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Brazil’s corrugated packaging industry started 2026 with surprisingly positive news: Shipments in February rose 0.3% year on year to 323,000 tonnes, only 6,000 above our estimation for the month, after jumping 2.3% year on year to 343,000 tonnes in January, almost 20,000 tonnes above our forecast for Empapel’s assessment, marking the strongest performance ever recorded for the month in the historical series.
After a weak 2025, when total shipments dropped by 0.5% due to lackluster domestic demand, volatile currency movements and uncertainty around export‑dependent sectors, this early momentum naturally raises the question of whether the industry may finally be turning a corner. But as encouraging as the January-February figures appear, the underlying drivers suggest that the path ahead is far from straightforward. As a result, we are currently keeping our 2026 forecast unchanged, with very timid 0.9% growth in the best-case scenario, only differing from our +0.7% forecast disclosed in January as a result of new data absorption.
Much of the upside at the start of the year can be traced to specific one‑off factors within the animal protein segment, which accounts for almost 26% of the corrugated box and board demand in the country. The beef and pork industries represent 21% of total demand, while the poultry sector accounts for nearly 4%, according to Empapel and Fastmarkets.
The release at the beginning of 2026 of previously restricted beef exports to the United States following the late November suspension of additional tariffs, combined with normalization of chicken shipments to China after months of sanitary‑related restrictions, boosted packaging demand in January as total animal protein exports increased 11.6% to 810,000 tonnes, the strongest volume ever exported for the month in the historical series, according to the Global Trade Tracker data and Fastmarkets adjustments. At the same time, in anticipation of China’s new quota regime,[1] effective for 2026, Brazilian beef exporters accelerated shipments in late 2025. This front‑loading and spillover into logistics and packaging in early 2026 created an unusually strong January baseline, especially for integrated paper producers with long-term contracts with animal protein exporters, whose operating rates rose.
What makes the result particularly striking is that it occurred despite a strengthening Real (exchange rates dropped by 2.7% month over month in January and 11.5% year over year), which historically dampens export momentum and, by extension, corrugated demand. Under more normal conditions, a lower exchange rate would temper shipments of animal protein and other goods, softening packaging requirements. The fact that this did not occur only reinforces how exceptional the drivers behind January’s result were.
A key uncertainty concerns how exporters will respond to the new Chinese quota amid the currency appreciation expected in the first half of 2026. One assumption is that Brazilian beef processors may accelerate slaughter and shipments early in the year to capture as much of the 1.1-million-tonne cap as possible despite the less favorable exchange rate. Should this “race to export” take place, volumes to China could remain elevated through the first half, supporting production of corrugated boxes and board above expectations for the period. This would be followed by a sharp drop‑off once the quota is reached, causing shipments to fall much lower than our estimates for the remainder of the year. Based on data from 2025, the decline in access to China represents a loss of roughly 400,000-600,000 tonnes or 11-17% of total Brazilian animal protein exports.
Whether this displaced volume can be fully redirected to alternative markets will be critical for corrugated demand later in the year. However, there are opportunities to do so, given the current asset allocation and industrial organization of Brazilian beef processors, who own assets and companies in other countries, including Uruguay, Paraguay, Argentina and Australia. If companies succeed in reallocating most of the shipments that would have gone to China, the total export volume in 2026 could end the year close to 2025 levels, limiting the negative impact on packaging demand.
Even in this scenario, however, production constraints remain an significant headwind. We continue to expect a contraction in animal protein production and slaughter in 2026 regardless of whether exports are rerouted primarily because a stronger currency will reduce export profitability and, thus, export volumes. Our market estimates point to a 2.0-3.5% decline in meat output in 2026, which could translate into an additional 0.4-0.7 percentage‑point drop in corrugated board shipments that is not yet fully incorporated into our scenario. When taking this into account, our current projection of 0.7% growth for the year falls to nearly zero, effectively signaling stagnation as the best‑case scenario. This reinforces the view that January’s performance, while positive, should not be assumed to be a sustained trend without clearer evidence of stronger underlying demand.
