for kraftliner and recycled linerboard in the US market increased by $50 per tonne this month, with market participants citing a subtle spring demand uptick that some said was partly influenced by the FIFA World Cup matches in 16 cities in the US, Mexico and Canada, combined with high costs due to the US war in Iran and US inflation now at a more than three-year high.

In Mexico, sources were more neutral regarding the impacts of the World Cup. “I was expecting more volumes related to that, we had a few campaigns for packaging that focused on the tournament, but still not enough to really show that demand in Mexico is looking better,” a contact said.

Another source mentioned that, in their view, prices were still mainly stable in June and demand for corrugated boxes in Mexico remain very constrained.

“There is still nothing showing sign of a reaction. Discussions around the [United States-Mexico-Canada Agreement] are still not clear, we expected more definition in June, but it seems decisions will be taken very close to the deadline proposed for the review of the agreement,” the contact said.

With no clear signs of what will happen with commercial relations between US and Mexico, industrial investments have been postponed in Mexico, also not contributing to the economic growth. “Meanwhile, some sectors that depend a lot on exports to the US, including in the agricultural market, are facing a lot of difficulties with extra tariffs, including tomatoes, while other products such as lemons and avocado noted lower exports, affecting packaging demand too,” a contact said.

In the boxboard market, sources continued to report that cost pressure is mounting, but competition with imports remains fierce despite anti-dumping measures and tariffs. Because of that, it has been difficult to talk about price increases in this segment.

Fastmarkets’ cartonboard/boxboard, recycled folding boxboard, coated kraft/grey back 320-325 g/square meter or 16 pt, delivered Mexico was stable in June at 17,500-18,000 Pesos per tonne, with no changes for over a year.

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