Against this backdrop, our overall outlook for 2026 remains unchanged. We still anticipate only marginal growth in corrugated board shipments this year, and recent positive signs are not yet sufficient to alter our projections. We expect the exchange rate to appreciate throughout 2026, which, if confirmed, could reduce the competitiveness of Brazilian exports across sectors such as animal protein, shoes and appliances, and limit production in packaging-related industries. Even with the reopening of key markets like the US following the removal of tariffs on Brazilian beef in late November, structural changes in trade conditions are likely to weigh on the performance of exports relative to 2025.
The current domestic environment does not show signs of sustained growth, but rather a cautious outlook amid challenges. We expect consumers to increase their consumption of animal protein and beverages throughout 2026, partly because there are fewer business days compared with 2025, due to the distribution of holidays and bridging weekends, which create 3- to 5-day non-working periods across the year that have historically boosted meat and beverage consumption. Additionally, the FIFA World Cup in July typically raises demand for these products, along with increased television production and sales in the two months prior, which will also supporting the demand for corrugated paper. Presidential elections also tend to increase the need for corrugated boxes, which are used to transport electronic votes and materials across the country. However, risks to this outlook remain. Consumer spending faces pressure from high debt levels and tight financial conditions, while sectors such as appliances, footwear and consumer goods will likely see reduced exports. Although January’s data looks promising, it does not outweigh the broader macroeconomic factors that will influence demand for packaged goods throughout 2026. Ultimately, the domestic market’s strength will be crucial in absorbing (or not) the volumes that might otherwise flow to the export sector.
The strong beginning to the year should be interpreted with caution. In our view, it reflects a normalization of flows following the disruption of late 2025 rather than a clear inflection point in underlying demand. The structural and cyclical forces affecting Brazil’s corrugated packaging market (currency appreciation, sector‑specific headwinds and shifts in export dynamics) remain firmly in place. Until clearer evidence emerges that domestic consumption is strengthening or that export‑oriented industries are on a more stable footing, the prudent stance is to maintain our projections.
The January data is encouraging, and it certainly reduces downside risks for the first quarter. Domestic prices for kraftliner in Brazil have also been reacting to lower demand and currency appreciation, falling by 3.9% in December and remaining flat in January at the lowest level since November 2024. We expect prices to remain slightly below current levels during the first quarter, but a risk to this forecast is whether beef processors will accelerate exports to China despite the exchange rate drop, which could unexpectedly support demand and prevent prices from falling.
Geopolitical risks are also on the radar for 2026. The recent escalation of tensions involving Iran, Israel and the US raises the likelihood of broader conflict in the Middle East and threatens key maritime corridors, such as the Red Sea and the Strait of Hormuz. Any disruption there could lead to higher freight rates, rerouting, delays and insurance surcharges. For Brazil, whose animal protein exports to Asia, Africa and parts of Europe depend on these routes, even indirect disruptions will add pressure to already tight margins and increasingly volatile external demand.
The Middle East itself is not an important destination for Brazilian paper products exports, accounting for less than 5% of total exports, but the region is a key market for Brazilian animal protein shipments, especially poultry, representing over 30% of exports. Heightened instability could restrict imports, complicate port operations and displace trade flows. This could also make it difficult for Brazil to find alternative markets for its surplus beef exports, reducing expected export demand and, thus, internal packaging consumption, further loosening the supply-and-demand balance in the country. From a global value chain perspective, the situation underscores the vulnerability of interlinked logistics networks and the Brazilian protein sector’s dependence on predictable maritime transport.
Beyond the food trade, the Middle East is also an important source of fertilizer supplies for Brazil and Argentina, while it has weaker links with other Latin American countries. Iran alone provides nearly 20% of Brazil’s urea imports, a key fertilizer for corn production. Whether Iran or its trade partners could face new sanctions remains uncertain; however, the risk is likely irrelevant. Brazil has historically continued trading with sanctioned suppliers, such as Russia after 2022, and both Brazil and Iran are members of the BRICS+ bloc, together with China and Russia. Still, any further escalation could amplify supply‑chain uncertainties at a delicate moment for the protein sector.
The broader narrative for 2026 continues to be one of challenges. For now, the question is not whether strong data should prompt an upward revision, it is whether market fundamentals will allow the industry to avoid a year of stagnation. The answer to that question will only become clear as the extraordinary effects boosting the early year performance fade and the underlying trend begins to be revealed.
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